“When I make sales, I want to sit and count my money at the end of the day”: Low Adoption of Digital Payment Platforms among SMEs in Ghana

by IMTFI Fellows Clement Adamba, Onallia Esther Osei, and Rebecca Sarku

"There is power and some good feeling in holding cash"

Introduction
Ghana’s informal economy is dominated by small and medium-scale enterprises (SMEs) whose huge contribution to the economy is widely acknowledged. SMEs are, however, characterized by limited application of technological innovation that could enhance business financial transactions. Current non-cash payment platforms in Ghana include switch and card, primarily operated by e-zwich, gh-linkTM; mobile or wallet money operated by big mobile telecommunication companies such as MTN, Airtel, Tigo, and Vodafone networks. There is also real-time gross settlement system (RTGS), a funds transfer system where the transfer of money or securities takes place from one bank to another on a "real time" and on a "gross" basis.

Mobile Money Vendor
Accra Central Business District

There are a limited number of SMEs using digital financial platforms for transactions despite efforts to encourage adoption and utilisation. The Bank of Ghana (BoG) has attributed the low adoption of digital payment platforms to high illiteracy and ignorance about the relevance of non-cash payment systems (BoG, 2014). In our recent study, we found that, indeed some operators of SMEs in Ghana have adopted some form of digital financial payment for personal and business transactions. Our study also confirmed that illiteracy and lack of knowledge about digital money are the two predominant factors that affect adoption and utilisation of available digital payment platforms. However, we found two other reasons that will require more than literacy to encourage patronage among SMEs in Ghana – the high value of cash and low feelings of trust.

In the remainder of this blog post we highlight some of people’s perceptions about the value or power of holding physical cash over digital money and the issue of trust expressed in the reliability of the system and its operators.


“I want to count my money…….”
There is the feeling among some SME operators that counting cash at the end of a day’s business is an indication of a good day. One is able to determine physically whether or not the day’s transaction has been good or bad. More importantly, holding money and counting it at the close of the day enhances one’s self-image and gives a positive self-feeling. In the expression of one lady in Makola, Ghana’s busiest market in the capital city of Accra, the power associated with the holding of cash supersedes digital money. The feeling of having cash in hand arouses a greater sense of liquidity, power and feeling.

Inside the Makola Annex Market

“When I make my sales, at the end of the day, I want to sit down and count the money. Then, my self-esteem is enhanced. And then I also feel that I am working. But if the money is on a machine like the mobile thing we are talking about, it doesn’t make sense to me. There is power and some good feeling in holding cash [more] than there is with numbers on your phone or on a card.” (A 28-year-old female make-up kit trader in a focus group discussion in Makola, 24/3/2016).

This expression resonated among most of the participants in our study, who immediately concurred with this sentiment. In cases where people have received a mobile money transfer for example, they will immediately go and withdraw the cash.


The other problem is trust
Negative experiences of some adopters with digital payment platforms have led them to lose trust in the system, which has provided added impetus for many to completely stay away from adoption and use of digital payment platforms such as mobile money transfer services:

Adawso Roadside Market

“When I went to a vendor one time to withdraw a customer’s payment for goods that she transferred into my mobile money account, I was asked to bring my code. And I was afraid that once I tell the agent about my code, they may steal my money. Meanwhile I don’t know how to operate my phone. So as soon as I gave my code out, I withdrew everything from my account. This is because my cousin said she left GHC 200 in her account but when she went to withdraw her money, she was told that she did not have anything in it. It means that either her agent or someone took note of her code and then withdrew her money. So I prefer to have my money in cash. I know where to hide the money and not even a rat could notice it in my room. [This is better] than this code and secret number things they are talking about as a form of security for my money” (A 40-year-old fishmonger in Adawso market, 18/03/2016)

However, the distrust of the mobile money system could often be linked to misunderstandings of how the system works. For instance, some SME operators expressed concerns as to why one had to pay for registration fees and charges for transfer and withdrawal of money from mobile money vendors. Others expressed concerns about the need to pay charges for some of the most basic services. These concerns suggested that the SME operators feel exploited with fees or charges; eliciting their fear that mobile money service providers are cheating them instead of helping them with their businesses. But mobile money service agents and some platform service providers have noted that what subscribers call registration fee is actually an initial deposit for the wallet, just as it would be the case in starting a savings account with a bank.


Acknowledgement of some positives with digital financial service platforms
Notwithstanding the concerns of some SME operators about the challenges and the fact that there is the need for one to count his/her cash at the end of day, some SME operators do acknowledge some positive aspects associated with utilising a digital platform service.

mobile money advertisement in Ghana

For example, it is safe and reduces the risks of theft or robbery associated with travelling over long distances with physical money. For example, a female trader indicated that:

 “I don’t carry cash in my bag these days. At first when I travel to buy goods, we are usually attacked by armed robbers but with the mobile money technology, I usually transfer all my cash onto my mobile money wallet and then when I get to my destination, I withdraw it into physical cash to transact business. And so, even if we are attacked by robbers, they can only take my mobile phone and only a small amount of money away. Even if I lose my mobile phone, I still have my money because the code is with me” (A 32-year-old female cosmetic trader in Makola, 06/04/2016).

Another trader noted that keeping money in a mobile wallet helps to avert impulse spending:

“The benefit of keeping my money in my mobile money wallet is that when they pay me cash, it is likely that I may do an impulse buying but if the money is in my wallet it will be very difficult for me to go withdraw it. I hardly get time and if I will have to join a queue very often to withdraw money, then I will prefer that the money remains in the wallet. So it is more or less like a bank savings for me” (A 27-year-old female trader in Makola, 06/04/2016).

Conclusion
Digital payment platform designers and service providers have an obligation to educate potential users of the digital payment platforms on the suite of services that they provide.

Field Interview, Ga-Mashie

They need to spend more time on public media to educate people about the operations or workings of the digital platforms and how even illiterate users can operate these effectively without relying on any second party for support. Improved education outreach can also serve as a catalyst in reducing fears about security and the safety of wallets. Specifically, user-centered education can help people understand how to access money in their wallet as well as operate and utilize all the available packages on the platform such as buying airtime and paying bills through the mobile wallet. Platform providers need to do more to allay subscribers’ fears of risk and losing money through theft, including by agents.

Read their final report here

Economies of Scale: Session Five of the 2016 Conference

In the second panel of the day "Small Size Big Impact? Management of Financial Opportunities and Constraints by Micro-entrepreneurs and Small Merchants" with discussant Olumide Abimbola, Max Planck Institute for Social Anthropology focused on the so-called "SME" sector with a focus on small and medium-sized enterprises and led off with "Influence of Mobile Money on Control of Productive Resources Among Women Micro Entrepreneurs Participating in Table Banking - Nakuru, Kenya" by Milcah Wavinya Mulu-Mutuku and Castro Ngumbu Gichuki of Egerton University. Mutuku discussed Kenya's Vision 2030 and how the aim is to transform Kenya economic, social, and political pillars. The research team decided to focus their study on the "social pillar," with an emphasis on the reduction of gender disparities and boosting of access to control around productive resources for women. They narrowed in on the business of "table banking," where money is put on the table and people borrow from the pool of currency, a practice that has even received presidential endorsement. As illustrated in the photograph above, audience members were encouraged to look at the entire assemblage of materials on the crowded table and to notice differences between documents, such as the differentiation of light blue passbooks from beige ones, which might indicate two different types of transactions. Researchers also visited Safari.com mobile money services.

The methodology was characterized by three stages of data collection 1) questionnaire (data collected; analysis on-going), 2). focus group discussion (May, 2016), and 3) in-depth interviews (June & July, 2016). The culminating event would be a results dissemination workshop on September 2016. In surveying informants, they discovered that the issue was "not that they don't know about competing companies like Airtel," but getting accustomed "to a particular service for business." They also discussed how not all Safari.com services remained popular, because "they stopped using Lipa Na M-PESA," because the convenience of till numbers was offset by unanticipated service charges."

Although their intention was to study women's groups, they discovered significant levels of participation by men in the groups. For example the Peniel Young Women Group had a male treasurer and secretary and a 13-10 gender ratio, The Faith Women Group also had a male treasurer, Hosea, who introduced new ideas to the group, such as acquiring land. The benefits of being in these groups could be amplified by technology as well as gender diversity, so that table banking + mobile money might lead to a "transformation of life, as in the case of one of their subjects, Mary, who now encourages customers to use normal person-to-person money transfers. She wants customers to pay using mobile money and then transfers funds to her bank account, which makes her more able to important her goods from Uganda. With table banking and mobile money, her wealth has grown from 2 dollars to 700 dollars. According to researchers "when men are added," there might be "even higher benefits." So they asked, in focusing on empowering women alone, "are we missing something?" As Hosea exclaims in the end of their presentation, "women's eyes were open long ago, and the men's eyes are still closed."

"Informal Loan Trap: Bombay 5-6 and its Effect on Tacloban Micro-entrepreneurs" by Rosalita M. Dula and Marilou Pelenio Grego of Eastern Visayas State University looks at loans and informal arrangements in the Philippines. Tacloban city is a regional capital that was recently devastated by a typhoon, Local lore attributes the presence of Indians to conscripts who jumped ship during the British occupation of earlier centuries. Today the "Bombay 5-6" wear distinctive checked shirts and zip through the city on motorbikes, which allow them to pass through alleys, escape ambushes, and not stay in the areas for too long as "walking cash dispensers." The micro-entrepreneurs who serve as their client base may sell fruit, root crops, street foods, and other products and services such as watch repair. As ambulant vendors, they need capital to set up for the next day Dula cited prior work on the group in studies of informal financial survival in business by Mari Kondo.

Grego explained the methodology of the study. She also narrated accounts of interpersonal dynamics, which might include pleading and negotiating the issue of default (which might be more common with formal bank loans despite their low interest). With these informal loan operators, women can easily begin a relationship. In contrast, with banks they feel the problem "of starting a business with only a dollar." Dula and Grego lauded these entrepreneurs for being highly innovative, although profit was often used in household expenses rather than business growth or expansion. Money lenders reach out to ambulant vendors and keep books very informally, so that "a piece of a notebook and a whole lot of trust" constitute the basic elements of the exchange.

The final panel of the session was "Assessing Unmet Needs of Small Merchants in Adopting Digital Payment Systems in Southern Ghana" by Clement Adamba of the University of Ghana, who began by crediting Onallia Esther Osei and Rebecca Sarku for their dedication to the project. Unfortunately these members were unable to get visas to the IMTFI conference, despite their important contributions to the study that comprised home-based enterprises, roadside businesses, and work conducted in the back of shops. They focused on 1) 30 respondents who were SMEs on Osu Oxford Street, 2) 90 respondents from Makola, one of the oldest markets in Accra, which is dominated by imported foods, 3) 30 respondents from old Accra in Ga Mashie, the former capital of colonial government, and 4) 50 respondents from a rural district, the Adawso Roadside Market. Each site also included at least one FGD and one IDI. Most respondents were women, with a gender ration of 154 to 46. 28% of respondents had used digital payment platforms, but 8.9 % had dropped out, and 25% were currently using. Factors included 1) illiteracy and ignorance, 2) poor communication networks characterized by waiting ("we cannot afford to go and wait for two hours"), 3) security and lack of trust, 4) language barriers that might be exacerbated by lack of transport, and 5) the fact that holding cash has more power than holding a card or invisible wealth on a phone. This show of cash was strongly linked to self-esteem. Respondents explained that "we want to count our money after a day's work". They look forward to ongoing fieldwork.

In the lively question and answer session, a variety of innovative research questions were discussed, from deploying mystery shoppers to potentially going into business themselves to move toward more participation and less removed observation. There was also considerable debate about the dynamics of interest rates as incentives or disincentives of pursuing particular credit strategies.