Saturday, December 13, 2008

The Foreign-Aid Micro Credit (FAMC)


Delivering Foreign Aid directly to "The Bottom of the Pyramid" via Cell Phone

A Micro Foreign Aid system to avoid graft, fraud & bribery -- I've been Madoffed !!

While promoting the Carbon Micro Credit (CMC) concept described in detail in the many posts below, I continue to hear foolish rich people in the Developed / First World voice complaints that poor Individuals in the Developing / Third World will game the CMC system to steal 15 or 25 cents a day. The horror !

OK, let's micronize or apply our intellectual electron microscope to another parallel situation -- Foreign Aid -- which is FREE money given by the Developed / First World to the Developing / Third World.

What happens with Foreign Aid so often? -- it disappears into the black holes of graft, fraud, embezzlement and bribery as the money passes through multiple bureaucratic choke-points in foreign governments and NGOs. Moreover, foreign aid is often stolen in amounts of 100s of thousand or millions of dollars at a time -- poof ! -- gone in a few minutes.

So how could these HUGE financial "leakages" be avoided ? And how could donor countries be more sure their funds actually ended up at "The Bottom of the Pyramid"? Again, as with the Carbon Micro Credit, the answer is the cell phone. That is, cell phones in the hands of millions of poor Individuals in 1,000s of villages and cities in the target country.

Let's say Japan, one of the world's top Foreign Aid donors in terms of absolute aid size, but small in terms of its GDP, plans to give U.S.$ 1 billion in untied foreign aid to Tanzania, one of the world's poorest countries. With a population of 40 million, that means each Tanzanian -- man, woman & child -- should receive about US$ 40.00.

As part of the grant, the Japanese cell phone makers Sharp, Kyocera, Panasonic, DoCoMo and Sanyo agree to provide simple cell phones to the program for only US$ 20 each -- their manufacturing cost -- plus in exchange for tax-breaks from the Japanese government. 10 million phones are needed for the 40 million people (assume 4 people/family). That leaves US$ 800 million for the 40 million Tanzanians or about US$ 20 per person or US$ 80/family.

Mobile carriers operating in Tanzania such as Mobitel MIC, Vodacom Tanzania, Celtel and Zantel agree to split up/share the 10 million new phones/accounts and assign telephone numbers to the 10 million phones -- and why not ? -- in one stroke they each gain a few million new customers courtesy of Japanese foreign aid. And new customers with money too.

Next, Japan wires the US$ 800 million to the central bank of Tanzania, which then shares the funds pro-rata with the mobile carriers that assigned the telephone numbers to the phones. The carriers credit each new account with US$ 80 (perhaps less a small set-up fee...?).

The phones are distributed throughout Tanzania by NGOs, charities, church groups and the postal system. Each phone comes "pre-loaded" with US$ 80 (US$ 800 million / 10 million phones = US$ 80), so the most money that could "disappear" at one time is only this small amount. This contrasts with many cases where millions or billions of dollars of foreign aid have suddenly vanished with no trace. E.g., Iraq.

Once the phones are distributed, each individual/family can withdraw the money or transfer it to another party using a cell-phone-based SMS funds-transfer system such as Safaricom's M-PESA network in Kenya.

In sum, this foreign-aid example above rapidly creates 10 million new ATMs in Tanzania and provides 10 million microfinance grants (not loans) to every family in the country. It also provides Tanzania with a new/additional monetary base or money supply of US$ 800 million (or the equivalent amount in Tanzanian Shillings) that should experience an economic multiplier effect as it is invested or spent.

Moreover, the distribution process of the foreign aid funds is very straight-forward and easy to audit. It is highly unlikely in this example that millions of dollars could disappear via graft in a few minutes. Yes, theft rates of cell phones in Tanzania would probably increase, but if each cell phone's account is password-protected, thieves could not also steal the credit/money in the phone's account at the mobile carrier.

For families in Tanzania living on US$ 1 - 2 / day, to suddenly have an additional US$ 80 to invest/spend, plus to suddenly own a cell phone that could also serve the functions of tele-education / microeducation, telemedicine / micromedicine and telecommerce / microcommerce, must certainly spawn a rapid and miraculous transformation of Tanzania's economy and society.

Once again, the cell phone is the Solution.

Globally & warmly yours,

David A. Palella
Caped Carbon Crusader

San Diego, CA
tel: 858-793-0741

Key words: Foreign Aid Nano Credit / Foreign Aid Nanocredit / Foreign Aid Microcredit / Supersizing Foreign Aid / Homogenizing Foreign Aid / Foreign Aid Democratized / Micro Foreign Aid / Micronizing Foreign Aid / Foreign Aid Direct / TeleMicroFinance / Tele-microfinance / Foreign Aid Inside / Tele-foreign Aid / Foreign Tele-Aid