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?


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.

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."

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