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

By Catur Sugiyanto, Tiar Mutiara Shantiuli and Zuhrohtun.

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

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

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

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

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

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

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

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

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

Mobile Money Payments in Ghana: Part Two, Public Intervention

By Yaw Owusu-Agyeman and Abena Offe

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

Photo by Yaw Owusu-Agyeman and Abena Offe

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

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

Photo by Yaw Owusu-Agyeman and Abena Offe

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

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

Photo by Yaw Owusu-Agyeman and Abena Offe

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

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

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

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

-Read Part 1 Blog post, "Mobile Money Payments in Ghana: Part One, Private Intervention" 
 
-Cited in David S. Evans and Alexis Pirchio, “An Empirical Examination of Why Mobile Money Schemes Ignite in Some Developing Countries but Flounder in Most,” University of Chicago Coase-Sandor Institute for Law & Economics Research Paper No. 723, March 2015, 2.

IMTFI at MoneyLab: Coining Alternatives in Amsterdam

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

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

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

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

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

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

Be sure to visit the MoneyLab website for future developments!