- Inspired by One-Laptop-Per-Child (OLPC) campaign, the FAB Campaign that I would like to see launched is that we open an Online Bank Account for Every Child that is Born with an initial deposit of $100
- The Online Bank Account can be opened together with Birth Registration
- The initial deposit, with accrued interest, can be withdrawn when the child is 16 years old
- If we start in 2011, by 2030 -in 20 years - every child and young adult in the world will have access to Financial Services. Currently, half the world has NO access to financial services such as savings, credit and insurance bit.ly/2CmcsZ
- Think of how easy this will make targeting of charity and aid - anyone with a click of button (with an internet interface similar to www.kiva.org, www.microplace.com or www.unitedprosperity.org ) could transfer funds to anyone in time of need - without resources being siphoned off
- How much will it cost?
- Currently, about 134 million children are born per year.
- Assuming that 25% of the children born to won't need the initial deposit of $100, we will need $10 billion per year for the remaining 75% - 100 million children
- Is that a lot? Not really - 100 million people donating $100 every year.
- We will need cooperation of the largest banks in the world (after all, they do need to repair their reputations and credibility), the technology companies, philanthropic organizations and committed and passionate people to make this work.
- Vijay Mahajan of BASIX, India (www.basixindia.com) first heard me talk about this idea. He is enthusiastic about it.
- I also discussed it briefly at a meeting of the Center for Financial Inclusion (www.centerforfinancialinclusion.org) in April, 2009 where some liked the idea and thought that it could work.
- This is just the initial idea. For the campaign to take traction, I need your help and support in making it visible. If you are on Twitter, please tweet about it) and ask your friends and followers to retweet. If you are on Facebook, share it with your friends. Blog about it.
- Link to this blog post is bit.ly/FABlog
- Don't forget to read many thoughtful Comments at the bottom of this post. Add your own observations.
1-310-844-6529 (1-310-Think B9)
fabcampaign@gmail.com
Who has seen 16 years?
ReplyDeleteIsn't this similar to the current proposal in US Congress -
ReplyDeletehttp://articles.moneycentral.msn.com/SavingandDebt/SaveMoney/juniors-first-paycheck-500-dollars-at-birth.aspx
Where do you propose the money will come from?
Yes, it does seem similar. What I am envisaging
ReplyDeletethough is financial access for the world's poor. The idea isn't so
much that we give money away but the initial deposit will ensure that
people do sign-up and create an account. The benefits will come once
the online account is set-up. Imagine there is natural calamity in a
particular region in the world. People can transfer money to those in
the affected area directly.
I agree, there are many details that will need to be worked out.
I think this a wonderful idea- good luck! If there is anything I can do to help, I would love to get involved.
ReplyDeleteI looked at your idea. I love the grandness of it. Something that encompasses every child that is born. This sounds like an idea for TED (ted.com). If you could work it into a 20 minute or less talk, and then make it a wish on TED, it might give it some early legs.
ReplyDeleteAlso, did you see the current scrutiny of Kiva.org? (http://www.nytimes.com/2009/11/09/business/global/09kiva.html?_r=1&scp=1&sq=kiva&st=cse) It's important to have transparency in any such endeavor.
This is a fabulous idea. As the author has currently pointed out, the central tenet of his proposal is NOT to give away resources for free to everyone at birth, but rather to establish a basic financial infrastructure for the world's poor.
ReplyDeleteIn fact, as much of the microfinance literature documents, individuals face large impediments to accessing even the most basic financial instruments. What is more, this situation is not limited to developing countries. Even in the US, it can be exceedingly difficult for individuals from very low income backgrounds to open a checking account.
It would make the life of charities much simpler and avoid costly transaction fees.
I am inspired by the commitment behind this effort. The quality of the future that lies before us has a huge impact on how we live our lives. An effort such as this creates a possible future for people who would not have it otherwise. Thank you for this effort.
ReplyDeleteI think this is an excellent idea, and I am very interested to hear more about the implementation and how it would be organized.
ReplyDeleteI did not understand what kind of financial services are you talking about. How much will be the total money in the account in 16 years? Is it going to be enough to pay for college tuition? How will you decide who should get the money and who shouldn't? What kind of loans will be approved? Obviously, $100 million can not just sit in the bank. There has to be a fund established to take care of this amount which is a risque business. Another point to consider is the tax consequences given this this effort will span international boundaries.
ReplyDeleteHi Bhagwan
ReplyDeleteI liked the idea and Re-tweeted. I have shared the post on my blog as well http://bit.ly/2F2rzZ
Hope hands will join and will make this campaign a success. For a good cause and a better society around us.
um the problem still remains - too many people. poverty won't be manageable until the number of people is controlled.
ReplyDeletehow about mandatory sex education for the kid that receives funds into such an account at age 16 (hopefully they would have got some education already before age 16, but still) emphasizing to him/her the disadvantages of having too many kids?
-somegal
poverty eradication is all very well through charity, but poverty eradication can only be consistently achieved through education and population control, in tandem with free money.
One of my friends told me that a similar scheme exists in the UK: http://www.childtrustfund.gov.uk
ReplyDeleteGreat concept indeed.
ReplyDeleteLet me join the supporters' club!
In the suburb where I was born in Paris, Fr. there used to be a similar scheme as well. I don't know if it still works that way but I got an account with 100FRF (approx 15euros) just for being born there. There was no other conditions and at that time I guess it was partly financed by the town or local district.. but now it seems many banks there give 20euros if you open a 'birth savings account' for your child at one of their agencies.
Like the idea better now that I get the premise ... but if the premise is every person having an account, why not fund with much less, e.g., $10. And, if the goal is to create a mechanism for delivering charity, maybe the construct should instead be one account per village, which could be cooperatively owned. To use the example of India, which I believe has some 500K villages, one acct @ $10 per acct would take $5 M - perhaps no more than 5-10x this amount would cover all villages worldwide, or 25-50M, which seems manageable.
ReplyDeleteCooperative ownership with some rules of acceptance, such as how to distribute funds in an emergency, without prejudice to gender, caste, etc., would make conditions upon individual folks less relevant - I was initially concerned about this, like the poster who suggested sex ed for recipients.
I like this idea a lot. Here are a couple of thoughts:
ReplyDelete1) Essentially you are talking about giving people two things (A) access to financial services and (B) 100 dollars. On the site you mention the benefits of each individually (banking can match people and creditors up easier, money can help people make investments in businesses, etc). However one of the things that is very powerful about the idea is that the money and the financial services are likely complements. I think the appeal of this plan can be broadened by focusing more of the future discussions on the complementaries (beyond simply the ability to earn interest on the initial 100 dollar donation). For example the 100 dollars is enough to get a business started, and once the business generates sales there is an easy way to save that money.
2) There are numerous opportunities here to run field experiments based on this idea. One would be to try to test for the complementarities between financial access and the cash transfer on some outcome of interest. Another would be to address some of the concerns, such as whether this idea will influence fertility decisions. You might think that parents would decided to have more kids based on anticipated future transfers of wealth. You could imagine rolling this plan out in a village for a year and seeing how that impacts fertility versus some control villages.
Very interesting. I hope you continue to work on this topic.
This is a great idea to create the necessary resources. However, the devil is in the details. What real activities will the funds created in this way support? Will it help educate children so they grow up to stand on their own legs? Or, will some clever person drain the funds to his/her benefit?
ReplyDeleteAs far as I know, Indian Government is also pondering over such proposal...(Nandan Nilekani's book also mentions this)...
ReplyDeleteThis is an initial response that some of the earlier postings have already addressed:
ReplyDeleteHow do you keep parents from getting the $100? If the parents can't get the $100, how do you keep them from selling their child's $100 to the equivalent of a loan shark that waits until the child is old enough to get their money and then they take the money.
How is this not offering $100 to everyone who has a baby - the exact opposite of birth control, family planning, etc.
What happens to the money if the child dies? Does it go to the family? In some places would this encourage infanticide?
The questions surrounding fraud in third world banks is a whole issue in itself.
Bhagwan, this is a great idea. The only suggestion that I have is that the
ReplyDeletemoney is available at age 18, rather than 16, which is the age that children
legally become adults in the U.S. Also, it would be interesting to know approximately how
much money the child will have accumulated at age 18 and what that can buy: education,
housing, training, etc.
i think this is an excellent idea. my favorite aspects are: 1) eliminating almost all the slippage between the donor and the recipient and 2) the positive externalities associated getting the actual account started (e.g. opening the door to broader access to financial services, making it easy for donors to send additional funds, etc).
ReplyDeletebut for me the really exciting prospect is allowing donors to target their donations -- i.e. link them to grades, abstinence, hardship, updates, etc. one could also imagine setting it up so that each recipient "knows" their donors or sets of donors so that bonds can get formed.
Thank you for sharing the concept.
ReplyDeleteMy 2 cents:
(1) It is critical to provide financial education to the children to enable them to benefit from the scheme.
(2) Parents should be able to draw from the funds for investing in the child's education and healthcare. Singapore's EduSave and MediSave schemes present a working model. Money at 16 is not worth it if the child does not survive; has not received basic primary and secondary education.
(3) It should not be a donation based model - typical scalability challenges - coordination issues; agency costs; leakages. The same objectives can be achieved by providing a long-term interest-free loan. This will increase the value the children and their parents will place on the funding received.
Concept is great - as usual, the devil lies in the details and the execution - that's where most models fail. Would be great to continue the discussion in that direction.
Cheers!
Bhagwan. I've been thinking about your idea this weekend. I've been
ReplyDelete> trying to imagine how to resolve 2 issues that I have:
> 1. how to set correct incentive and goal in order to make the $100
> available so it is not just a handout...
> 2. how to ensure that it is for the benefit of the intended child and
> not create incentives for corruption...
>
> 1. For the first issue I've been playing with the idea of tying
> the grant to education goals? Perhaps x$ to be
> contributed to each account for every year completed of education? I
> know this could potentially create corruption incentives, but at least
> it would tie the continued support of each account if the intended
> beneficiary has completed x years of education?
> 2. For the second one, perhaps if the money could only be withdrawn
> by 50% of the balance at the age of 18 yrs and the remaining becomes
> eligible at the age of 25 yrs perhaps this could dissuade corruption on many fronts?
>
> I find the idea intriguing and the above are the issues that I think
> should be resolved some how.
From the November edition of the "MicroCapital Monitor"
ReplyDeleteMercy Corps, XacBank Emphasize Savings
A recent forum in the US state of Oregon, sponsored by Mercy Corps,
featured XacBank’s efforts to alleviate poverty in Mongolia through
savings accounts. One program, “Future Millionaires,” offers higher
interest rates on savings accounts opened for children at birth, with the
stipulation that no withdrawals be made until the child reaches age 18.
The minimum deposit is equivalent to USD 2.10. Another XacBank
program, supported by Women’s World Banking and the Nike
Foundation, encourages young girls to open savings accounts and
teaches them about personal finance. November 5. 2009
Bhagwan--
ReplyDeleteI too love the grandness of this idea and see it addressing two needs: 1. Financial inclusion- addressed through the linkage with birth registration and 2. wealth creation -- addressed through the small amount of start up capital used to open the account.
I think the first objective could be achievable and scaleable with the right governmental cooperation and incentives to the banking industry. Creating linkages to the formal financial sector from birth on could be a powerful disruption to the current status quo of financial inclusion haves and have nots...
The second objective to me seems almost less important. Yes, we need to find a way to get capital in the hands of the poor, but I worry about identifying the $10 billion needed. Maybe I'm old-fashioned but $10 billion still seems like a lot of money and I would hate for the first objective to be held hostage to the second.
But all in all, bravo for thinking big!!!
Outstanding idea!
ReplyDeleteAnd it could be launched on a self-funding basis, through local sustainability commitments.
1. In choosing communities, initial funders could give preference to poor regions that agree to "land grant" endowments that over time will contribute funds to a Financial Access from Birth trust for their community.
2. Special preference could be given by the initial funders to communities that also agreed to awaken the "dead capital" in land values of their community through transparent land titling reforms, and eGovernment pilot projects to remove obstacles to entrepreneurship.
"Free zone" incentives for the land grant endowment areas also could lead to 5x appreciation in the assets held by community's FAB online bank account trust. (Background on how success-sharing free zones can be quickstarted is at www.openworld.com).
Again, congratulations on the idea. Openworld would be willing to make microstipends available for work-study projects by students in poor community that would like to research the Financial Access at Birth opportunity, and upload summaries of their findings to YouTube.
Mark Frazier
Openworld.com
@openworld (twitter)
Sadly, I don't think this is a good idea for several reasons:
ReplyDelete1) There are many, mnay more immediate and intense emergency needs that trump this idea. I would rather see money ($10 billion) go towards more pressing needs.
2) Financial Access at Adulthoold (FAA) trumps Financial Access at Birth (FAB) because that would have immediate impact rather than the donor waiting 16 years to see the benefit of his/her contribution; (b) giving money (i.e., accounts with money) to poor children, many of whom will become self-sufficient when they reach age 16, is not the optimal thing to do. It would be better to select beneficiaries from a group of 18 year old adults than to select beneficiaries from newly born infants.
I think the initial idea is great.
ReplyDeleteNot only are you proposing to jump start savings for some, but indirectly are promoting a very important concept that has been alien to many-- that of saving. At this nascent stage, it doesn't matter if the amount is $10 or $100.
On a personal note, I would love to see this tied to the education sector in some way. Maybe incremental rewards for grades completed successfully. I know this sounds like an administrative nightmare to even think of; but what I am proposing is an idea in concept. The details can always be scrubbed later.
Its important to keep stressing on education- as ultimately without one, no amount on bank balance will enrich a life.
Others have already covered some of these points...
ReplyDeleteThere needs to be a mechanism to ensure that we are not encouraging people to have more children. For e.g. child 1 is $100, child 2 is $60 each, child 3 is $50 for just the first two children. There has to be a negative motivator for the parents to have lesser children.
To avoid fraud, the money should not be encashable but rather in the form of coupons that can be redeemed at a university / technical college / business incubating organizations, etc, and only by the child in whose name and details the coupon is.
FABulous Idea! Please permit 3 Comments:
ReplyDelete1. Economists should elaborate some sample solutions, algorithms and models for the payment, accumulation and disbursement management of the fund, for use by governments, NGO’s, social welfare groups and financial institutionscould use to start with.
2. To succeed in any society, the idea should be first adopted by the intellectual public opinion and promoted as one requiring urgent action.
3. This idea dovetails wonderfully with the Unique Identification Number Project currently starting in India yielding high synergy benefits. Contributing to the poverty eradication program could be a remarkable immediate benefit of the UID and FinancialAaccess@Bbirth projects.