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  The Hunt for Profits Goes South: With Purchasing Power Rising, Euro Firms Eye Developing World

The Hunt for Profits Goes South With Purchasing Power Rising, Euro Firms Eye Developing World

By Julia Bonstein

Part 3: Micro-Insurance and Mobile Phones for the World's Poor

Despite these concerns, the new corporate enthusiasm for the world of the poor also results in productive partnerships with aid organizations in developing countries. In southern India, for instance, the German insurance and financial services conglomerate Allianz is involved in a joint program with CARE, an aid organization that once distributed packages in Germany to help survivors of World War II, to introduce a new type of micro-insurance. The monthly premiums of about five cents are designed to be affordable for the very poor who, in India, are often left destitute by the injury or death of a family's breadwinner.

It took a tragedy to draw Allianz's attention to this gap in the market. After the Indian Ocean tsunami in late 2004, staff at the company's Munich headquarters noticed that they were receiving very few claims from the region -- and realized that most of the victims in Southeast Asia were uninsured.

The notion that necessity is the mother of invention has been especially beneficial to the mobile phone industry in the developing world. The availability of mobile phones has already led to a minor revolution in Asia and Africa. In India alone, more than 7 million people sign new mobile phone contracts each month. The industry is gearing up for an expected 2 billion new customers worldwide in the next five years, 80 percent of them in the developing world.

Companies have been successful in developing countries by employing business models tailored to local conditions. Nokia, for example, has developed a mobile phone with a dust-resistant keypad for the Indian market.

In Africa, some wireless companies are already competing with banks by offering similarly innovative solutions. M-Banking is a technology that allows users to transfer money with a mobile phone. Wireless customers use text messaging to transfer money to another user's phone. The recipient can then go to a shop and convert the credit into cash.

M-Banking is a promising service in a country like Kenya, where there are only 500 bank offices but 10 million mobile phones. Poor people in remote areas of the country have no access at all to banks. Mobile phone banking now enables them to transfer money.

As in the case of India's new inexpensive car, local companies have been pioneers in offering the new service. But now they have new competition from the Vodafone Group, which has discovered the market's potential. In a period of 18 months, Vodafone sold 200,000 contracts for its M-Pesa service in Kenya, and the British company now plans to expand the service to other countries, including Afghanistan and Tanzania. One of its key target groups consists of guest workers who earn money in places like London and send some of their earnings home to their families -- a transaction that could just as easily be performed with a mobile phone.

What began as a good idea in Africa could soon be imported into affluent countries. Executives at wireless companies are convinced that the concept has international potential.

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