Gates invests in banking for the poor

Bill Gates: Philanthropist, Genius,….Banker?

Bill Gates has philanthropically donated over $28 billion to improve life in on our long-suffering planet. Now, after all that hard work giving away his wealth, his next project could be….a bank?

Gates is developing a plan to provide one-third of the world’s unbanked access to banking features across the globe, according to Forbes.

However, the 2.5 billion people who do not have access to bank accounts, loans and insurance might think differently – especially if the access that they do gain is far different than banks in the Western world. The Bill & Melinda Gates Foundation is nonetheless ploughing $65 million into the Alliance for Financial Inclusion (AFI), an organization it helped create to solve the issue.

Alfred Hannig, AFI’s executive director, says:

“This started as an idea in 2006 when I was working in Indonesia in a financial development co-operation organization and got an email and then a call from the Gates Foundation. They asked me a very simple question that I had never heard before. If there was no funding constraint, what would I do to leverage what I knew about financial inclusion from the national level to a global level?”

Hannig created proposals based on banking standards in emerging countries in an effort to bring banking to previously unbanked countries and people. “What was missing was a mechanism to share this knowledge so others could follow suit and replicate what was working,” he says. The model was approved in 2008 and AFI was launched in September 2009, structured as a project of Germany’s GIZ ministry for development.

Since the beginning, AFI has been the implementation partner for financial inclusion of the G20 group of developing and emerging countries. The Gates Foundation provided an initial five-year grant of $40 million, partly matched by $9 million from the German government. “The Gates Foundation explained to me that for them this was a bet,” Hannig said.

Funding for the AFI is comparatively smaller than funding for other Gates Foundation causes, and the FSP (Financial Services for the Poor) only employs 25 of the Gates Foundations’ 1,211 total staff. What the AFI does share with the others is their almost total reliability on the Gates Foundations’ grants and gifts. AFI now has 42 staff and 180 members from 94 countries. It calculates that its Gates Foundation funding has enabled it to provide financial inclusion to 20 million people who would otherwise have remained unbanked.

And it’s working. Tanzania’s unbanked has lowered from 70% to 50%. Nigeria has lowered from 47% to 39%. The Gates Foundations’ ultimate goal is to provide this kind of banking worldwide, creating a paradigm shift in the banking industry. The world can only hope.

[Image Via lemonde.fr and forbes.com]

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