Tuesday, August 22, 2017

Financial Inclusion: Integrating the Poor into the World Economy – A Look at Migrant Laborers in a Karachi Marketplace and How They Move Money

by IMTFI Fellow and International Board Member Noman Baig, Habib University

Vendor at Jodia Bazaar, Karachi 
My interest in money stems from the incidents of 9/11 in the United States. After the attacks in the US, all major governments and international organizations passed stringent laws against informal money transfer channels labeled as funding terrorism all over the world. In Pakistan, the state curtailed the illegal funds transfer channel known as hawala by arresting prominent currency dealers and passing the Anti-Hawala Act. A hawala channel is a monetary network/practice that relies on centuries-old kinship bonds for transferring value without moving physical cash from one place to another. In place of these informal and embedded monetary channels, the state opened up a market for multinational corporations such as Western Union and the branchless banking sector to integrate hitherto unbanked people into the gambit of modern finance under the national strategy called “financial inclusion.”

Despite the state’s coercive crackdown on moneychangers and moneylenders in the country’s local bazaars, the lower-income labor class continues to depend on such informal money channels to send and receive money. These personalized networks allow them to feel secure that the money will reach its destination safely. I conducted ethnographic research in Karachi’s marketplace, Bolton Market, the largest wholesale bazaar of a variety of commodities such as skin care, spices, fabric, steel, medicine, etc. While the merchant community was under the direct surveillance of the state security agencies, the laborers were freely moving their funds.

An archeology of funds transfer methods in Karachi’s Bolton Market

Bolton Market, Karachi 
During my research in these markets, I have discovered an archeology of funds transfer methods. I call it an archeology because there are layers of channels, often superimposed on each other, cross-cutting in many cases, and undermining each other at various intervals. It can be called a gradation of financial channels. For example, an informal hawala transfer made through a local money changer passes through a kinship channel, but at some point in a long chain the same transaction will intermingle with the formal banking system. If the transaction raises a suspicious activity report, then the Federal Investigation Agency (FIA) will examine it before the funds reach their final destination.

Jodia Bazaar, Karachi
Financial practices in Karachi’s marketplaces are a lattice work, convoluted, and rhizomatic, making the location of the sources of a transaction by the researcher a dizzying task. In just a single transaction the number of actors involved can include a number of players, such as banks, moneychangers, security agencies, merchants, etc. Sometimes transactions may include shrines, mosques, and charity organizations by virtue of the mere fact that the gift economy and commodity exchange are so tightly knit. Thus it becomes extremely difficult to neatly categorize and differentiate one method of financial transfer from another. In fact, it is also incorrect to use labels such as “informal market,” which according to recent estimates is 75-90% larger than the size of the “formal economy.” To be very clear, “informal” does not mean that the market operates haphazardly, randomly, or irrationally, though it is the kind of impression we generally get when we hear the word informal. In fact, the informal market, if it can be neatly categorized as informal, does not operate outside of the formal market. Both domains intermix with each other at multiple locations.

Bhandari’s story – Considering migrant laborers in Karachi

The research I conducted engages with these multiple methods of funds transfer. One of the channels often used by laborers in Bolton Market involves a kin-based network of largely Pakhtun migrant workers in Karachi.  One of the laborers who I became friends with is called Khan Zareen, also known as Bhandari in the market. Bhandari arrived in Karachi as a porter in the early 1980s. He started working in the city’s vegetable market (sabzi mandi) loading and unloading vegetables and fruit on his back. After the resettlement of the vegetable market to the outskirts of city, Bhandari decided to work in Bolton Market, where he started hauling heavy boxes to and from the warehouse.

Vendor at Jodia Bazaar, Karachi
My encounter with Bhandari was sudden and unexpected. One day while loading boxes on the cart to take it to bus station, he came to hear, rather incorrectly, from a shopkeeper that I was a journalist writing a story about the markets. Bhandari came rushing into the office and instructed me to write about his suffering and condition. “Our houses have been destroyed in Bajaur, and we never got any compensation from the government, while the landowners (malik) are constructing new palatial houses,” he said.  These were the first words that Bhandari uttered to me bluntly. Initially I responded to him by saying that I would tell his story, but that he would have to give me more details. As the days passed, we became friends. Every time I would visit Bolton Market, we would go to a chai dhabba (tea shop) for a cup of tea.

One day Bhandari showed me how he transfers money to his home in Bajaur. He took me to another Pakhtun porter, who is known as Laal Zeb. Bhandari handed over cash to Zeb and told him to deliver rice, ghee, wheat, and sugar to his home. Laal Zeb took the cash and called his brother in Bajaur who owns a food ration shop in the village. The next day, Zeb’s brother delivered the goods at Bhandari’s house. There were no fees or charges for any part of the entire transaction. Bhandari was able to buy food items for his family from Karachi, while Zeb collected the cash for his brother’s shop in the village. However, when Bhandari sends cash to the village via a moneylender/shopkeeper, he has to pay Rs. 30 for every Rs. 1000 (which is still half of what branchless banking services such as Easypaisa charge their customers). These are personalized networks operated mainly by village communities who are spread across rural and urban Pakistan. Porters such as Bhandari never go to the bank. Several years ago, with the aid of the state officials, he managed to open a bank account in a local bank branch in Bajaur to receive government compensation for the reconstruction of his house, but after several years the bank account is still waiting to receive funds from the government.

I asked him why doesn’t he use new services such as Easypaisa—Pakistan’s largest branchless banking network—to send money. He replied, “Easypaisa charges Rs. 60, while I pay Rs. 30 on every Rs. 1,000. Also nobody in my home can get to an Easypaisa shop, which is outside of the village.” In conservative tribal areas women are not allowed to go outside alone. Bhandari has no male family members living in the village; his two sons who are 22 and 14 also work in Karachi.

Although Easypaisa has become a phenomenal success among the laboring classes in Karachi, and in Pakistan in general, Pakhtun laborers in Bolton Market continue to use the old ways of sending and receiving money. They use personalized channels such as Laal Zeb not only to transfer value, but also to solidify affective bonds, social relationships, and ethnic ties. These symbolic values play a determining role in maintaining community boundaries. In an Easypaisa store, affective and ethnic relations are rendered unnecessary, while the rationalized market ethos of efficiency, security, and instant transaction takes precedence.

Vendor at Jodia Bazaar, Karachi
Laborers such as Bhandari constitute the majority of Pakistan’s working class who survive on less than $2/day. It is this sector of the population that is seen as existing outside of the “real” economy, the domain of modern, “formal,” rational, and bureaucratic finance propelled by identity cards, paperwork, written records, and a survivalist ethos. The recent financial sector development policies and practices are an effort to bring laborers like Bhandari under the umbrella of the state and the corporate economy through giving them easier access to savings, loans, and credits. One of the ways proposed to implement this is to initiate a network of branchless banking or retail agent banking. The state and corporations justify these efforts as a favor to laborers, a remedy for alleviating their so-called “miserable” conditions through the cure of financial inclusion.

Expanding the Discourse on Financial Inclusion

The agenda of financial inclusion to offer easy access to savings, loans, and credit to the masses, is fraught with inequalities and injustices. This is not to say that the laborers should cease using branchless banking. But to charge heavy fees for the services owned by a foreign corporation proves how terms of trade set during the colonial era continue to extract surplus value from the bones and flesh of the laborers. Most importantly, if international developmental organizations such as the World Bank are seriously interested in improving the financial conditions of the poor by bringing them inside of modern finance, then they should start by identifying the actual root causes of their exclusion. If they want to include these people, then the governments need to start a radical program of wealth redistribution through policies that allow its more even distribution. In other words, the poor masses all over the world are excluded because the wealthy few hold the wealth of 99 percent of the people. The majority will always stay excluded, and any financial inclusion program will fail miserably, unless a just economic system comes into place.

Laborers near Urdu Bazaar, Karachi
The discourse of financial inclusion therefore demands a critical scrutiny in light of the developmental ideology propagated in the postcolonial world. With the beginning of modern colonialism in the mid-eighteenth century, such efforts at integration and inclusion have resulted in an imbalanced power structure and income inequality at a global scale. For instance, in British India, colonial rule forced the integration of the vast land of the Indian subcontinent, and its markets, its weavers and peasants, into the international markets. The outcome was horrendous, and resulted in the siphoning of wealth and resources from the colonies to the metropolis. Thus this is not the first time that a serious effort at integrating the masses into the world economy has been undertaken. The postcolonial world has been experiencing such programs of integration for at least the last two hundred years, often with disastrous consequences.

Stay tuned for a blogpost insights from "Financial Inclusion of the Poor workshop" in Karachi, Pakistan.
Photos credits: Noman Baig 

Wednesday, August 16, 2017

From the wallet to the refrigerator: why in the future machines will pay for everything

Experts point out that a multitude of Internet-connected devices will begin to take care of small daily transactions

by Andrés Krom from LA NACIÓN (The NATION, Argentina) 


About 8,000 years ago, the first farmers began to use part of their crops as exchange goods. For practical reasons, people later leaned more towards precious metals, which were not only easier to divide up, but also to carry. Paper money began to be used during the eleventh century, one of the many inventions attributed to medieval China.

Over the last 50 years, the state of available means of payment—cash, checks, credit cards—remained relatively stable. However, the proliferation of Internet access, the rapid adoption of mobile phones, and the emergence of new technologies have opened a window to a radically different future in many aspects, including economically.

So, if we were to travel a few years ahead in time, what kind of means of payment would we see from the slightly tarnished window of our DeLorean?

Probably none.

Invisible future

Unless you are in the habit of going everywhere with printed photos of your family, traditional leather wallets will become a museum artifact in the coming years.

The reasons? There are several, but we might start with the future dematerialization of the more than 1 billion credit cards currently in circulation. "I think the format of credit cards is likely to change," Bill Maurer, Director of the University of California, Irvine's Institute for Money, Technology and Financial Inclusion (IMTFI), tells LA NACIÓN. "We see a gradual migration towards a more virtual space, which is already beginning to be seen in online shopping," he adds.

Rubén Salazar Genovez, Senior Vice President of Visa Products in Latin America and the Caribbean, agrees that there is a need to move from plastic to an invisible environment in which payment credentials are maintained. "Connected devices are changing everything we know about shopping and payment. The web and mobile payments are just the beginning," he adds.

The expansion of mobile payment platforms and the consequent digitalization of money will also put banknotes and coins in check, but will not be enough to extinguish them. "I do not think cash will disappear," Maurer augurs. "Coin, in particular, is one of the oldest technologies in use that exists. It's incredibly durable."

According to this academic, the use of cash will endure among the lower classes, where access to financial services is limited. Even Anuj Nayar, Director of Global Initiatives at the electronic payment company PayPal, thinks that cash will withstand the digital onslaught. "There are still spaces for outdated technologies," he says. "The problem is the discomfort that comes with its use, its deterioration, what happens when it is lost."

In this context, it is estimated that this partial dematerialization of the means of payment will be tied to a noticeable drop in the role of human beings in some transactions, which will begin to be automated.

Things that talk to things

If Gartner's predictions are met, the Internet of Things (IoT) will be an established reality in the next four years. There will now be around 20.4 billion Internet-connected devices, from coffee machines to streetlights.

In this new world, diverse elements connected to Internet will have the capacity to transact with each other continuously and without the permanent supervision of users—a phenomenon that Maurer calls "ambient payments." "In the world of IoT, we will see some payments that happen in the background, especially at the level of micropayments," he indicates.

Gregorio Trimarco, of the Global Products and Digital Channels division of Mastercard, agrees with this vision. "We see that payments are going to be convergent. We believe that every connected device can be a payment device. The technology already exists for this to happen."

Imagine, for example, having a smart refrigerator with sensors that allows it to detect when a product begins to run out. Through a simple Internet connection, this appliance can put itself in contact with a supermarket every time it is necessary to replace the out-of-stock food.

Connected and autonomous vehicles might also be a determining factor in the expansion of this new economy. A system built into the automobile will allow, among other possibilities, to automate the payment of a series of services, like fueling, parking meters, and even automotive insurance.

There is also room for new payments in the virtual reality sector. Just this May, the payment processor Worldpay presented a proof of concept for a solution that allows consumers to buy items available in a simulated reality context.

Security, the last frontier

With new technologies come new problems. Any of the elements connected to the Internet will be vulnerable to cyberattacks, so ensuring the protection of privacy will become essential, especially when the financial integrity of users is at risk.

That is why multinationals like Visa, MasterCard, and PayPal are already preparing for a world in which passwords and payment voucher signatures will be nothing but distant memories. Among the technologies they are exploring geolocation and biometrics stand out, in their various facets: facial recognition, fingerprint device authentication, etc.

"The more complex the systems become, the greater the challenges," says Maurer. "It only takes one weak link to complicate the whole chain."

Translated by Taylor C. Nelms. Read original post (Wednesday, August 09, 2017) in Spanish here - http://www.lanacion.com.ar/2051464-de-la-billetera-a-la-heladera-por-que-en-el-futuro-las-maquinas-pagaran-por-todo.

Wednesday, August 9, 2017

Barriers to a single European payments market: Cultural-economic feedback loops

PERSPECTIVES By Erin B. Taylor, Canela Consulting, former IMTFI Fellow and co-creator of the IMTFI Consumer Finance Research Methods Toolkit

Look into the average traveller’s pockets today and you will find evidence of multiple means of payment. Debit cards, credit cards, traveller’s checks, several currencies, cryptocurrencies, and payment apps are now so common that it seems impossible to run out of ways to pay. Wherever we buy things—on the street, in shops, restaurants, at ticket machines—we have a way to pay. 

As cash falls out of favour, foreigners must switch between different debit 
and credit cards in order to pay. Photo By Erin B. Taylor.

Or so it would seem. In fact, as many travelers can attest, it is still possible to run out of ways to pay. 

Let me give an example. One fine winter’s day in early January 2016, I stopped at a kiosk at the University of Amsterdam to buy a coffee. It was the beginning of my six-month stint as a visiting academic, and the environment was brand new to me. 

I handed the teller some cash to pay for my coffee and croissant, and she looked at me in surprise: “We only accept PIN,” she said. She meant that the kiosk exclusively accepted payment via a Dutch debit card: no cash, no foreign cards—not even European ones. 

I was astonished. Not accepting foreign cards is bizarre enough, but who doesn’t accept cash? As it turns out, a growing number of retailers in northwestern Europe are turning away from hard currency, citing cost and safety reasons. Some stores don’t accept cash, but they accept virtually all foreign cards (debit and credit). Others accept cash and local debit cards, but not foreign cards. And a minority (like my kiosk) exclusively accept local debit cards. 

The unsuspecting traveller may encounter inconveniences not only when trying to pay in the odd kiosk, restaurant, or shop, but also when simply trying to get from A to B. In the Netherlands, an unusually cash-averse society, some parking meters and train ticket machines only accept Dutch cards, and many a traveller has been caught out trying to return to the airport but unable to pay for the fare. Even the simple act of making a meal can involve a complicated series of transactions (see text box at the end of this post, "A Recipe in pan European Payments"). 

This is not just a Dutch peculiarity: payments are a Europe-wide problem. The European common market is meant to deliver the “four ‘f’s”: freedom of movement in people, goods, services, and capital. Theoretically, this should endow people with far more choice as consumers, workers, and citizens. 

Yet despite decades of financial market integration, many consumer finance products and services cannot be readily used across national borders within Europe. This situation could worsen when Brexit is implemented. A diversity of financial systems and a willingness to experiment means that the consumer can never be quite sure what to expect when crossing national borders. Consumers who live, work, and socialize across Europe’s borders can encounter problems using a wide range of finance products and services (e.g., payments, mortgages, taxes, and pensions). Why is this the case?

Some ticket machines in the Netherlands only accept cash or
Dutch debit cards. Photo By Spoorjan (Own work)  CC BY-SA 3.0 

Barriers to integration

One major problem is that the process of financial integration is far from complete. Generally, this integration process is conceptualized as being primarily technological and regulatory. The Single European Payments Area (SEPA) has been largely rolled out across the continent, and the Target Instant Payment Settlement (TIPS)  service promises to abolish waiting times for transfers between European banks. European regulators are working to create legal solutions, such as developing Europe-wide pension schemes, and the Payment Services Directive 2 (PSD2) is due to be implemented next year, further deregulating payments and opening up the market to new players and products. 

However, there are also barriers to integration at the level of the firm and the consumer market interactions, and our understanding of these is threadbare. Some of these relate to market structures, such as pricing. For example, in some European countries, credit cards are not widely accepted because merchants consider the cost to be prohibitive. Other barriers have socio-cultural leanings, such as consumers’ preference for local services, which dissuades them from shopping around the EU, or a preference for using cash in Germany.

These barriers might appear to be either economic or cultural, but closer inspection often shows them to be both. Let me illustrate by way of an example. In an ECB Report, Kokola argues that the Dutch tend to be more averse to credit card debt than their neighbors, whereas Germans are more risk-averse. This kind of cultural heterogeneity influences how financial products and services are developed, marketed, and consumed. 

Such cultural predilections can have deep historic roots. In the Netherlands, there is a longstanding aversion to credit due to historical attitudes towards indebtedness, but bank cards were adopted early on. Because the Dutch are averse to credit, but used to debit cards, credit transactions are relatively rare compared with other countries. And because the Dutch don’t use credit cards much, the cost of credit card transactions remains expensive. Because they’re expensive, merchants don’t accept credit cards, and this reinforces the Dutch aversion to them. 

And so a cultural-economic feedback loop is created.

This lines up with what we know about the interplay between economy and culture globally. Social researchers have long observed that economy and culture are analytically inseparable, no matter what kind of economy people live in. This is easiest to observe in pre-capitalist societies, such as in the use of shell money in Melanesia. 

But economy and culture are intertwined everywhere. In Dreaming of Money in Ho Chi Minh City (2014), Allison J. Truitt discusses how money culture influences what banknotes people will accept (dirty or broken notes are rejected), how money is used for ritual purposes, and many more phenomena that cross the culture/economy divide. In Liquidated: An Ethnography of Wall Street (2009), Karen Ho describes how the decisions of investment bankers are  shaped by their sociocultural beliefs. Nobody, anywhere, is immune.  

The diversity of cultural-economic feedback loops has significant implications for the integration of consumer finance markets in Europe. It suggests that there are hard limits to what can be achieved through technological and regulatory means alone. As Sander, Kleimeier & Heuchemer note, “cultural distance limits international financial integration over and above what can be expected from economic trade and transaction costs.” Even if full integration is achieved, consumers will continue to face limits to their freedom of choice as they live, work, and socialize across European borders.

To understand why there is still no single market for financial services in Europe, it is not enough to look at technical or regulatory matters. But nor can we simply shift the blame to culture. Rather, a cultural-economic feedback loop comes into existence when an economic practice and a cultural practice reinforce each other’s existence. 

The standard EFTPOS machine is fast
being replaced by other POS devices.
Photo By Erin B. Taylor.

The EU’s problem is global

The globalization of payments and other financial services is also creating an imperative to figure out what happens when money cultures meet. Given that so many consumer finance products and services are now available over the Internet, consumers are no longer limited to what is available in their home town or country. Today, we can research and buy an increasingly wide range of savings, transfer, investment, credit, and money management services from anywhere around the world. 

Let’s stop for a moment to consider the irony here. A resident of one European country cannot use their bank card in a second European country, even though there is a single currency and theoretically an integrated payments system. But that same person can buy travel insurance from the U.S.A., invest money in a fund in India, exchange currency using a mobile app based in the United Kingdom, and trade cryptocurrency based in—well, anywhere really.

The problem we face is twofold. First, the integration of financial markets globally is proceeding at different rates in different places. This means that consumers are facing a rapid expansion of choice on the one hand, and the same old limitations on the other. (In fact, these limitations are becoming more problematic because people are more mobile across borders than they were before, and so they encounter these problems more often.) Regulators and financial services providers are over-providing services in some areas, and under-providing them in others. Corporate and government strategies for integrating financial markets need to find a balance between these extremes. 

Second, we have little idea what consumers do when faced with this strange situation. How do consumers work around obstacles to making financial transactions? Do any of the new products and services available globally fill gaps in local services? Why are some people willing to experiment and become “early adopters” of new digital finance products and services, while others remain “laggards” dependent upon traditional banks? And what will a more mature global market for financial goods and services look like in the future? 

Since consumers can now use financial services from around the world, we cannot assume that it is sufficient to approach any of these questions from a local or European angle. In the future, consumers are likely to care less and less about whether the financial services they use are local or not. This is particularly the case when brands that are already globally popular (such as Google, Apple, or PayPal) develop their own range of payments solutions, such as digital wallets. 


A Dutch ATM, fast becoming a rare commodity. 
Photo by Canadian Pacific CC BY-NC 2.0

Mixing methods to understand changing markets

Our challenge is not to get everyone using exactly the same tools, but to create a global ecosystem in which multiple tools and avenues are accepted. To do this, we need to first understand the market. This means we need to design research that investigates how a variety of factors–cultural, economic, regulatory, technical–shape market practices. This holds even if we are trying to specifically understand consumer behaviour. 

Due to the complexity of markets, relying on one single research method (e.g., a survey or interviews) is unlikely to be sufficient for many research questions. Just as financial markets for consumer services are diversifying, so must our research methods also diversify. Understanding consumer choices requires analysis of both qualitative and quantitative factors that influence behaviour, including price, market structures, personal preferences, social structures, and cultural norms. 

This is not news: product developers, designers, and marketers know well that in order to sell something, the offering must hit the right price point and the right “tone” with the consumer. But the shift to Internet-based and mobile consumer finance services presents a challenge because the transition is incomplete and the market is highly complex. 

While little can be done to predict how regulations will change, it is certainly possible to improve our understanding of changing consumer behaviour and thereby generate more robust market knowledge. As we discuss in the Consumer Finance Research Methods Toolkit (CFRM Toolkit), researchers from both industry and academia are innovating new ways to record and analyze the financial behaviours of individuals and households. 

Ethnography, interview methods, financial diaries, online/offline studies, experiments, and so on, are all being reconfigured and combined with other methods to account for the increasing mobility products and services through accessible digital spaces and technologies. Adapting and combining methods offers substantial potential to generate detailed data on a variety of cultural and economic problems. This is because they either include ways to collect qualitative and quantitative data simultaneously, or because they can be easily incorporated into mixed-methods research. 

Combining interdisciplinary thinking with mixed methods gives us a chance to understand the cultural/economic feedback loops that are shaping the emergence of a new generation of consumer financial practices and markets, not only in Europe, but around the world. Regulators, service providers, and researchers are best placed when they take this range of factors and geographies into account. 

Tuesday, July 25, 2017

Remittance Technology Models: African Innovations for Southeast Asia?

By Ivan Small,  Assistant Professor of Anthropology and International Studies at Central Connecticut State University and previously a Postdoctoral Scholar at IMTFI. This blog post derives from a paper presented at Cornell University's Mobile Money, Financial Inclusion and Development in Africa 2017 symposium.

MPESA Agent, Kenya (Photo by Ivan Small)

One of the earliest and most heralded mobile money systems in the world is the M-Pesa system of Safaricom in Kenya, now extended to ten countries with around 30 million users. Safaricom, Kenya’s largest mobile network operator, introduced M-Pesa in 2007. Kenya, a country with many rural-urban migrants, but also significantly one characterized by periods of uneven political authority and stability, was a prime market to tap the needs and demands for domestic money transfer services. Safaricom, with close connections to government regulators, was able to quickly and effectively establish a national mobile money infrastructure including 40,000 agents that became widespread and most importantly, widely trusted. User uptake was rapid and today the system is seemingly ubiquitous, with some other competitors such as Orange and Airtel also joining in to compete for bankless customers eager to bypass the risks of physical money transfer. M-Pesa outlets are widespread in Kenya’s cities but also rural areas, where traditional brick and mortar banks are often lacking, and provide near instantaneous money transfer services for customers to cash in and cash out. Besides reducing risk, M-Pesa also reduces transfer fees. Following the success of M-Pesa mobile remittance services, Safaricom has expanded offerings to allow mobile phone users to access a range of other services, from bill and salary payments to an innovative microcredit system called M-Shwari where users can apply for small loans. The latter also reflects a growing practice of utilizing mobile user remittance histories as a form of financial records and Know Your Customer, thus creating greater possibilities for formal financial inclusion.

M-Pesa’s model has spread to other countries in Africa – next door Tanzania has seen a significant uptake in mobile money usage, quadrupling the number of people who now have access to financial services according to CGAP. But the M-Pesa effect goes beyond Africa. Indeed, the success of mobile money in Kenya has made it a technological hub and model for much of the Global South. In 2013, GSMA – a trade body representing the interests of many mobile network operators worldwide, held its Mobile Money for the Unbanked conference in Nairobi, Kenya. In attendance were Mobile Network Operators from countries around the world, as well as entrepreneurial start-ups eager to design, develop and hatch new MM systems. Most significantly however was the presence of bank regulators from many countries that did not yet have mobile money service operations but were interested in learning their potential and how to implement them. Among those represented were central bank regulators from some countries in Southeast Asia, including Laos and Vietnam.

Rural village in Central Coastal Vietnam
(Photo by Ivan Small)
Southeast Asia is a region that could benefit significantly from mobile money services. Like Africa, Southeast Asia consists of a diverse set of developing economies characterized by relatively low banked populations, high cell phone penetration rates, significant rural populations, and rural-urban migration. After Kenya and outside Africa, the Philippines has one of the most developed domestic mobile money systems in the world, with Smart Money and G-Cash launched in the early 2000s a few years after M-Pesa. The significance of Filipino international migration has also driven internal migration as labor moves to fill in employment vacuums as workers circulate in, out and around the country. Filipino mobile money success has been in part due to the flexibility of regulators that have allowed Mobile Network operators to cash in and cash out without going through a bank mediator, similar to M-Pesa. Notably, the Philippines (along with Kenya) in 2010 had been designated as non-compliant with anti-money laundering protection measures by the Financial Action Task Force, perhaps reflecting looser regulatory environments in which mobile money could more easily flourish in informal settings with relaxed Know Your Customer (KYC) requirements. Tightening regulatory measures on money laundering however, has not diminished the significance of mobile money in the Philippines, nor for that matter, Kenya.

Elsewhere in Southeast Asia, a number of pilot services have explored the potential mobile money market. In Cambodia the MNO Wing has offered some services, which although limited in scope seem to have a strong value proposition, as Jeff Fang’s research shared on the IMTFI blog suggests. Myanmar is a country that has been compared to Tanzania in size and scope of unbanked population, availability of bank branches, mobile penetration, and around a 30/70 urban split. Companies like Wave have received regulatory approval for mobile money and hope to scale up in four years, following Tanzania’s model. Access to mobile phones is relatively new, the price of a Sim card having dropped to $1.50 compared to $1500 prior to 2011. Today over 90% of the population have cell phones and 80% of those are smart phones. For more recent IMTFI-supported projects in Myanmar, see "Intermediaries, Cash Economies, and Technological Change in Myanmar and India" and "Money Practices & Services Myanmar."

Indeed, the increasing prevalence of smart phones is likely to change the mobile money landscape as Southeast Asia, a later entrant to the scene, gets up to speed. Tom Boellstorff’s IMTFI research for example examines the ubiquity of the smart phone in Indonesia and how it is central to consumption, browsing, and online commerce. However the smart phone, with its short battery life, is likely to face limitations in rural areas where electricity may be scarce and intermittent. As mobile money emerges in Southeast Asia, it is much more likely to be part of a large ecosystem of payments in which value is increasingly cashless and digital. Doing so is attractive for convenience, but of course disrupts and may ultimately bypass traditional intermediaries of remittances as well as businesses who are not part of such payment ecosystems.

Another country in which cell phones have had a significant role in connecting traders, markets and information, including in a cross border context with neighboring countries, is Laos. Landlocked with few major roads, Laos seems to be a potentially prime market for mobile money services, but the government has also struggled with anti-money laundering regulations and it will take some time to effectively implement domestic transfer channels that can hold up to regulatory scrutiny in the long run. Towards this end, the Lao Central Bank has been working with the United Nations Development Programme’s Mobile Money for the Poor (MM4P) initiative to establish a working group to launch branchless banking and mobile money services.

MoMo mobile payment and remittance service, Vietnam
(Photo by Ivan Small)
In Vietnam, mobile value transfer practices have started to emerge as users within the same provider network are able to transfer airtime credit via phone. There has also been experimentation with electronic kiosks where people can deposit money and input a cell phone number where the credit will be sent. Some start-ups like Momo have moved from airtime credit transfer to mobile wallet and e-payment services. The Vietnam Bank for Social Policies, in partnership with MasterCard and the Asia Foundation, recently ran a feasibility study and pilot project for mobile banking. However, the regulatory go ahead for Mobile Network Operators to provide P2P services without the intermediary of a bank has not yet happened, and many mobile money start up services appear to be closer to mobile banking than a service along the lines of M-Pesa or G-Cash.

In many countries in Southeast Asia, due to a long history of war, regime change, demonetization and economic instability, there is also a history of unbanked value storage in material items that range from gold to US dollars to motorcycles. People in countries like Cambodia experienced the destruction of the Central Bank and the abolishment of money in the 1970s. In Vietnam, informal black markets traders and money agents stepped in to provide financial services when the state sector was unable to do so. This led to the development of long standing networks where trust and history are extremely important when it comes to choosing financial services. It will be important to recognize the potential impact of how such historical, symbolic and material value management traditions and experiences will shape potential mobile money technological horizons going forward.

Mobile money has become somewhat of a buzz-word in Southeast Asia, but it also remains an anticipatory future horizon for many countries outside of the Philippines exception. In many cases, mobile money is conflated with mobile banking, and indeed the rapid uptake of smart phones and extension of banking channels in many countries like Vietnam, Indonesia and Cambodia suggest that the smart phone – banking equation is likely to change the situation in those countries by the time mobile money becomes fully established and is widely operable. In this sense, “mobile” “money”, in a broad sense of the word(s), is very much the future in Southeast Asia. However, the contours of adoption and adaptation may be quite different from what M-Pesa looked like when it was first introduced in 2007, and also different across diverse regional financial cultures and national legal regulatory contexts, ranging from Indonesia to Laos. In this sense, models like M-Pesa and other stories and lessons from Africa offer inspiration as well as cautionary tales, rather than blueprints, for how domestic and even cross border remittance technologies and frameworks will eventually take shape in Southeast Asia.

About the author: Dr. Ivan V. Small is Assistant Professor of Anthropology and International Studies at Central Connecticut State University. He is co-editor of Money at the Margins: Global Perspectives on Technology, Financial Inclusion and Design (forthcoming 2018, Berghahn Press) and author of Currencies of Imagination: Channeling Money and Chasing Mobility in Vietnam (under contract, Cornell University Press).

Monday, July 17, 2017

How India's Cash Chaos Is Screwing Over Their Neighbors — Oops!

IMTFI Fellow Vivian Dzokoto cited in article by Charu Sudan Kasturi in OZY

WHY YOU SHOULD CARE - Because cash knows no borders.

The waiting game: Millions of people rushed to withdraw money at an Indian Bank ATM
in New Delhi on  December 1, 2016. Source Sanjeev Verma/Getty

Over three decades, Sri Lankan Tamil businessman Sundar Thangarajan built a stash of Indian bank notes totaling the equivalent of $2,000 as insurance if he had to move to India from the island where the ethnic minority has often felt under siege. But on a visit to the southern Indian city of Chennai this April, Thangarajan decided he would no longer save Indian notes, and instead bought gold bars. His insecurities in Sri Lanka haven’t disappeared. But his faith in Indian currency has vanished now that his savings have turned to scrap.

Thangarajan is among millions across South Asia hurting from India’s decision last November to ban — overnight, with no advance notice — currency notes of 500 and 1,000 rupees (about $8 and $16) that comprised 85 percent of all available Indian cash at the time. The note ban, India argued, was aimed at uncovering undisclosed wealth and tackling fake currency within its borders. But for decades, these notes have been the savings Nepalese workers in India sent home, a source of security to war-ravaged Afghans and Sri Lankan Tamils, and a route to health, education and prosperity for patients, students and traders from Bangladesh, Bhutan and Myanmar.

Now, saddled with wads of unusable notes, many of them are weaning themselves off the “regional dollar,” as some refer to the Indian rupee, which is the largest and most stable currency in the neighborhood. Some, like Thangarajan, are buying gold as security; others, American dollars. Still others are discovering merits in their national currencies. The glint of the Indian rupee has dimmed for them. “This is natural,” says Vivian Dzokoto, an associate professor at Virginia Commonwealth University, who has researched past demonetization exercises internationally and their social impact. “People across South Asia will ask, ‘What will India do next?’ ”

Pakistan, Myanmar, Zimbabwe, Nigeria, Ghana and North Korea have all tried demonetization. But none of them had economies the size of India’s, and the impact of the moves on neighbors was negligible, say experts. Unlike the gradual shift proposed by advocates of less cash like Harvard University’s Kenneth Rogoff, India’s initiative also was sudden.

To read the full article, visit - http://www.ozy.com/fast-forward/how-indias-cash-chaos-is-screwing-over-their-neighbors-oops/78977

To read Vivian Dzokoto's blogpost as part of IMTFI's Special Perspectives Series on Demonetization: "Before Money isn't Money Anymore," visit - http://blog.imtfi.uci.edu/2017/02/special-perspectives-series-on_7.html

Tuesday, July 11, 2017

How to Talk about Money: Ethnographic Approaches to Financial Life

by Erin B. Taylor, Canela Consulting, former IMTFI Fellow and co-creator of the IMTFI Consumer Finance Research Methods Toolkit

Money changers in the bi-national market on the border
of Haiti and the Dominican Republic. Photo by Erin B. Taylor.

On 1 June, 2012, I arrived at the British Museum to attend the opening of its newly renovated Citi Money Gallery. This was an exciting moment for me: inside was a display of money-related objects and images from Haiti that I collected with Heather Horst and Espelencia Baptiste for a research project. I couldn’t wait to see how our coins, phones, cards, and underwear with secret pockets for hiding cash would look inside this venerated institution.

It was a huge success. People were spending far more time in the new gallery, lingering over the displays. Why, all of a sudden, was money so much more gripping?

The answer, said curator Katie Eagleton, was the social aspect. Whereas traditional money galleries usually focus on coins, promissory notes, and other traditional forms of money, the new gallery includes a range of displays that focus on the social history and current practices of money. Not just for coin-collecting enthusiasts, the money gallery had something of interest for everybody.

By putting money-related objects in social context, the Citi Money Gallery challenges many of our assumptions about how people relate to money. Our approaches to researching money and finance need to change as well. What can we learn from ethnography?


It’s about Lives, Not Numbers

Popular culture tends to depict money as something that people are greedy for or afraid of. We are either trying to get more money to fuel our consumption habits, or we’re trying to avoid facing our financial realities. But in fact, people’s interest in money is far more diverse.

Most people, like ethnographers, view money as interesting for both its economic and cultural aspects—its utilitarian and symbolic functions. But conducting qualitative research into people’s financial behaviours can be difficult due to a range of money taboos, ethical issues, and practical matters. People can be very private about money and may be ashamed of their financial positions. Being wealthy can be as embarrassing as being poor, so asking people to talk about their financial positions is fraught with obstacles. Asking people to tell you their bank balance or how much debt they’re in strikes at the heart of people’s fears that they are using money incorrectly.

Even financial professionals face these fears: one economist recently told me that he avoids opening letters that will tell him that he’s losing money. If the professionals can’t generate the nerve to face their financial realities, what hope is there for the rest of us? If people seem inarticulate about money it’s fashionable to assume they’re financially illiterate—but the problem is just as likely to be fear, stigma, or other social issues. If researchers misunderstand these issues, our findings maybe limited or just plain wrong.

The key is in our approach to getting people to talk about it. When we started our research in Haiti, a number of people (including other researchers) told us that our project was doomed to fail: Haitians are wary of talking with foreigners at the best of times, and certainly wouldn’t be willing to talk about their finances with us. Our experience showed otherwise. We learned that asking people about what matters in their lives, and how money works for them as a social tool, is far more effective than asking people for numbers.

Our participants were more than willing to tell us how they sent money by boat to their children studying in other towns, complain about how long they spent standing in bank lines, demonstrate how they used the new mobile money service via their phone, show us the “symbolic money” they carried (such as foreign banknotes), and so on.

The technique we used was the Portable Kit Study. It was a challenging proposition, since it involved asking people to take all their possessions out of their pockets and bags, display them on a table, and talk about each object in turn. Coins, notes, bank cards, receipts, and identification cards were among the money-related objects we were shown. Asking about these objects allowed us to develop a picture of people’s financial behaviours without having confront people directly.


A research participant in our Portable Kit Study on the border of Haiti and the Dominican
Republic shows us what's in his bag, wallet, and pockets. Photo by Erin B. Taylor.

For example, one young Haitian man we interviewed on the border of Haiti and the Dominican Republic ran errands for a living using his motorbike, ferrying goods and passengers across the national border. His motorbike ownership papers led to a discussion of how his wife was able to get a loan to buy his bike because she had a Dominican passport and a full-time job.

This interview revealed the problems people face accessing credit, and how they can sometimes use services and social capital across the national border to solve financial problems. We ended up with quite detailed information about their incomes, debt obligations, and thoughts about their financial futures without having to ask them outright.

Read on for more about mobile money use in Haiti and innovative ethnographic approaches to money in the original article post part of the EPIC (Advancing the Value of Ethnography in Industry) Perspectives Series: https://www.epicpeople.org/how-to-talk-money/

Friday, July 7, 2017

When - and why - did people first start using money?

by Chapurukha Kusimba, Professor of Anthropology, American University


"Quart de shekel de la cité de Sidon en Phénicie," cgb CC BY-SA 


Sometimes you run across a grimy, tattered dollar bill that seems like it’s been around since the beginning of time. Assuredly it hasn’t, but the history of human beings using cash currency does go back a long time – 40,000 years.

Scientists have tracked exchange and trade through the archaeological record, starting in Upper Paleolithic when groups of hunters traded for the best flint weapons and other tools. First, people bartered, making direct deals between two parties of desirable objects.
Money came a bit later. Its form has evolved over the millennia – from natural objects to coins to paper to digital versions. But whatever the format, human beings have long used currency as a means of exchange, a method of payment, a standard of value, a store of wealth and a unit of account.
As an anthropologist who’s made discoveries of ancient currency in the field, I’m interested in how money evolved in human civilization – and what these archaeological finds can tell us about trade and interaction between far-flung groups.

Why do people need currency?

There are many theories about the origin of money, in part because money has many functions: It facilitates exchange as a measure of value; it brings diverse societies together by enabling gift-giving and reciprocity; it perpetuates social hierarchies; and finally, it is a medium of state power. It’s hard to accurately date interactions involving currency of various kinds, but evidence suggests they emerged from gift exchanges and debt repayments.
Chinese shell money from 3,000 years ago. PHGCOM, CC BY-SA
Objects that occurred rarely in nature and whose circulation could be efficiently controlled emerged as units of value for interactions and exchange. These included shells such as mother-of-pearl that were widely circulated in the Americas and cowry shells that were used in Africa, Europe, Asia and Australia. Native copper, meteorites or native iron, obsidian, amber, beads, copper, gold, silver and lead ingots have variously served as currency. People even used live animals such as cows until relatively recent times as a form of currency.
The Mesopotamian shekel – the first known form of currency – emerged nearly 5,000 years ago. The earliest known mints date to 650 and 600 B.C. in Asia Minor, where the elites of Lydia and Ionia used stamped silver and gold coins to pay armies.
The discovery of hordes of coins of lead, copper, silver and gold all over the globe suggests that coinage – especially in Europe, Asia and North Africa – was recognized as a medium of commodity money at the beginning of the first millennium A.D. The wide circulation of RomanIslamic, Indian and Chinese coins points to premodern commerce (1250 B.C. - A.D. 1450).

Coinage as commodity money owes its success largely to its portability, durability, transportability and inherent value. Additionally, political leaders could control the production of coins – from mining, smelting, minting - as well as their circulation and use. Other forms of wealth and money, such as cows, successfully served pastoral societies, but weren’t easy to transport – and of course were susceptible to ecological disasters.

Money soon became an instrument of political control. Taxes could be extracted to support the elite and armies could be raised. However, money could also act as a stabilizing force that fostered nonviolent exchanges of goods, information and services within and between groups.
Medieval English tally sticks recorded transactions and monetary debts. Winchester City Council Museums, CC BY-SA
Throughout history money has acted as a record, a memory of transactions and interactions. For instance, medieval Europeans widely used tally sticks as evidence for remembering debt.

Read on to learn about following the money to see trade routes in the full blog post found at The Conversation here: https://theconversation.com/when-and-why-did-people-first-start-using-money-78887

Wednesday, July 5, 2017

Series on Socializing Finance Blog - Bill Maurer and Lana Swartz. Post #3: Considering Money Stuff

Socializing Finance, a blog on the social studies of Finance, recently invited IMTFI Director Bill Maurer and Lana Swartz, the authors of Paid: Tales of Checks Dongles, and Other Money Stuff, to write a few posts. This is the third and final post in the series, written by Alexandra Lippman, Whitney Trettien, and Jane Guyer, contributors to the book, who respond to the book as a whole. Lippman’s section includes a link to the playlist she created for the book.



Alexandra Lippman on the Art of Money

Money is the most commonly circulating art form. At the same time, payment objects are unstable and excessive, frequently transforming their status from money to trash to art (and back again). Argentinian artist, Máximo González—who I write about—weaves out-of-print Mexican pesos and discarded scraps of currency into fabrics like The World’s Garbage (2012) and creates collages from out-of-circulation currency into Landscapes with Landfill (2003, 2005) transforming the trash of cash into art (potentially convertible to cash).

Through our repeated handling, however, the art of money stuff becomes unremarkable. U.S. dollars—through their uniform color and dimensions—appear particularly adept at fading into the background. By curating payment objects in Paid: Tales of Dongles, Checks, and Other Money Stuff, Bill Maurer and Lana Swartz take these things out of circulation. Each of the chapters sets a particular type of “money stuff” aside and asks the reader to take a moment with it. The chapters reveal the personal stories, history, memories, and beauty bundled up in diverse objects of payment. We, the readers, must pause to consider the complex ways in which we keep track, tally, make jokes, create art, and remember through objects of payment.

Money stuff also inspires art. While Square may have killed the signature—how can we take our finger-painted “signatures” seriously? —it also gave birth to electronic signature art. When asked for their e-signature, artists, as Bill Maurer relays, instead draw scenes such as “the sun setting a house on fire and people running away and one guy on fire.” Not only are these “signatures” accepted by merchants, but also collected in ‘zines devoted to this new art form. More than 250 years prior, Benjamin Franklin pressed foliage—raspberry leaves, fern fronds—into the printing press to prevent the counterfeiting of bills. Printing from nature—as beautiful and seemingly whimsical as it is hard to replicate——Whitney Trettien suggests, “authenticated the strange materiality of money” (2017:163).

Inspired by Maurer’s and Swartz’ remarkable work editing Paid as if curating an imaginary exhibition of money stuff, I ask what the possibilities for curation are within scholarship. To mark the publication of Paid, I have experimented as a collaborative scholar-selector by curating an unofficial soundtrack to the book. I asked chapter writers to send their favorite songs about money to mix with my own. The playlist explores some of the ways in which payment is represented and debated in different genres, time periods, and places. From Horace Andy’s dubby repetition of “Money, money, money is the root of all evil,” to Wu-Tang Clan’s “Cash Rules Everything Around Me,” money stuff inspires music. Not only that, but money—as the sampled clink of coins or whir of bills being counted—becomes music.

Money—or often the idea of if—is also sonified. On YouTube, a two-hour-long track of water bubbling, rain, and whirring, “Sleep Programming for Prosperity-‘Millionaire Mindset’ -Attract Abundance & Wealth While You Sleep!” boasts 2 million hits. Hundreds of other (very popular) tracks promise to attract money to the listener through subliminal binaural beats, hypnosis, or spoken affirmations in various languages. In a very different vein, artist and writer, Jace Clayton, is planning a project to sonify the data of financial markets. Gbadu And The Moirai Index, which will take place on Wall Street, by using an algorithm to translate the financial market’s movements into a musical piece for four voices. Each singer plays a mythological character — the Moirai are Greek goddesses of fate and Gbadu is a Dahomey fate deity, and the performance will reflect on the history and architecture of Lower Manhattan.


Whitney Trettien on Print and Money

I’m a book historian, which tends to raise eyebrows when I say it; but it simply means I study the history of print and other text technologies. I’m particularly interested in the ways people have used reading and writing technologies to create communities.

As part of this research, I think a lot about words like “publication,” “circulation,” and “value.” Publishing simply means to make something public; but who gets to make information public any given time fascinates me. For instance, one of my primary research projects right now addresses a set of cut-and-paste biblical concordances — essentially radically “remixed” collages made from fragments of printed bibles and engravings. They were produced by a group of women at the religious household at Little Gidding in the 1630s and 1640s, a time when women had limited access to traditional print publication. How does one get around the injunctions for Renaissance women to remain chaste, silent, and obedient? If you’re at Little Gidding, you “print” with scissors and paste. This clever book-hack (literally!) has the added bonus of making their concordances into boutique, speciality objects, available only to powerful patrons. Et voila: ideological restrictions have become a strength. It’s not a bug; it’s a feature.

I didn’t think of my work as having much to do with the history of money or finance until working with the editors of Paid and reading the other contributions. Across our various fields, we share an interest in circulation as a social process, and value as contingent on some sense of a public. We also share an interest in the objectness, the brute materiality, of cultural transactions. In my own short chapter, I drew on book historians’ research on nature printing in the eighteenth century to show how trust in colonial currency was tethered to innovations in printing technology — innovations that were not themselves the natural outcome of the history of printing but which in fact happened in tandem with social and financial pressures. I’m thrilled to see this work alongside chapters on dongles and Bitcoin. In this fabulous tangle of interdisciplinary interests lies the future of the humanities, and I’m honored to be a part of it.


Jane Guyer on Trust and Money

Materiality is the central, and inspirational, theme across all these contributions. It provoked me to search into the rich details to explore the socio-spiritual properties imbued into these materials. Not unlike the classic “spirit in the gift”, its hau, the trust in monetary transactions, which lives in these objects, seems to have a life of its own. In God We Trust was first stamped into the American currency, a coin, in 1864, and onto every paper bill after 1956. Does this convey to the users that what we do with cash/money is under the oversight of God? “Trust” also pervades the financial vocabulary: as trust funds and trustworthy partners, whose qualities can also be nuanced from the Old Norse term for confidence, traust, into the Latin-origin fidelity, from fides, for faith. There has been a continual nuancing of these terms and their referents, and here we have material forms that are infused with their qualities. Does a “token of value”, as Maurer and Swartz put it in their Introduction, have a “life” of its own, and, if so, what is understood by this “life”, especially – perhaps now – when “part of their job is to be invisible”? Maurer suggests that signatures evoke “wonder”. Hau, trust, what words now circulate for the inner qualities of money materials? The papers about the past – Graeber, Trettien and others –  and about elsewhere – Urton, Hart and others – invoke, or imply, older, and non-European, terms. The articles about new technologies bring us into a new linguistic world: “ether” (O’Dwyer), the transfer of “trust” to “trust in yourself’ through the cryptocurrencies (Brunton). By ending with a current experience with silver (Brunton), which can take us back to the past, this collection prompts the reader to return to every paper, bringing close attention to the infusion of immaterial qualities into the Money Stuff of the title. The whole book deserves reading with close attention, inviting each reader to enter their own unfolding monetary experiences and perceptions into the collective conversation.

For original post - https://socfinance.wordpress.com/2017/06/30/blog-series-from-bill-maurer-and-lana-swartz-post-3-considering-money-stuff/