By Jamie Zimmerman and Ignacio Mas / December 31, 2010

To help the poor, get rid of their cash More than 2.5 billion people around the world today lack access to formal financial services – a major obstacle to building vital savings. But new mobile banking services are spreading in Africa, helping millions of people pull themselves out of poverty.

The recent ad spot for M-Kesho, the groundbreaking mobile phone-linked bank account launched earlier this year in Kenya, is endearingly playful. To gently teasing music, a man with a jar of coins digs a gigantic hole in an empty grass field. He sticks his jar deep in the mud, but finds that the hole he’s dug is now too deep to get out of. “There are easier ways to look after your money,” a voiceover tells us. No kidding.

In the fight against poverty, achieving global access to financial services holds enormous potential. Even the poorest need tools to help maintain their daily needs, prepare for sudden adverse events like illness, and build assets to pull themselves out of poverty. Saving is the best tool both to reduce the risk of destitution and to increase wealth. Yet more than 2.5 billion people today lack access to formal financial services, which could help them achieve these feats.

Not long ago, conventional wisdom held that the poor cannot and do not save. Now, the imperative of formal savings services for the bottom of the pyramid is finally getting its well-deserved spotlight. On November 12 at the G20, world leaders put financial inclusion among the nine core pillars of economic growth in their Action Plan for Development. Four days later, the Bill & Melinda Gates Foundation made a further $500 million commitment to financial inclusion, and in particular, access to savings accounts.

Cash is an obstacle What stands in the way of global access to financial services? It may come as a surprise, but the single biggest obstacle is cash. In short, cash is expensive.

The poor tend to live in an entirely cash-based economy. But banks find it too costly to sustain branches in disadvantaged areas to collect the small amounts of hard cash that poor people can save. So poor customers have to travel miles just to make a deposit – wasting time and running up transport costs.

We can’t make cash go away. But we can make it easier to transform cash into electronic information, which is all a bank account is, really. Once money is “de-materialized,” it can be sent around electronically at very low cost. The fastest, most convenient way to achieve this transformation globally is to use the stores that exist in every neighborhood and every village as banking surrogates.