Muhammad Yunus won a Nobel Peace Prize for pioneering the concept of lending small amounts of money to the rural poor in his native Bangladesh with his Grameen Bank. In doing so, he invented a billion dollar industry by lending amounts that were considered too small to be economic to a constituency that were considered to be too high risk to normal banking institutions. Not to mention changing millions of lives for the better in the process.

A famous mobile example is lending people enough to buy a mobile phone, that they can hire out within their communities by the minute.

Counter-intuitively, 95% of loans are paid back in full, which is far higher than traditional lending in the west, or via credit cards, for instance.

But according to this article in The Independent, this system appears to be about to change, with at least one Indian bank launching mobile banking, putting themselves in direct contact with the borrowers.

It’s not entirely clear from the article what the motivation might be. It could be that the banks want to muscle in on the microfinance houses themselves by approaching the potential borrower directly. Or that they simply want to make the whole system more efficient, so that borrowers can check payments and outstanding amounts at any time.

I assume that the system isn’t designed to cut of the microfinance houses themselves, as the lending system is dependent on developing deep roots within the local community. This is both to provide support to the borrowers, but also it means that if a loan fails, it could result in the community itself failing to get further credit for its members and this is one reason for the high repayment record. If you remove the local element, the credit risk will spiral alarmingly and the banks must know that.

But either way, the new system could have profound affects on India’s rural poor, their ability to obtain and manage loans and contribute to India’s (and other developing markets) future prosperity as a society.