Can financial inclusion be synonymous with financial justice and equity?

In IMTFI's PERSPECTIVES blog series, IMTFI’s International Board members and affiliated researchers take on the definition of financial inclusion. This series aims to foster an open dialogue on issues around money, technology, and financial inclusion for the world’s poor. Individual contributions reflect contributors' own reflections on recent events based on their research and areas of expertise. The topic of financial inclusion will conclude with a capstone white paper by IMTFI titled "Mobile Money: The First Decade."

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

After lunch, an unofficial “IMTFI panel,” titled Mobile Money and Remittances—Lessons in and Beyond Africa, featured IMTFI researchers Vivian Afi Dzokoto and Ishita Ghosh as well as former IMTFI postdoctoral scholar Ivan Small discussing mobile money research in global context. Dzokoto’s presentation, “Mobile Money in Ghana: Past, Present and Future,” raised an important contrast to Kusimba’s research, and in so doing reiterated the reality of “one size doesn’t fit all” that has confounded mobile money service providers. Ghana shares many similarities with Kenya when it comes to GDP PPP, share of the population who are unbanked, and widespread access to mobile phones. However, development experts and mobile network operators alike have lamented mobile money’s relatively slow adoption in Ghana when compared to its East African counterpart. In her talk, Dzokoto highlighted several key differences between Ghana and Kenya that help to explain why mobile money has failed to scale as quickly as some would have hoped. First, differences in immigration patterns: Whereas migration from rural villages to cities and the remittance corridors that followed helped to propel M-Pesa’s adoption in Kenya, these trends did not and do not exist in Ghana to the same degree. Second, the regulatory environment: the Central Bank of Kenya’s early embrace of mobile money and willingness to work with Safaricom and brick-and-mortar banks to create an enabling environment was a fundamental condition of M-Pesa's possibility. Ghana is a good counterexample of what happens when banks see mobile money as competition instead of as an opportunity for collaboration with telcos. The Ghanaian public also has very little trust in mobile network operators, in part because of network outages and infrastructural shortcomings.

Dr. Vivian Dzokoto

Education and outreach have been lacking in Ghana, too, with very few of Dzokoto’s respondents reporting that they knew how to use mobile money or had any sense of why it might be useful for them to do so. Finally, there is the fact that Ghanaians love cash and see little reason to use mobile money when cash is an option. Building on research that she has been involved with for nearly a decade, Dzokoto explained that the cedi’s redenomination in 2007 ended up incentivizing the use of cash and disincentivizing adoption of mobile money; since Ghanaians no longer had to carry around large piles of cash for even basic transactions, one of mobile money’s potential advantages—i.e. a more secure, more convenient mode of value transfer—was essentially obviated. All of these factors have combined to make mobile money an “option of last resort” in Ghana, used primarily for emergencies and remittances rather than day-to-day transactions.


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?

The answer, she argued, is because in both Uganda and India there are important symbolic significances entailed by in-person transactions that make them preferable alternatives. Social etiquette matters; asking for a loan through a mediating technology like a mobile phone is difficult for many people because it does not afford the same opportunities to perform self-effacement and gratitude as a face-to-face interaction. Thus, reducing transaction fees for mobile money transfers and making interest-free loans available ultimately do not matter if the underlying social norms that influence financial behavior go unaddressed.

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

technologies, but they’re only as useful as the problems they solve.” The main problems that the panelists and audience members identified were twofold. First, there is clearly a need to develop a framework that can facilitate strategic partnerships among businesses, governments, development agencies, and, of course, the financially excluded. But who is best equipped to take the lead? The consensus was that it depends upon the problem at the time, and that like mobile money, one solution will not work everywhere or for every situation. Everyone agreed, however, that governments need to be more involved in helping to bridge disputes among banks, mobile network operators, and fintech innovators. Government regulators in particular are in the unique position to demand that financial practices be unbundled from the big banks. But at the same time, none of these interest groups can try to dominate the others.

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

Bank Backdoors, Burials, and Betting: Session Three of the 2016 Conference

The panel on "Accessories to Technology: Mobile Financial Services, Risk, and Insurance with discussant Ananya Roy of UCLA addressed how institutions must adjudicate claims and manage liability in volatile environments of new products, precarious populations, and financial experiments.  "Assessing the Need and Feasibility for Using Pre-Paid Card Technology in Delivering Added Services to Micro Finance Customers in Selected Regions of Uttar Pradesh: (India) by Debashis Acharya of the University of Hyderabad and Tapas Kumar Parida of the State Bank of India led off the session with a focus on the third largest state in India, where about 22 MFIs (microfinance institutions) operate.

New 2014 regulations have been reshaping the role of IRDA, the statutory body that regulates the insurance sector in India, which is tasked with both protecting the interests of policyholders while also ensuring the growth of the insurance industry.  Knowledge partners in the study included Bajaj Allianz Insurance, M2P Solutions (a prepaid card provider), and Utkarsh Micro finance, which is one of the leading 25 MFIs in India, according to a CRISIL 2014 report. They traced how a claim settlement process might evolve along three trajectories: 1) the Traditional/Conventional Model in which the MFI collects documents from clients after the death of the insured and submits materials to the insurance company, 2) the model of Electronic Transfer (NEFT) to the bank, which opens up possibilities for alternative payment mechanisms and split payment paradigms, and 3) the Open Loop Pre-Paid Card model in which the nominee gets directly benefitted by this process and in which unsettled claims can be reissued and fresh claims can  processed by pre-paid card.  Acharya described the costs and benefits of pre-paid cards from the perspective of users who think about mobile phones primarily as devices for communications.

"The Curious Case of Mobile Micro-insurance in South Africa: A View from Above and Below" (South Africa) by Christopher Paek of London School of Economics focused on Xhosa funerals and financial risk mitigation through insurance.  To demonstrate the importance of the issue of funeral insurance, he began with the case of Godfrey, who maintains a household composed of a wife, three children and a mother in a township outside Cape Town. With a monthly income of R2000 (about $130) it would be difficult to manage costs generated by the death of his father-in-law, which would include multiple undertakers, transportation to ancestral homeland, ceremonial slaughter of one cow (and a second cow for a male head-of-household), food for guests, and the slaughter of a sheep for the funeral banquet.  All tallied, such costs would be R41,780 or about  21 months of Godfrey's salary.  Rather than turn to the formal sector of conventional insurance, most planning for family funerals would depend on informal mechanisms, such as burial societies, family and friends, churches, or Mashonisas (loan sharks).  Funeral parlors themselves could serve as either formal and informal partners in contingency planning.

Paek explained his methodology of mixed qualitative and quantitative methods and his choices to integrate ethnographic methods in his work at the primary site in Khayelitsha, Cape Town, South Africa.  His data was collected from 23 formal sector interviews, which drew on informants in insurance companies, MNOs, and TSPs, as well as regulators/legislators, administrators, and industry representatives.  He also conducted 6 informal sector interviews with funeral parlors and burial societies, as well as client interviews with 76 survey respondents and 47 focus group respondents.

As inspiration Paek cited the work of Camilo Téllez and plugged his 2012 paper on "Emerging Practics in Mobile Microinsurance."  Now that telecommunications companies and mobile money firms were becoming interested in the funeral insurance market, there were even possibilities for paying for funeral coverage with airtime spending. Paek described M-insurance as "fertile ground" for innovative products and presented both a "view from above" and a "view from below" that was informed by Evans' and Pirchio's 2015 research oriented around an empirical examination of why mobile money schemes may flourish in one country and flounder in another. Like other IMTFI researchers he pointed to concepts and notions of trust.

He argued that mobile money might be slower to take off in the context of high crime rates, lack of access to formal legal recourse, inundation by scams, lack of consumer advocacy, saturation with fly-by-night operations, high unemployment rates (which erodes trust in social networks), and a proliferation of scams on the phone.  All of these factors undercut potential word of mouth benefits and reinscribe consumer needs for tangibility, typified by desires for a paper contract or a need to see an office.  This "seeing is believing" mentality preserves the status quo, as do gatekeepers on the fence between informality and formality.  Furthermore, South Africa is a country that is relatively heavily banked, so that mobile money is not something people need.  Moreover, there are very heavy regulations, and e-money can only be lent by banks.  In these "less than ideal payment systems," the risk of overdraft fees presents an additional deterrent to adoption.  When national policies must balance between financial inclusion and consumer protection, South Africa leans toward protection.

"Sports Betting in Uganda: Causes and Consequences" by Sylvan Herskowitz of UC Berkeley encouraged those afflicted with academic snobbery to take a "multi-billion dollar global industry" seriously, which has "exploded across sub-Saharan area" and "quintupled between 2009 and 2013," thanks to a weak regulatory environment, access to international betting markets, new technology to manage bets, and the credibility of payouts  With more than 1500 betting branches in a country with less than forty million people, Uganda is a vibrant area of economic experimentation.  He laughed at how the signifiers of betting culture were often invisible to Westerners, however, as in the case of the location of an  Ebola washing station in front of betting station in Liberia in a New York Times photograph.  One of Herskowitz's photographs documented all the international football tickets he had bought.  Like most betters he had lost his investment in all of them.  This is not surprising, since the standard multi-match ticket requires that all of the wins need to take place.  (The lure is that the winning long-shot ticket offers a large payout.

He argued that researchers need to document neglected issue, particularly one with strong behavioral biases.  For Ugandan betters this meant spending more than they normally would and ignoring how betting crowds out other expenditures.  The numbers are significant, because in his study group of betters, expenditures on betting represented a median 11% outlay of income and a mean of 15%.  Most of his respondents (75%) were heads of household.  Even though 40% of their families knew they bet, only 25% knew how much they bet.  In explaining his work on communities around Kampala on financial motivations, he dropped "economic speak" for a moment to characterize incentives as "if you want to get stuff that's big and expensive" but are constrained in ability to save or access to credit.  After all, betting is one way to generate liquidity, despite its bad rate of return.  In studying driving factors, researchers offered betters cash or betting tickets and designed the experimental situation so that timing might be before or after they got tickets. The prime increases demand for betting tickets by 15-25%.  Participants also chose higher payouts.  An experiment in which he gave them a wallet for setting money aside for betting seemed to decrease betting.  Rather than frame it as "overrationalizing an activity" he saw it as "encouraging people to reflect."  He reported a 10% reduction in betting among those who had underestimated their expenditures.  He looked forward to testing more experimental primes to sort out budgeting and failure aggregators, improving data quality by decreasing noise in the results, refining the wallet as a physical instrument, differentiating the benefits of a tangible object from simple targeting, and doing testing in relation to other expenditures such as food.

Technology Knows No Age: Voices of Elderly Persons Receiving Mobile-Enabled SAGE Cash Transfers in Uganda

by Julius Okello  

This blog reflects on the immediate impacts of the Senior Citizens Grant, a component of the Social Assistance Grant for Empowerment (SAGE) provided by the Government of Uganda. Digital payments geared toward changing the lives of elderly persons started with the SAGE pilot program in 2011. SAGE remits monthly stipend to beneficiaries aged 60 years and above through Mobile Telecommunication Network (MTN). Although mobile money services have existed for seven years in Uganda, they are still viewed as novel and mostly used by younger generations. With the mobile disbursement of SAGE, however, older persons in Uganda are gradually tapping into these electronic payment innovations. 

SAGE Beneficiaries guided by MTN agents to insert MTN yellow card into yellow easy talk phone 

Initially, when SAGE payments through mobile money were introduced, many of the elderly beneficiaries were very confused. Most of them did not even have a mobile phone, nor did they have any knowledge of how to operate one. Others wondered how they would receive money from a phone -- a machine! This was further coupled with concerns from the older persons and politicians about whether MTN could smoothly implement the program, given the corruption in Uganda that has derailed most government programs in the past as well as the fact that mobile money was still a new technology to reckon with for the “born before computer” (BCC) generation. Nonetheless, senior citizens grants (SCG) beneficiaries are now encountering the reality of mobile money services. Payments to beneficiaries’ mobile money accounts are made through an instant e-money transfer service and are converted into cash by an MTN agent at designated pay points. All beneficiaries are given a five-digit Personal Identification Number (PIN) by MTN and also receive an identification card issued by the SAGE programme that MTN agents use for identity verification. This enables registered MTN subscribers to access their money through authorized MTN mobile money agents in their district. After verification, the recipient’s MTN card is inserted into the yellow talk machine to verify the balance on the mobile money account before paying out the stipulated amounts. While some beneficiaries do not necessarily grasp the entire process of effecting payment, they are aware of the amount that they are supposed to receive. 

Why MTN mobile money for SAGE cash transfer? 

Given past experiences of corruption and mismanagement of government programs for the poor, the Ugandan Ministry of Gender Labour and Social Development felt that SAGE money should be handled by MTN for purposes of: 

• Extending services nearer to older persons.
• Minimizing transfer costs through banks.
• Creating an enabling environment for the elderly who are mostly unbanked.
• Reducing risks associated with handling cash within the ministries.
• Reducing load on management and its associated challenges.
• Minimizing leakage associated with handling cash.
• Guaranteeing transparency and accountability for SAGE funds.

The program was the first of its kind to be implemented by the government through MTN mobile money and it has been fairly effective and serves as a lesson for government, individuals, businesses and development partners.  

Overall, it has been observed that cash transfers through MTN mobile money has improved the nutrition of older persons and their families in Uganda. Over 90% of beneficiaries spend the largest portion of their cash transfer on food and the smallest proportion (10%) reported spending it on alcohol. Meals eaten by beneficiary households have greatly improved; unlike earlier older persons can now afford two reasonable meals per day for themselves and their families, particularly their grandchildren. A 69-year-old woman in Lwamata Sub County revealed, “Because of the availability of quality food, our grandchildren are now happy to go to school, are able to stay in school longer and learn better.” Another respondent in Kiboga town council said, "My grandchildren in lower primary can now carry food stuffs to school for at least three weeks from the time the payment is made by MTN, they are now willing to go and stay longer at school since they have packed food."

Another frequent use of SAGE cash transfers is for medical care. About 52% of the respondents reported having spent the money to pay for their medical bills and 40% used it to purchase prescription medicines. A 77-year-old man from Kibinga sub county, explained, “Before the SAGE cash transfer, I would hesitate to go to hospital because most government hospitals require us to buy medicine. But with the SAGE cash transfer I can easily afford paying for my prescriptions as I am waiting for my children’s assistance.” 

Paying school fees is generally a major problem for most vulnerable families in rural areas. However, this is slowly changing with more efficient disbursement of SAGE cash transfers. According to older persons, with the little they get they are able to invest in school fees as well as buy scholastic materials for their grandchildren. This was confirmed by an 87-year-old woman who stated, “I have five grandchildren whose mothers died of HIV/AIDS. Each of them left children for whom school fees has to be paid. Through the SAGE cash transfer I have been able to educate three of the children up to primary six, senior one and four.” A head teacher was also quoted saying, “Most children in the SAGE households can now ably attend school. Their completion rate has greatly improved compared to before SAGE.” All of these findings are worthy of substantiation by future research.  

Elderly women’s participation in community affairs has also increased with the SAGE program resulting in greater self-esteem and empowerment. Female  beneficiaries feel less discriminated against in their communities; they feel more valued by their families on account of their ability to make social contributions within their families and community. For instance, an 82-year-old woman from Bukomero sub county was able to pay for the funeral of her neighbor's daughter. She said, “Recently my neighbor lost a daughter, there was a need to secure a coffin and other needs. I contributed four thousand, this happened when MTN agents had just paid me SAGE money.”   

SAGE beneficiary households also tend to invest the grant in increasing productivity of farming and agriculture and the establishing small businesses. An elderly woman in Kibiga Sub County stated, “I regularly save a portion of my grant to cover emergencies, cultivation, meeting the basic needs of my household as well as saving to hire day-laborers to open up idle agricultural land”. 20-30% of SAGE beneficiaries regularly invest in agricultural production by buying livestock and other agricultural inputs and hiring ox-ploughs and day-laborers.

While the mobile transfer of government assistance has contributed to the improved welfare of older persons and their families in Uganda, MTN has faced several challenges in the implementation of the SAGE program. Limited infrastructure and lack of a robust mechanism for controlling fraud has been a problem, particularly in Kole, Nebbi and Katakwi. In addition, there are only a few banks for mobile money operators to acquire the necessary floats for SAGE funds. Due to the large number of beneficiaries relative to MTN agents, elderly persons have to sometimes wait longer then anticipated to receive their funds and also face delays in the replacement of lost or faulty SAGE cards. 

Overall, however, the SAGE pilot program, remitting funds through MTN mobile money, has proved to compliment goals of ending hunger and poverty through financial inclusion of the unbanked. For more efficient delivery of services especially in rural areas, the SAGE programme has very good lessons to offer. Mobile money seems to be the most viable way to implement such programs and minimize the bureaucracy of government institutions and the resulting leakages and corruption that are common to many present governments in Africa. 

The views expressed in this blog are not necessarily those of the African Institute for Strategic Research Governance and Development.

For more details, read Julius Okello's Final Report. 

Reimagining Rurality in Mobile Money Times: Life, Identity, and Community in Southern Uganda (Part 2)

By IMTFI Researcher Prince Karakire Guma

In my previous blog post, I showed how mobile money is not only meeting the needs and demands across demographically diverse populations in my study – wealthy and poor, young and old, male and female, rural and urban participants. It is also reinforcing new forms of interaction between them. I showed how mobile money has considerably affected – and become a fundamental part of  – everyday life. People who are registered with mobile money accounts are able to “connect to all,” enhancing and maintaining their pre-existing kin ties and friendships, as well as ways of communing, collaborating, and networking. In this part of the post, I seek to present exemplary cases of the broader impact of mobile money and its importance for notions of rurality in parts of Southern Uganda.

Community
One reality that constitutes a great part of reality of the rural in parts of Southern Uganda is the belief system of “obuntubulamu.” Obuntubuamu presumes that an individual does not and cannot exist alone but owes existence to the village and/or community. It is a system that simply recognizes the usefulness of community-centeredness. What makes the mobile money application ideal in this case is that it is not perceived as a threat to such ingrained and indigenous ideals, notions, and realities of the community. Instead, mobile money is the kind of application that is taken up by one so s/he is able to live on with their lives just as they did before it existed.

For example, many women have experienced subtle reforms in daily life, family life, community, and networks. Women describe a better life as the ability to be a good family, community and social person. They seem contented with the idea of being in small family groups in which they could express their opinions, concerns, and wishes. Besides, they claim to dress better, eat better, decorate their houses and take much better care of their gardens and animals. As the cashier of a local affirmative group argued:

"Before mobile money, we were left behind and excluded. Today with access to phones and money, we feel included. We feel empowered. We are even able to save up to cope up with droughts, disasters, and times of crisis through our networks that are now closer with mobile money. In times of crisis and need, I think it is a great system. Once we have got texts on the mobile phone, we can get the money immediately from our kin. There is no need to travel long distances."(Gift, 2014 interview)

Phones have intensified the kinship system in the rural. Such symbolic fields as kinship and rituals represent dominant practices and enduring meaning structures that cannot be ignored by the rural residents nor overlooked when interpreting village life. Especially important is the idea of gifting up and down generations in rural Uganda. Younger people give to parents, grandparents and other close kin in their parents' generation. This way, mobile money is able to enhance inherent informal risk sharing networks. Most users in Southern Uganda use it to support friends, family and relatives. It is a method for social gifting, and sometimes contributing to ceremonies and social rituals and functions.

Sending money is closely connected to practices of chatting or texting. Mobile money transfers between the urban and rural dwellers almost always follow a chat, a text message, a beep (or intentional "missed-call"), or a call between the two. Mobile money in Uganda has acquired an etiquette that is often followed when using the mobile phone. Participants often indicated that they commonly used their gadgets to maintain relationships through sending money, airtime, and similar gifts.

Women have increasingly formed self-help groups supported and sustained by mobile phone applications such as mobile money. One group that had benefited greatly from using mobile money among its services was the "Responsible Motherhood Savings Group." Members explained to me that they didn't have to worry about carrying money, carrying cash in bulk or standing in long bank cues to buy checks. Besides the tangible benefits, mobile money services have enhanced a community spirit as well as collective action among these women, reinforcing the feeling of community among members of the village. When one of the members faced a challenge, everyone in the group gave their individual contributions, sometimes through mobile money. Members argued that through mobile applications such as mobile money, they felt closer to each other than before—they were transparent amongst themselves and more connected. Through mobile money services people were able to care for each other and engage in each other’s lives.

Identity
Unlike in the urban where it is sometimes about class, convenience, networking, and just merely the position of the consumer, rural residents were motivated to adopt mobile money only then when they were sure that the emergent ways were better than the ones they had. Whatever mobile applications were used in a community and locality, it was because of its ability to solve something for the individual, for a group, for a community, or the entire village. From my observations, applications were appreciated for nothing else than their ability to solve a genuine problem that they faced.

Particularly interesting is the experience of one health-worker who said she had not returned to her home village since her father died in 1998. She said she no longer had any reason to come back just to pay homage to an almost "empty" village. However, when she finally traveled to the village over fifteen years later, she realized how much the rural had changed and explained how she has been making plans to settle and set up a mobile clinic there to make good use of mobile money applications (and be able to save) in the village.

In another interesting narrative, one herdsman excitedly told me how with his smart phone he will take a picture of a sick cow and explain to his boss the details about what and where the problem is. He will then receive money for its treatment through mobile money, or be advised to sell it in the market. He immediately sends profits over to his boss through mobile money. As the LC 1 Chairperson for the village confidently added, "today, the village is not just for the poor, the old or the sick; it is clear from the mobile phones that communication and the frequent use of mobile money are getting people out of the circle of total poverty." From these and similar responses it was possible to read the enlightenment on the faces of the participants as they pointed out how educated and financially-abled people they had become.

However, with the urbanization of African villages, the rural is losing much of its idealistic image. This is so much so that the rural is emerging as a model of "modernity."It is no longer that space of completely intact evergreen forests and arable lands. Due to globalization and rural-urban/urban-rural travels, there are many urban-like changes happening through use and uptake of mobile money services.

Even for businesses in the private sector – like the MNOs, banks and financial institutions – the rural is increasingly becoming a more dynamic and competitive environment. Infrastructural changes and the presence of mobile services are increasingly influencing lifestyles and in turn necessitating new models of survival. More connectivity has meant more access to infrastructural facilities, and ultimately, transformations in the conventional image of rural life and rurality. In many ways the rural is emerging as a global, dynamic, multi-faceted territory such that rural life is being re/shaped, re/drawn, re/constructed, and generally transformed.

While many embrace these changes, some residents see it as a danger. As one villager told me:

"It's just that my village is no longer the typical traditional self that it once was. I think that urbanization is beginning to have a real impact here, as the face of the city is increasingly being threatened and destroyed by these new innovations. The village is not as rural and traditional as it used to be. I do like the clean water, electricity, radio and TV, roads, cell phones, etc. But I mind that visiting it is no longer like going back in time. It’s more like a change of scenery.” (Namujju, 2014 interview)

Many rural residents were concerned about protecting, or at least paying more attention to the rural and its aspects and ideals, arguing that otherwise it would lose its identity. Rural areas should have a specific internal dynamic of changing and adapting.

Rurality in mobile money times

My study shows that mobile money is in fact proving to be integral to re-imagining rurality. However, further research is needed to show if rural elements are in fact being preserved, changed, or recreated in urban form. It is important to examine if mobile money will eventually change how we feel about rural space and if so, what its applications, services and innovations mean for rural authenticity.

For part one of Reimagining Rurality, see here

Read more in Prince Karakire Guma's final report here

Reimagining Rurality in Mobile Money Times: Life, Identity, and Community in Southern Uganda (Part 1)

By IMTFI Researcher Prince Karakire Guma

In some parts of rural Uganda, a whole village will use one or two phones to bank, to contact relatives, to share money amongst themselves, to access loans, and simply to check weather reports. Low teledensity does not imply lack of mobile money use and spread. Freed from the expense of ownership and maintenance, an individual of a particular group or community will spend longer periods of time per use on the available gadget(s), hence generating more revenue not just for the individual or group involved, but for the whole village. Such collective use by a community makes the dream for financial inclusion plausible—even a reality—for rural life.

In this 2-part blog post series I present vignettes organized around three themes—life, identity, and community—through which mobile money and rurality is re-imagined. Mobile money inclusion is providing new tools to maintain existing practices and values, reshaping but also reinvigorating rural-urban ties, and along with these, new understandings of the rural.

Rural Life, Identity, and Community in Mobile Money Times

My study provides a snapshot of the impact of the mobile financial services in rural Uganda in relation to debates on financial inclusion and empowerment. Mobile money is increasingly turning out to be a most viable tool of financial inclusion to those who have neither bank accounts nor deposit lockers nor credit cards, but do have a basic mobile phone. The Ugandan Central Bank recently cleared the path to mobile finance, a shift that forced the nation’s banks to look seriously at the low-income consumer banking market for the first time. Provoked by discussions of rurality vs. urbanity and the exclusion of remote and rural towns and villages before mobile money, I wanted to understand the extent of changes today in light of the rise of initiatives such as MTN Mobile Money (MTN), Msente (UTL), Airtel Money (Airtel), and Orange Money (Orange), which have led to the growth of an increasingly complex mobile money ecosystem that allows funds to be transferred between rural and urban subscribers. Mobile money has changed the ways of life for groups most at risk of poverty and social exclusion that often lack access to traditional bank accounts. Populations previously excluded because they do not own property or a business are beginning to get included through a myriad of mobile money innovations and applications.

With the emergence and dispersion of mobile money services in southern Uganda, 'the rural' has attained a certain kind of dynamism and fluidity, and a whole new identity through varied features of lifestyle, community, traditions and landscapes. I explore this problematic within a so-called “traditional” rural setting—still remote, excluded and poverty stricken—that is at the same time representative of emergent and transformative innovations through mobile money. I understand the rural as part of an integrated space within mobile spatial systems that delete, rub away or dis-able the aspect of distance between issuer and receiver, urban and rural, and modern and traditional. I explore how the rural territory is re-interpreted through processes, lifestyles and behaviors influenced by the new contemporary technologies of mobile financial transformations.

The setting for this study is the village communities of Masaka and Rakai comprised of households that are spread over hilly lands. Families of up to five adults and sometimes ten children live in a single homestead, which are often clusters of mud-brick and iron-roofed two or three bedroom dwellings with a sitting and dinning room, and occasionally a kitchen. Birdcages, kraals and/or gardens are reserved for subsistence crops – especially banana cultivation.

Most people have extensive kin across the corners of the village or in the neighborhoods. Given that many can trace their ancestry over five generations, the idea of family, kinship and network in such communities is profound. These are rural communities in every sense. But there are also glimmers of transformation with regard to life, community, sociality and identity.

Interviews and focus group discussions were my primary method in the two communities, along with observations of daily activities. I identified community leaders, such as local councilors, religious leaders and traditional leaders, as potential participants and used purposive sampling to ensure a full range and extent of the phenomena necessary to answering my research questions. This method of analysis allowed me to better understand the 'lived' realities of mobile innovation in the rural context in ways that challenge the discursive marginalization of communities most at risk of rural poverty and social exclusion.

Life

The money transfer application has proved to be the most important “killer application” of mobile money, fundamentally transforming rurality in Southern Uganda. It supports the indigenous and traditional settings, realities and world-views of the Baganda who constitute about six million people, or 16.7 percent of the entire population of the country.

Before mobile (money) innovations and services, quality of life and access to social services were poor in the southern districts of Uganda. Literate rural residents exchanged information on crucial news such as serious illnesses through letters. But for the illiterate this was problematic. Letters were less informative and were often disseminated informally through trusted friends and it would often take days, weeks or even months to receive a reply. Today, calling and the use of texts or "SMS" have replaced most of the letter writing. Mobile money, which operates through text and "SMS," meets basic functionality needs and operates on the most basic handset. It takes old technology and uses it in new and innovative ways that enhance and substitute older practices of sociality, social life and lifestyles. 

Mobile money has tremendously influenced peoples’ savings behavior where previously keeping money under mattresses or in fabric, often tied in knots, was common. Now mobile phones are clearly substituting for traditional unreliable savings channels and remittance services. Where previously people only used trustees and formal institutions including banks and other financial institutions, mobile money has now made it possible to send money from urban centers to Ugandan villages through remittances at even lower transaction costs. Without having to travel long distances and cue in traditional banks, or travel across borders, rural dwellers are now able to receive money in the comfort of their homes. 

Mobile money is also substituting traditional ways of making monetary payments. Payment through agents or “middleman” have especially been substituted by mobile means of cashing in (depositing funds), cashing out (withdrawing of funds), transferring funds through person-to-person (money transfer) or purchasing of airtime, even to make payments to workers. When asked why they used mobile money, some rural residents in my study suggested that it was the appropriate alternative and substitute to unfavorable fixed and traditional ways of spending money such as cash. They said that using traditional bank accounts, credit cards and financial facilities were very complex to understand, operate, and maintain in remote villages and was often the preserve only of those wealthy enough to afford a handset. They pointed out that mobile money improved access and efficiency and simplified their lives when they needed to access goods and services. 

The sector that has benefited the most is probably education, where schools have substituted traditional means of paying tuition and other school fees – such as delivering funds in person or proxy, and use of agents such as banking institutions – with mobile alternatives. Many community schools in the region have now adopted mobile money as an acceptable means and mode of payment. They were registered with MTN and Airtel Uganda Limited where parents were allowed to transfer school fees and other school related costs for the kids. Some explained that they used electronic transaction forms for additional home goods and food items such as sugar and salt. Others used mobile money for paying utility bills for water and electricity, and salaries to their house girls or housemaids and other support staff in their homes, instead of going to the bank to withdraw cash.

Mobile money remittances exert multiplier effects on the community. For instance, they have in some cases motivated young local men and non-receiving households to start seasonal entrepreneurial activities. Before, youths used to have no choice but to leave their villages for towns and cities like Masaka, Mbarara and Kampala, so much so that there were not enough youths to work in farms and gardens. But with the fast paced changes through mobile money many are now realizing that the rural is indeed a fine place to live and work. One young man who was part of a group of young men molding mud bricks and then baking them in huge ovens to make them strong and resistant to erosion by water or rain explained how they would sell the bricks to the remittance-receiving households to build houses on their homesteads.

In fact, where non-existent infrastructure has typically stood in for the “rural” as static or cut-off from the world, it is exactly this reality that shows dynamism because it has inspired the tremendous uptake and transformation of mobile money. The absence of clear roads, accessible banks, hospitals and transport facilities in rural areas explain why a mobile phone will be popular for saving, transferring and making real-time payments. Access to health attention and remittance payments through mobile technology is a dream come true for rural residents. There was also the case of multi-nationals and NGOs coming to the village that had substituted in-person payments in cash with mobile money payments and other mobile applications to reach out to the communities and distribute emergency aid to families. 

As such, the new infrastructural concepts engineered by MNOs are not only broadening the range of transactions that target the rural poor, they are also providing dynamic substitutes making rural spaces and territories even more fluid. Such accessibility and availability means that almost everyone in every corner of the country, community and village has a story to tell about mobile money.

While the increasing number of money transfers from urban to rural territories through the mobile phone has also increased the flow of information between people in and outside the village, one consequence is that urban dwellers are increasingly keeping away from these rural localities owing to the convenience and reliability with which mobile applications provide them. According to a church priest,

"... a lot of people here come to the village when it's Christmas. They only come to the village for the seasons’ holidays. And when they come here, it’s as if there is nothing to keep them there. They leave as soon as they arrived. Mobile phones have encouraged our people in the urban not to visit at all. They have provided an easy means of communication and sending money. People no longer need to physically come here. It is as if the major motivation for people to purchase phones nowadays is so that they can avoid expenditure on travel to the village. It is as if there is no need for the inconvenience of having to make constant trips to the rural." (Sam, 2014 interview)

While some study participants worried about the changes brought by mobile money it was also clear that it was not introducing entirely new ways of life but substituting what already exists. Mobile money seems to enhance rural lifestyles of community through which people who are registered are able "connect to all" including their kin, friends and community. It provides opportunities to establish and maintain community, collaboration, and access, which I will describe in part 2 of this blog post. 

To read part 2 of Reimagining Rurality in Mobile Money Times: Life, Identity, and Community in Southern Uganda, see here.

Moving Research Applications into Circulation: Putting Knowledge to Work

The final session of the IMFTI conference focused on research applications.  "Putting Knowledge to Work" was moderated by discussant Michael Joyce of TNP2K (the Indonesian National Team for the Acceleration of Poverty Reduction) who noted that Indonesia had already opened electronic accounts for a million people receiving government-to-person transfers.  He also thought that IMTFI research would be important in ensuring the success of such programs to get people to actually use the "next generation" full suite of tools realized by leading service providers in places such as Kenya with services such as  M-Shwari that had interest-based saving, credit, and more sophisticated models than existing microcredit paradigms.

The first paper on "Effectiveness and Challenges of Using Mobile Money Service in the Implementation of the Social Assistance Grants for Empowerment Programme: A Case of Kiboga District in Uganda" by Julius Okello and Dorothy Massa of the African Institute for Strategic Research Governance and Development  emphasized a G2P case in the Kiboga District of Uganda. Okello explained that SAGE (Social Assistance Grants for Empowerment) was the first major social protection initiative by the government of Uganda and how it was an arm of expanding social protection under the Ministry of Gender, Labour and Social Development. It received funding for launching its services from DFID, Irish Aid, and UNICEF, and it is also supported by Maxwell Stamp, a UK based consulting firm.  Okello explained that SAGE was a five-year pilot program which started in 2011 in Kiboga, Kaberamaido, and Kyenjojo but was later rolled out to another 11 districts.   Researchers noted that Kiboga has a population of 148,606 people, of which 4,808 citizens, both male and female, participate in SAGE.  SAGE targets elderly citizens, those from intact heritage cultures, and other vulnerable populations.

According to Okello, the MTN mobile money service was launched in the country in March 2009 and has registered 1,553,770 users since. He asserted that this translates into an adoption rate of 64,740 persons per month.  On average the relative market share of MTN Mobile Money, ZAP, and M-Sente between March 2009 and February 2010 was 89.6 percent, 9.1 percent, and 1.3 percent, respectively. Given the history, coverage, and capability of MTN Uganda, the government opted to hire MTN mobile services to remit funds to SAGE beneficiaries.  The use of mobile money in Uganda is still relatively new, according to Okello, however.

Okello's study used a mixed methods approach that combined quantitative and qualitative information gathering and was inspired by Creswell & Plano-Clarks' 2011 manual for researchers.   The Kiboga project was designed to consult about three hundred informants.  Quantitative methods included regression analysis and involved statistical figures, tables, and graphs, while the group's qualitative methods emphasized detailed explanation with evidence about their informants' livelihoods.  He showed a complex circuit of stakeholders in the project, who included the government of Uganda, the Bank of Uganda, development partners, The Ministry of Gender, Labour, and Social Development, the Uganda Communications Commission, MTN, MTN district agents, the district coordinators of ESP, and the SAGE beneficiaries themselves.  Because Uganda is one of the worst countries in the world for corruption, according to Okello, the hope is that this system of checks and balances will protect SAGE constituents.  He also worried about potential complaints from telecommunication companies that might feel "locked out" of participation.

For elderly participants without cellphones, MTN created a variety of devices and services, including this yellow box that performed all of the functional financial operations of MTN transfer services.  Yet MTN has relatively limited coverage outside of the capital, so money sometimes cannot reach the beneficiary and becomes diverted to other parties through corruption and fraud.  Unfortunately researchers found that the elderly are often targets who unwittingly share pin numbers because they are reluctant to travel the distance to the point of contact with mobile money agents or are too gullible when told that machines have broken down. In concluding Okello argued that the elderly could still be vibrant economic actors capable of launching businesses, and he closed with hopeful stories of growing sunflowers, poultry, pineapples, and piglets and an anecdote about how ritual slaughter is combined with the seeming windfall of mobile money.

Another G2P program was featured in "Paying Conditional Cash Transfer Programs in Bank Accounts" by Enrique Seira of ITAM-QFD, and the panel shifted its focus to Mexico, where it was also possible to analyze characteristics of debit card owners and their behaviors as consumers.  Seira noted that in Mexico debit card owners have three times more tertiary education, three times more savings, and more trust in general in society and institutions.  (One Seira survey question asked if informants thought that a lost wallet would be returned to measure such trust.)  Debit card owners tend to live in municipalities with 20% more ATMs per capita.  In contrast, Oportunidades “Debit” beneficiaries, who were not self-selected by their decision to get a card and used accounts relatively little, as described in this earlier IMTFI panel.  Seira noted that they also had significantly less education, and although about 45% claimed to have savings, only about 10% had "formal" savings.  This amount of savings represented about 1/50 the numbers common in the general population.  A comparison of late vs early debit card owners in Oportunidades showed that they were similar, which was good for measuring the impact of debit card expansion, as the cards became able to work in ATMs and be accepted in stores.

Seira claimed that the aspect that influenced the value and use of the account was its convenience, although a savings account with no branch nearby and no card able to pay in POS devices was not very useful.  Unfortunately, this was how Oportunidades (Mexico’s main CCT program) operated pre-2009. Of about 1 million savings accounts, none had ATM/Debit card features.  In 2009, Oportunidades started awarding Debit ATM cards in a staggered fashion. Expansion was decided by Oportunidades at the local level (not by bank branches).

Seira has planned to do a DID analysis of the effect of ATM/debit on savings in recipients' accounts. He noted that his sample was based on data on account savings for 342,000+ beneficiaries of 308 Bansefi branches in 411 municipalities during a period covering 17 bimesters: January 2009 to October 2011 (5 bimesters pre-treatment and 12 post, max).  About 70% of participants received an ATM card during the researchers' sample period.  There were three group studied: early switchers, late switchers, and those who had not yet switched.  The three groups were distributed geographically across the country and included similar distributions of indigenous groups.  Although seemingly counter-intuitive, Seira also posited that debit cards could impact savings behavior positively, because withdrawals could be smaller and done in a more controlled manner.  He acknowledged that yesterday's IMTFI session with Jonathan Morduch reached the opposite conclusion that plastic could encourage more irresponsible spending behavior.  Subjects in Seira's study ultimately saved 30% more than non-implementers, although this behavior often took six months to manifest itself.  It also often followed a pattern of significant variation among users, and research indicated that subjects had relatively low financial literacy regarding ATM use and fees.  He observed that new users also frequently checked balances, because they were distrustful about money remaining in the account.

Researchers also found evidence of early implementation problems, especially involving emigration to debit card accounts.  Surveys were also given to 100+ personnel from ATM providers, and those serving in early adopting municipalities seemed to have less knowledge about training materials.  There were also surveys distributed to 5000+ beneficiaries, which revealed that early adopters (even if they have had more time to learn) needed more help to use ATM card than late adopters (57% vs 50%, 5% significance).  While 32% of early adopters knew they had a savings account, only 30% of early adopters knew (10% significant).  Late adopters did 35% more ATM purchases per bimester.  According to Seira, there seemed to be increasing use and trust with time as well.

The final formal presentation at the IMTFI annual conference was "The Use and Impact of M-Shwari as a Financial Banking Product in Urban and Rural Areas of Kenya" by Jane Mutinda of Kenyatta University and Ndunge Kiiti of Houghton College and Emory University.  You can read more about previous IMTFI research produced by Kitii and Mutinda's collaborations here.  Mutinda credited Professor Charles Nzioka of Nairobi University, who also participated as an author in their findings presented this year.  Monique Hennik of Emory served as a consultant to improve the group's training, because the university students that they used as field researchers came from many different institutions.

Mutinda opened her presentation with a gorgeous and evocative video that explained that the Jua Kali (the word refers to the heat of the sun) were self-employed people working in the informal sector of the Kenyan economy doing 90% of the service work, which included masonry, plumbing, carpentry, metal working, and many artisanal trades.  According to experts shown in the film, this sector also employs about 19 million people and is critical for successful development.  Even the economic commentators described their own experiences as Kenyans in the bankable population as very difficult, so that someone might have to walk dozens of kilometers to make just one transaction.  People in the Jua Kali sector found opening and maintaining accounts particularly challenging, although access to resources, small loans, and savings for small businesses were all among their critical needs.  In the film researchers argued that Safaricom needed to do more outreach and education to explain the product, which was less widely in use in rural areas divorced from cosmopolitan populations of users and which privileged English speakers over those who communicated in Swahili or tribal languages. 

Kiiti took over the presentation after the video to explain the "why" and the "how" of the project, which built on their earlier work in mobile money in Kenya.  They also observed increased use of the M-PESA platform and an expansion of Safaricom bank partners providing mobile money services and products.  In addition to M-Shwari, provided in conjunction with the Commercial Bank of Africa (CBA), Kiiti also noted the existence of M-Kesho with Equity Bank and M-Benki with Kenya Commercial Bank.  Researchers chose to focus on M-Shwari, which was introduced in 2012, because it allowed subscribers to save and borrow from their phones and to earn interest on money saved.  It also provided access to credit and a paperless form of financial transaction.  Nonetheless, more needs to be done to reach the unbanked: apparently CBK has estimated that over Kshs. 300 billion ($3.5 billion) sits outside formal banking systems, and millions of Kenyans are still unbanked.  She noted that 50% of people using M-PESA still did not have a bank account.  Researchers also consulted with Safari.com to attempt to influence policy, although they were wary of possible influence.

Kiiti summarized from research highlights that indicated that M-Shwari loans were "essential in providing quick cash-flow for the Jua Kali businesses."  She also cited a number of strong assertions from those in the financial sector about the power of this product, including Michael Joseph, Director of M-Pesa within Vodafone, who argued that "M-Shwari is a 'transformational service'; saving is no longer the privilege of the elite."  She justified the study's focus on the Jua Kali, by emphasizing the fact that the informal sector contributes about 18.4% of Kenya’s GDP while creating 74% of all new jobs annually, although researchers were sometimes stymied by a lack of data.  She incorporated research done by the Africa Development Bank in her presentation as well, and argued that Kenyans rely on the Jua Kali sector for services and feel strong investments in those communities. She explained that workshops continue to be part of their research study design.

The study trained 15 graduate students and professionals.  Students came from six different campuses and were tested on their cultural/language representation (both vernacular & national).  Their training in a mixed methods approach included role-playing and practice listening, probing, and note-taking, and they included M-Shwari representatives in the process.  8 counties were and 4 regions were included in their fieldwork.  Consent was very important given the nature of the very personal questions asked by researchers about money.   160 Questionnaires were gathered with 10 users and 10 non-users of M-Shwari in each county.   Researchers examined sample characteristics, such as access/convenience, usage, gender, and sectors and found trends that involved social status.  As the research team moves forward they hope that the link/gap between marketing or promotion and knowledge or application could be better addressed if policy and practice questions receive more attention.  Obviously researchers felt that their findings could be very significant for issues of financial inclusion and exclusion in mobile banking in Kenya.

Hurry Up and Wait: “G2P or G&P”: Governments, Payments, and Publics

In this panel about how state policies shape financial inclusion, IMTFI alumni participant Jing Gusto of Mercy Corps suggested that coordination with government agencies required a "Gangnam Style" spirit and an understanding that it was "more fun to not dance alone."  He argued that the innovations of government could serve as a significant vehicle for financial inclusion, although many researchers on the panel complained that it was difficult to make much progress on understanding the synergies between government and the private sector when policies and practices were being changed by new administrations struggling to keep up.

"The Physical and Electronic Payment Interface and its Influence on Consumer Payment Choices and Informal/Fraudulent Practices: A Case Study of the National Water and Sewerage Corporation (NWSC) Uganda" by Tugume Howard of Benda Associates Ltd also reflected the work of Nanteza Justine and Kobusinge Justine, although the Justines were unable to attend the conference.  By focusing on the physical and electronic payment interface and its influence on consumer, Howard argued that a case study involving a national water and sewage could provide understanding of the influence of consumer choices, payment choices, and informal practices.  Howard argued that Benda Associates benefited from its knowledge of business start-ups and agribusiness as an agency capable of comprehensive research.  He began by noting that the Bank of Uganda had an ambitious Financial Inclusion Project and that the BOU's recent financial inclusion report indicated that there had been significant growth of bank branches and ATMs, although the distribution of banks and ATMs failed to serve large sectors of the population, because 41 percent of districts in Uganda lack access to any bank branch.  He also described dramatic growth in mobile money technology with 17 million people have registered.  Additionally, the distribution of mobile money agents in Uganda was more likely to follow the distribution of population than offices of the traditional financial sector.  For those who want to learn more about the financial landscape of Uganda, you can check out the maps and information graphics produced by the Finclusion Lab.



The National Water and Sewer Corporation already offered a range of payment options including mobile money, direct debit, and  ePayment, and researchers were interested in seeing if these options might ameliorate systemic problems of corruption and reduce fraudulent informal practices.  They explained that they wanted to examine the factors that drive people’s payment choices and examine the impact that the interface between physical and material might have as well.  Researchers chose to focus on a diverse set of survey areas, comprising four districts – Kampala (the capital city), Mukono (urban), Mpigi (semi-urban), and Luweero (rural).  The methodology included user interviews, expert interviews and document review.  They discovered that users reported relatively good knowledge of payment methods: 89% were aware of mobile money, 37.06% were aware of bank transfers, 85% knew about cash deposits, and  58% knew about cash.  Because the NWSC stopped accepting cash payments in its offices, users had incentives to learn about alternative methods.  Now 40% used mobile money, 23% persisted in using cash, 79% used the cash deposit method, and 8% tried bank transfers.  Although the work of the last six moths indicated that electronic payments could reduce corruption, users were also exposed to modern malpractices, such as hacking now that water bills could be paid thanks to mobile money and access to ATMs.  The Ugandan researchers also noted a number of limitations to a study largely done in urban centers that depended on a consumable (water) that presupposed development and the fact that informal practices were not yet documented, as were aspects of behavior related to gender.  Although they described it as "too early to draw conclusions," they sketched out the rest of their research plan including data entry and analysis and dissemination of results.

The IMTFI has funded a number of researchers to study practices in Mexico around digital money, and cross-border collaborations have been a particularly important aspect of the institute's scholarly work.  "Delivering Conditional Cash Transfers via Savings Accounts: Default and Mental Accounting Mechanisms" by Carlos Chiapa and Silva Prina also focused on a specific area -- conditional cash transfers that reward poor families for school attendance, preventative health visits to clinics, or participation in nutritional and other forms of education --  that IMTFI field researchers have done work on in other countries, including Gusto's own work in the Philippines (described in blogging from previous IMTFI conferences here) and work on CCTs in Brazil (as detailed here.)

Prina noted that their study was situated in the context of a large body of existing scholarship that showed that inclusion into the financial system helps the poor escape poverty (Aghion and Bolton 1997; Banerjee and Newman 1993; Banerjee 2004).  Those new to this work might start with the work of MIT Professor Abhijit Banerjee and the university's Poverty Action Lab.  Unfortunately, the poor are usually excluded from the financial system, and thus they end up using imperfect substitutes (Collins et al. 2009; Rutherford 2000).  Fortunately, it seems possible to find alternatives to this Catch 22, because there is untapped demand for formal savings devices and access to and use of a savings account increases savings and investment and promotes the welfare of small entrepreneurs and households (Dupas and Robinson 2013; Prina 2014).

The research team focused on Oportunidades, which is now rebranded Prospera, a series of social protection programs that include depositing transfers of cash to accounts of participants in BANSEFI, the social bank of Mexico.  Although most of poorest Mexican households have been granted access to the formal financial system, researchers argued that having an account (being banked) is a necessary but not sufficient condition for financial inclusion, which is defined not only by access to formal financial services, but also by use of those financial services, appropriate regulation, and financial education.

In understanding the "supply vs. demand" problem of the CCT program in Mexico, researchers found that users made little use of their accounts and that most withdrew their funds at once.  Grim results from a 2009 pilot changed little in a 2012 study that showed that 81% still withdraw at once.  Now that researchers have begun a more granular study in May 2014, they have discovered that 58% of beneficiaries do actually save: 38% save in the formal formal (although only 30% of this group does so with BANSEFI) and 79% save in informal institutions.  To understand problems on the demand side, researchers surveyed users and found out that 42% felt that they did not have enough income to save, and 43% had been told to withdraw all at once, which pointed to a "hint of misinformation and disinformation."  Indeed, 11% feared being kicked out of program if they saved, and 11% worried that the government would keep their money if they tried to keep some in reserve.   Only 51% of recipients knew they could save in their BANSEFI accounts, and basics of procedures seemed mysterious to participants, since 83% didn't know how to make a deposit, and 88% didn’t know the money was protected by federal government, although 62% did consider that keeping money in a formal back account did have advantages.

To tackle the problem of low financial literacy, they began with assessment.  They discovered that a simple question about calculating 10% of 1,250 pesos – roughly the amount of a typical conditional cash transfer – could only be answered by 31% of participants.  43% could answer questions about interest correctly, and most knew about inflation.  Drawing on a literature that showed that mental accounting could affect savings and financial accounting decisions (Feldman 2010; Sahm, Shapiro, and Slemrod 2010; Thaler 1990, 1999) and that defaults have also been shown to be very effective in increasing savings in developed countries with low-income population (Thaler and Bernatzi 2004; Madrian and Shea 2001), the researchers looking at CCT programs in Mexico wanted to design a study that emphasized these features. Unfortunately automatic savings programs are often not available in poor households in developing countries, although the concept of an account denominated for emergencies was something salient to people.  Researchers argued that it should be more salient, and that such accounts could be facilitated by a default feature, so that participants don’t have to remember to save.  Speaking on a personal note, I know that the automatic deductions from my paycheck for my retirement have certainly spurred my own default savings behavior, so this assertion certainly seems logical.

Researchers designed a randomized controlled trial in which those in Control 0 all receive a special educational workshop on how to use their accounts and booklets to track savings, those in Treatment 1 are also given an account for emergencies with sticker, and those in Treatment 2 have an automatic designation in which 10% of their income is deposited into emergency savings.  With three treatments it becomes possible to separate out the effects of mental accounting from those of a system default.  Unfortunately researchers described delays caused by political changes in Mexico, particularly now that the entire CCT system was being redesigned.  Although they said that "we know very little," they were confident that "replication should not be particularly difficult."  In the question-and-answer session afterwards participants proposed using better graphic design to promote financial literacy and considering the gender dynamics of banking behavior uncovered by IMTFI researchers working in Chiapas.  One participant also argued that it may be wrong to assume that "people are misinformed," given that banks may have incentives to push customers toward investments in risky ventures and that even a middle-class Mexican research center pension might be tied to speculation with Goldman Sachs.

'The New Financial Architecture in Ecuador: Public Regulatory and Sociopolitical Contexts for Payment Systems" by Javier Felix of Renafipse and Monica Pozo of SENPLADES began by providing the context before the financial crisis of Ecuador in 1999, which resulted in the dollarization of Ecuadorian Economy and a big currency devaluation with very high levels of inflation.  The economy had already been dollarized informally, so the government's pragmatic policy was intended only to acknowledge the existing reality.  Soon it payed off and the economy stabilized, so that the country moved from 95% inflation to rates at a more manageable 3 to 4%.  This period was also marked by extreme political instability in an era in which there were eight presidents in a short period of time.  The government has since embraced policies based on a new constitution oriented around the well-being of citizens, harmony between humans and nature, and new economic systems of a "popular and solidarity economy" that was a response to neoliberalism and deregulation, typical of what Felix described as "21st century socialism in Latin America."

By placing a priority on public policies that addressed the fact that 70.5% of Ecuadorians didn't have a bank account, the government decided to analyze new forms of payment, particularly in response to huge movement in the mobile payments sector in a country with 17.9 million mobile phone subscribers.  Policy makers envisioned a "Public Electronic Monetary System in which the electronic money system, as defined by the Central Bank of Ecuador, is a "set of operations, mechanisms, procedures, and regulations that facilitate the flow, storage, and real-time transfer of monetary value between the different economic agents."  To further this vision, the use of electronic means would include "mobile devices," "Internet," "Smart cards," and other digital monetary instruments.  Although the Central Bank of Ecuador would serve as the Distributor and Administrator, there were other regulatory institutions and technological channels to consider.  For example, there were three mobile companies in Ecuador, and the central bank has signed agreements with all of them.

Like other IMTFI researchers, Felix described flux in the process, including a "pilot phase ending tomorrow," which examined macro agents, transactional centers, users, and delays and changes.  By imagining a financial structure of inclusion that was not based on any private institution, mobile money could become a legal tender and a state liability, as a currency that all must accept.  In this particular theory of money, money should be a public good.  The Ecuadorian team warned that private companies might want to influence users and exploit market share.  Because electronic money in circulation must be backed one hundred percent with the liquid assets of the BCE, there were established limits on the system.  For example, users were limited to three accounts and $2000 per month.  Nonetheless the researchers were eager to acknowledge different perspectives on the strategy of monetary policy to speed up the recirculation of money, especially in rural areas, and they even granted that speculative markets might be necessary.  Although nationalization is often seen as a bane to private industry, the researchers asserted that mobile companies saw a new line of business and technological adaptation and that macro agents saw business opportunities and cost reduction for collections.  In closing, the presentation raised the question of how it could have a greater impact than a private system, particularly in the wake of "trauma about owning national currency."  For these researchers, money serves "as a social agreement" that "needs people’s trust and approval to be part of their lives."   Therefore, "rules should be constructed transparently and with democratic accountability."