Wednesday, September 23, 2020

The CARES Act and Credit Reporting: What Credit Unions Need to Know

by Bill Maurer and Melissa Wrapp, Center of Excellence for Emerging Technology, Filene Research Institute - creating research, innovation and connections for credit unions

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was enacted on March 27, 2020, to provide emergency relief to consumers and businesses suffering from the economic fallout of the COVID-19 pandemic. The CARES Act contains a section (Sec. 4021) specifically addressing the credit reporting consequences of the pandemic. Even with direct stimulus payments, increased unemployment benefits, and the Paycheck Protection Program, consumers are facing dire financial circumstances. The expiration of relief payments and enhanced unemployment protection on July 31 has only made their situation more precarious.

Section 4021 does not go nearly far enough. It places the entire burden on consumers. It does not include all forms of debt, including debt collection accounts (which includes 99% of medical debt on credit reports). It does not standardize credit reporting practices. And more.

Still, there are ways your credit union can help your members.

PROBLEM: Protections are not automatic.

Consumers are required to contact creditors to ask for an accommodation. They are also required to do so for all their accounts. Most don’t even know where to begin.

What your credit union can do:

  • Proactively contact your members to let them know how to ask for an accommodation from their creditors.
  • Remind them of the top five most likely creditors they should contact. You can either look for trends in your area or go for the most likely creditors that any member would have. Provide them a checklist: Mortgage; car loan; student loan; credit cards.
  • Provide phone numbers or websites to the national credit reporting agencies (NCRAs) so they can obtain their free credit reports.
  • Preserve the dignity of your members and don’t overrun your call centers! Instead, consider automatic loan deferments or online/mobile solutions for loan deferment requests.

PROBLEM: Only deals with active accounts.

The CARES Act only deals with active credit accounts, not debt collection accounts like medical debt or debt owed to collection agencies employed by former landlords.

What your credit union can do:

  • Target small-dollar lending products to utility delinquencies, medical debt, or other debt collection accounts.
  • Help members identify court records of evictions and petition the court to have them expunged or sealed. The easiest way is to look at the Public Records section of their credit reports. They can also look up records on line via the National Center on State Courts website or partner with a third-party provider like MyRentalHistoryReport.Com (which charges a $29.95 fee). Or, identify and partner with a local nonprofit legal aid foundation.
  • Provide a dated letter of reference to members with eviction records indicating they are a member in good standing of your credit union that they can share with potential landlords when filling out a rental application.

PROBLEM: Consistency using the AW code.

Furnishers are not consistently using the AW code (“natural disaster”) in providing data about COVID-related delinquencies.

What your credit union can do:

  • Demand from NCRAs that furnishers of credit data use the AW code or CP (“short term forbearance”) in any data they provide to NCRAs.
  • Lobby Congress for consistent application of Metro 2 ® codes related to natural disasters, including pandemics. Make this an immediate and high priority for our trade groups.

PROBLEM: Student loans.

75% of forbearances are for student loans.

What your credit union can do:

  • Reach out to student borrowers and others with student loans to discuss their options. Identify them through your student loan providers/servicers; or, look for student loan payments in ACH files.
  • Ask your student loan providers/services to advertise the benefits provided in the CARES Act for student borrowers.

PROBLEM: Poor understanding of credit reports.

Consumers poorly understand their credit reports. The 3 NCRAs are currently providing weekly free reports during the pandemic.

What your credit union can do:

  • Make your members aware of the NCRAs free reports.
  • Provide educational materials for members on their credit reports, how to read them, the importance of their credit score, and how to improve their credit score. Direct them to the websites of the NCRAs or the CFPB, which has a handy primer on credit scores.


For full original post, additional resources, and detailed specifications from the CARES Act, go to:



Important Note
At the time the guide was prepared (August 2020), the second major stimulus and relief act has passed the House of Representatives, but negotiations are stalled between the House, Senate, and Trump administration. The House bill, called the Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES) Act, replaces section 4021 of the CARES Act and provides a couple of important additional protections. Most significantly, it bans reporting medical debt related to COVID-19 treatment. This is a step in the right direction, but many individuals will suffer medical debts unrelated to COVID-19 treatment that they will still struggle to repay given the economic fallout from the crisis. It also forbids the use of alternative credit scoring models that “would identify a significant percentage of consumers as being less creditworthy when compared to the previous credit scoring models.”


Monday, September 14, 2020

Money and Speculation in Times of Crisis

by Smoki Musaraj. Ohio University

During the peak of the COVID-19 pandemic in Italy earlier this year, I frequently checked the Facebook feed of many friends and family living there. Growing up in Albania like me, many of them had migrated to Italy in the 1990s. I checked to make sure they were OK. Other friends situated in other parts of the world did the same. Facebook feeds became a space for comparing the degrees of quarantine in different countries and for providing mutual support in times of collective isolation. During these checks, I often ran into conversations by Albanian diaspora that compared the experience of the COVID-19 quarantines to that of the infamous year 1997 (or, in colloquial Albanian, nëntdhteshtata, the ninety-seven). This was a year of political anarchy, of a state of emergency, closed borders, of curfews and protests caused not by a virus but by the collapse of a dozen pyramid schemes. For many of my friends who had come of age in late-1990s Albania, the COVID times brought back the memory of social isolation and economic insecurity they experienced when the schemes collapsed.

My book, Tales from Albarado: Ponzi Logics of Accumulation in Postsocialist Albania (Cornell 2020), takes an ethnographic approach to the rise and fall of the dozen of pyramid firms (firma piramidale). The firms emerged alongside the free-market reforms and post-communist financial institutions that followed the demise of the communist regime. When the pyramid firms folded in 1997, the country unraveled into anarchy and a near civil war. Looking into newspaper archives and interviews with former investors, Tales from Albarado seeks to gain a better understanding of how people from various paths of life came to invest in the financial schemes and, in turn, how such schemes intertwined with everyday transactions, dreams, and aspirations. Through this ethnography of the Ponzi schemes in Albania, the book explores more broadly the materialities, socialities, and temporalities of financial speculation.

I served as postdoctoral fellow at IMTFI during 2012-2014. During these years, I revised the manuscript of Tales from Albarado while working alongside IMTFI fellows from different parts of the world who were also exploring questions about money and technology in the global South. My work with IMTFI and a wonderful group of fellows influenced my thinking about the various top-down and bottom-up financial repertoires mobilized by the pyramid firms in Albania. I began to think about the pyramid firms alongside many other financial enterprises that serve the unbanked and perform many of the financial functions that we associate with the formal banking sector. Given the history of a strict ban on private property during the communist period, many Albanians lacked assets and savings and they were quickly excluded from formal institutions during the 1990s, a time of free-market reforms and widespread privatization. Many of them turned to the pyramid firms as a means of saving, borrowing, and investing. I therefore situate the pyramid firms at the interstices of formal and informal economic institutions and repertoires that emerged alongside post-communist reforms. I argue that these institutions persist to this day.

"The Pyramid" by Like Rehova, Revista Klan, 2.11.1997, Vol 1 (1): 2.
Courtesy of the New York Public Library. 

Scholarly discussions of financial bubbles often focus on the abstraction and anonymity of capital as the fuel of speculation. In Tales from Albarado, by contrast, I emphasize the materialities and socialities of speculation. I do so by looking at the circulation and conversions of various things—stack of cash, privatization vouchers, remittances, housing—through the pyramid firms. These materialities, I argue, are entangled with specific economic and social histories and cultural norms. This approach resonates with the work of so many IMTFI fellows who research the old and new financial technologies and repertoires used by people living at the margins of global capital (Maurer, Musaraj, and Small 2018). Like many IMTFI projects, Tales from Albarado explores how financial activities are deeply intertwined with social ties. 

Thus, a key finding in Tales from Albarado pertains to the role of a widespread bottom-up economic repertoire: remittances. Remittances were sent to Albanian residents via transnational kinship networks. They were mostly in cash and in multiple currencies as this was a time before the euro. Drachmas, liras, marks, dollars featured prominently in recollections of former investors who often expressed pleasure in dealing in multiple currencies and in carrying stacks and sacs of cash to and from the firms. Cash enabled bundling deposits from multiple investors; multiple currencies enabled cultural cachet and opportunities for arbitrage; social ties of kin, friends, and brokers (sekserë) enabled the expansion of investments to the firms. Accounts by former investors point to the highly personalized transactions that enabled financial speculation. Further, they provide a picture of a bottom-up repertoire—an informal cash economy in multiple currencies mediated by social ties—that constitute an enduring strategy of accumulation in a context of ongoing economic uncertainty. 

In addition to seeking other means of making wealth, I explore how participation in the pyramid firms entailed a negotiation of the temporalities of life and finance. The book looks into the buying, selling, and desiring of homes in conjunction with participating at the pyramid firms. A number of investors sold their recently privatized apartments (formerly state-owned) in order to invest at the firms. At the same time, most investors I interviewed, when asked what they planned to do with their returns, expressed their desire to buy a new home. The new homes were often imagined as an accelerated path towards a capitalist and European modernity. Those who had lost their homes to the schemes lamented their “lagging behind” this imagined trajectory. Housing, thus, became a site for materializing such temporal aspirations and for witnessing their failure. 

By examining the materialities, socialities, and temporalities of the speculative schemes, Tales from Albarado identifies economic practices and institutions as well as desires and aspirations that have endured throughout the three decades of neoliberal transformations in Albania. Strategies of value conversion, a propensity for accessing multiple regimes of value, intertwining finance and social ties, desires for an accelerated European modernity—these are all well-established social and financial institutions that make up the economic and social life in Albania. They are also practices and institutions that mirror the experiences of myriads of people whose lives are shaped by similar forms of geopolitical marginality and economic instability. These intertwined economies and socialities in contemporary Albania thus speak more broadly to the making of neoliberal economies at the margins.


References

Maurer, Bill, Musaraj, Smoki and Small, Ivan V. eds., 2018. Money at the Margins: Global Perspectives on Technology, Financial Inclusion, and Design. Berghahn Books.


Smoki Musaraj is associate professor of anthropology and director of the Center for Law, Justice, and Culture at Ohio University. 


Friday, September 4, 2020

GovExec Daily: Physical Cash and the Pandemic

Dr. Bill Maurer of University of California, Irvine joins the Government Executive Daily podcast  by Adam Butler and Ross Gianfortune to discuss what cashless payments look like, in light of the pandemic.


Access GovExec Daily: Physical Cash and the Pandemic





With the COVID-19 cases spiking and online shopping following, the argument for ending physical money has come up again in the public conversation. But, a cashless existence is not our reality yet. 

Bill Maurer is dean of University of California, Irvine's School of Social Sciences, a professor of anthropology and director of the campus’s Institute for Money, Technology & Financial Inclusion (IMTFI). He joined the show to examine why the conversation about the end of physical cash is probably premature, even during the pandemic


Tuesday, August 4, 2020

Mapping the Intermediate: Lived Technologies of Money and Value

Guest editors Mrinalini Tankha, Portland State University and Ursula Dalinghaus, Ripon College of  "Mapping the Intermediate: Lived Technologies of Money and Value," Journal of Cultural Economy, Volume 13, 2020 - Issue 4


ABSTRACT
As financial transactions are increasingly digitized, old and new kinds of intermediaries are only expanding in importance. Intermediaries, mediators and brokers sit at critical junctures and operate between diverse financial arenas and pathways. We argue that mapping the intermediate entails identifying how different kinds of actors—human and non-human, objects and interfaces, institutions and practices—delimit or reify but also stitch together and overcome spatial and temporal differences in people's financial lives, while taking on varying burdens of risk. Mapping the intermediate is both an empirical and methodological exercise. Empirically, it requires following the agents and traders, brokers and material objects that facilitate transactions and add, extract, or re-work different kinds of value. Methodologically, intermediaries and the intermediate are not only the objects of analysis but act as analytical tools in their own right, making the process and politics of transactions visible and tangible. Attending to the intermediate in our inquiries around money, currency and new digital financial technologies, thereby, offers new directions for grounding finance in politics and history and better connecting micro and macro and local and global economic processes.




Wednesday, July 29, 2020

The comfort of cash in a time of coronavirus

(Financial Times)

Bill Maurer cited in "The comfort of cash in a time of coronavirus" by Brendan Greeley | Financial Times JULY 16, 2020 | 7:49 PM

Bill Maurer, an anthropologist at UC Irvine who studies payments, calls the decision to withdraw cash “contextually rational.” It’s not that people are worried about how the Fed distributes cash, he says. It’s that, as in any disaster, people are worried about everything else — the electrical grid or the mobile network. … Holding on to a stack of bills, says Maurer, is “the recognition that in a pinch I can use cash and it will work with anybody.

For the full story, please visit Los Angeles Timeshttps://www.latimes.com/world-nation/story/2020-07-16/cash-coronavirus-covid19

Monday, July 20, 2020

Consumer Finance Research Methods Toolkit - 2020 Update

by Erin B. Taylor and Gawain Lynch, Canela Consulting

The Consumer Finance Research Methods Toolkit (CFRM Toolkit) presents cutting-edge approaches and methods being done across different sectors of finance. We give practitioners a starting point to think about how they can improve their research and prepare their organisations for the future.

CFRM Toolkit 2020

ABOUT THE CFRM TOOLKIT
This toolkit was produced as part of the IMTFI’s Consumer Finance Research Methods Project. It demonstrates how different methods are being applied in finance research to help both for-profit and not-for-profit organisations cope with rapid changes in the sector. It is designed to help researchers and managers to:

  • Learn about innovations taking place in consumer finance research
  • Understand how to use research to improve their organisation’s strategy
  • Facilitate connections between researchers and organisations with complementary expertise

Just as consumers have an ever-increasing choice of financial products, researchers have an ever-increasing array of methods at their disposal. This Toolkit provides readers with inspiration for ways they can develop their research, either by themselves or in collaboration with others. Readers can choose to learn about applications that are familiar to them, or discover entirely new methods and professionals who practice them.

WHO IS THIS TOOLKIT FOR?
The CFRM Toolkit is intended for use by anyone who needs to adapt to the new global finance market:
  • Innovation specialists
  • Research and design teams
  • Organisations and companies
  • Individual professionals
  • Instructors and students
User insight specialists, designers, NGO workers, policy specialists, and academic researchers are among those who may benefit from the Toolkit’s descriptions of how different methods are applied to a wide range of problems around the world.

Whether you work in the field, in a lab, or at home on your notebook, this Toolkit covers methods that are relevant to your research context.

FOREWORD by IMTFI Director Bill Maurer

When the first edition of this Toolkit was released in 2016, I asked, in my prefatory remarks, “Why a consumer finance research toolkit, and why now?” I wrote mainly of the explosion in new payment, financial and insurance technologies being introduced into social systems and markets around the world, often with unintended consequences, and often with little forethought on the part of their developers as to how these new technologies would impact the human side of money and finance. 
While I could easily make the same case today, three years later, it is striking how some things have changed quickly, and others, not at all. “Fintech” is now a word, and a business and investment space. The term was still relatively new in 2016 (and it wasn’t used once in the first toolkit!). 

But payment is still … boring, despite all the hype and new technology “deployments.” How many readers of this report have used Apple Pay a few times only to abandon it because of its lack of general availability, ease of use relative to cash or cards, or force of habit? How many have re-adopted it since purchasing a smart watch? And how has the cost of such devices pushed new payment technologies ever further up the socioeconomic hierarchy, leading many at the bottom back to cash? 

Cash, meanwhile, has been under assault, even as its continued use makes it seem more resilient than ever. In countries like the US and the Netherlands, for example, more and more merchants have gone cashless and celebrate their status as such. Realizing the exclusionary impact of refusing cash at the point of sale, municipalities and some states in the US have been pushing back, banning cashless stores. Cryptocurrencies have reached record valuations, only to plummet again, firing up the speculative imagination as well as generating much-needed skepticism. 

On the horizon: artificial intelligence is increasingly being used to predict consumer behavior and price risk—and will potentially unleash new forms of discrimination and injustice. The presuppositions of the post-World War II liberal order are under assault and the regulatory frameworks guaranteeing fairness and accountability are being rolled back at a rapid pace, making more urgent than ever the responsibilities of the business community to ensure fairness, equity, and even financial justice.

Money and payment have opened up for political and social discussion as never before. Since the dawn of agricultural states in the ancient Near East thousands of years ago, accounts-keeping has been central to the allocation of resources in complex societies. You know something interesting is afoot when respectable journalists or government officials question the long run viability or existence of physical banknotes, or even state issued currency itself. In the United States, we have not seen such enervated discussion over the nature of money since the greenback/goldbug political conflicts of the late 19th century.

It is curious, then, that we still have to remind those working to create and introduce new money, financial and payment systems into the world that such systems are used by…. people! And people use them in systems that are simultaneously social and technological, systems that they use by choice or necessity to meet their basic day to day needs, while also using the technologies of money—from cash to Venmo to WeChat Pay—to make social connections, honor the dead, fulfill religious obligations, or make political statements. 

How people do money is often more significant than what money is, and the debates over what it is are almost always grounded in the ways that people use money and its associated technologies to get by and make do.

This updated toolkit provides a roadmap for a deep and nuanced understanding of the ways people do money, and the ways technologies are complexly integrated into existing sociotechnical arrangements. Approaching these questions requires guides to careful research, like the ones presented herein, and a small degree of hubris. 

The future is hard to predict—but it is surely a future of humans making meaning and social relationships with one another through consumer financial technologies and systems. The methods provided in this toolkit help us get a handle on how they do so, and to what ends. 


Access CFRM Toolkit 2020 at the following LINK

Friday, July 17, 2020

What’s next: The future of cash - The death of dollars has been greatly exaggerated

by Pat Harriman, UCI | July 8, 2020


Contrary to popular belief, COVID-19 does not mean the end of cash. Although there was some concern during the early stages of the current crisis that paper money might transmit the virus, its demise had, in fact, been heralded by many people even before the pandemic began. Despite the convenience of plastic, the sense of safety with contactless online payment systems or the allure of cryptocurrency, however, there are still situations where dollar bills are best.

Bill Maurer is dean of UCI’s School of Social Sciences, a professor of anthropology and director of the campus’s Institute for Money, Technology & Financial Inclusion(IMTFI). Here, he provides expert insight into the driving factors behind – and implications of – eliminating physical currency, the changing uses and social relations of money, and the enduring appeal of cash.

The general public has been hesitant to handle cash during the pandemic. What does this mean for its future?

The King James version of the Bible uses the phrase “filthy lucre” five times, so money has long been associated with base motivations. While all kinds of germs and bacteria can survive on bank notes, they are not an efficient means of transmission. My concern is that if people associate dollar bills with disease, they’ll stigmatize those who – out of necessity – use cash. These tend disproportionately to be poor people, recent immigrants and refugees, people of color, the homeless, the elderly and the disabled.

As far as other payment methods are concerned, there’s some evidence to suggest that coronaviruses survive longer on plastic and metal. If you think about all the fingers that tap on point-of-sale terminals or hand-held wireless devices, those might be a greater risk. The epidemiological advice is the same as for everything: Wash your hands after you touch stuff.

If the pandemic isn’t the catalyst for all the talk about eliminating paper money, what is?

The drive toward cashlessness is mostly driven by two factors: fiscal concerns over revenue collection and industry interest in capturing additional data about people’s lives. If you’re a state tax authority, eliminating physical currency means that transactions have to pass through a bank or other institution. Despite secrecy rules and privacy regulations, if they have due cause, officials can still peer into people’s financial affairs.

For the Big Four platform companies and smaller digital services, going cashless offers a view into users’ offline spending. If you use cash at a physical till, there’s no data capture; but if you tap and pay with your watch or phone, platform companies all of a sudden know a lot about what you’re doing in the physical world. That’s a treasure trove of personalized information to use in targeted marketing, risk assessment and pricing for things like loans, as well as for predictive models to identify trends.

Can currency be completely replaced by plastic – credit and debit cards?

In the U.S., it’s not going away anytime soon. We have a very high level – 15 to 30 percent – of people who have no bank account or have difficulty maintaining a minimum balance, cycle in and out of formal banking services, or rely on check-cashing services. As a result, they live in a cash economy. Another reason is that when there’s a natural or manmade disaster, paper money becomes absolutely essential to community resiliency. When all other infrastructure goes down, dollars still work as a store of value and means of exchange.

And ironically, with every new digital or mobile payment innovation, we’ve seen cash demand go up. Apps linked to bank accounts make it easy to buy something or split a restaurant bill, so many people who use these apps withdraw money from ATMs as their “savings” because they can lock it in a drawer and eliminate the temptation to spend it.

What are the disadvantages of eliminating paper money and metal coins?

The biggest disadvantage will be the economic exclusion of the poor and underserved. Another implication is that eliminating paper money will more easily allow central banks to lower interest rates below zero. When the interest rate is close to zero or below, people start taking their money out of the bank and put it under the mattress, which acts as a kind of brake on further lowering the interest rate.

While eliminating cash would give the central banks more tools to deal with monetary and financial crises and also allow for relief payments to be made much easier via digital channels – so long as the government provides one for all people to use, like the FedAccounts proposed in an early version of the CARES Act – it also concedes a lot of power to them.

Do you think widespread concern about cash and germs will boost the credibility and popularity of cryptocurrencies such as Bitcoin?

Interestingly, as stay-at-home orders were being issued and the extent of the pandemic was becoming clear in early to mid-March, Bitcoin investors dumped their crypto and converted it into U.S. dollars. There have been ups and downs since then, but the overall trend has been to dump cryptocurrency, along with a more general flight to more liquid assets like the U.S. dollar. And I bet a good many of the people who sold their crypto ultimately converted it to cash.

Read original post in UCI News: https://news.uci.edu/2020/07/08/whats-next-the-future-of-cash/

Thursday, July 9, 2020

Electronic banking fraud in Nigeria: how it’s done, and what can be done to stop it

By IMTFI Fellow Oludayo Tade, University of Ibadan, in The Conversation

Stefan Heunis/AFP via Getty Images

Six years ago, a cashless policy became fully operational in Nigeria. The aim was to encourage electronic transactions with a view to reducing the amount of physical cash in the economy. The logic was that this would minimise the risk of cash-related crimes.

But a major downside of the policy has been pervasive electronic banking fraud (e-fraud). Although the cashless banking system was designed to foster transparency, curb corruption and drive financial inclusion, it’s threatened by the growing perpetration of fraud.

About N15.5 billion was lost to bank fraud in 2018. About 60% of the fraud was perpetrated online owing to available internet-based and tech-rated banking services.

Our research investigated dimensions of electronic fraud in Nigeria. We found three: internal fraud carried out by banking staff; external fraud carried out by ordinary Nigerians; and collaboration between fraudsters and banking staff.

We found that inefficient supervision, non-performance of oversight by regional heads of banks, and poor follow-up on customers’ addresses (Know Your Customer) accounted for the fraud that took place.

Our study provides the banking industry, banking public and investors with critical pointers on how to reduce fraud.

Read more about the different types of fraud and recommendations in the full post here: https://theconversation.com/electronic-banking-fraud-in-nigeria-how-its-done-and-what-can-be-done-to-stop-it-141141

Access research publication: "Dimensions of Electronic Fraud and Governance of Trust in Nigeria’s Cashless Ecosystem" by Oludayo Tade and Oluwatosin Adeniyi in the International Journal of Offender Therapy and Comparative Criminology (IJO).

Thursday, July 2, 2020

Here and there? Mobile money and the politics of transnational living patterns in West Africa

by Solène Morvant-Roux and Anna Peixoto-Charles, University of Geneva in Oxford Development Studies (Volume 48, 2020 - Issue 2)


Ouagadougou, Burkino Faso. Photo credit: Solène Morvant-Roux

Abstract
The authors examine the use of mobile money in the context of cross-border remittances in West Africa. Relying on mixed methods and a multi-sited empirical strategy they look at both the sending and receiving conditions of mobile money transfers. By looking at money as socially embedded and the role of migrants in the production of a transnational space, their results highlight that uptake and usage of mobile money for remittances are shaped by a transnational living pattern. At the same time, mobile money also contributes to strengthening and reshaping this pattern. By showing that conversion of virtual money to cash may be performed by brokers that live far away from the end recipient, the paper highlights an important gap between spatial distribution of mobile money infrastructure and the social mediation that supports e-money flows. Cash-based transactions, in turn, are shown to play a key role in the social mediation dynamic.

Select Citations
"According to Leon Isaacs (cited in Heyer & Mas, 2010), 65% of the 23 million African migrants are regional as opposed to trans-continental migration with West Africa hosting major sub-regional corridors. Côte d’Ivoire is one of the countries with the largest long-standing diasporas from neighboring countries. This is especially so for the Burkinabè diaspora which accounts for almost 2 million people (IOM 2018) compared to the total population of Côte d’Ivoire (at 23 million). This migration flow is mainly composed of rural males leaving their village to settle in a more dynamic agricultural region in Côte d’Ivoire. Remittances between the two countries are a major component of the flows between migrants and their family members in Burkina Faso (IOM 2018). This shows that despite an old migration corridor (existing over several generations) that allowed migrants to invest in lands and houses in Cote d’Ivoire, Burkina Faso still appears to be considered their ‘home’, at least partially."

"Our findings highlight that while the spatial spread of MM retailers (supply) is impressive in sending and receiving settings, the social spread of MM in Burkina Faso exhibits a much more complex web of in-between informal brokers. Far from the person-to-person transaction and beyond issues of proximity, MM sending and receiving patterns are strongly shaped by the migrants’ transnational living pattern (distributive livelihoods) as well as the imperative to maintain community membership over the long run."

"With MM transfers, migrants can play a more active role in daily expenses or timely responses to financial difficulties without it being communicated to others. Previous to MM access, migrants would not have been able to quietly send money to their children for school in their home country, or for family events without it being known more widely. In interviews, they described: ‘we were neither able to send our children to our home country school nor to take part to family events because we had to rely on intermediaries who are always indelicate.’ Discretion is key: ‘Unless you talk, these transfers remain secrets’. "

Read more on the research findings in the full paper in Oxford Development Studies:
https://www.tandfonline.com/eprint/XEASAXJXRE53RWBIVQE7/full?target=10.1080%2F13600818.2020.1770208&

Read up on original IMTFI-funded research project: "Cross-border Transfers as a Strategic Tool to Promote the Diffusion of Mobile Money in Rural Areas. The Case of Burkinabe Diaspora Living in Ivory Coast".

Tuesday, June 16, 2020

Digital Transformation in the Age of COVID-19: What Should Credit Unions Deliver?

by Bill Maurer and Scott Mainwaring, Center of Excellence for Emerging Technology at UC Irvine

The old era of neighborhood branch gathering places no longer looks tenable as a new era dawns of self- and curbside-service, constant online connectivity, and conversation in virtual spaces.


Digital transformation is here with a vengeance, whether we like it or not. The global COVID-19 pandemic has people paying with mobile apps instead of cash, applying for and receiving assistance online, and coping with anxieties around housing, employment, debt, and even bankruptcy. The cascading consequences of the pandemic means that credit unions must urgently engage with business reinvention in order to continue their mission of service to their members’ financial well-being. How can this mission be sustained even as online becomes the dominant way they deliver products, offer support, and work with members to solve problems?

We have been researching the implications for credit unions of emerging technologies that use so-called artificial intelligence techniques to support “natural” conversations, though text, voice, and/or graphics, between people and artificial agents that more or less pose as people in enacting a service. Amazon’s Alexa and Apple’s Siri are well-known examples, through financial service-specific versions like Bank of America’s Erica have also launched.

As social scientists, we start from a broad set of questions about how people experience and expect these systems to behave, both positively and negatively. And for these “conversational agent” technologies, we start in particular with questions of intimacy and empathy.

Intimacy of AI
In 2018 the popular parenting website BabyCenter released results of a survey it conducted on new parents and their use of AI assistants like Alexa and Siri. The results were striking—seven in ten parents own a smart device; and a third of those said that having one made them a better parent. 22% percent said their virtual assistants are “like another part of the family,” and 42% of device owners say that they speak to their virtual assistants like an actual person. The “intimacy of AI,” as AdWeek calls it, seems inevitable.

Voice and AI aside, intimacy is already central to smartphones themselves. These personal and personalized devices are our constant, daily, bodily companions. Add an always-available virtual assistant to chat with, and our relationship with our phones—especially in a time of social distancing—becomes even closer.

“Intimacy” from virtual assistants being rolled out by the big banks is threatening to credit unions precisely because credit unions have historically prided themselves on the quality of their customer service and their knowledge of their members. Take Bank of America’s Erica. Via your smartphone, she can help you plan a spending path, manage your expenses, alert you to when bills or other recurrent payments are coming due, give your FICO score, and even provide rudimentary credit counseling.

If interactions with financial digital assistants are to replace person-to-person conversations with customer service agents, is the credit union system back in a familiar position of trying to play catch-up with the big banks and their big pockets? Not entirely – to employ new technologies that put people first, credit unions have advantageous positions as member cooperatives that place well-being over profits.


Continue reading about intimacy, empathy, and opportunities for credit unions in the age of COVID-19, full post on the Filene Research Institute blog available here: https://filene.org/blog/digital-transformation-in-the-age-of-covid-19-what-should-credit-unions-deliver


Wednesday, June 3, 2020

Part 3: South Africa in lockdown: Innovation in G2P payments

By John Sharp, University of Pretoria and Sibel Kusimba, University of South Florida

Sassa queue outside office in Cape Town. Photo credit: Barbara Maregele

More than eighty countries have increased their social protection programs in the light of the COVID-19 outbreak. At least 58 countries are scaling up cash transfer schemes. Some countries have been more efficient than others in providing funds to low income, elderly and other vulnerable citizens, and the urgency of the human need and the population scale these programs seek to reach are unprecedented.

As in other countries, authorities in South Africa are under social and political pressure to either curtail lockdowns or ameliorate the loss of income and employment that has ensued. Observers have praised the South African Social Security Agency (SASSA) for their rapid adoption of a new method of distributing state grants to millions of South Africans. SASSA was obliged to move fast given that President Cyril Ramaphosa announced, on 23 April, that the state intended to make a brand new social grant available to provide relief to South Africans during the COVID-19 lockdown, and that payment would start in early May.

This grant targets a new category of poor people – those who are of working age but without paid employment during the Coronavirus crisis. Ramaphosa noted that the plight of elderly people, children under 18 years, and disabled people was covered by the state’s existing social grants program, administered by SASSA, but that the lockdown had exposed a gap in the case of working-age people who were unemployed. He said that these people would be able to apply immediately for the new ‘Social Relief of Distress’ grant of R350 per month for six months.

Social distancing tricky in queues for social grants
However, with no information on the people who fall into this category, SASSA has faced challenges in identifying appropriate grant recipients.  The elderly who depend on state pensions, the caregivers of children, and the disabled are on existing databases, but working-age people who are unemployed are not. SASSA solved the problem by deciding that anyone could apply by sending a message via WhatsApp or USSD to the official COVID-19 phone number (hitherto used only to give out information on the virus), that applications would be checked against existing databases of taxpayers, Unemployment Insurance Fund recipients, and recipients of other social grants. Those who qualified would have the grant deposited into their bank accounts or receive it on their mobile phones either as a code that would access cash at an ATM or as a voucher redeemable at selected retail stores.

This solution came together quickly. But whether there is merit in the comment from one observer that this signals ‘a major shift away from the cash payments or deposits via traditional bank accounts that have long bedevilled the already massive SASSA system is an open question.

Two key problems afflicted earlier systems for distributing social grants in South Africa. One stems from the fact that distribution took place all at once – on a set day or set days every month. Grants were paid out in cash that had to be transported – in armoured vehicles – to pay-out points scattered across the country. Recipients – many of them elderly – had to travel to these venues and wait in queues for hours while the cash was disbursed manually. There was an attempt to change this after 2012, when many recipients had bank accounts opened for them by a private financial services company contracted by SASSA to distribute social grants. But all the grants were deposited in these accounts at the same time, and since recipients needed to cash them out immediately, the congestion and long queues persisted. People were still obliged to stand in the sun for hours on end in order to get their grants in the form of cash.

Sassa fiasco: Three pensioners die during long wait for social grants. The South African

This particular grant program, administered by subsidiaries of fintech company Net1, reached more than a third of South Africa’s population, even before the COVID pandemic. Nevertheless, distribution of social grants was preyed on by those seeking to sell a range of financial services to grant recipients. When pay-outs were made in cash, companies selling insurance and advancing credit dispatched agents to pay-out venues; the agents engaged in high-pressure selling which recipients were often unable to withstand. When grants were deposited in bank accounts that had been opened specially to receive them, the private company involved gave its sister companies access to the recipient database, allowing targeted marketing of airtime, insurance and loans, and ensuring a fail-safe method of payment for these services. Payments were deducted at source from the recipients’ bank accounts, and they were paid out whatever was left after the payments had been made.

The new payment system SASSA has developed may make such practices more difficult, but high pressure salespeople pushing insurance and credit can still target ATMs if large numbers of unemployed people gather in front of them at the same time to key in the codes they receive on their mobile phones in order to access the cash they need. Even if the new system is upgraded to a full mobile money system in due course, the problem would not necessarily disappear entirely. If private companies can issue mobile money, they can readily add financial services to their mobile platform. The recent proliferation of mobile loans in countries such as Kenya provides a case in point: people are encouraged to take out ‘quick little loans’ on their mobile phones. The loans are made instantly and have to be repaid, with interest, in mobile money. The ease and speed of the transaction are tempting and lead growing numbers into debt they cannot repay easily.

If the new system of code and voucher transferrals via mobile phone is easy to stagger, this problem will be minimised. But estimates are that some eight million unemployed people will qualify for the Social Relief of Distress grant, and if they all receive pay-outs at the same time (and at the same time as the 18 million South Africans receiving old-age, disability and child support grants in a country of 58 million), the result will be the same as before.

Critics have pointed out that the amount of the new social grant is too low to support the direct recipients, let alone the other members of their households who will depend on them, and that it will be paid out for much less time than they are likely to remain unemployed. These are important issues, with which we agree. But the way in which G2P payments are made is also important.

World Bank experts are recommending that government payments during COVID be designed to 1) ensure social distancing at delivery; 2) minimize costs to recipients; 3) manage risks such as theft, 4) communicate well and 5) put systems in place for the long term. A number of ecosystems could provide these features, both agent-based cash-out schemes and account-based transfers. The overall point is that a new payment technology such as the one developed by SASSA over the past fortnight cannot deal with the problems identified above on its own. No matter how grants are paid out - in cash, into bank accounts, via codes on mobile phones, or indeed, as mobile money – there is a risk of exposing recipients to inadvertent hardship and to high-pressure selling of add-on services.

A comparative study of G2P payments as social protection identified five overriding principles for effective efforts: Cash transfer programs work best when they are: ‘fair, assured, practical, large enough to impact household income, and popular.'1 Reaching a national consensus on these dimensions needs to combine technological innovation with policy expertise and the perspectives of recipients of the social grants themselves. This last point is something to bear in mind for when the COVID-19 emergency is over.

References
1 Hulme, David, Joseph Hanlon, and Armando Barrientos. ‘Social protection, marginality, and extreme poverty: Just give money to the poor? In J. von Braun and F, Gatzweiler (Eds.) 2014. Marginality: Addressing the Nexus of Poverty, Exclusion and Ecology.  Springer Netherlands. Pp. 315-329.

Read Part 1: "COVID and Digital Payment in Kenya and South Africa: Crisis Innovation?"
Read Part 2: "The war on COVID in Kenya: Will the social networks of mobile money survive?"

Thursday, May 28, 2020

Part 2: The war on COVID in Kenya: Will the social networks of mobile money survive?

by Sibel Kusimba, University of South Florida, Chap Kusimba, University of South Florida, and Gabriel Kunyu, Independent Researcher

Meme circulating on Kenyan WhatsApp. Bora Uhai is a phrase
meaning that nothing matters more than life. It is commonly
used when things don't work out as planned or expected.

“I saw people rejoice when it was announced that there would be no transaction fees for any amount sent below 1000 Kenya Shillings (US $10). But since there is no money, people are not sending.” Millicent has had an M-Pesa shop in the Sweet Water estate of Machakos, Kenya, for several years. This town about 60 km southeast of Nairobi has been a hub of trade in and out of Kenya’s capital since colonial times and before1. The area is still known as a commercial hub. But on April 7, 2020, all transport and travel in and out of Nairobi to the rest of the country was cut off for 21 days as part of the authorities’ response to the COVID-19 pandemic. On that day chaos ensued when travelers and drivers were cut off en route; some went off road and on foot to reach their destinations. Now the Athi River just two miles north of Machakos has been completely cut off, as has the port town of Mombasa - and with it the many goods, such as foodstuffs, household goods, and second hand goods that so many make a living trading in this area.

Millicent reflected that initially there were a lot of people sending money, especially in the week before the roads were closed, when restrictions on gatherings and restaurants were imposed. There were fewer withdrawals, and the country’s many itinerant urban workers were sending money to their rural families. But now at the end of April, M-Pesa agents like Millicent are finding they have fewer customers. People used to wait in the queue at Millicent’s shop before COVID, but these days she will see only 2-3 people in a whole day. She says they are well off people such as teachers, and that they are loading money on to their phones, not cashing out. She is not sure where this money is going, but she reasons they are either sending money to relatives in the rural areas or using the digital balance on their phones to shop at the grocery store and use digital retail payment- Lipa na M-Pesa (a Safaricom merchant pay service based on sending money to a till number associated with a shop or seller). Millicent says most people are not coming to use her money transfer services. She understands why because she is having the same problem: no money. Although she used to send money to friends and family before COVID, she cannot anymore. She is instead relying on Fuliza loans for airtime (a Safaricom loan service) and on digital M-Shwari loans (offered by the Commercial Bank of Africa, through Safaricom) to feed her family. “Any money I get goes to paying these loans and for food. I cannot send any more.”

The Western Kenyan town of Kimilili about 50 km from the Western national border with Uganda is surrounded by farmland. Most of the families here combine income from several sources, such as farming, selling, trading, and labor of many kinds, and occupations such as teaching or the civil service. Mobile money agents here are also seeing drops in customers since the lockdown. Kimilili mobile money agent Annette is a student at Mount Kenya University studying economics and finance. When the university closed due to COVID she came to stay at the home of her brother, a local teacher. Her family had moved around due to “family problems” and her brother’s place was the best option for her when universities closed. We learned in speaking with her that her brother is the registered M-Pesa agent, but she is “helping him out” by handling transactions. Annette expressed a lot of anxiety about her planned graduation in December and hoped it would not be delayed because of the virus. Her brother said that transactions have plummeted since the COVID response was instituted. He explained that people are following the government’s directive to avoid cash: people with money are using Lipa na M-pesa digital retail much more than before. Annette still gets some business from people cashing in and out in relatively small amounts. Profits are way down because amounts of cash in/out is how agents earn commissions. Annette appreciates the government directives about handwashing and social distancing but says few people are taking it as seriously as they should. "You cannot stop Kenyans from shaking hands," she says. Annette herself does not wear a mask, as she says it aggravates her asthma.

Under Kenya’s curfew, informal workers – barbers, hairdressers, shopkeepers, repair shops, bicycle, and car maintenance, along with M-Pesa agents – are using masks and gloves and sanitizing their workplaces. In Sweet Water in Machakos, the county government fumigates shops regularly, but businesses must still pay for water and sanitizer. Workers here must make money outside of a strict curfew which shortens their working days. But the commercial activity they depend on has plummeted. With Nairobi closing off informal workers have left for their rural homes; shops have less business as people fear the virus; gatherings and celebrations are forbidden, cutting off the personal care industry and the celebration economy of tent rental and hiring of musicians and DJs. With the roads cut off, the cost of goods has doubled or tripled.


An M-Pesa agent shop, Kimilili, Kenya. May 9 2020.
Note soap solution and water on the left. Photo Chap Kusimba. 

Money-Transfer Networks
Kenyans use money transfer to send and receive money with friends and relatives in dense social networks. Participating in these networks is necessary for economic life and social belonging2.  The effect of the COVID restrictions and their impact on informal workers, who earn their money every day, has been stark in the Sweet Water area. Not only have livelihoods been cut off; but informal workers have been left without money, and with it the ability to participate in reciprocal money-transfer networks that support friends and family. In the Sweet Water area we met and spoke with several informal workers who are all experiencing the same hardships, whose stories we sketch out below. Customers have left for upcountry, and wholesale goods have shot up in price. With a loss of the daily income these informal workers have turned to M-Shwari digital credit loans. They have been unable to send and receive e-money in their networks.

John is a young man who sells sausages in the marketplace at Sweet Water. Most of his customers left for their family homes in the rural areas as soon as the government announced that roads would be closed. His stock costs more now, and with the curfew his business hours are shortened. “I no longer send money as I used to because what I get is less than before. Even relatives and friends don’t send money anymore.”

Maryanne is a waitress in Sweet Water who was fired when the business closed. Her sister has sent her money to care for her four-year-old. She is trying to take in washing for money but is finding few customers. Another lady, Mary, is a tailor, who mostly repairs peoples’ clothes. She is usually paid in cash because these small repairs are paid for in coins. She is often supported by friends and relatives, but she has wondering what she will do now that even these small coins are not coming. Down the street, Risper owns a salon and has seen a big reduction in business. Her customers have reduced greatly. Furthermore women are no longer going to church, celebrations, and gatherings. Those who do come use cash exclusively. “There is no sending and receiving like before” in her social network, Risper said. Her children are home from school, and she must cook much more often for them.

Alex is another informal worker in Sweet Water. He butchers and sells fresh chicken, but his business is near collapse. He has no customers, cannot any longer buy chicken in bulk so he must pay more for his stock. His children are home as well and he has been feeding them chicken, further threatening his business. Normally he reaches out to friends and siblings when life is hard. But these days “My friends are not on jobs, so they don’t send me.” There has been more conflict in his home because of money problems. Taxi driver Gerald said that most savings club members have not met their obligations for March or April – again, people have no money. Taxi driving gave him a lot of money at night, but in the day people will take the bus. Disagreements at home have ensued.

Timothy is 25 and in sales for off-grid solar lighting (pay as you go).  He also makes money ride hailing on a rented motorcycle (boda boda). His wife runs a retail shop near their home. In the past month he has had fewer customers for solar lighting, and many of his clients are having trouble paying. He used to give several customers motorcycle rides at a time, but these days he is checked by the police constantly for overloading (which is against social distancing rules) and he is afraid of being arrested. As a worker in the transportation field the police would often hassle him before as well, but nowadays harassment has increased. Now that police have been charged with enforcing curfews and other COVID restrictions, they will arrest you for any reason. Timothy will have trouble paying rent to the owner of his motorcycle. His mobile money social network has also been affected. He used to send money to his mother (his natal home where she still lives is about 30 km away) and his wife in equal amounts to “balance the money;” but since COVID he has only been able to send money to his wife.


Payment Channels 
Methods of payment are changing and, as in other places, are revealing the effects of social and economic class. In spite of the suspension on fees, the increasing use of digital payment is concentrated among wealthier people who shop in the supermarkets and spend more money. The poor are focusing on cash as they pay in small amounts. Cash is also, we discovered, a way to keep value safe in these uncertain times. Many people who are in debt to Safaricom’s Fuliza services keep and use cash. This is because any amount loaded onto the Safaricom wallet will automatically be deducted to pay the Fuliza balance. Consequently, many people use cash to avoid their balance garnished to pay the Fuliza digital debt.

Sweet Water shopkeeper Mamake is sending and receiving a lot less with her friends and relatives. No one has any money right now, she said. As before, most of her customers pay a few pennies cash for goods packaged in the smallest quantities. Wealthier customers go to the shops where they can follow the government directives to use digital payment. She says her customers “can’t afford to put money on their phones.” The costs of goods has increased for her, but she cannot raise her prices. Her customers will not afford the goods, so she has tightened her own margins instead. She is the breadwinner in her home and her children depend on her work. She has started feeding the family with items from her shop out of necessity – but it will also hurt her business.

A lucky few have found opportunity in these circumstances. Faith runs a movie shop where she sells DVDs for 50 shillings (US$00.50) to people who can afford this luxury. Because many people are staying home she is getting more business. Her customers come in the evening before curfew. Most are paying with M-Pesa because of the belief that cash spreads the virus. Kids are paying with cash. They are home from school, and they pool their coins together to pay. With increased business, she spends more time and money on transport, electricity, and internet for downloading and copying movies. Her children eat at home now which is costing her more money. But she carefully noted that money transfer services have dropped transaction fees. She is sending more money to her rural home and she is able to help friends who are out of work and need food with cash and money transfer. Similarly, Peter, a barber, says his business has not changed. People will always want to look good, he says. James runs a video shop and says business is normal. People are sending less; so he is trying to help his family and friends when he can. He recently sent 500 Kenyan Shillings (US$5) to a friend who was travelling.

Uncertainty was foremost in peoples’ thoughts about the virus. Used clothes seller Jacob has been destitute since market days were banned. His stock has skyrocketed in price and he has had trouble selling clothes to customers, who think his clothes might be from China and therefore be contaminated. He expressed a great deal of sadness in our interview:
"I lack happiness because I need more money for my family because their needs are not met. I do not send money to friends, because I do not have. Neither do they send me. Fewer people are sharing with friends with M-Pesa as before. Will the government lock down completely? People are sending very small amounts, but they are also keeping money. Because we do not know what will happen with this virus situation."
What will happen? Will the extreme sacrifices that Africa’s poor are making to stop the virus make a difference in the end? COVID-19 and public health efforts to contain it are causing extreme shocks to Kenyan households. Their social networks are their safety net, but they may not be strong enough to provide much resilience, beyond the day to day survival of small digital loans. Will the social networks of mobile money survive the virus?


References

1 Traders, including women traders, from the region around Machakos through their activity built networks connecting the colonial capital with supplies of foodstuffs and other goods. See Claire Robertson, Trouble Showed the Way, 1997, Indiana University Press.

2 Kusimba, Sibel, Gabriel Kunyu, and Elizabeth Gross. 2018. Social Networks of Mobile Money in Kenya. In Money at the Margins: Global Perspectives on Technology, Financial Inclusion & Design, edited by Bill Maurer, Ivan Small, and Smoki Musaraj, Berghahn, London, pp. 179-199

Stay tuned for Part 3: 
"South Africa in lockdown: innovation in G2P payments"






Tuesday, May 26, 2020

Part 1: COVID and Digital Payment in Kenya and South Africa: Crisis Innovation?

COVID and Financial Technologies in South Africa and Kenya 

A Three-Part Blog
Part 1: "COVID and digital payment in Kenya and South Africa: Crisis innovation?"
Part 2: "The war on COVID in Kenya: Will the social networks of mobile money survive?"
Part 3: "South Africa in lockdown: Innovation in G2P payments"

Business groups want to end lockdown restrictions.
In the caption, a worker sanitizes a truck performing food delivery.
South Africa’s Sunday Times May 10, 2020. 


Part 1 of 3: "COVID and Digital Payment in Kenya and South Africa: Crisis Innovation?" 

by Sibel KusimbaUniversity of South Florida

How will the outbreak of COVID-19 and the response to it affect the use of mobile money and financial technology in sub-Saharan Africa? In this three-part blog series we will take a look at Kenya and South Africa during COVID-19 pandemic. How have sudden imperatives, from social distancing to lockdowns to transportation restrictions, effected the use of money transfer, banking and loans? Will the dire economic threats to both the informal economy and the global markets spell the end of pro-poor innovations, or will new forms of payment create lasting money relations?

Mobile Money: Disaster Innovation? 
Disasters upend normal life and introduce new risks or dangers. Yet, disasters and their aftermath have catalyzed some of the most successful fintech innovations. After China’s 2008 Wenchuan or Sichuan earthquake killed hundreds of thousands of people and displaced 5 million families, charity donations received more than 100 billion yuan in donations over digital channels like WeChat1. Remittances are a valuable response tool in the wake of natural disasters such as the earthquakes in Rwanda and Haiti2.

M-Pesa’s 2007 roll-out was followed just a few months later by a disputed national election. Accusations of vote rigging triggered months of post-election unrest, especially in opposition areas, and led to 1500 deaths; roads were blocked and stores and banks closed. Anthropologist Olga Morawczynski was in Western Kenya at the time3.  She found that the use of M-Pesa increased dramatically during the period of violence - with hundreds waiting in line to visit agents - and that money flows also actually reversed. Usually Kibera residents sent money and airtime their rural relatives. But during the political crisis urban residents relied on relatives in the western Kenyan locality of Bukara to send them money. In turn they used airtime to keep relatives in Bukara informed about their safety. Morawczynski’s account suggests that unusual circumstances may be more important for the origin story of M-Pesa than is commonly acknowledged.

Many parts of the South have been greatly effected by the coronavirus outbreak and the response to it. In the developing world, harshly enforced restrictions have been implemented with the hope of slowing the spread of the virus in densely populated areas. But lockdowns, work restrictions, and police harassment are preventing informal work, which many residents of those very areas rely on for income. Many workers have decided to return to the rural areas, and confusion around transportation and movements may have helped spread the virus. Disruption of the global economy has begun, including loss of tourism, global supply chain disruptions, and drops in manufacturing. Investors have turned away from emerging markets. The month of March saw more than US$100 billion dollars in capital flight from the developing world - which will weaken currencies and cause prices to rise4.

The fallout may hit Africa especially hard. About half of Africans face unemployment. Small businesses will not only have fewer customers, but global trade could also be disrupted. Higher prices, food shortages and income loss threaten informal workers and farmers. Funding for microfinance is likely to suffer. In Kenya, the crisis has put the spotlight is on P2P payments. The way agents and rural-urban family networks respond to the crisis will again be key to the story. In South Africa, G2P payments are the focus. The government is facing political and economic pressure to expand an already extensive social grants system without exposing beneficiaries to further risk from the virus.

Kenya’s Pandemic Response: Curfews, Transport Bans, Digital Payment
On March 6 Kenya made public their first case of COVID-19 in a college student returning home from the US. The authorities immediately quarantined and tested 27 persons who had contact with the student, revealing two more positive cases. Three days later official country-wide response began, including social distancing and closing off the country to international flights. A nightly curfew began in mid-March to reduce informal workers’ activities without cutting of their livelihoods altogether, and the President hosted Christian, Muslim and Hindu clerics for a televised National Day of Prayer on March 21. On April 7, all passage in and out of major cities was cut off, causing chaos on roads and buses.

In the March 7 edict, President Kenyatta made a point of putting money at the center of the country’s coronavirus response. He encouraged Kenyans to use electronic payment channels, warning that passing cash from hand to hand could hasten the spread of coronavirus. In sync with his directive, providers in Kenya and Uganda have cut or lifted the fees for mobile money services for the foreseeable future. If President Kenyatta’s directive spurs a turn to digital payment, the COVID-19 pandemic will be the second time a crisis has facilitated the adoption of mobile money in Kenya.

The current pandemic response could, like the events of 2007 and 2008, further drive use and innovation with money transfer. Without reliable transportation for the foreseeable future, the mobile channel will be the only mediator for in-country remittances. Furthermore, the reduction or cancelling of fees could demonstrate the effects of a free service and the value of a public infrastructure for digital payments. Another area that might be lifted is digital microinsurance. For example, Equity Bank customers build up “hospital cash” as a reward for using the bank’s digital channels and loans; claim submission process requires submitting a digital photo of a hospital bill. The Kenyan government has received the assurance from the insurance industry that COVID-19 claims will be accepted. If hunger, food shortages, and illness spread widely, relief through cash transfers or in-kind distributions could also become a focus.

Social grant queue in East London - The South African. Photo credit: John Sharp

South Africa: Lockdowns and Social Grants
South Africa’s first case of COVID-19 was announced on May 5 in a returning citizen visiting Italy. The very next morning, the biometric security system at the University of Pretoria campus where I am a visiting fellow was disabled to prevent spread of the virus. President Cyril Ramaphosa declared the coronavirus pandemic a national disaster ten days later. Afflicted persons were put under isolation, including 60 German tourists who arrived just before flights ceased. On March 16, the university closed altogether. Within three days the 30,000-student campus and dormitories seemed completely empty. Finally, on March 26, with 1000 cases recorded and two deaths, the country went beyond Kenya’s curfew approach and called a national five-week lockdown. Dog walking and sales of alcohol, cigarettes and cosmetics were proscribed. On May 1, a phased reopening approach began outside of hotspots.

BBC News wrote that “South Africa seems to have acted faster, more efficiently, and more ruthlessly than many other countries around the world.”  The country won deserved recognition from the World Health Organization for assertively confronting the virus, including door-to-door testing in at-risk communities by 28,000 health workers.  The result has been a flatter curve than other countries; but it has come at a price. There has been looting and illicit trade of alcohol and cigarettes. Like elsewhere, domestic violence has increased. The actions of police and army have included mass arrests, violence and moving the homeless into camps and sports stadiums. As in many countries, social distancing is a privilege; while the middle classes and white-collar workers can work from home, the many informally employed are unable to pursue their activities. Rituals and celebrations are out; unemployment has affected mining, retail, and manufacturing. Poverty and food insecurity have suddenly deepened in the past weeks.

April 27 was Freedom Day in South Africa, commemorating the first democratic elections on that day in 1994. In 2020 it was also day 32 of a strict national lockdown and its economic and political fallout. In televised remarks to the nation, the president and some of the opposition addressed the nation. First came words by Julius Malema of the Economic Freedom Fighters (EFF)– a populist leftist group borne of but now sitting in opposition to the ruling African National Congress. For many South Africans poverty and hopelessness has increased over the past 25 years.  The EFF have advocated a massive redistribution of South Africa’s wealth to the black majority and has called out the banking industry for its failure to serve the average citizen. Malema has proclaimed 2020 “a year of action against the racist financial sector.” Malema spoke of how the lockdown had underscored poverty, inequality, and police brutality. But he cautioned the government not to lift restrictions too soon and instructed his supporters to respect the policy. President Ramaphosa spoke next and acknowledged the challenge of social inequality, calling the pandemic an opportunity to “reimagine equality in South Africa.” The dueling speeches underscored that the sacrifices required by the lockdowns were not being borne equally.

To walk the tightrope between the lockdown and the public health challenge, officials have donated parts of their salaries to the country’s solidarity fund. And most importantly, they are relying on financial technologies – specifically an expansion of G2P payments - to help the vulnerable and maintain public support. On April 23 President Ramaphosa announced that grants to the elderly, child caretakers and the unemployed will be increased; the program is expanding to the unemployed for at least six months.

Some question the value of lockdowns in Africa, which is imposing unachievable social distancing constraints and shutting down the livelihoods of the majority of Africans who are informally employed. Lockdowns have also been misused in countries where state power is routinely directed against the poor.  Unfortunately, as elsewhere they have contributed to a public debate in which public health is falsely pitted against economic thriving.

Will brave Kenyan mobile money agents stay open again? How will South Africa’s expansion of social grants pay out amidst the COVID crisis? What will the upheaval reveal about financial inclusion, and the relationship between digital finance and the state? Stay tuned for two more pieces about P2P in Kenya and G2P in South Africa.

References
1 Richart, Rebecca. 2018. “Rocking the Earth: Natural Disasters and the Roots of Philanthrotech in China.” California-Shanghai Innovation Dialogues. Irvine, CA, Sept. 28; see also Shieh, Shawn, and Guosheng Deng. 2011. An Emerging Civil Society: The Impact of the 2008 Sichuan Earthquake on grass-roots associations in China. The China Journal, No. 65, 181-194.

2 Joshua Blumenstock, Marcel Fafchamps and Nathan Eagle (2012), “Charity and Reciprocity in Mobile Phone-Based Giving in the Aftermath of Earthquakes and Natural Disasters.”

3 Morawczynski, Olga. 2009. Exploring the usage and impact of “transformational” mobile financial services: the case of M-PESA in Kenya Journal of Eastern African Studies 3:509-525.

4 Canuto, Otaviano. “Coronavirus Brought a Perfect Storm to Developing Countries. Webinar by PrakalsaTalk, Effects Household Over-Indebtedness in the Corona Driven Recession, April 14, 2020.


Wednesday, May 13, 2020

Filene Fill-In Ep. 66: Managing Misinformation in the Midst of a Pandemic

Podcast with Filene Fellow Bill Maurer and Dr. Joan Donovan


In this episode of the Filene Fill-In, Filene Research Institute discusses what credit unions can do to combat the spread of disinformation and misinformation, and sustain the level of trust they’ve built with their communities and their members. Plus, we share resources below (COVID-19 Financial Scams: Look out for these scams!) and talk about some tangible ways credit unions can deal with the spread of misinformation if it is happening on their digital and social platforms.




"In a public health crisis, timely, reliable and trustworthy information is critical to safeguarding people’s health and well-being. Unfortunately, the widespread adoption of digital media and information technologies today has made it easier and faster to produce, disseminate, and be exposed to false or manipulated content, from simple misinformation to conspiracy theories to hate speech.

Our research fellow for the Center of Excellence for Emerging Technology, Social Sciences Dean, and IMTFI Director Bill Maurer of UC Irvine has professed through his work with us that credit unions have a great role to play in lessening consumer anxieties by reassuring their members, fighting to protect their communities, and making wise decisions about our future.

Bill returns to another episode of our podcast with Taylor and I, in which we are most fortunate to be joined by Dr. Joan Donovan -- Director of the Technology and Social Change Research Project at the Shorenstein Center on Media, Politics and Public Policy at Harvard Kennedy School.

In this episode, we discuss what credit unions can do to combat the spread of disinformation and misinformation, and sustain the level of trust they’ve built with their communities and their members. Plus, we discuss some common scams that we’re seeing and how to protect against them. We talk about some tangible ways credit unions can deal with the spread of misinformation if it is happening on their digital and social platforms.

Find out why Joan says local and redundant information is so valuable right now. And stick around for recommended trusted sources of information from our experts -- BONUS: stay till the very very end for a special coronavirus song from Bill. It’s no lie."




Resources:
Novel Coronavirus (2019-nCoV) Situation Reports, World Health Organization
Surge of Virus Misinformation Stumps Facebook and Twitter, The New York Times
How to fight an infodemic, The Lancet
The coronavirus is the first true social-media “infodemic", MIT Technology Review
Here’s how social media can combat the coronavirus ‘infodemic’, MIT Technology Review
How search engines disseminate information about COVID-19 and why they should do better, Harvard Kennedy School Misinformation Review
Coronavirus Misinformation Spreads on Facebook, Watchdog Says, Wall Street Journal
‘Surviving the Coronavirus Infodemic’, UW Center for an Informed Public
COVID-19 Financial Scams: Look out for these scams!, UC Irvine

See original post at Filene's Resource Hub