Cellphones a tool in India’s fight against corruption

BARBIGHA, (BIHAR) INDIA—In many remote corners of the developing world, cellphones have become a valuable tool to battle poverty.

Farmers use them to get timely weather forecasts and tips about fertilizers. And when their fields are harvested, they rely on contacts in nearby markets to send SMS messages that help them decide where to take their produce for the best prices, cutting out greedy middlemen.

Now, government officials in the central Indian state of Bihar hope the cellphone can tackle a new challenge: battling government corruption.

In early 2009, officials with Bihar’s ministry of health told an international development agency of their concern that frontline health-care workers might bolt their jobs.

Bihar has 72,000 accredited social health activists — volunteers who are paid commissions for ensuring children are born in hospitals and properly vaccinated. But the activists typically aren’t paid for months and, even then, only get a portion of their earnings because local managers demand kickbacks of as much as 40 per cent in exchange for their paycheques.

But when the Indian government last year relaxed its regulations to allow financial transactions over cellphones, an opportunity surfaced to stamp out at least one layer of corruption here.

In coming weeks, Bihar’s health ministry and the Norway-India Partnership Initiative (NIPI), an aid agency funded by the Norwegian government, will roll out a pilot project under which social health activists will receive their pay in a mobile bank account that’s linked to their cellphones.

“We have to make sure the social health activist gets everything she is owed in a system where the temptation is so big to get a piece,” said Tomas Nordheim Alme, a Norwegian overseeing the mobile banking plan’s introduction. “If the social health activist isn’t paid and she decides not to work, there is no one else to do this. There is no strategy for a backup plan.”

Once a health-care worker registers a mobile bank account with a local retailer, she can deposit or withdraw funds using a unique pin number. In theory, she should receive her entire stipend since her supervisor wouldn’t be required to sign her paycheques.

It comes as welcome news for Meena Devi.

On a recent morning in this rural village of rutted roads and homes built of crumbling mud bricks, Devi was among 10 social health activists who visited a local hospital to hear details of the mobile banking initiative.

Devi, 50, said her position pays her about $23 a month, money that supplements her husband’s income as a labourer across the country in Jaipur.

But she hasn’t received her salary in six months. Her boss is demanding a $36 kickback before he hands over the $91 she’s owed.

Nine of the 10 women in attendance had their own cellphones and knew how to add credit on them, a process which is similar to making a mobile bank transaction.

It’s noteworthy that the mobile bank effort will roll out in Bihar. Long regarded as one of India’s most corrupt states, tales of influence peddling, kidnappings and extortion were commonplace.

But the state’s coalition government, elected in 2005, has established a far better reputation, aid workers said. Earlier this year, Bihar said its economy has grown 11 per cent a year over the past five years – the second-best rate in the country.

Alme and local officials have high hopes for mobile banking, which has been used for years in Africa and other developing countries but hasn’t made a mark in India because the government’s fears it could be used to finance terrorism and launder money.

Each mobile bank account won’t be allowed to process more than $2,200 worth of transactions a year to allay the government’s concerns.

Even though the dollars might seem small, mobile banking represents a huge business opportunity in India.

The number of Indians with cellphones is skyrocketing.

The country now boasts 525 million wireless subscribers — 165 million in rural markets — and is adding another 17 million a month. By contrast, Canada has a total of 22.9 million cellphone customers.

Bihar alone has 32 million wireless customers, according to the Telecom Regulatory Authority of India. Charged up by truck batteries and diesel generators, the phones quickly become a family’s prized possession.

Meanwhile, in a country of 1.2 billion, there are only 75,000 bank branches, and not many of those seem to covet the business of the rural poor, who make less than $1 a day.

Poor people who do have access to a bank aren’t comfortable going there because they’re typically chased out, said Piyush Gupta, an executive with Eko, a New Delhi-based company that’s implementing the mobile-banking effort.

“But they are comfortable going to a (pharmacy) or a grocer where they already go every day,” Gupta said.

In less than a year, Eko has gone from no mobile-banking customers to 55,000, a figure Gupta says may grow to 1 million next year.

His company hopes to expand its offering to health-care workers in other states, and is also talking to the city of New Delhi about rolling out mobile banking for its 1 million labourers. Fab India, a well-known retail chain here, is similarly interested in using mobile banking to pay 3.5 million artisans around the country.

Eko’s “no frills” savings account pays account holders 3.5 per cent annual interest and makes money charging fees for person-to-person money transfers — such as when Devi’s husband uses his cellphone to send money back to his family from Jaipur.

“Our country’s changing fast,” Gupta said. “This could be used across every industry and could one day be the lifeline of the Indian economy.”