By Stephen C. Rea, IMTFI Assistant Researcher
“In theory, every theory is great, but in practice, not every theory works.”
– Marcel Kitissou, University of Albany
From April 21st to the 22nd, Cornell University’s Institute for African Development and the Cornell International Institute for Food, Agriculture and Development sponsored a symposium titled “Mobile Money, Financial Inclusion, and Development in Africa.” IMTFI researcher Ndunge Kiiti was one of the event’s organizers, and IMTFI was a co-sponsor. The symposium presented an opportunity for academics and development experts to come together and discuss the current state of mobile money in Africa, its effects on the continent’s financial development thus far, and some of the obstacles and tensions that have arisen around financial inclusion. It also afforded a reunion of sorts for a number of IMTFI-affiliated researchers. In this blog post, I will focus on their presentations and the concluding discussion, both of which produced some sobering critiques of financial inclusion as an agenda for international development.
|Sibel Kusimba, Rahel Diro, Belete Temesgen|
Social and Economic Impact of Mobile Technology panel
Social networks and mobile money in Kenya
I arrived on the 22nd just in time to catch IMTFI researcher Sibel Kusimba’s presentation, titled “Digital Fundraising and Mobile Finance in Kenya,” on the Social and Economic Impact of Mobile Technology panel. Kusimba’s research has time and again reaffirmed an important lesson that often gets lost in the hype about subscription rates and transaction volumes: Mobile money services are most successful when they complement preexisting networks of social obligation. M-Pesa, which has become the “gold standard” for mobile money in its first decade of existence, has succeeded in large part because it operates through a densely intertwined social infrastructure that predates its deployment. However, as Kusimba pointed out,
Kenyan social networks are also variable, with some more persistent over the long term than others. Age, gender, and kinship are all contributing factors to the warp and woof of these networks, as money circulates through matrilineal sibling ties and women often act as arbiters of distribution. But personality and charisma are also crucial elements, especially for becoming a node or “hub” in a social network. Kusimba noted that maintaining one’s status as a hub requires considerable “relational work,” which in turn opens up additional opportunities for more relational work. Moreover, different network ties are useful for different sorts of transactions (e.g. emergency loans vs. money transfer), and so individual nodes in a network are vehicles not only for payments, but also can become small lenders themselves. Kusimba’s research demonstrates how M-Shwari and M-Changa— microcredit and fundraising apps, respectively, that ride on M-Pesa’s rails—afford new means of articulating relational work. M-Changa, which makes it possible for fundraisers to monitor each other’s activities, complements relationships built on trust in these social networks, acting like what IMTFI Director Bill Maurer calls a “distributed ledger” that works in a similar manner to the fact-checking functions in blockchain currencies. (Maurer kicked off IAD's symposium earlier in the week with his talk, “The Problems of Cash and the Perils of Cashlessness: Researching Mobile Money and Payment Infrastructure after M-Pesa" interview can be found here.)
Mobile money uptake in Ghana – one size doesn't fit all
|Dr. Vivian Dzokoto|
Remittance models in Southeast Asia
Ivan Small’s presentation, “Remittance Technology Models: African Innovations for Southeast Asia?”, considered how the lessons gained from mobile money services in Africa might inform their deployments in Southeast Asia, specifically in Laos and Vietnam. As noted above, remittances and remittance corridors have been instrumental in the adoption of mobile money in places like Kenya. Small argued that the focus on harnessing remittances for development illuminates a few interesting points. First, development discourses have shifted from seeing migration primarily as a negative (e.g. anxieties about “brain drain”) to seeing it as a positive. Moreover, development experts—especially those working in and around financial inclusion—have come to understand internal migration and domestic remittances as potentially more significant than international ones. At the same time, since the early 2000s, anti-money laundering and counter-financing of terrorism initiatives have brought greater regulatory and public attention to remittances, for better and for worse. If remittances are so important to the success or failure of mobile money, then it is imperative to understand the specific contours of remittance practices in a given environment. As Small pointed out, local cultural ecologies and monetary repertoires influence adoption of new services like mobile money and affect financial practices in often unexpected ways. Uptake depends not only on local savings and transfer behaviors, but also on trust in networks, both social and technical; for example, the relative instability and unavailability of electricity in Laos has proven to be a challenge for mobile money. Furthermore, material liquidity continues to be prevalent throughout Southeast Asia because of long histories of conflict and political instability.
Preference for in-person transactions by the urban poor in Uganda and India
In her talk, “Informal Loans and the Mobile Phone: Glimpses into the Coping Strategies of the Urban Poor in Uganda and India,” Ishita Ghosh compared research on lending practices and strategies in East Africa and on the Indian subcontinent. She raised a deceptively simple research question that has profound implications: when the option of using mobile money for securing loans exists, why aren’t people calling upon their distant social networks and instead are maintaining their proximate networks?
Moving forward – Financial Inclusion or Financial Justice?
The symposium’s final panel, Perspectives, Potentials, and Promises—What Next?, was moderated by IMTFI researcher Ndunge Kiiti, and featured Willene Johnson, former U.S. Executive Director of the African Development Bank; Melita Sawyer from Tufts University’s Fletcher Leadership Program in Financial Inclusion; Lourdes Casanova, Director of the Emerging Markets Institute; and Edward Mabaya, Senior Research Associate in Cornell’s Charles H. Dyson School of Applied Economics and Management. In her opening remarks, Kiiti noted three potential threads to think about moving forward. First, research has made it clear that in order for mobile money to flourish, stakeholders such as telcos, banks, and regulators need to work together, and so figuring out how best to facilitate their alignment will be crucial. Second, when looking at new entrants into the mobile money space like Alibaba’s Alipay, are services like M-Pesa becoming "backwards" before they are even over? In other words, trying to replicate M-Pesa outside of Kenya and simply hoping for the best clearly isn’t working, so what best practices should mobile money providers adopt in order to remain innovative, not to mention effective? Third, we have learned over and over again just how important remittances are not only for mobile money, but more importantly to the financial practices of the unbanked, and so one practical step that must be taken is reducing the price of remitting money, both domestically and transnationally.
A general sense of dissatisfaction with the current direction of financial inclusion pervaded many of the audience’s questions for the panelists. Mabaya offered this pithy reminder for those excited by the promise of so-called “disruptive innovation”: “It’s easy to get carried away by the
The second problem, which builds upon the first, was well articulated in a comment from the audience: What do banks, insurance companies, and mobile network operators all have in common? They have all been deemed “too big to fail,” and thus enjoy subsidization by governments and aid organizations that allow them access to the poor in the name of “inclusion.” What are the distributional consequences of this? If the point of financial inclusion is making financial services more available, accessible, and affordable for marginalized social groups, can we honestly say that this has been the outcome, or are we simply propping up old vulnerabilities and creating new ones in the process? As Kusimba raised in her talk and the panelists echoed in their remarks, what does finance mean for someone living on less than $2 per day? Can we assume that traditional ways of approaching finance informed by centuries of banking practices are appropriate or even desirable for the financially excluded?
A larger question that grows out of these critiques is whether or not financial inclusion, as presently articulated, can be synonymous with financial justice and equity. And if so, can mobile money contribute to improving financial justice, or will it only perpetuate the same inequalities that many hoped that it would help solve? Over the next few weeks, the IMTFI blog's PERSPECTIVES series will feature reports from a number of conferences where participants have grappled with these same questions.
Photo Credits: Ndunge Kiiti