The small Indian Ocean nation of the Maldives has begun setting up a pioneering system which it hopes will make it one of the first countries whose citizens bank primarily using mobile phones.

All the country’s banks have been brought together under a single system to allow the islands’ residents to pay money in and out swiftly without the need to travel to the nearest branch – which could be many miles away.

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The Maldives received a US$7.7m loan from the World Bank in April, allowing it to begin establishing m-banking. It was seen as an ideal place to start up, with a relatively high GDP and lots of people with mobile phones.

“People are quite supportive, because the project is targeted at the rural islands, and especially the people who don’t have any banking,” Maldivian journalist Zahina Rashee told BBC World Service’s Culture Shock program.

“For example, in the 2004 tsunami, a lot of people lost all their life savings because they had them in a pillow or a tin can at home.”

Extending credit

Tom Standage, Business Editor of The Economist magazine, said that mobile banking has been a major success story in the developing world and is in fact ahead of the developed world.

He explained that in a typical developing country, for each extra 10% of people with mobile phones, an extra half a percentage point is put on GDP growth a year.

And he predicted that the next wave of economic development will be driven by “m-banking”.

“There’s are some very interesting things happening in Kenya, in South Africa, in the Philippines, with mobile banking – and this is taking it to the next level,” he said.

“What’s interesting about this system in the Maldives is that it’s an experiment, as far as I can see, that the World Bank is setting up as a way of extending credit to people.”

He added that it would be “very interesting” to see the impact of getting all banks together and applying a single system across the whole country.

“I think it’s a very promising area,” he added.

“Yes it does make money for the operating companies – essentially it costs the same amount as a text message to send money in or out – but even the poorest people who use this are prepared to do that, because there are benefits for them there.”

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