Resistance to e-Money in Poor Remittance Recipient Families: The Case of Lombok Island, Indonesia

By Catur Sugiyanto, Tiar Mutiara Shantiuli and Zuhrohtun.

Each year, approximately 50,000 workers from the Nusa Tenggara Barat (NTB) (West Nusa Tenggara) Province in Indonesia go abroad to work. Their main destinations are Malaysia and Saudi Arabia. In addition, many workers seek work in Taiwan, Hong Kong, and South Korea. These workers usually have little education. The Human Development Index (HDI, HDI Human Development Index) for this province is low; the index rates the region 32nd out of 33 provinces in Indonesia. Such a low HDI indicates that most of the population, including the poor, has little education.

Remittances have been key for the livelihoods of the families that workers leave behind. There are different ways to send money home: In the past, sending money to friends or acquaintances through surrogates who are returning home accounted for a large portion of remittances, although the exact proportion is unknown due to a lack of official statistics. Delivery through bank transfers and other modern electronic methods (Western Union, Money Gram, etc.) is already widely known to workers. In addition, asking for friends’ help is still common. It is not known with certainty, however, how much money is sent through friends and Tekong (unregistered sender/agency workers).

Transactions with the bank and post office are not easy for remittance recipients. 
They need “someone” who can help.

The technology used to transfer money from abroad includes a number of modern transaction technologies. Therefore, it is interesting to examine the process of the adoption of new technologies as well as their adaptation. Other research shows that the process of adoption of new technologies is not a simple one. For the case of the adoption of new technologies in agriculture, various studies have shown how the extension system was successful in Asia (Otsuka and Kalirajan, 2006; Otsuka, 2006), and also in Indonesia (Resosudarmo and Yamazaki, 2011).  Adoption of new technologies moves the adopter from a transactions space  were he/she is very comfortable, familiar, full of confidence, into a new domain that exposes him to new conditions that are not necessarily comfortable, though perhaps still familiar, and that involve new risks. Therefore they need an intermediary person who helps the adopter move from the old system into the new system.

In order to understand how the workers’ families learn about new technology, we surveyed 200 poor remittance receivers in the NTB province. Receiving remittances through banks is preferred because although users cannot conduct their own transactions,  there are private services (usually motorcycle drivers) who are "knowledgeable about transactions with banks”.  Families receiving remittances pay a fee to the motorcycle taxis of around 50-200 thousand per transaction (including the return transport) to facilitate the transfer. Receiving money through Western Union (WU) is also favored by families of migrant workers, because the process is easier: there is no need to open a bank account,  no need to carry a passbook, and it is sufficient to show an identity card (ID) and enter a pin code (which is usually a PIN sent via SMS) to receive the money. WU also has more strategic locations and is affordable for families of migrant workers. WU is available in various banks, Indomaret mini markets, and pawnshops. WU locations in the post office are also common and accessible.  The number of post offices in NTB province is 79 units, consisting of 4 post offices, 56 post office branches, 10 additional post office units, 2 mobile postal units and 7 sub-sub office branches. WU at pawnshops have more accessible locations because they are available everywhere.  There are about 128 outlets in NTB province. These pawnshops have relatively flexible hours, since they are also open on Sunday, meaning that they are accessible all week from 10am-8pm.

Families of workers are also likely to receive money at the airport, through Tekong or friends returning home. Families waiting for remittances have become a common sight at the arrival gate of the Lombok airport. Receiving money via the worker recruitment agency is also convenient because compatriots usually work in the same place (eg the same plantation), so it imakes the delivery and retrieval of funds easier. Remittance transactions through MONEY GRAM (where the transaction process is almost the same as WU’s), are also seen as convenient by workers’ family members: those who have subscribed can take money orders via telephone and money can be delivered to the families’ homes,with no set fee.

The stages along the path to the use of new technology are also interesting to observe. Do the remittance recipients have bank accounts or mobile phones first  or  do they use both concurrently? If they begin using a mobile phone first then they may need a bank account to save money. If remittance recipients begin with a bank account and then use a mobile phone to receive a PIN transfer, it usually indicates that they are looking for flexibility in accepting a transfer: not necessarily through the bank but through a variety of media discussed above. These processes have not been explored in the survey, therefore there is no definite answer to how to process remittance recipients' adoption of modern technology in the transfer of money.

A "tekong" helps a remittance recipient navigate the cash transfer process.

Thus, it can be concluded that the beneficiaries of remittances still prefer traditional methods: receiving money through a friend or someone they know. Even when dealing with the bank, the post office, or other institutions, they need intermediaries who can "speak local" and make them comfortable, even if they are not motorcycle taxi drivers or office workers formally involved in these transactions. Those who are willing to use bank transactions continue to prefer "person to person " transactions with service tellers over automated technologies. It seems that the continued importance of intermediaries in developing familiarity with new kinds of transactions and technologies is key to why remittance recipients continue to prefer traditional transactions over e-money.

Mobile Money Payments in Ghana: Part Two, Public Intervention

By Yaw Owusu-Agyeman and Abena Offe

In the second of two blog posts on mobile money uptake in Ghana, we look at the role we believe the government of Ghana can play in promoting mobile money uptake. We have explained in detail some key responsibilities of government in the uptake of mobile money in Ghana and some lessons drawn from the conference that was organized in March 2013.

Photo by Yaw Owusu-Agyeman and Abena Offe

Creating a cashless society
The creation of a cashless society will help all Ghanaians and more importantly the businessmen who travel very early in the morning and late in the night to carry out business transactions. Other participants also indicated that the Bank of Ghana must put in place measures to create a cashless economy with the introduction of mobile money services. Key to these processes will be the use of mobile money agents to create awareness of the benefits of transacting business without the use of cash. The agents could also educate individuals on the advantages of using mobile money and more importantly, train and register them at their own convenience. Thus, people will not have security concerns if the government and BOG direct or encourage the uptake of the services.

Participants at the conference were unanimous in their submission that the role of government in mobile money was very important especially in the design and implementation of policies that support the uptake of mobile money in Ghana. Other presenters also indicated that financial institutions, especially the banks would have to develop appropriate blue prints with the MNOs and the Ministry of Finance to develop special products for farmers in the rural communities to sell their farm produce. This point was corroborated by the Minister of Communication who indicated that government will continue to partner individuals and organizations to ensure that mobile telecommunication and mobile money reaches the both rural and urban poor. He also indicated that government would create the enabling environment and policies that would ensure that Ghana developed a cost effective and affordable information communication infrastructure for the benefit of all Ghanaians.

Photo by Yaw Owusu-Agyeman and Abena Offe

MNOs, retail agents, consumers, NGOs and other related agencies all indicated that there is the need for government to control the agency networks and provide agents with the necessary financial support to promote mobile money across the country. According to one of the presenters at the conference, the agency network has not been well considered by all stakeholders in Ghana and is one of the contributing factors to the low uptake of mobile money in Ghana. In order to develop user confidence in any digital financial payment system, it is important to provide adequate state-controlled security measures that will protect all parties in the transaction and this can only be well structured by the government through the Ministry of Communication.

Other issues of concern included: the need to increase consumer awareness of mobile money and other forms of digital financial payment systems, improving information dissemination about the use of Mobile Money and the involvement of retailers and consumers in the product design and usage. Since government had a department responsible for the dissemination of information to rural areas, some participants to the conference were of the opinion that the Information Services Department could play a leading role in education people in the rural areas about the benefits of mobile money. Participants at the conference also strongly opined that there was the need to involve consumers in the design and development of any mobile money product to ensure increased patronage and use.

Photo by Yaw Owusu-Agyeman and Abena Offe

Role of government in mobile money uptake
Global trends in Information Communication Technology require all countries to adopt best practices that seek to include all citizens especially the less privileged. While urban dwellers continue to benefit from the gains of infrastructure and technological development, it is imperative for government to provide rural dwellers with the necessary digital financial services to make them also enjoy the gains of a cashless society. Government funding in the mobile money sector is very necessary at this time when there seem to be several challenges confronting MNOs and banks. Several people have called for government to pay for the cost incurred by rural dwellers when transferring money through mobile money systems as a way of encouraging the uptake of digital financial services.  There have been several calls by various organizations and individuals that a committee comprising the government, National Communications Authority, the Ghana Chamber of Communications and the MNOs be set up to find alternative ways of promoting mobile money in Ghana.

One of the key areas of concern as stated by some participants was the role of government in developing mobile money in Ghana through an effective interoperability system that would be backed by effective policies. These policies, according those who argue for the establishment of an interoperability unit, would enable government to build trust among users of mobile money about the security of their transactions and the support of government in the process.  Participants who argued for the setting up of the interoperability unit added that areas that could be of key concern in any interoperability system were: customer level, agent level and platforms where different MNOs could work together to ensure that the transfer of funds could be done across different platforms. Government could also provide agents with additional capital to expand their businesses and help increase the customer base of money in Ghana.

Today, Ghana has an active branchless banking market with three (3) mobile network operators and twelve partnering banks that are at the forefront of this drive. There are also a reported 3 million registered customers representing 20 percent of the adult population in Ghana. Available statistics from the three Mobile Network Operators in Ghana that are into mobile money show that there are 5.4 million subscribers with total daily transactions of approximately GHC 16.5 million. If all stakeholders would harness their resources and ideas, we could as a nation reach the “unbanked,” especially those in the rural areas. Other sectors such as insurance companies, rural banks and trading companies could team up with the MNOs to provide digital services and payment systems to the rural and urban poor.

Finally, there are calls for government to take the initiative to pay pensioners, teachers and health officers in rural communities through mobile money as a way of promoting mobile money among rural dwellers. Although the Bank of Ghana, through its guidelines for the promotion of branchless banking in 2008, has provided improved platform for the use of digital financial services and payment systems in Ghana, this has led to little success in the area of mobile money. Government's involvement in the promotion of mobile money could be extended to areas such as payment of gate fees for entry to all sports facilities, payment of fees for entry to all tourist sites, payment of utilities, payment of road tolls and the payment vehicle examination and insurance across the country. Government could also seek the advice of experts in the mobile money business to advise it on appropriate interventions in addition to what we have listed to promote mobile money as has been done in Kenya and Tanzania. If well driven, we consider mobile money as the future of formal financial services in Ghana especially among in our rural communities.

-Read Part 1 Blog post, "Mobile Money Payments in Ghana: Part One, Private Intervention"

IMTFI at MoneyLab: Coining Alternatives in Amsterdam

Lana Swartz, IMTFI Director Bill Maurer, and Taylor Nelms at MoneyLab: Coining Alternatives

The Institute for Money, Technology and Financial Inclusion was well-represented at the MoneyLab: Coining Alternatives conference, organized by the Institute of Network Cultures March 21-22 in Amsterdam. Bill Maurer (Director of IMTFI and Dean of Social Sciences at UCI), Taylor Nelms (PhD candidate in Anthropology and Research Assistant at IMTFI), IMTFI research fellow Erin Taylor (Postdoctoral Research Fellow at the University of Lisbon), and friends of IMTFI Gawain Lynch and Lana Swartz all gave presentations. Maurer and Swartz presented on emerging payment systems, while Taylor, Lynch, and Nelms reviewed developments in the world of mobile money, including research conducted by IMTFI research grantees. (See the full program for the conference here.)

Those presentations can be viewed online through the Institute for Network Cultures.

In addition, you can read reflections on the conference written by Erin Taylor on her website:

• Mobile money and the social good of financial globalization (about Erin's paper)
• MoneyLab: Questioning the monetization of everything (about the first panel of the conference, including Maurer's presentation)
• MoneyLab: Is mobile money an alternative? (a summary of the mobile money panel)
• MoneyLab: Is money the issue? (about the conference as a whole)

Finally, Erin has also written up a summary of a walking tour taken by conference attendees through the financial history of Amsterdam, led by payments expert and finance historian Simon Lelieveldt.

Be sure to visit the MoneyLab website for future developments!

Use of m-money for conditional cash transfers in the Philippines: Part 1 of 3

By Erwin A. Alampay based upon his IMTFI funded research with Charlie Cabotaje

Design-Reality Gaps in the Use of M-money for Conditional Cash Transfers in the Philippines

Conditional cash transfers (CCTs) are programs that transfer cash to poor household beneficiaries on the condition that they regularly accomplish a set of human development tasks on a regular basis. These are often related to investments in the health and educational well-being of their children that are also monitored. Most CCT programs move transfers through the mother (Fiszbein & Schady 2009).

CCT Distribution by GRemit merchants in San Jose, Mindoro Oriental
Photo credit: Charlie E. Cabotaje

In the Philippines, the conditional cash transfer program is called the Pantawid Pamilyang Pilipino Program (4Ps) and is overseen by the Department of Social Welfare and Development (DSWD). It is a human development program that invests in the health and education of the poor, particularly those with children between 0-14 years of age. As of June 2013, the program had already enrolled 3.9 million households. The amount disbursed has also grown by 3300% in 5 years, to almost Php34B (about 753M US$) in 2013. Given the program’s scale, whereby beneficiaries are given cash grants of between Php1600-2800 (35-62US$) every two months, one of the main challenges is logistical, given the limited access to banking services in a country that is composed of more than 7000 islands.

Growth in funding allocated to CCT 2008-2013 (Source DSWD)

At present, DSWD uses various channels for sending the CCT. The basic design is through Landbank of the Philippines (LBP) and the use of cash cards. Ms. Antoinette Duero, from the DSWD’s Financial Management Service, estimates that around 40% use cash cards and the rest (60%) uses other conduits, like Philpost, GRemit, etc. They estimate that operationally, they only have around 20% with logistical problems overall (for example people may face significant costs in terms of transportation to get to the payout site, absence of alternative channels, etc.). The majority (80%), DSWD finds ‘manageable’.    

GRemit as a conduit 

On November 5, 2010, DSWD and LBP engaged the services of Globe Telecom in the pilot implementation of the distribution of cash grants using the GCash Remit service, the telecommunications company’s cash pick-up service. Since the pilot, was considered a success, the DSWD decided to expand to more areas using the same service. By 2011, the service was serving about 300,000 beneficiaries and distributing approximately PhP 1 billion (22M US$) in cash grants to almost 70 areas in 16 remote districts in the country. This was said to have made the act of claiming grants more convenient for beneficiaries who used to spend money and time for their transportation to, and queuing up in banks and distribution centers but has also spurred local economic activities as the beneficiaries were more likely to spend their grants in their community (Bold, 2011).  

Design-Reality Gaps on mobile money use

GCash is the mobile money technology that Globe Telecom developed over a decade ago. Among the potential advantages of GCash, and mobile money in general, is its supposed efficiency and security features. In reality, however, the primary consideration for DSWD was to get a partner with a presence in the different areas and districts in the country where they needed to disburse the grants, particularly those where there is no Landbank present and no rural bank available to help disburse the grants. For instance in Balabac in Palawan where GRemit was first piloted, there were no rural banks, and GRemit was the only option they knew at the time. It was noted that initially, beneficiaries were made to travel to the next municipality of Bataraza (or Brooke’s Point) to claim their grants, however this posed security issues for the beneficiaries and significant transportation costs. According to DSWD's Regional Program Coordinator, Mr. Vincent Obcena, “We (initially) had to have the beneficiaries go to the nearest Landbank (in Brooke’s Point or Batarraza). This would cost the beneficiaries several hundred pesos, sometimes 300-500 pesos even.”

Bringing the bank to them

Photo credit: Charlie E. Cabotaje

Another option was to bring Landbank to the municipality through the use of land and air transportation. Mr. Obcena described the logistical challenge of implementing the distribution in 2009: “We even used a helicopter to bring the money, because it was risky for LandBank to transport it by public transportation and boat. That was a risk they did not want (to take on). However, it was also not always possible to have the money brought in by helicopter, and it was not sustainable because it was expensive."

It was noted that the design of its implementation never considered what mobile money technology had to offer. In Mr. Obcena’s words the m-money model does not apply in this case because: “there was no use of the technology by the beneficiary.”

It is worth paying closer attention to the way that money actually passed across the different groups involved in the transactions. To explain how it works, we have an extended quote from a DSWD regional staff member:

"There is no use of (mobile money or mobile phones) technology among the beneficiaries. Instead, beneficiaries are given transaction slips by DSWD with codes. They gave this to the GRemit merchant who will enter the code for verification before remitting the cash. It is only the merchant who has a GCash account in this arrangement. They put the code that DSWD generated at the central office, and texts this back to GRemit. They needed this then because they could not verify the GCash transfer without the code. This was done individually, and not in bulk, as a control measure in case the beneficiary did not appear on the day of the release for funds.  Merchants then get paid per transaction  by GRemit (per beneficiary who are able to collect their CCT) and GRemit, in turn is paid by LandBank of the Philippines."

Ms. Duero, from the DSWD central office, says this is a way for GRemit to monitor their merchants, considering also that these merchants are just accredited by GRemit and not really part of their company. The text sent by the merchant to GRemit is their way of monitoring if beneficiaries were paid and by how much. This is also important because GRemit and the merchant also have an internal fee sharing arrangement for each transaction. The argument (for the sharing) is that even as the merchant provides the manpower and direct field contact, Globe provides the technology and infrastructure. 

Photo credit: Charlie E. Cabotaje

Unfortunately, the design as stated, never really took into consideration how the mobile money technology can be more beneficial for cash transfers. Such a model has been demonstrated to be possible, as Aker, et. al  (2011) have documented in Niger. In the Philippines, the U.N. is also piloting a similar scheme, but this time, partnering with SMART Money as part of a cash for work program to rehabilitate communities affected by Typhoon Haiyan (see Lee-Brago 2013).

As such, among those who qualified for the bidding, GRemit was outbid in early 2013 by MLhuillier, a remittance company with a nationwide network of pawnshops. Partly this was because GRemit did not really have the technological advantage working for it, and MLhuillier’s network could just as easily compare with Globe’s network of merchants. Among the considerations for those who participated in the bid was the matter of cost but also their capacity to deliver the grants down to the barangay-level (community-level).

However, it is also unlikely that the 20% of the population that DSWD finds problematic will be solved through a truly mobile money based system. According to Ms. Duero, the problem for mobile money in those cases would be very basic: some beneficiaries do not have cellphones and some areas lack cell sites and have poor cell signals. More likely, m-money can work in the 80% that DSWD finds less difficulty.  However, if they are not as problematic and is already manageable, why should DSWD consider this as an option? 

Where mobile money can help will be discussed in my next blog, part 2 of 3: “The Potential and feasibility of m-money for CCT in the Philippines: where mobile money can help.”

Gender Inclusion - Financial Inclusion

Supriya Singh, Professor of Sociology at RMIT in Australia, blogs about the need for the gender of money to be a key aspect of the policy of financial inclusion.

"This will mean two conceptual changes in regulatory and banking policy. Firstly, regulation and ‘suitable’ banking services will need to consider money as both a social and market phenomenon. The use of financial services has to be seen in the context of money as a medium of social relationships; men and women’s management and control of money in the home; migration and remittances; and access to mobile technologies. Secondly, gender will become an important implementation and monitoring measure for financial inclusion and economic empowerment..."

Read more over on the Smart Services CRC Research Group's blog. 

What can ethnography contribute to microfinance research?

IMTFI researcher, Erin B. Taylor gets qualitative in her latest blog on ethnography and micrfinance:

Money costs

"A problem with microfinance is that profit margins have to be very narrow to keep costs down.

If prices rises even a little, the world’s poorest people–for whom these products are intended–will not be able to afford them. This is why it is often necessary to keep a product range simple...

Private/public partners

"Where a market alone cannot support a product, non-profit funders (such as NGOs and multilateral development banks) may step in to provide support. This has been the case with both microcredit and mobile money, both of which are profit / non-profit hybrids....

Getting qualitative

"Qualitative research, such as ethnography, can reveal patterns of behaviour that we never would have expected. The best example of this that I have come across in recent times is David Stoll’s study of a Guatemalan village, described in his 2013 book “El Norte or Bust!: How Migration Fever and Microcredit Produced a Financial Crash in a Latin American Town.”

Read on.

Today, Transactions: A Payments Archives launched a new occasional series of short videos on the material cultures of payment, money, and debt. These pieces pair academic experts with objects from the human transactional archive, drawing on the collections of the Institute for Money, Technology & Financial Inclusion and others. We are thrilled to launch this experiment with a commentary by Keith Hart (Centennial Professor of Economic Anthropology, London School of Economics), who took a break during a recent visit to IMTFI to discuss a kina shell necklace from our collection and its connections to the history of anthropological thinking about money, gifts, and exchange. As always, please consult Transactions' Contribute page if you would like to get involved in the video series or other initiatives.