Monthly Archives: February 2009

How Mobile Phones are Changing Banking and Finance. Money Next?

This story suggests the enormous possibilities inherent in the new mobile phone technologies and networks. – t.h.g.

How mobile phone banking is empowering the poor

13 Feb 2009 15:11:00 GMT

Written by: Natasha Elkington

Six years ago on a whim, I was lucky enough to buy a farm with two friends in my native Kenya. The farm borders the Shimba Hills National Reserve, high above the coastal plain. It’s an enchanting other world, but also very remote. As I live in Britain at the moment we’ve hired a caretaker, Samuel, to protect the land from squatters and wild game that occasionally breaks through the fence looking for food.

The problem is how to pay Samuel when the nearest bank is 50 km (30 miles) away in Mombasa. The answer – as improbable as it sounds – is by mobile phone. Two years ago, a new phenomenon hit Kenya that allows money to be transferred between people using text messaging called M-PESA (pesa means money in Swahili).

This system, known as “branchless banking”, lets people set up remote bank accounts that are accessed through their mobile phone or other technology.

It’s a financial revolution that has taken Kenya by storm and will probably do the same across the rest of the continent by giving Africa’s poor access to financial services for the first time. Africa has seen phenomenal growth in mobile phone subscribers – with 278 million users by the end of 2007, according to Britain’s Department for International Development (DFID).

M-PESA, which was set up by Vodaphone and funded through DFID, now has 5 million users in Kenya, more than all the bank accounts. It is being expanded to support salary payments, bill payments and social benefit payments. Poverty experts say a lack of access to banking hampers people’s ability to improve their incomes and pay for healthcare and education, whilst holding back countries’ economic growth.

This is true especially in Kenya, where a large part of the population don’t have bank accounts because they live in remote areas, don’t have proper addresses, don’t have funds to maintain an account or don’t have the education to deal with a bank. But with the introduction of M-PESA, people are beginning to feel more financially empowered.

It works like this. A registered user can put money into their account at an M-PESA agent and send it to other mobile phone users by SMS instruction. The recipient can then retrieve the money from another agent. These outlets include local mobile dealers, petrol stations, supermarkets and kiosks.

This service has also literally been a life-saver! Two months ago, Samuel sent a text telling me his wife was having a difficult labour and he had to rush her to hospital. The next text I received was that his wife was in critical condition. Right away I called my friend in Kenya who was already on the case and in a matter of minutes we were able to send money to Samuel whose wife received immediate attention and is on the road to recovery. Unfortunately, the baby could not be saved.

But if we had not been able to send money to Samuel so fast, he would have almost certainly lost his wife too. This vital technology is changing how people in developing countries live their lives, has the potential of easing the burden of poverty and can be a way to advance microfinance projects.

Britain’s International Development Secretary Douglas Alexander announced this week that the government is embarking on a £1.4 million ($2 mln) three-year project that will lay the foundations for financial services to be made available through new and emerging technology across Africa and Asia – including Kenya, Tanzania, Pakistan, Nigeria, India, Bangladesh and Ghana.

“A lack of access to finance in some parts of the developing world stifles entrepreneurship, stunts development and leaves people trapped in a poor, cash-only society,” Alexander said. “It is the world’s poorest who could benefit from this most … A rapid increase in access to financial services could lift millions out of poverty and help change their lives forever.”

It is predicted that mobile-phone banking could add as many as a billion banking customers to the system in five years because it is relatively inexpensive to set up and there is no need to invest in new infrastructure because it uses the existing mobile phone network.

From Reuters AlertNet

Yes, Abolish the Fed, But How?

Congressman Ron Paul has for many years been the lone voice crying in the “wilderness” of Congress for an end to the exploitative and disruptive central banking monetary system. Once again he has called for abolition of the Federal Reserve Banks and Board, and recently introduced a bill that would accomplish that. In his introductory remarks, he also called for government to issue only currency that is “backed by stable commodities such as silver and gold to be used as legal tender.”

While I agree with the need to abolish the Fed (and all similarly structured central banks that exist in most other countries around the world), and I agree that the power of the banks and the federal government to debase the currency needs to be curtailed, it is extremely unlikely that legislation adequate to that task can ever make it through Congress. Nonetheless, I applaud Congressman Paul’s efforts because they will at least accomplish the job of raising awareness in the public mind about the nature of the money problem.

Eventually, it may be possible to act effectively at the governmental level, but only after the people have strongly asserted their own power to mediate the exchange process using their own credit apart from banks and the political money system. Only that assertion can bring about the “true free-market economy” that Mr. Paul desires. The nature of this power and how we can assert it are thoroughly addressed in my upcoming book, The End of Money and Future of Civilization.(Due to be released in April, 2009 by Chelsea Green Publishing). – t.h.g.

The following was taken from

End the Fed

by Ron Paul

Before the US House of Representatives, February 4, 2009, introducing The Federal Reserve Board Abolition Act, H.R. 833.

Madame Speaker, I rise to introduce legislation to restore financial stability to America’s economy by abolishing the Federal Reserve. Since the creation of the Federal Reserve, middle and working-class Americans have been victimized by a boom-and-bust monetary policy. In addition, most Americans have suffered a steadily eroding purchasing power because of the Federal Reserve’s inflationary policies. This represents a real, if hidden, tax imposed on the American people.

From the Great Depression, to the stagflation of the seventies, to the current economic crisis caused by the housing bubble, every economic downturn suffered by this country over the past century can be traced to Federal Reserve policy. The Fed has followed a consistent policy of flooding the economy with easy money, leading to a misallocation of resources and an artificial “boom” followed by a recession or depression when the Fed-created bubble bursts.

With a stable currency, American exporters will no longer be held hostage to an erratic monetary policy. Stabilizing the currency will also give Americans new incentives to save as they will no longer have to fear inflation eroding their savings. Those members concerned about increasing America’s exports or the low rate of savings should be enthusiastic supporters of this legislation.

Though the Federal Reserve policy harms the average American, it benefits those in a position to take advantage of the cycles in monetary policy. The main beneficiaries are those who receive access to artificially inflated money and/or credit before the inflationary effects of the policy impact the entire economy. Federal Reserve policies also benefit big spending politicians who use the inflated currency created by the Fed to hide the true costs of the welfare-warfare state. It is time for Congress to put the interests of the American people ahead of special interests and their own appetite for big government.

Abolishing the Federal Reserve will allow Congress to reassert its constitutional authority over monetary policy. The United States Constitution grants to Congress the authority to coin money and regulate the value of the currency. The Constitution does not give Congress the authority to delegate control over monetary policy to a central bank. Furthermore, the Constitution certainly does not empower the federal government to erode the American standard of living via an inflationary monetary policy.

In fact, Congress’ constitutional mandate regarding monetary policy should only permit currency backed by stable commodities such as silver and gold to be used as legal tender. Therefore, abolishing the Federal Reserve and returning to a constitutional system will enable America to return to the type of monetary system envisioned by our nation’s founders: one where the value of money is consistent because it is tied to a commodity such as gold. Such a monetary system is the basis of a true free-market economy.

In conclusion, Mr. Speaker, I urge my colleagues to stand up for working Americans by putting an end to the manipulation of the money supply which erodes Americans’ standard of living, enlarges big government, and enriches well-connected elites, by cosponsoring my legislation to abolish the Federal Reserve.

Dr. Ron Paul is a Republican member of Congress from Texas.


Here is the bill as introduced in the House.

Taken from

Federal Reserve Board Abolition Act

HR 833 IH


1st Session

H. R. 833

To abolish the Board of Governors of the Federal Reserve System and the Federal reserve banks, to repeal the Federal Reserve Act, and for other purposes.


February 3, 2009

Mr. PAUL introduced the following bill; which was referred to the Committee on Financial Services


To abolish the Board of Governors of the Federal Reserve System and the Federal reserve banks, to repeal the Federal Reserve Act, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,


This Act may be cited as the ‘Federal Reserve Board Abolition Act’.


(a) In General- Effective at the end of the 1-year period beginning on the date of the enactment of this Act, the Board of Governors of the Federal Reserve System and each Federal reserve bank are hereby abolished.

(b) Repeal of Federal Reserve Act- Effective at the end of the 1-year period beginning on the date of the enactment of this Act, the Federal Reserve Act is hereby repealed.

(c) Disposition of Affairs-

(1) MANAGEMENT DURING DISSOLUTION PERIOD- During the 1-year period referred to in subsection (a), the Chairman of the Board of Governors of the Federal Reserve System–

(A) shall, for the sole purpose of winding up the affairs of the Board of Governors of the Federal Reserve System and the Federal reserve banks–

(i) manage the employees of the Board and each such bank and provide for the payment of compensation and benefits of any such employee which accrue before the position of such employee is abolished; and

(ii) manage the assets and liabilities of the Board and each such bank until such assets and liabilities are liquidated or assumed by the Secretary of the Treasury in accordance with this subsection; and

(B) may take such other action as may be necessary, subject to the approval of the Secretary of the Treasury, to wind up the affairs of the Board and the Federal reserve banks.


(A) IN GENERAL- The Director of the Office of Management and Budget shall liquidate all assets of the Board and the Federal reserve banks in an orderly manner so as to achieve as expeditious a liquidation as may be practical while maximizing the return to the Treasury.

(B) TRANSFER TO TREASURY- After satisfying all claims against the Board and any Federal reserve bank which are accepted by the Director of the Office of Management and Budget and redeeming the stock of such banks, the net proceeds of the liquidation under subparagraph (A) shall be transferred to the Secretary of the Treasury and deposited in the General Fund of the Treasury.

(3) ASSUMPTION OF LIABILITIES- All outstanding liabilities of the Board of Governors of the Federal Reserve System and the Federal reserve banks at the time such entities are abolished, including any liability for retirement and other benefits for former officers and employees of the Board or any such bank in accordance with employee retirement and benefit programs of the Board and any such bank, shall become the liability of the Secretary of the Treasury and shall be paid from amounts deposited in the general fund pursuant to paragraph (2) which are hereby appropriated for such purpose until all such liabilities are satisfied.

(d) Report- At the end of the 18-month period beginning on the date of the enactment of this Act, the Secretary of the Treasury and the Director of the Office of Management and Budget shall submit a joint report to the Congress containing a detailed description of the actions taken to implement this Act and any actions or issues relating to such implementation that remain uncompleted or unresolved as of the date of the report.

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