Tuesday, March 21, 2017


IMTFI'S Spring 2017 Newsletter has just been published!

Here's a look at the Institute’s recent announcements, academic publications, media hits, and public engagements.  

Read on for details on upcoming events:
  • 4/08 - Financial Inclusion of the Poor Workshop at Habib University, Karachi, Pakistan
  • 4/19 - Mobile Money, Development, & Financial Inclusion in Africa Symposium at Cornell University
  • 5/04 - Financial Inclusion and Sustainability: How Profitable is the Business, How Viable the Indebtedness? at Universidad ICESI, Cali, Colombia 
  • 5/15 - Dilemmas Concerning Financial Inclusion at CIESAS, Guadalajara, Mexico 

Tuesday, March 14, 2017

My Smart Phone is a Love Trophy: On Boyfriend-Girlfriend Negotiations and the Tensions between Adults and Adolescent Girls in Digital Nigeria

By Jude Kenechi Onyima and Chinedu Francis Egbunike

Boyfriend wooing an adolescent girl with smart phone
at a bush path in Anambra Stateption
"….If you do not like him, why did you accept his friendship?’’ Chika’s friend asked her as they walked from school homeward. ‘‘I accepted because he bought me a Samsung smart phone," Chika replied.

Exchanges like the one above appeared in many of the stories we collected during our 12-month ethnographic research in Nigeria about the tensions between adults and adolescent girls regarding ownership and use of mobile phones. A majority of adults in our study agreed that feature phones (cheap phones meant for calls and text messaging) are appropriate for early adolescents, and that smart phones were acceptable for late adolescents, but with conditions. In contrast, a majority of girls felt that restricted access to mobile phones is an infringement on their autonomy and their quest to join the global community. Especially in Christian neighborhoods, adolescent girls have found allies in their boyfriends who provided girls with smart phones. This has connected adolescent girls, their boyfriends, and girls’ parents in an unexpected web of duplicity, interdependence and contradictions.

The intrigues that surround phone ownership and use by adolescent girls show how the mobile phone mediates how young people construct their identity, struggle for autonomy and their self-expression. It exemplifies how technology can create a new social culture. Smart phones, unlike feature phones, display symbolism which transcends economic or technological meaning. Apart from attracting prestige and the feeling of 'I have arrived,' they reveal emotional flows and connectedness.

As we observed in our study, boyfriends’ purchase of smart phones for their girlfriends consolidated boyfriend-girlfriend relationships in a unique way. As seen in Chika’s story above, a girls’ acceptance of a phone means acceptance of a relationship. By purchasing a smart phone, a boy extends his influence and control over a girl. In another example, Edna, a 16-year-old student, returned a Techno mobile phone to her boyfriend after six weeks when she heard that he purchased another phone for another girl. Similarly, Arinze insisted that Sandra must return the phone he bought for her when they broke off their friendship. Phone ownership among adolescent girls and their boyfriends therefore represents a new form of creating visibility, attachment and identity.

When Amaka, a 17-year-old caregiver, lost her phone, her worry was not about the phone but the strain that the loss would put on her relationship with her boyfriend Chidi, who could not afford to buy a new phone for her. For Amaka, accepting another guy’s gift of a phone entails shifting her allegiance away from Chidi. For boyfriends, providing a smart phone to a girl is a symbol of conquest over other potential intruders. A smart phone is a love trophy. Whose phone a girl accepts and also uses draws the boundary between those whose intimacy is desirable and those whose is not. The smart phone in the context of a boyfriend-girlfriend relationship is more than a technological innovation. Mobile phones acquire new meanings as they become embedded in relations of accountability, reciprocity and secrecy.

Adolescent girls comparing phones at high school
graduation party in Enugu State, Nigeria
A smart phone in the hand of an adolescent girl signifies the autonomy, empowerment and strength of her opposite sex friendship. In our study, over 87 percent of adolescent girls were using smart phones they did not purchase but were given to them. Most girls do not enjoy using feature phones and usually turn down men who could not acquire smart phones for them. Mobile phones could be given as birthday gifts, graduation gifts, lovers’ day gifts, appreciation gifts and gifts brought back from long distance trips. In contrast, feature phones and old phones do not evoke the same symbolism with regard to the quality of opposite sex friendship. Ninety-nine percent of phones bought from abroad were smart phones and they are highly symbolic. They show where a girls’ attachment lies and where her affection flows ‘’…I cannot put my phone in a bag except where I am not proud of it.” Mercy, a 16-year-old apprentice replied during one of our interviews:

 “…As you know, we girls compare a lot when we meet one other. In the past, we discretely compared shoes, jewelry, hairstyles and handbags. Today, it is our mobile phone. I flaunt it [the phone] to intimidate other girls and make my boyfriend proud….”.

Surprisingly, girls are not much interested in how the money is raised for acquiring the phone, or what lengths boyfriends go to in order to give phones to their girlfriends. Obinna, a 17-year-old student could not sit for his Senior School Certificate Examination because he used the money for his examination fee to buy a smart phone for his girlfriend who, incidentally, was his classmate. “…I did not want to lose her love to other men….” Obinna pleaded, in response to his parents and school authority’s queries about what happened to the money. Boyfriends do not take lightly the privileges conferred on them by purchasing smart phones for their girlfriends. They always check up on how the girls are using their phones. Adaobi, a 17-year-old hawker, fought with her boyfriend over access to the phone, refusing to tell him the new password and denying him access to it. Just like the phone that was smashed during their fight, so, too, was their friendship broken: “…Someone who did not bring money to repair the phone he bought earlier does not have the right to question what I do with the phone. He lost his privileges when another man gave me money to repair it, ”Adaobi retorted, as she justified her behavior.

Smart phones purchased by boyfriends have therefore become instruments of accountability and availability, as Erin Kenny observed in her research with Tanzanian University students (2016). Boyfriends expect explanations of what their girls do with their mobile phone. “….Nothing worries my boyfriend like seeing ‘user busy’ when he calls me. He expects me to put all other calls on hold and answer him first. He also monitors how long I spend on calls and with whom…” a 17-year-old female university student in our study narrated during an interview. Buying smart phones for adolescent girls gives boyfriends a special place in the lives of their girls. It shifts accountability for a girl’s phone life away from her parents and on to her boyfriend. When Aisha Mammud, our female researcher asked 17-year-old Fatima how frequently her parent accesses her phone, her response was immediate: “…I will not let them touch my phone at all.” However Fatima allowed her boyfriend access to her password and he goes through her contacts and phone logs for monitoring purposes.

A veteran pharmacist in one of the communities we studied insisted that her daughter must finish high school before she could use a smart phone. She was shocked to discover that her daughter was already using a smart phone for over six months - bought for her by her boyfriend. Just like other girls in our study, the daughter left her phone with her friend and sometimes hid it in the house. I had a similar experience of shock the day that I gave one thousand Naira (about $3) in airtime to three students in a Christian neighborhood, thinking that it was only one of them who owned a mobile phone. One of the students privately unzipped a section of her clothing to reveal a phone hidden in her underwear, while another ran towards her friend’s bag to pick up her phone that she had been hiding there.

Eighty-five percent of adults we interviewed did not want adolescent girls to use smart phones without first meeting parents’ requirements that girls first graduate from high school or reach age 18. Adults believed that smart phone use could work against girls’ concentration and learning as well as give access to unsafe knowledge. "Phones connected online are dangerous in the hands of adolescent girls...," a 54-year-old mother of three burst out at one school debate. Most adults, especially in Christian neighborhoods, believed that smart phones could drive girls into uncharted life adventures, what Mizuko Ito and her research team refer to as, "geeking out" (page 28), and thereby diminishing adults’ control. As one community leader with three grandchildren explained to us:

“…Any mobile phone not purchased by a known relative should be confiscated or returned. Early ownership of smart phones offers unchecked autonomy to adolescent girls; this is malignant due to their age. It makes them gullible to treacherous habits. A number of high school girls have died seeking after the promises of people they met through the phone…”

Sadiq, who purchased a feature phone for her daughter in order to prevent her from accepting a smart phone from a boyfriend, discovered that her daughter willfully damaged the feature phone in order to make room for a smart phone. The daughter changed the casing on the new smart phone her boyfriend bought for her to an old one and lied that it was a spoilt old phone she got from the outgoing school principal. In another case, a 52-year-old female teacher who insisted that her daughter should return the smart phone bought by her daughter’s boyfriend discovered nine months later that said phone had been hidden by her daughter and not returned after all.

An adult querying an adolescent girl over the source 
of the smart phone she was caught using.
Our in-depth interviews with adolescent girls and adults provided justification for why most parents frown on boyfriends’ smart phone gifts. There are incessant phone-related misunderstandings, violence, and battering. Men tend to take their privileges to the extreme. Girls who out of naivety accepted the offer from a boyfriend did not find it easy to exit the relationship when they became uncomfortable. A 19-year-old school dropout told us that she was raped by the man who bought her smart phone: “…Men do not believe in a free lunch; any kindness they show is an investment of which no pleading can deter them from raping.” She continued, “Many of us who accepted guys because of phone reasons regret the act and wished we were smarter." Some men insist that their smart phone should be returned to them whenever the relationship collapses and such tensions have generated issues involving police and community leaders. “…He has slapped me for allowing another man to use the phone he bought for me. He had seized the smart phone from me many times and had uninstalled whatsapp services in it to avoid my interaction with other men,” Amaka, an 18-year-old fashion apprentice revealed to us. When we inquired why some girls accept smart phones from men knowing these potential consequences, Muna, a 17-year-old university student, shared her views:“…They accept because it is a ‘smart phone’. It gives them identity, smart phones is freedom and reputation. It shows that you have arrived. A smart phone is a girl's best friend - it cures loneliness.”

Finally, our study revealed that phone-related quarrels occur every 72 hours in homes where there are adolescent girls. Adults have reservations about adolescent girls’ use of smart phones. Many felt uncomfortable, threatened, even perplexed, while others are resigned to the fact of girls using smart phones. Adults shy away from the task of preparing adolescent girls for the responsibilities entailed in the digital revolution. Meanwhile, girls have not relented in a bid to outmaneuver adults and their roadblocks. Highly religious people feel more threatened by adolescent girls’ use of smart phones and as a result, create more roadblocks to uptake. However, Christian adolescent girls have more opportunities to acquire smart phones from boyfriends than do their Muslim counterparts. Yet tensions appear to be greater in Christian homes. Tensions are also higher among urban than among rural poor.

The digital revolution has indeed altered adults and adolescent girls’ social identities and created a new social space mediated by smart phones. This change is common in Christian-dominant Southern Nigeria. Our study shows that under these circumstances, adults who can play a “midwifery role” in ushering girls into the digital age could achieve better results in ‘redeeming adolescent girls’ from irresponsible use than those who play resistant roles in restricting girls’ smart phone use. The peculiar role of smart phones in boyfriend-girlfriend relations is still evolving. What has become clear for many of our study participants, is that a new culture of juggling identities in this social space is here to stay. But for those participants who are not comfortable with the identity the digital revolution has assigned them, there is still much room for negotiation.

Read Jude Kenechi Onyima and Chinedu Francis Egbunike's final report here
Kenny. E (2016) “Phones means lies”: Secrets, Sexuality and the Subjectivity of Mobile Phone in Tanzania.  Economic Anthropology 3: 254-265. http://onlinelibrary.wiley.com/doi/10.1002/sea2.12062/abstract

Ito. M, Horst. H, Butanti. M, Boyd.D, Herr-Stephenson. B, Lange.P, Pascoe. C and Robinson. L (2008) Living and Learning with new Media: Summary of Findings from Digital Youth Projects. The John. D and Catherine. T MacArthur Foundation Reports on Digital Media and Learning. (November) http://digitalyouth.ischool.berkeley.edu/files/report/digitalyouth-WhitePaper.pdf

Tuesday, March 7, 2017

The Last Mile or The Informal Ecosystem for Balancing Monies

This blog builds on a research project that looked at patterns of mobile money (MM) usage for sending money “home” by Burkinabé migrants living in rural settings in Ivory Coast. The study looked at supply characteristics and households' practices in both Ivory Coast and in Burkina Faso and closely focused on conditions around sending and receiving mobile money. We found that the spatial spread of mobile money retailers in remote areas of both countries helps to overcome the migrant senders’ and remittance receivers’ lack of knowledge of the mobile phone technology. While mobile phone companies show a (very) strong interest in the development of a formal “ecosystem” to enable the usage of mobile money to perform payments and act as a payment device instead of being only a value transfer device, our study highlights an informal ecosystem to overcome the challenge of balancing monies in rural settings. In both the areas social intermediation remains key in helping users overcome the challenges associated with knowledge of withdrawal from the mobile money account.

Local retailers play a key role in sending and receiving mobile money remittances

When looking at the supply side, we highlight an impressive increase in the number of MM suppliers between 2012 and 2014. This improvement in MM coverage includes the most remote localities in both countries. MM suppliers, now cover not only the sub-regional economic centers but also remote localities and even the migrant camps found in Ivory Coast. The spatial diffusion provides the infrastructure to convert cash to MM and perform mobile money transfers. In Ivory Coast, 50% of mobile money transfers are performed by relegating this task to the local MM agents/retailers. Thus, while mobile banking is supposed to enhance peer to peer banking relationships using the new technology, local MM retailers still play a key role in performing MM transactions. In Ivory Coast where the migrants live, the presence of local retailers allows the head of the family to use this new technology without having to relegate it to the younger more educated family members. This aspect allows them to maintain control over their financial decisions. In Burkina Faso, the crucial decision of the receivers of the remittances relates to from whom and were they are going to cash out remittances.

Accessing cash and balancing monies, a key issue for MM providers

However, "sending money home" via mobile phones from Ivory Coast to Burkina Faso strongly implies cashing in and cashing out CFA Francs. Deriving most part of their income from farming activities, migrants use the cash they get from the harvest to send money home. Meanwhile, remittances received in Burkina Faso rural settings are always converted to cash. In this context, most mobile money agents in Burkina Faso often end up short in CFA Francs while in the Ivory Coast the problem is where to deposit cash. Thus, for the local MM retailer in Ivory Coast, the problem of carrying cash is considerable while for that in Burkina Faso, the issue is finding a regular access to cash. Far from a peer to peer transaction, the last mile (from the retailer to the bank and from the retailer to the end-user) is therefore of main concern here. Thus, cash is a main constraint that local MM retailers face in establishing reliability with their clients.

Picture 1. Selling goods or cashing remittances out?

In deciding how to send money “home” (either informally or through mobile or international services), Burkinabé migrants living in Ivory Coast do take into consideration the capacity of their local agent in Burkina to cash out the mobile money remittances. This is critical for larger sums of money (above 1 million CFA Francs). Therefore, the issue of the last mile deals mostly with the ability to balance CFA Francs with mobile money. In short, in Burkina Faso, local mobile money providers have to find a way of balancing the two monies to be able to provide remittance services to the local population.

Our findings in the regions where we conducted the research highlights that mobile money agents often combine mobile banking services with commercial activities involving buying, selling, and trading goods. The location of MM providers according to different selling point characteristics is illustrated by the figure below, built from our own census in Burkina Faso where the study was conducted.

Picture 2. Types of mobile money providers along different settings in Burkina Faso      

Solving liquidity constraints while avoiding security issues: creating a non-official and local MM payment system

It is striking that in Ivory Coast only 12% of the MM providers are shopkeepers while this is the case for 50% of local MM providers in Burkina Faso. The difference can be explained by the fact that in Burkina Faso, the selling goods activity is key in the delivery of international remittances since access to cash is ensured by buying and selling items which then allow cashing out of MM remittances. 

In remote villages, MM services are exclusively provided by shopkeepers. MM transfers are also provided by local shopkeepers who do not own a MM seller sim card and instead make use of their own sim-card to perform remittances withdrawals.

Accessing cash in remote areas also implies managing security. The problem is the following: a selling point in a remote setting faces difficulties supplying the necessary cash for large withdrawals because of a lack of access to large amounts of cash. To overcome this constraint, one strategy we found in this region is that the shopkeeper uses mobile money to buy goods in semi-urban settings, from a MM dealer who is also a shopkeeper. This enables him to reduce his mobile money by getting goods. He then sells these items, converting them into cash, which is available for future mobile remittances. In this context, the linkage with cash remains an important challenge to strengthen MM services in rural areas. Buying goods with mobile money enable the MM selling point to balance the cash-in and cash-out transactions. 

The key role played by social intermediaries in channeling remittances

This may also explain why mobile money remittances target semi-urban areas instead of directly reaching rural ones as well as the frequent use of intermediaries. Actually 50% of the transfers first go through intermediaries before reaching the end-beneficiary. Beyond local MM agents, intermediaries involve people from the extended family who are able to master the new technology and access cash (again) such as young students (female and male) in Ouagadougou. Usually these students come from Ivory Coast to study in Burkina Faso where they play a central role in strengthening the ties between family members in Burkina Faso and the migrants in Ivory Coast. Cashing out remittances and delivering them is a key task they perform. In addition, the other similar central figures (masculine) are the uncle or the brother. These intermediaries are also instrumental when the recipient lacks a MM account, which according to our interviews is unrelated to mastering the technology since “the local agent can help!” Most transfers are performed at the MM selling point. This is illustrated by a young female student who formerly was in charge of carrying the money sent by her father to her grandma, but she says that now she has her own account. Finally the cashing out constraint is illustrated by the percentage of remittances sent by mobile phone that reach semi-urban regions compared to the number of traditional sending services that do.


Mobile phone companies show a (very) strong interest in the development of a payment platform to enable the usage of mobile money to perform payments and act as a payment device instead of being only a value transfer device (not only able to perform transfers but also to perform payments). In Burkina Faso, mobile money is not yet a means of payment because of the limited scope of the payment platform. However, some local usages by the shopkeepers allow its usage as a means of payment.

Our findings show that the situation in Ivory Coast and Burkina Faso is still mainly driven by cashing in and out CFA Francs instead of making direct use of MM. In that context our study shows that the diffusion of mobile money services (mainly used to perform national and international transfers) in rural settings is closely shaped by the provider's ability to access cash. Shopkeepers are therefore key in this process. This capacity of converting mobile money into CFA Francs might also limit the expansion of mobile money usage in rural settings. Finally, in contrast to what is being argued in the literature, use and ownership of mobile phones do not play a central role in mobile banking usage and uptake to perform remittances within the context we focussed on. The lack of knowledge and lack of mastery is partially compensated by relegating the task to local retailers and/or social intermediaries.

Our aknowledgements to IMTFI team for constant support and relevant feedbacks to earlier version, Marc Roesh for the comic and Joshua C. Greene, for the editing.

The final report for the project can be found here.

Wednesday, March 1, 2017

The Mobile Money Revolution That Has Not Come: Report on Displaced Peasant Families in Rural Colombia

IMTFI Researchers Maria Elisa Balen, Sonia Laguna and Rosa Guerrero

We are pleased to share the final report of IMTFI funded research "The Mobile Money Revolution That Has Not Come." The research explores the role of mobile money technology in social protection networks among displaced peasant families in Colombia. 

Drawing family maps. Research participants in Putumayo, Colombia,

Report Abstract 

Several countries in the world have sought to pursue the agenda of financial inclusion in combination with government cash transfer programs. This joint effort is geared towards ensuring a certain virtuous cycle where the government to people transfers are partially envisioned as instruments for fostering financial inclusion, the expansion of which in turn would further facilitate the distribution of government cash transfers. This is also the case in Colombia where government agencies, despite their adherence to ‘market dynamics’, have engaged in a series of regulatory changes aimed at facilitating financial inclusion. The development of mobile banking in parallel to government cash transfer has been a part of this agenda.

The uptake of mobile banking, in these target populations has, however, failed to meet the expectations. This report is based on research carried out in two rural areas of Colombia (Montes de María in the north of Colombia and Putumayo in the south). In it, we explore the vicissitudes of mobile banking development by looking at both the materialization of government policy in these two territories and actual practices among the local population who use alternative ways of sending money to their relatives. Our findings relate to the territorial deployment of mobile banking and the movement of money in networks of social protection among forcibly displaced families. In terms of government policy, we found that shortcomings in the physical and organizational infrastructure required for government cash transfers impair the uptake of mobile banking. Related to this, frequent procedural changes make it difficult for people to develop sufficient knowledge and trust in mobile banking technologies. The long-term internally displaced peasant families have been resettled in different territories and face the twin challenges of increased money needs as well as overcoming distance in their practices of social protection. In contrast to the cross-national remittances through which economic migrants participate in the social life of their families and communities, these families practice what we have termed ‘accompanied money’ which means transportation of money by family members themselves. We found that by accompanying the relatively small, yet much needed sums of money, they are able to magnify their support by bringing in goods such as food parcels, and also with their care and company.  

The final report can be accessed here.

Wednesday, February 22, 2017

Special PERSPECTIVES Series on Demonetization in India – Insights, Challenges, and Ways Forward

By Ursula Dalinghaus, Nima Lamu Yolmo, and Janaki Srinivasan

Demonetized  ₹500 and ₹1000 notes
Source: Frontera News 

On November 8, 2016, India demonetized two major banknotes in circulation. According to the Reserve Bank of India (RBI) figures, the denominated notes accounted for 86% of the value of currency in circulation. Importantly, the 500 and 1000 demonetized notes have been replaced by new denominations of 500 and 2000. All of this took place before ATMs were even configured for the new notes! The most visible effects of demonetization were the long queues and cases of numerous casualties and deaths in front of ATMs and banks. With the issuance of the new notes of 500 and 2000, demonetization (“notebandi”) has largely taken the form of replacement, aimed at targeting counterfeiters.

While some see the demonetization move as part of the quest for transitioning to a more digitized payment system, the timing and procedures for the replacement did not take into account factors related to basic infrastructure, coverage, digital financial literacy, and knowledge about the ways in which payments function within formal and informal sectors, social networks and relationships, and barriers related to caste, gender, and literacy, among others.

What lessons does this exercise hold for research on digital financial inclusion in India going forward? 

In our Special PERSPECTIVES blog series on Demonetization in India, we asked IMTFI fellows to provide some preliminary reflections on these issues. In this post, we wrap up our series, highlighting key themes and questions raised by our contributors.

Series Overview

As Vivian Dzokoto (Before Money isn’t Money Anymore…) reminds us, India’s demonetization exercise is neither the first nor the last exercise in changing money’s material form. Monetary authorities guarantee what will count as money and its value, but they can also alter or even revoke it. Money objects are tied up with social relations, cultural repertoires of use, and a larger ecosystem of monetary practices. A change in money must take the user into account. Failure to do so results in loss of trust and social disruption. These outcomes can negatively impact the goal of financial inclusion and undermine the credibility and longevity of payment infrastructures.

Janaki Srinivasan (Demonetization and its Discontents) creates a roadmap for identifying gaps between user experiences on the ground and the categories and visions driving the demonetization experiment in India. Policy efforts to advance the project of greater digital inclusion are not necessarily helped by suggesting one is either for or against cash. Instead, the promise of digital platforms is their flexibility in providing choice among payment options. The user must be at the center of product design. For example, categorizing all unreported cash as “black money” risks putting into one policy basket the multiple (and legally valid) contexts that lead people to keep money hidden and store value in cash form. In particular, a large section of women, including many belonging to the middle class, have had good reasons to hide their small savings in rice bins and cosmetic jars, away from husbands and other family members. This cash is more than money – it is “women’s agency, built through years of under consumption and self-exploiting sacrifices” (Tara Nair, IMTFI financial inclusion workshop, 2016, Bangalore). Demonetization has suddenly compelled women to reveal to men their secret cash stashes, bringing women’s savings practices to the attention of their husbands - with potentially negative consequences for women’s autonomy.  Like Dzokoto, Srinivasan reminds us that one should be careful of “desirable solutions” that bypass the user.

Debashis Acharya (The Recent Indian Demonetisation and Cash Exclusion, Part one and two) gives a first-hand account of the demonetization move as it unfolded. He recognizes that this “policy-induced cash exclusion” has been experienced by particular segments of Indian society as a crisis. But he also suggests it is a positive shock - by being compelled to use digital alternatives, people may encounter positive dimensions of these tools. Success and sustainability will depend on the supporting infrastructure – technological and financial. In a follow-up post, Acharya and his colleagues Subbarao, and Venkatachalapathy test these propositions. They review data-supported trends in uptake and recount a visit to a village participating in a cashless village experiment near Hyderabad. Acharya and his team find that village bank representatives’ ("Mitras") role as intermediaries has become even more important. For grocers, new challenges have erupted with regard to PoS (Point of Sale) devices. How will cost-incentives be structured? Who will/should share the costs? How will the infrastructure be built out? User-centered answers to these questions will be essential to sustaining this digital drive, long-term.

Isabelle Guérin, Santosh Kumar, and G Venkatasubramanian (The Dangerous Liaisons between Demonetization and the Indian Informal Economy (Part one and two) also raise critical questions about the impact of digitization on informal economic practices. In North India and Coastal Tamil Nadu, these have provided a primary safety net for the poor. In part one, they discuss widespread distrust of banking and digital transactions. Demonetization has impacted financial circuits and strained social relationships in these communities. The move – as an instrument of formalization – raises new questions about who will benefit. Far from fighting the informal economy, demonetization is strengthening it. In part two, they outline some crucial questions: What measures can be taken to ensure social protections, fair pricing, and privacy for the poor? Like Srinivasan (and Nair, see above), Guérin and co-authors underscore how cash has been instrumental for women in creating "micro-spaces of freedom" in the household, but also for men, who have their own social networks. How will the move to digital payment forms take these existing strategies into account? Will it facilitate greater financial inclusion?

Disruption. Inclusion. Ways forward…

To conclude, we call attention to some productive dissonances in how contributors approach the implications of this demonetization policy move. Srinivasan is critical of the compulsory nature of this demonetization policy and emphasizes the importance of preserving choice in payment forms. Guérin and co-authors point to the significant technical barriers to implementation of digital finance, which, combined with widespread distrust of formal banking, have the potential for severely disrupting the informal, cash-based networks of social security and exchange upon which the poor greatly rely. In contrast, Acharya folds demonetization into a broader move toward cashlessness and streamlining of payment forms, to the possible exclusion of cash at some point in the future. Pre-paid card projects and other digital experiments are introducing people to the benefits (including security) of e-payment forms, while the need to establish trust in these new technologies remains an ongoing challenge.

These “different takes” on the demonetization move remind us of the politics of payment infrastructures, most visible at times of disruption and change (Rea et al, 2016). Dzokoto’s recent work on currency change in Zambia, where both currency redenomination and the introduction of mobile money were taking place at the same time, shows that a technical change in money always has political implications for policy makers, providers, and for users. For research going forward, it is therefore important - particularly in the wake of this major policy and technological shift - to attend to the interplay of specific payment forms in everyday social practices as a variety of social actors and institutions in India come to terms with these changes.

Insofar as demonetization, as a state policy, has been proclaimed as a move toward greater financial inclusion, there is a need to attend to the crucial question of what do we mean by “inclusion”? By definition, ‘inclusion’ means the involvement of more components and participants. What practices and networks of financial transactions are people being “included into” or “excluded from” by such policy shifts remains a vital question. Have we identified criteria that will help us understand whether a policy or technological intervention is financially ‘inclusive’ or ‘exclusive’? These are questions worth considering every time we encounter a disruptive innovation.

We invite you to send comments to imtfi@uci.edu

Monday, February 13, 2017

Special PERSPECTIVES Series on Demonetization in India: The Recent Indian Demonetization and Cash Exclusion (Part 2)

In IMTFI's PERSPECTIVES blog series, IMTFI fellows take on the recent demonetization move in India. This series aims to foster an open dialogue on issues around money, technology and financial inclusion for the world’s poor. Individual contributions reflect contributors' own reflections on recent events - based on their research and areas of expertise. The topic of demonetization will conclude with a curated commentary by IMTFI on key themes, important questions, and what we can learn from these contributions for digital financial inclusion going forward.

By Debashis Acharya, V V Subbarao, and T K Venkatachalapathy, School of Economics, University of Hyderabad

Mr. A Kalyan Kumar and Mr. A Nagesh “Bank Mitras” of Allahabad Bank,
demonstrating the use of D180 MPOS terminal and Evolute Impress biometric
 reader for cashless transactions in the village.  (Photo by V V Subbarao)

It’s been two weeks since I (Debashis) summarized the recent demonetization move as a crisis-led financial inclusion drive in the first part of this blog. Since then, we (myself with V V Subbarao, and T K Venkatachalapathy) have been following the trends in uptake of digital payments at the national level and the efforts of the local government, i.e. Government of Telangana. The Government of Telangana has been working on furthering this national effort towards a more cashless economy. The experiment has begun in more than twenty villages and these villages have been declared to be cashless villages.1 The report of the committee on digital payments – chaired by a former finance secretary, the Government. of India, and the present principal advisor to NITI Ayog, Government of India – is now in the public domain.2 Before we discuss one of these cashless villages around Hyderabad, let us look at the trends in digital payments before and after demonetization. Though, it’s too short a period to assess the impact per se, the trends in such payments can provide some insights.

The recent data on digital payments published by the Reserve Bank of India (RBI) indicate sharp growth in pre-paid instruments (PPIs) as alternative to cash payments. The PPIs as compiled by the RBI include m-Wallet, PPI cards, and paper vouchers. Payment by m-Wallet is the highest over the financial years 2012-13 to 2016-17, followed by PPI cards and paper vouchers, both in terms of volume of transactions and value of transactions. The figures 1 and 2 plot these trends in PPI based on uptake in digital payments. It’s worth looking at the daily transactions data on PPIs published by the RBI to judge the incidence and possible impact in the future to go cashless. The data on PPIs have been made available, effective from 2010. Data on other digital/electronic payments are available from 2004-05. The apex bank has even been alert to daily transactions through digital modes, effective from Jan 1, 2017.

The objective of generating and compiling such data, as well as keeping it in the public domain, reflects the vision and policy expectations of the current regime and the apex bank. The Government of India has just approved a grand digital literacy program – named Pradhan Mantri Digital Sakshrata Abhiyan(PMDISHA) – for six crore rural households on Feb 9, 2017 (reports Business Standard).3 Figure 3 shows an increasing trend in the daily value of PPI transactions. Here, one sees an increasing trend, even though cash has increasingly been made available on a daily basis over the last two months. In addition to these modes, one could transfer money from one’s account in any bank to another account in any bank through Aadhar Enabled Payment System (AEPS) or PIN PAD using ATM PIN. For instance, AEPS transactions are done using Evolute-Impress biometric machines and the PIN PAD transactions are done using D180 mPOS machines in villages near Hyderabad. We don’t have disaggregated data on such transactions at the moment.

Figure-1 Uptake of Digital Payments by Pre Paid Instruments (Volume of Transactions)

Based on data from the Database on Indian Economy, Reserve Bank of India, 2017.

Figure-2 Uptake of Digital Payments by Pre Paid Instruments (Value of Transactions)

Based on data from the Database on Indian Economy, Reserve Bank of India, 2017.

Figure3: Trend in Daily value of PPI transactions in Dec 2016 and Jan 2017

Let us now turn to some local stories around Hyderabad on cashless village experiments by the local government bodies. As reported by a national daily, the Hindustan Times,4 the first village to go cashless has been Ibrahimpur, 125 kilometers from Hyderabad. Andhra Bank, a public sector bank, has ensured that all villagers have bank accounts and debit cards. The report also notes that some women in the village said they are happier than before with their debit cards since they don’t have the fear of parting with cash for their husband’s buying of alcohol.

The first grocery store in Kasala, as we enter the cashless village.
(Photo by V V Subbarao)
To supplement the macro figures reported above and to learn more on the above said cashless village experiments, we just visited Kasala, a village in the district of Sangareddy, about 60 kilometers from Hyderabad, to study the ongoing cashless experiment. The district administration has declared this village a cashless village. The office of the Collector of this district has had discussions with the Village head and people to promote cashless transactions. As we entered the village the first Grocery store we encountered displayed in the form of a pamphlet an appeal to the villagers to adopt cashless modes of payment,  i.e. through mobile wallet, paytm, and bank account.

This grocer had to manage his payments to the wholesaler by visiting the bank branch, or though the “Bank Mitra” (representative)5 of the village, to procure grocery for his retail outlet in the village. He transferred money to the wholesaler’s account from his account since cash was not available. Before demonetization he preferred cash transactions to the transfers mentioned above. Similarly, the villagers transferred funds to the grocer’s account through Bank Mitras and bought their grocery by producing charge slips given by the Bank Mitras. This was due to lack of cash at hand and for small transactions starting at Rs.200/-. Bank Mitras have been working as business correspondent agents even before demonetization to facilitate financial literacy and awareness on banking, including transactions such as deposits, remittances and withdrawals, etc. They have worked in a variety of ways to bridge the distance between the village and a brick and mortar bank branch. Their importance seems to have only increased after demonetization. However, mobile-based transactions have been very few to date, according to the grocer.

Pamphlet to adopt cashless payments
(Photo by V V Subbarao)
We had an opportunity to interact with the Bank Mitras of Kasala and two other villages nearby. To quote Mr. A Kalayan Kumar, “Bank Mitra” of Allahabad Bank serving Kasala, “The total transactions, post demonetization until Dec 31, 2016, amounted to Rs. 49 lakhs for about 1047 transactions. The transactions per head has been approximately Rs. 4680/-. Before demonetization the transactions used to be Rs.300-400/- per month, amounting to Rs.2 lakhs.” At present, the cost of two of these machines – i.e. a laptop and the Evolute Impress biometric reader – are borne by the Bank. But the Bank Mitra pays about Rs.5000/- for the PIN PAD i.e. D180mPOS, which is used to swipe ATM-Debit cards. An increase in cashless transactions shall prove to be lucrative for the Bank Mitras, given the fact that cashless transactions have increased after this digital push. In villages, Bank Mitras never made a living on the banking activities alone. They used to engage in other economic activities for their livelihood. This could be due to different reasons. Bank Mitras usually get a fixed monthly remuneration and the rest of their earning is commission-based, i.e. a fraction of the transactions they carry out. The commission differs from bank to bank. Hence, Bank Mitras may see a bigger volume of transactions if this digital push is sustained in the days to come and their earnings from commission may increase.

There was some skepticism on the part of the Public Distribution System (PDS) agents, other businessmen, and farmers we interviewed in Kasala. According to Mr. Kalyan and Mr. Nagesh (Bank Mitras), out of 3000 households in the village about 40% preferred cash to cashless transactions, post demonetization, even in spite of the promotional efforts of the local government to go cashless. The PDS agents and businessmen, including grocers, were concerned about the fixed and variable costs of PoS machines needed for cashless transactions. To quote another grocer:

“It’s difficult to invest Rs.10,000/- for one PoS machine on my part and pay a monthly rent of Rs800/-. Why can’t the government bear this cost for at least two grocers in this village? This will instill confidence among us and the users too. We won’t mind paying for this once we realize the benefits.” 

The PDS agent expressed his concern in a similar tone. But the farmers had a tough time paying wages to the laborers due to the daily withdrawal limits. Even though most of them had bank accounts, laborers did not know how to use the ATM card. Although there is no fear on the part of the grocers, small businessmen, farmers, and PDS agents to go cashless and adopt digital payments, the fixed and variable costs of PoS machines seem to be an impediment for sustaining this digital drive in the long run.

As we returned from Kasala, we saw an announcement by the National Bank for Agriculture and Rural Development (NABARD) in favor of some stakeholders, i.e. the PDS agents. The Indian express on February 6 reported:

“In a major push for cashless transactions, PoS machines for credit/debit cards, as well as Aadhaar-based transactions, will be installed at all PDS shops and fertilizer depots over the next few months. In an interview to PTI, Finance Secretary Ashok Lavasa said over 1.7 lakh PoS machines have already been installed at public distribution system (PDS) shops and more will be done in the next few months. ... NABARD has committed to supporting banks through the Financial Inclusion Fund for deployment of up to two PoS devices per village, to cover one lakh villages of tier 5 and 6 areas.”6

The PDS shops have been transacting in cash to date. This announcement is aimed at digitizing a particular segment - i.e. PDS shops and the fertilizer depots - providing free PoS machines as an incentive to induce uptake of digital payments.

The crisis of cash exclusion seems to be turning into an opportunity for businesses, households, and also for the government. Here, business refers to those engaged in the digital payment business who are taking advantage of this digital push. The households partly benefit since they don’t have to keep all the cash with them at a given point of time, thereby avoiding involuntary lending of the extra cash or the risk of theft. The government benefits from transparency in the transfer of benefits.

With “Bank Mitras,”Farmers, and a PDS agent in Kasla village,
Sangareddy District, Telangana. (Photo by V V Subbarao)

What is the future of cashless payments in India? Is this digital inclusion sustainable? The report of the committee on digital payments submitted to the Finance Minister7 cites the high cost of cash as one of the key factors for going digital. To quote the report, “India's dependency on cash imposes an estimated cost of approximately INR 21,000 Crores on account of various aspects of currency operations, including the cost of printing new currency, costs of currency chest, costs of maintaining supply to ATM networks, and interest accrued. Transitioning to digital payments for government payments alone could save Rs. 100,000 crores annually with the cost of transition estimated at Rs.60, 000 to Rs.70,000 crores." However, it is difficult to predict anything clearly either from our macro figures or our brief study of Kasala. For instance, the modalities of a cashless village and the underlying incentives to go cashless seem to be ambiguous in our study of Kasala. There have been two meetings held by district administration with the households and village head in Kasala. The PoS machines have not reached either the grocers or the PDS agents. There is no clarity on the sharing of costs of the machines and the rentals of the machines. Further, the cost discussed in the report of the committee on digital payments may be limited in its scope. The variety of payment options have suddenly gone up in the post demonetization phase. Therefore, the costs associated with different payment options may be different.

The government seems to be transitioning to payments based on Aadhar issued by the Unique Identification Authority of India and the BHIM app simply to reduce costs. These options interfere with the existing big players like VISA and MASTER Card. A point worth noting is that of investment in security innovation. These two big players invest a lot on security and continuously innovate on security features to avoid frauds. How feasible is it for the Government of India to invest in security innovation? Without security and coming to an understanding with these big players, it may be difficult for the Government to sustain this move. I am also reminded of my pre-paid card project and issue of preference for soiled notes by villagers here. Technology needs to be trusted by people in terms of its immediate and long term benefits. A sudden surge in payment options may confuse potential users too.      

Let us sum up our discussion of the macro figures mentioned above on digital payment uptake and our field observations in Kasala. The sustainability of digital payments, from the supply side, will largely depend on savings in terms of cost to the economy. However, not clear at this stage are the cost calculations associated with a broad spectrum of payment options. The voices from our field clearly indicate the need for clarity on cost savings for different stakeholders. For instance, the grocer wants to understand clearly the model of cost sharing and the benefits to be derived. The Bank Mitras are of the opinion that financial literacy drives led by outsiders such as NGOs work better in improving uptake of digital payments. Finally, sustainability may well depend on customized digital payment modes winning the trust of users. This is especially important when the overall infrastructure is not geared up to provide seamless service of a particular digital payment  (such as mobile wallets that are not functioning due to poor networks) and PoS machines failing due to link failures. We will need to allow some time to see how these challenges are addressed in the near future -  and how diverse stakeholders respond.  

For part one of this post, see here

1 http://telanganatoday.news/20-villages-sangareddy-declared-cashless

2 Report of the committee on Digital Payments, Ministry of Finance, Govt. of India, December, 2016 http://www.finmin.nic.in/reports/watal_report271216.pdf

3 http://www.business-standard.com/article/news-ani/cabinet-approves-pradhan-mantri-gramin-digital-saksharta-abhiyan-117020900131_1.html

4 http://www.hindustantimes.com/india-news/telangana-s-ibrahimpur-becomes-first-cashless-village-in-south-india/story-N3sWpxDR1sxdg3uRttqlrJ.html

 5 Bank Mitra is a representative of the bank. He is available in the village with a laptop, D180 mPOS, and Evolute Impress biometric reader to facilitate digital payments. In this village the Bank mitra serves about 3000 villagers.

6 http://indianexpress.com/article/india/card-aadhaar-enabled-payments-at-all-pds-fertiliser-depots-soon-4510416/

7 Report of the committee on Digital Payments, Ministry of Finance, Govt. of India, December, 2016

Tuesday, February 7, 2017

Special PERSPECTIVES Series on Demonetization in India: Before Money isn't Money Anymore....

In IMTFI's PERSPECTIVES blog series, IMTFI fellows take on the recent demonetization move in India. This series aims to foster an open dialogue on issues around money, technology and financial inclusion for the world’s poor. Individual contributions reflect contributors' own reflections on recent events - based on their research and areas of expertise. The topic of demonetization will conclude with a curated commentary by IMTFI on key themes, important questions, and what we can learn from these contributions for digital financial inclusion going forward. 

By IMTFI Fellow Vivian Dzokoto, Virginia Commonwealth University

Demonetization of currency notes -  as the recent one in India - is a reminder about what money really is: material that does not possess inherent value unless society or in this case, an issuing authority decrees that it does. The case of the Reserve Bank of India’s demonetization of 500 and 1,000 rupee notes late last year also reminds us that “money-ness” can be revoked as easily as it can be accredited. While India’s recent change in its moneyscape has been a focus of many critics, it is important to recognize that:

(i) India is not the first country to demonetize its national currency (in part or as a whole and as a matter of fact, this isn’t India’s first demonetization exercise)

(ii) India will most likely not be the last country to demonetize its currency (either in part or as a whole), and

(iii) The world needs to learn from India’s case, just as India should have factored in lessons from the demonetizations of yore.

It is of course easy to be a critic after things go wrong. Hindsight is 20/20, after all. The fact is: being in charge is not an easy task. Tough decisions have to be made. The question to ask at this point is how tough do such decisions have to be, and what needs to be taken into consideration when tough decisions are made? In the case of demonetization exercises, the myriad factors often taken into consideration include the state of inflation, counterfeiting, taxes, the black market, political symbolism, the denominations of the existing notes, people operating outside the formal banking sector, and the efficiency of cash handling systems. Are these important? Absolutely. Should these be taken into consideration? Absolutely. Is this list exhaustive? Absolutely not. 

One thing is often missing from deliberations, especially in cases of demonetization exercises that fail or experience a significant number of hiccups. The user. In particular, the everyday interactions of the everyday person with the material that is money, the ecosystems that have developed around the different objects that are used as money, the convertibility of one form of money into another, and the degree of equivalence of function in cases where conversion is in fact possible. How do disruptions (actual and potential) to the moneyscape affect the lives of the everyday user? How do people learn about, understand, use, and build practices around new iterations of money? Simply put, prior to demonetization, redenomination, or alternatively tinkering with a material’s “money-ness,” issuers of money have got to understand the world of the user better.

"The Way of the Dinosaur" by Mark Wagner
Photo Credit Mark Wagner
Money in the form of cash is many things. To the issuers, it’s legal tender. For many, it’s a political statement. To a baby, it’s one of the numerous things you’re not supposed to put into your mouth. To the R&B artist, it’s the stuff “rain” is made of. To the drug addict, it’s …. Never mind. For techies, it’s an exasperating dinosaur that should have been extinct by now. But it sure looks like cash is here (that is, in many countries) to stay for a while. That means we (students of money, and agencies that deal with the issuing, processing, storage, and securing of money) have to fully understand its various and evolving roles, pathways, practices, and the like in the societies that it serves. And what tinkering with a financial ecosystem does to the user. And what redundancies can be worked into the system as structural changes to the monetary systems are planned. And not just understanding such information: acknowledging it, and factoring such knowledge into public policies and into the logistical planning of national exercises that impact money-ness. Who knows, some of this information might also be relevant to future forms of money.

Over the years, ignoring such information has resulted in negative consequences for the user. In the past, previously wealthy and suddenly penniless owners of huts filled with suddenly worthless cowrie shells in colonial Africa (Saul, 2004) could be seen wringing their hands and contemplating their purpose in life. In India, we have seen long lines, daily activities disrupted because of logistical mishaps, and sadly, lives lost. What negative consequences are there going to be in the future? The answer lies in what we know, and how we use the knowledge that we know. Money is, after all, meant to be used by people. Before going a-tinkering with it, it’s vital to understand how the people interact with it – and do so in its various complexities and forms.

Read more about Vivian Dzokoto's IMTFI research in Ghana and Zambia here and here