Financial inclusion and well-being are core issues for most professionals working in the area of consumer finance. This is especially true since the Global Financial Crisis. Governments are investing more in research and programs on consumer protection issues, and banks are infusing their communications with emphases on well-being at work and at home.
|A Western Union office opens in Anse-à-Pitres in 2010. Photo by Erin B. Taylor.|
But this data does not speak for itself. Qualitative techniques in complement to quantitative measures and indicators (which our toolkit will be showcasing) can greatly improve our understanding of how inclusion and well-being diverge. Let me explain by taking a tour through our research on money in Haiti.
A case study from Haiti
In June 2010, five months after the earthquake that devastated Port-au-Prince and its surrounding areas, I began researching financial practices in Haiti along with Heather Horst and Espelencia Baptiste. There were plans afoot to launch mobile money services there, and we were asked to assess how people were currently using financial services and mobile phones. After mobile money was launched, we returned again to see how people were adapting to it.
Mobile money, while a commercial service, is often introduced into countries with the aim of improving financial inclusion. The idea is that having access to formal financial services will have a positive effect on well-being. But is this really the case?
When financial inclusion improves well-being
To a certain extent, the answer is “absolutely.” While people who are “unbanked” often have access to a vast array of informal financial services, sometimes these are not enough. Formal services are often cheaper, more reliable, and more flexible. They give people a greater range of choices, helping them to organize their finances in ways that contribute to their well-being - and often in ways that we might not expect.
For example, one young man we knew well, Emmanuel, lives in Anse-à-Pitres on the border of Haiti and the Dominican Republic. We interviewed Emmanuel and followed him as he worked and socialized. We also conducted a “portable kit study” in which we asked him to talk about the possessions he carries on a daily basis, including his wallet, any bank cards, his phone, and documents. This combination of techniques helped us to construct a picture of the financial services and interactions he carries out in his daily life.
Emmanuel signed up for mobile money so that a cousin of his, who lives eighty kilometers away in Jacmel, could send him money to pay her Sky television bill across the border in the Dominican Republic.
In this case, her financial inclusion was not as a person attempting to escape poverty, but as a consumer whose payments were made more efficient through this new technology. Previously, she had sent the money for free via a fleet of fishing boats that travel from Marigot (near Jacmel) to Anse-à-Pitres twice per week on Mondays and Fridays, which are market days on the border.
“Financial inclusion” enhanced Emmanuel’s and his cousin’s well-being by saving them time and effort. While this may not seem like a major advantage of financial inclusion, time and effort in fact carry a heavy social cost because they interfere with people's abilities to devote themselves to core activities such as earning a living, looking after families, and relaxing.
When access doesn't guarantee use
In contrast, people can have a reasonable level of well-being without formal financial inclusion. Even when people have access to financial services, the transaction costs in using them can be a deterrent.
|Money changers in the binational market on the border|
of Haiti and the Dominican Republic. Photo by Erin B. Taylor
For example, David has been a resident of Anse-à-Pitres since 2002. He has family in Port-au-Prince, Santo Domingo, and the United States. Because he works for the United Nations base in Anse-à-Pitres as a translator, he has an account with Scotiabank in Jacmel. He can use his Visa card to withdraw money “from any ATM around the world,” but in fact he rarely uses formal financial services at all.
Instead, he uses the local boat service to send money to his children who are studying in Jacmel. He sends 500 gourdes once per month to pay for their daily living expenses, plus extra money at the beginning of the school semester for fees and uniforms. The boat service may be slow, but David is not in any particular rush.
Learning to use a new service, and teaching his family how to use it, poses economic costs and transaction costs, and he does not consider the efficiency gains made to be worth the effort.
When access is not enough
Yet other people technically have access to financial services, but do not have sufficient resources to make use of them. Here the problem of insufficient income is more important than transaction costs.
|Goods waiting to be loaded onto the boats that travel|
twice-weekly between Anse-à-Pitres and Marigot, Haiti.
Photo by Erin B. Taylor
Before the earthquake in January 2010, Nicolas sometimes received money from his relatives in Port-au-Prince via both the informal boat service and the formal Western Union office. Few transaction costs blocked his use: the services were located in the center of his town, and he had sufficient time during working hours to visit them.
However, he has not received any assistance since because he has not been able to contact his relatives. He has no phone or even spare money to buy a calling card so that he can borrow someone else’s phone. He is very stressed because he does not even know if they survived:
“The earthquake killed a lot of people in Port-au-Prince, and I don’t know if my relatives are alive or dead. I had my uncle’s telephone number but I lost it. I want to go past the house of a neighbor here who knows well how to use the telephone, but I have no money to give him.” (Nicolas, Anse-à-Pitres, July 2010).”
Nicolas has essentially become “un-serviced” as his fortunes have changed. His case is a telling reminder of how, for the poor, financial inclusion does not just depend upon access and literacy, but also on receiving a minimum income to remain a customer.
Defining a research question
A major benefit of in-depth qualitative research is that it provides ways to identify these kinds of variations and help researchers decide which variables are important. These can then inform the design and use of quantitative methods, such as surveys or mapping, to understand broad patterns or structural barriers. Qualitative research can also assist in interpreting and telling a story about large data sets even after they have been generated.
Using qualitative techniques can be essential in defining what financial inclusion or well-being might mean in a given case. Few people are actually financially excluded: instead, they use a range of informal services of different kinds and qualities, and may already have access to formal services even if they don’t always use them—like David.
As recent discussions in the financial inclusion space are signaling, a robust research design should attend more to the quality of accounts—how they are used or not used, and to what ends. And for a case like Nicolas’s, we need to be aware that financial inclusion doesn’t just mean having access to financial services, but also the resources to take advantage of them.
Money and its management help us to achieve our social goals as much as our physical and practical ones. This point is demonstrated well in the work of Woldmariam Mesfin, who examined the impact of new technologies on payments systems in Ethiopia. Mesfin’s observations in Ethiopia demonstrate the centrality of monetary transactions to social well-being. Giving money to relatives and community members for everyday and ritual purposes is an important way to practice group belonging.
In fact, one could argue that this social financial inclusion — the ability to participate in group financial activities — is more important than access to formal financial services, because it contributes more to well-being. As Ana Echeverry notes:
“Financial inclusion is not about government and the banking system designing how to get people to open more bank accounts,” she said. “It is about how I interact with other human beings, how I make my transactions with you.”
Defining financial inclusion by using a more sophisticated suite of tools and techniques, from household savings-to-debt ratios to object centered analysis of money ecologies, can recouple the terms by suggesting whether and how financial inclusion may enhance well-being.
The toolkit that we will be building over the next few months will help you in this and other tasks by explaining how different methods can be applied specifically to consumer finance research. In the meantime, you can keep an eye on the IMTFI blog for more updates and releases.