Monday, August 22, 2016

Is the Rural Hometown a Worthwhile Investment?


This post is the second in a 2-part blog post series. For part one, see here.

The rural hometown is where all human mobility begins. In the case of developing countries, poverty, fewer job opportunities, and limited business activity hound rural development. It is thus not surprising that migration — be it to the cities, to the more gainful towns, or to overseas countries — pulls people to go elsewhere. Place becomes a livelihood and unfortunately rural birthplaces become less attractive, even to their own residents. But since not all can move, kith and kin stay at home, in their rural hometowns. The person moving, for his or her part, forges an economic relationship with their families through domestic and international remittances. 

Compared to non-migrant households, these kinds of households can be financially fortunate. These remittances can even contribute to local economic activity by enticing demand for more goods and services. Moneyed households, especially those with surplus incomes, can start businesses — or even invest in local property, in the products of local financial institutions, and other opportunities available locally. So remittances come to be an economic lifeline for rural areas. Remittances become a type of financing rooted in people and institutions that have links with origin communities of the migrants. Given that remittance incomes flow into rural areas, a crucial question that emerges is related to how rural communities could maximize the benefit of these remittances? For this, it is necessary to identify the local conditions that can stimulate the fruitful use of remittances. It may also be important to assess if moneyed income-earners like overseas migrants are financially capable of investing.

This is the case for the Philippines, a major origin country of overseas migrants who are scattered worldwide. Here, a group of researchers has been implementing a project that goes by the acronym RICART: Remittance Investment Climate Analysis in Rural Hometowns. Ricart sought to find out if overseas migrants and their families find wisdom in parking their money in the place —the rural hometown — they are familiar with. Even the way the rural hometown is governed, as well as the place’s socio-economic and investment-related conditions, was examined. Four municipalities have been studied over the last four years. The latest one is in Guiguinto in Bulacan, an hour’s ride away from Manila and a hub for manufacturers. Guiguinto is a progressive local community, economically.

Guiguinto is first-class in terms of income, and in securing business permits is perhaps the quickest in Bulacan. Registered businesses in Guiguinto are some P9.343 billion big in terms of resources. Local productivity, estimated at P1.235 million per worker, is high in Guiguinto. This is not to mention that Guiguinto has an estimated 3,959 overseas Filipinos sending incomes to loved ones back there, supplementing local incomes. Guiguinto’s economic lure has been a catch basin for 44 branches of financial institutions found in the community along with shopping centers. These institutions are accessible to local residents. 

So do overseas GuiguinteƱos find their community worthy to invest in? Ricart’s survey there (n=229 respondents who are overseas migrants and migrant and non-migrant households) found that only 30 percent of overseas remitters and 43 percent of overseas migrant families invest in Guiguinto. About 33 percent of remitters and 40 percent of migrant families have businesses in Guiguinto. And 44 percent of remitters and 26 percent of migrant households hold savings accounts.

These results can be surprising to observers. Why are many of these moneyed people not investing? One reason could be attributed to limited levels of financial literacy. The same Ricart survey for Guiguinto found that the three respondent-groups claim they do not need assistance in handling money, and have “good” levels of knowledge and skills on handling money. But when asked about three basic concepts surrounding finance — interest, inflation and loans — less than eighty percent of respondents gave correct answers to the survey’s questions. However, this does not mean respondents’ reasons for not investing in their rural hometown are suspect. Migrant households’ heads were asked in a focus group discussion what governs their decisions to invest in their own rural backyard. Their answers can be visualized like a magnifying glass, so a Magnifying Glass of Rural Investing Assessment was developed (see diagram). From the perspective of the person making the investment decision, in this case the remittance-receiving household, their assessment can be likened to holding a magnifying glass, inspecting personal, familial, environmental and institutional developments before saying yes to rural hometown investing.

The magnifying glass of rural investing assessment
(in Alvin Ang and Jeremaiah Opiniano, 2016)
The person trying to decide looks at his or her experiences as well as personal disposition toward saving and investing. The family also plays a role in the investment decision, with the household’s current financial condition being an important factor. Family members also assess present and future needs while weighing daily needs against short-to-long-term prospects. If we zoom out to the immediate geographical environment of Guiguinto. Visible economic progress is both good news and yet also a matter of concern given that moneyed people may then become prey for scammers. Peaceful and orderly local conditions may encourage the desire to invest in the hometown.

Finally, there is the assessment of the available financial institutions. While interviewees are concerned with the litany of requirements necessary to avail of a financial product, the financial institution’s stability is also a primary consideration. Previous as well as ongoing episodes of scams are reasons for such careful assessment. Some financial institutions operating in Guiguinto were also asked about overseas town mates’ financial behavior. There is concern about how incomes are predictably used for more consumption. But some overseas GuiguinteƱos save and even avail of housing loans. Some migrant town mates are also concerned about the accessibility of the financial institution, signaling the need to receive the overseas remittance quickly.

This Magnifying Glass of Rural Investing Assessment may reveal differing perspectives and attitudes on the part of prospective rural hometown investors like overseas migrants. There may be those who are attuned to risk-taking or those who are risk-averse. Despite the variations, financial literacy initiatives are an important development agenda, more so for the rural community. If a rural economy that is progressing wants to sustain the gains of such growth and benefit more from overseas remittances, capacity building through local financial literacy programs may well be the perfect complement.

For rural localities like Guiguinto, overseas and even domestic remittances signal the need to address a policy gap: how can these remittances be maximized for local development? Localities also have their own contexts to consider when remittances are to be channelled to productive purposes (in the case of Guiguinto, there’s industrialization and a declining role for agriculture, although gardening is a culturally-rooted entrepreneurial venture that still clicks locally). For its part, the local government has instituted many reforms over the past decade to make Guiguinto’s business climate friendly to investors and entrepreneurs.

Lessons from this migration-and-development story of Guiguinto have informed a Philippine local competitiveness agendum. Regardless of who sits in power nationally and locally, harnessing remittances for rural development will require political will and strategic interventions so that resources like remittances naturally go to productive economic activities found locally. Improving the business climate is a necessary precondition to overseas remittances development potential. It may help that financial institutions properly inform their clients locally of the many savings, investment and entrepreneurial options available to them.

In the end, if rural residents are more financially literate and capable, and if local officials offer programs and policy-making that account for the needs of local investors, moneyed rural residents like overseas migrants could be encouraged to make their rural hometown the natural choice for investing.


This piece is an outcome of the research project "Overseas remittances, hometown investing and financial inclusion: A remittance investment climate (ReIC) study in a rural hometown." This project was conducted by the non-profit Institute for Migration and Development Issues (IMDI) and supported by the Institute for Money, Technology and Financial Inclusion (IMTFI) of the University of California-Irvine. Read their final report here.

Read Dr. Ang's recent commentary on financial literacy and financial inclusion in the Philippines here.

Dr. Alvin Ang is professor of Economics at the Ateneo de Manila University.
Jeremaiah Opiniano is the IMDI executive director and an assistant professor of Journalism at the University of Santo Tomas. For comments:

Tuesday, August 9, 2016

Women, Social Capital, and Financial Inclusion: Linking Customer Data with Ethnographic Perspectives

By IMTFI Researcher Sibel KusimbaAmerican University, Gabriel KunyuIndependent Researcher, and Dave MarkCTO, M-Changa

December 2015, research team with one of our participants in the IMTFI project
Photo Credit: Chap Kusimba 

Financially including women has become a priority among development and finance experts. Women are less likely to be financially included. However, it has been widely observed that when included they are more likely to produce substantial economic gains for their households. It follows then that any good financial inclusion strategy must include women (GPFI 2015). Women face barriers to inclusion due to combination of various factors such as lack of literacy, access to mobile phones or banks, and time constraints among others. What does finance mean to unbanked women? For some time now, advisers to the industry have been suggesting flexible bank hours, mobile agents, and phone interfaces in multiple languages to address these realities (GPFI 2015; El-Zoghbi 2016; Murray 2016). In this context, IMTFI’s approach to use an ethnographic perspective to understand practices of money and finance around the world can help build models for women’s finance that connect to their existing practices (Dalinghaus 2015).

M-Changa platform:
fundraising for a wedding 
Our research seeks to understand the effect of gender on networks across differences in social class, income, and rural/urban settings. In this post we focus on a customer dataset from the fundraising platform M-Changa in Kenya, which provides interesting clues. M-Changa collects money via mobile money, EFT or Paypal into a unique account and is used by originators to fundraise money for medical needs, funerals, school fees and weddings. The company provides transparency and its activities are directed towards ensuring both trust and transparency which include posting and making public on their website hospital and school bills and funeral certificates. Since its launch in 2012, M-Changa has managed over 6000 fundraisers.

A customer data analysis by FSD Kenya categorized M-Changa fundraising events into five types based on the success of the fundraiser. Among these, one cluster was distinctly successful in fundraising events and was able to raise a large amount of money over a relatively short period of time from the largest number of contributors. In this cluster the originators were 45% female – even though only 20% of all fundraiser originators in the dataset as a whole are female.  What can account for the great success of women in using M-Changa fundraising?

The M-Changa dataset finds a compliment in the findings of ethnographic study that we undertook in 2012 and 2014 focusing on the social networks of primarily farming people in western Kenya. Supported by IMTFI, the study recorded examples of informal finance groups based on friends, family, co-workers, and neighbors, and drew the pathways of money sending connecting family members. We found that money circulated among close relatives, especially siblings, who were often connected to mothers and mother’s relatives. In these networks, women tended to be central nodes in the many pathways of money sending and receiving to other network members.

Furthermore, emotional connections and powerful social norms around reciprocity and obligation often seemed to drive remittances to women in Western Kenya. For instance, consider the case of Emmanuel, an unmarried 22 year-old caretaker at a private primary school. Emmanuel was raised by his maternal grandmother Wilbroda because he was born out of wedlock. His mother eventually married elsewhere and he has eight half siblings. He dropped out of school after the eighth grade due to financial reasons.

Emmanuel (Photo Credit: Gabriel Kunyu)
Emmanuel sends money to Wilbroda every month before she even needs to ask him. In the case of his mother, however, he normally waits for her to call, which she often does at the end of each month. Emmanuel explained that normally, if the amount he sends his mother is less than her minimum expectation (say 200 shillings (US $2)), she will not call back to give thanks but instead go silent, implying she was not satisfied with the amount. He says she will sometimes call with a false excuse of checking on him, but at the end of the call inquire if he has something to send her. In May 2016, Emmanuel’s mother called and requested assistance, barely two weeks after Emmanuel had sent her 300 shillings (US $3). As a way of encouraging Emmanuel, she also called her brother − Emmanuel’s maternal uncle − who in turn called Emmanuel and persuaded him to send her money, explaining that she needed it for buying fertilizer. Because of his uncle’s call, Emmanuel said he broke into his savings and sent her 1000 shillings (US $10). Emmanuel never sends money to his father, who took little interest in him growing up and refused to pay his school fees. His remittances to his mother rely on nudges from his maternal uncle and his own sense of obligation. His grandmother is clearly his financial priority.

The M-Changa dataset, like the Western Kenya study, shows a similar advantage for women in collecting resources, as nodes and hubs of social networks. It is all the more intriguing that M-Changa women are not rural farmers, but primarily college-educated, salaried, and technology-savvy Nairobi women. Further ethnographic work with M-Changa’s clientele will seek to tease out more of the sources of fundraising skill for its affluent, urban female users. Are emotional bonds or gendered social norms around obligation to women the common factor such that these urban women leverage close ties of family? Do they have broad networks reflecting diverse social circles, in which they perhaps cultivate more or closer friendships than men? How far do these urban-centered networks extend to relatives in rural areas? Following questions like these through a thick data understanding (Wang 2013) of users − taking into account well-elaborated customer data and ethnographic studies simultaneously − can reveal otherwise overlooked insights into the ways in which women may be financially included based on their existing financial strengths.

Sources Cited 

Digital Financial Solutions to Advance Women’s Economic Participation. GPFI (Global Partnership for Financial Inclusion), November 2015. 

Dalinghaus, Ursula. 2015. Going to Where the Women are: Insights from the Making Finance Work for Women Summit in Berlin, Germany.

El-Zoghbi, Mayada. 2016. What Excludes Women from Formal Finance in the Arab States?

Murray, Inez. 2016. Catalyzing Women’s Financial Inclusion: The Role of Data.

Wang, Tricia. 2013. Big Data needs Thick Data.

Wednesday, August 3, 2016

The Heads and Tails of Monetary Duality in Cuba

Read more about the rise and imminent fall of Cuba's dual currency experiment in a piece titled "The Heads and Tails of Monetary Duality" by IMTFI Postdoctoral Scholar and Fellow Mrinalini Tankha in the webzine Cuba Counterpoints. Using the striking iconography on the two national currencies - the Cuban Peso and the Cuban Convertible Peso - she shows how at the core of monetary duality in post-Soviet Cuba is the process of reconciling the role of the state and market.