Negotiating and Converting Money in Zimbabwe’s Multicurrency Environment

 By IMTFI Fellows Mahiya I.T and Gukurume S.

Hyperinflation

In 2009, under the banner of 'dollarization', Zimbabwe adopted a multicurrency system after experiencing protracted socio-economic and political quagmires and a world record hyperinflation exceeding a crescendo of 250 million percent in 2008. Under this multicurrency system, Zimbabwe adopted a basket of foreign currencies as official currencies. These included the United States Dollar, the South African Rand, the Botswana Pula, the British Pound and the Euro (and later on the Chinese Yuan) – all of which operated simultaneously in the economy. The beginnings of this multicurrency system coincided closely with the adoption and growth of mobile money services. This blog highlights findings from the 12-month long ethnographic research project that examined the socio-economic dynamics of balancing and negotiating the uses of multiple currencies in the wake of mobile money adoption. To gain a nuanced comprehension of the complex rituals involved in these currency conversions, data collection was done using qualitative ethnographic techniques such as participant observation and in-depth interviews with mobile money users and non-users, and key informants. Large and diversified sample from two communities – rural Chivi and urban Harare – allowed us to compare and holistically capture the complexities of mobile money politics as well as the temporalities of foreign currency conversions.

Multi-currency transactions prior to "dollarization" and the advent of mobile money services

In Chivi, a semi-arid rural community located in the southern part of Zimbabwe, most young men and women of working age migrate to close-by South Africa as legal and illegal migrant laborer or cross-border traders. Considerable remittance inflows from these migrants (locally called majonijoni) has led to a high circulation and usage of the South African rand in Chivi that predates the official adoption of the multicurrency system. 

Harare, on the other hand, being the capital, is the hub of economic transactions and where multiple currencies had been circulating illegally much prior to official dollarization. During the hyperinflationary era, the Roadport section of Harare was even referred to as the Zimbabwean “World Bank” due to the high prevalence of illicit transactions in foreign currencies that found their way in through informal remittance channels of the burgeoning Zimbabwean Diaspora. The crippling cash and liquidity crisis in the country, led mobile money transactions to arguably become the lifeblood of business transactions in Harare and Chivi. And several telecommunication companies providing mobile money services such as TextACash and NettCash (now rebranded as GetCash) have infiltrated the market and Econet’s EcoCash is the most widely used service in Zimbabwe. In Harare, where the government was actively encouraging cashless transactions, we found that many participants did not trust services provided by government controlled mobile operators such as Telecash and NetOne. As one of our respondents sarcastically asserted:

“…the government is about to close down due to bankruptcy, why would I buy a line owned by such a government… it will be a waste of money.”

Billboard for NettCash Mobile Money Service 

Social Capital, IDs and Trust in Mobile Money Transactions

Social capital and trust were important factors in transactions involving currency conversions especially for the rural people of Chivi who were using the US dollar for the first time and required social networks to i) confirm the currency was not counterfeit, ii) to circumvent regulations requiring identity verification based on national ID numbers, iii) and for the mobile phone to be physically present at the point of transaction. Due to convivial relations and social solidarity, mobile money agents often transacted without IDs and some clients even shared their secret pin number with the agents. Tino, a mobile money agent in Chivi explained:

…that young boy is my client’s grandson whom she sends to cash out some money here. I don’t ask for the identification document because I know them by name and even the ID number and above all I trust them. I have a number of such clients who always perform their transactions with me without their IDs.

In Harare, however, it was almost impossible to cash-out money or transact without ID and agents tended to be very strict. This may be because cases of fraud, fake money and theft were not uncommon in the big city. However, we noted that even though social solidarity and social capital were more pronounced in Chivi, villagers sometimes complained of being tricked and cheated due to their mobile money and foreign currency illiteracy.

Accepting and Rejecting Currencies

We observed that, while in Chivi the South African rand was widely accepted for everyday transactions, in Harare almost all retail shops and transport operators were reluctant to accept the rand. During our fieldwork, the value of the rand was unstable and volatile against the widely used US dollar, making it very precarious for businesses in Harare to transact in the rand. One of our participants in Harare, Evans, whose parents worked in South Africa, said:

My parents send me my school fees in rands through ‘EcoCash Diaspora’ but I have to convert it into dollars because no one is accepting rands these days even if you want to pay a taxi, buy tomatoes, groceries let alone paying school fees. I don’t know it just started recently there is nothing I can do.

EcoCash Client in Chivi

In sharp contrast, most businesses in Chivi including mobile money agents accepted the rand. This could be attributed to the large volume of cross border trade with South Africa. Most business operators in Chivi bought their products in South Africa and a large number of traders from Chivi commuted to South Africa on a weekly basis to buy goods for resale back in the community. In fact, Chivi closely mirrored its South African diaspora - most goods and clothes sold in the area were bought in Musina, a small border town in South Africa. One of our participants Mr Jonasi, a prominent businessman at Chivi’s growth point business centre who owns a grocery shop and a clothing shop, is also an EcoCash mobile money agent. We asked him which currency he prefers:

Of course the US dollar is more valuable compared to the rand but here we are not rigid. In all my businesses I accept both the rand and US dollar. You will go out of business if you reject the rand like they do in Harare. People here get most of their money in rands so say if you receive rands from South Africa and you want dollars to pay fees then I will convert it for you on the exchange rate of that day. I convert rands to dollars here everyday and the good thing is I buy my products in Musina in rands so I don’t make any loss by transacting in rands. 

Exchange Rate Fluidity, Conflicts and Calculative Risks

Exchange Rates in Chivi

Interestingly, we also observed informality and fluidity in the exchange rates especially in Chivi where people relied on information obtained from Zimbabwe-South Africa border. The exchange rate was not static but changed over time, varied from place to place and was often negotiated, which at times led to conflict and serious quarrels. We observed long and protracted discussions lasting ten to twenty minutes before currency conversions were decided upon and completed. For instance, Keresina, a female mobile money agent at Chivi turn-off along the Masvingo-Beit bridge highway got most of her clients from commuters and villagers. She said:

I had a nasty experience with one woman in the village, she thought I had cheated her because her husband had send her some US dollars through EcoCash but she wanted to buy grocery in Musina South Africa so I converted her dollars into rands. When she got to the border she was told a different exchange rate but you know these rates differ from place to place. So when she came back she confronted me and demanded more money - we ended up at the police station. From that day I just accept dollars only and I don’t convert unless it’s a person I know and we have agreed.

In Harare, the few people who accepted the rand and the Botswana Pula had to take calculative risks. First thing every morning, they gathered information on the current value of the rand from their social networks, which determined whether they would accept the rand on that particular day. We also observed that the prevailing cash shortages in the country almost paralyzed cash-out mobile money transactions as agents struggled to provide clients with cash. Driven by the crippling cash crisis, mobile money operators and foreign currency dealers also traded the dollar against itself. One dollar in cash from black market dealers and mobile money agents could be charged a premium and cost $1.07. Moreover, getting cash from a mobile operator was now being regarded as a favor and ‘appreciative’ clients would give small amounts of money (one or two dollars) to the agent for giving them cash. It became the norm for agents to ‘reserve’ cash for these clients. Some clients would even leave their phones and access pin codes with agents so that once cash was available, the agent could cash out on their behalf. This was in part fueled by banks imposing a maximum withdrawal of $500 per week due to the biting liquidity crunch. Other financial practices such as MMM Global have emerged where participants invest and donat money, particularly through EcoCash, and earned 30% interest, that some have framed as Ponzi schemes.

The Zimbabwean monetary ecosystem continues to transform on a daily basis. The government intends to introduce a surrogate local currency called ‘Bond Notes’ allegedly equivalent to the US dollar. This will undoubtedly influence and add new dimensions to mobile money adoption and currency conversions and in effect provide fertile ground for future investigation and research.

Read more in Mahiya and Gukurume's Final Report

Unemployed Ugandan Youth Gravitate to Sports Betting

By IMTFI Researchers Bruno Yawe and Kizito Ssengooba

Billboard of a betting shop in Kampala (Photo by authors)   

Sports betting can be described as the activity of predicting sports results and placing a wager on the outcome which may result into a loss or a win. About 62% of Uganda’s youth are not in any form of employment and the majority of them live in urban centers (ActionAid International Uganda, Development Research and Training and Uganda National NGO Forum, 2012).The growth of the internet and mobile devices with quick access to odds has made betting much more accessible.

In particular, sports betting has spread among Ugandan youth like wildfire. Several sports betting companies have recently set up shop in urban and semi-urban areas around the country. Unemployed young people gather at these betting parlors to gamble on things like televised soccer matches. On the weekends, hundreds of sports betting outlets are filled with young gamblers, most of them without any regular income. At the betting parlors in Kampala and its neighborhoods, young men watch soccer matches on flat-screen TVs. Every day, betting companies put a lineup of games for the public to bet on. For every game, there is a team of analysts who analyze the strength and prospects of each team. The stronger the team is, the higher the likelihood of a win but the lower the odds and return. The average bet size is about US$ 0.5. With this information, a prospective wager will place bets and wait for the results. Many unemployed youth are being lured into predicting sports results and placing bets by popular FM radio stations. Youth in the Wakiso and Kampala districts have embraced sports betting for survival because they have no jobs and see this as an opportunity to make some quick money. Majority of the youth interviewed said “I would rather try my luck with betting UGX 1,000 (US$ 0.5) and hope to win and meet my pressing needs than living without any hope at all.” Some say it is a good source of income, but others are not so sure.

Youth viewing match fixtures (Photo by authors)   

Lucrative, Legal Lure
The business of sports betting is give and take. For example, if everybody should bet on Barcelona today and Barcelona loses, betting shops benefit. Conversely, if everybody should bet on Barcelona today and Barcelona wins, betting shops lose while the customers benefit. Betting shops hire young people to work at their branches around the country, thereby creating hundreds of jobs. Although these sports betting operations are legal in Uganda they are not adequately regulated by the government. Before January 2014, there were no clear laws or guidelines to govern gambling in the country. Because of this lack of laws, some companies refused to pay up when somebody won a bet.

Deep Concerns
With the increasing presence of betting shops, some officials charged with youth welfare are very excited and are in agreement with their operation in the country. They argue that they will help to promote the government’s poverty reduction strategy by providing some employment opportunities to the youth. They claim that as more sports betting shops are licensed, more employment opportunities are created in the country. But not everyone agrees that this is a positive thing. Gambling is bad for Ugandan society. This is because the majority of youth are no longer going to school nor seeking gainful employment. They spend the entire day at the betting parlors. Some say the expansion of legal sports betting is fueling vices like the use of tuition fees for betting (among in-school youth); theft and cheating; more illegal street gambling; and sapping young people's motivation for finding jobs.

But back at the betting parlors unemployed youth say that they do not have much choice. They argue that there is no adequate social protection to shield them from the adverse effects of joblessness. They are not betting because they want to bet. Rather they are betting because they want to make a living. Gambling in general and sports betting in particular is growing rapidly, and Ugandan society is sitting on top of a gambling problem time-bomb. Gambling and betting represent new drivers of chronic poverty among Uganda’s youth. Many youth are abandoning participation in productive activities in favor of gambling, especially sports betting. This has emerged as both a rural and urban phenomenon and has increased idleness, diverting would-be productive resources in the hope of winning bets.  There is need for proper regulation of the gambling industry and more sensitization on the dangers of this practice. To address the adverse effects of gambling, Gamble Aware Uganda provides support, information, and advice to anyone suffering from gambling problems. The high unemployment rate among Uganda’s youth poses a serious threat to the country’s well-being.  The unemployed youth are likely to become a source of instability if the government does not plan for them early enough. There is need for urgent intervention to plan for the idle youth population who are likely to become a problem to the country’s security.

Read more in Bruno Yawe and Kizito Ssengooba's Final Report. 

Click here to listen to a radio program on sports betting on Uganda Radio Network in which Bruno Yawe was a participant. The program took place on 10th January 2014 at Makerere University. 

What's Behind Door Number One? Experimentation and Innovation: Tools and Solutions for Specialized Populations

The final panel of the day modeled how the educational mission of IMFTI might take many forms: academic lecture, episodic entertainment oriented around humor, or impassioned call to action from the perspective of non-governmental advocacy.  Despite some technical difficulties, the final trio of papers of the day was ably moderated by IMTFI stalwart Scott Mainwaring, an HCI researcher now based in Portland who has had a leading role in a number of UCI think tanks.

"Risk Preferences, Time Preferences, and Willingness-to-Pay with Mobile Money versus Cash in Bangladesh" was presented by Jonathan Morduch of NYU, but he gave credit to his NYU colleague  Jean Lee and to two other co-authors.  As one of the authors who created Portfolios of the Poor, Morduch has maintained a high scholarly profile on issues of financial inclusion.  In his talk at IMTFI he emphasized "new ways of thinking through new ways that people spend money," including new approaches to risk preferences, time preferences, and models for willingness to pay.  Although his study focused on the highly successful electronic currency efforts of bKash, he wanted to account for “monetary ecologies” that might be more complex.  He also aimed to go beyond existing US research on attitudes about cards vs. cash to understand how mobile phone currency might be different from traditional currency for citizens of a developing nation.

He prefaced his talk with some historical background about bKash, which was founded in 2011 by BRAC Bank and has counted IFC (International Finance Corporation) and the Gates Foundation among its investors.  It has garnered some impressive statistics, including about 14 million subscribers and 105,000 agent points that allow the company to offer both money transfer and mobile wallet services.  Sold and advertised as a payment platform – with advertisements featuring students, garment workers, and other economic actors -- Morduch argues that bKash functions in monetary ecologies of behaviors, resources, services, and products.

Morduch's team poses a significant question drawn from the IMTFI's own calls for proposals: "Does the digitization of money dematerialize the symbolism and physicality of money, and does it have consequences for decision-making involving spending and saving?  In other words, for those in Bangladesh, does 1 Tk in cash equal 1 Tk in mobile money?

Morduch notes that The Social Meaning of Money by Viviana A. Zelizer makes the argument that money depends on who earns it and how it is earned, so that different kinds of money are spent differently.  For example, money on mobile a phone sent from daughter working in a garment factory may be differentiated from money in cash derived from farm work by those remaining in rural life.  He pointed to other work in the US about credit cards vs. cash and observed that the use of this research in mobile money studies may obscure an important functional difference, in that such cards decouple the moment of spending from the moment of payment and thus involve notions of liquidity and the nature of credit.  Such currency functions as "play money," as Priya Raghubir and Joydeep Srivastava assert in their influential article "Monopoly Money: The Effect of Payment Coupling and Form on Spending Behavior," which examines how much experimental subjects were willing to pay for nine items on a menu without prices.  By adding a credit card logo to the menu, researchers noted behavior changes, just as a study of how $50 of gift scrip vs. the same amount of cash for use at a grocery outlet might influence how potential customers might choose items in favor of expensive soups over cheaper soups or expensive pens over less expensive ones in a phenomena that could be characterized as "spending more when not spending."

Researchers focused on the Gaibandha District in the Rangpur Division in Bangladesh near the Indian border.  The country has a low rate of food consumption, which is worsened by a famine season or "monga" condition.  Working with the NGO Gana Unnayan Kendra (GUK), which helps women to become garment workers and places them in jobs in the capital Dhaka, researchers also had to account for seasonal variability in incomes.  Morduch's team was interested in possible unexpected effects of remittances, if mobile money was considered dematerialized and not weighed with same consideration as cash money.  Using Raghubir and Srivastava's research with the monopoly money paradigm, researchers wanted to look at how a different context and time might shape risk preferences.  The sample studies was derived from families sending migrants to Dhaka, and the methodology was intended to account for the impacts of gender, class, occupation, and age.  By looking at risk preferences in work pioneered decades ago about sets of gambles that might be considered analogous to bets placed on head flipping, researchers can look at how subjects might choose a safer lower yield bet (such as 33/33) in comparison to a more risky tempting one (such as 0/95).  At this point they have completed stages for recruitment and consent, baseline surveys, time preferences, and willingness to pay.

"Mobile Money Financial Literacy via Television Comedy" by Andrew Crawford of Monash University looked at mobile money in Cambodia in the context of financial education campaigns rather than just at the uptake of a particular service, in this case Wing.  Crawford opened by reminding the audience that the financial system had been destroyed by the Khmer Rouge, that US dollars had been used for a period of time afterwards.  Although there were micro finance competitors, Wing -- like M-PESA -- "flows through the economy," and digital currency circulates with loan payments, money transfers, payroll, multi-currency conversion, e-commerce, ATM cards, and deposits.  Nonetheless, financial policy makers were well aware of the problems with mobile money observed by researchers, including the fact that it was expensive to conduct financial education, curricula were slow to rollout, and language and lack of interest issues could stymie retaining and applying information.  (At this point he noted that boredom from conventional presentations like own PowerPoint presentation could cause little to be remembered from his talk.)

Crawford argued that TV comedy could provide a viable alternative to conventional public information campaigns, given that 98% of people in the country watch television and that penetration is particularly high, because many people also watch shows on buses, where corporate synergies between broadcasters, such as  CTN and CNC, and bus companies present opportunities for the Cambodia Microfinance Association and ADA Luxembourg.  Crawford showed several episodes with a couple who progress from very small businesses in barbering and food service to larger enterprises that require more capital and financial planning.  As the relationship matures, along with their banking and credit skills, his hair gradually becomes tamed and his affect becomes less outrageous.

Crawford's research team wanted to find out if there was any impact in both short-term and the long-term financial literacy from watching the show.  Furthermore, can any impact measured in focus groups be extrapolated across wider populations?  The group focused on garment factory workers, because of a desire to focus on women, who represented about 400,000 workers, providing labor for major brands, who were paid in cash with no method to save and thus often remit to family.  In the past the transfer of money was effected via motorbikes with locked boxes, which was inefficient.  Subjects were usually young (in Crawford's opinion often too young to be working full time) and watchers of TV.  The methodology involved three groups: 1) Treatment 1, which experienced generic financial education with a five-minute slide presentation video, 2) Treatment 2, which experienced financial education entertainment with a five-minute comedy show, and 3) Control Group, which experienced a generic comedy show and received no financial literacy education.  Crawford explained that he wanted to combine quantitative research from surveys with qualitative research that involved 1-on-1 interviews with researchers and focus groups after each screening.  Follow up sessions conducted after 3 months to test long term effectiveness Phone surveys – CEO of Wing owns TV station, wife is host of Cambodia’s Next Top Model Country-wide changes – New mobile money accounts, demographics of new clients, general mobile savings trends Novelty Background, Effectiveness, Share results – final research paper

"The Formal Disguise: Financial Inclusion Among Flexible Workers and the Self-Employed" by Ana Echeverry and Coppelia Herrán of Inspira Lab focused on Colombia and the tough competition faced by workers often forced to pay-to-work in positions lacking any social safety net for health and education targeting an unskilled or low skilled labor force, in fields that include outsourced textile production and manufacturing, food and restaurant services, retail and sales, car maintenance and services, and fitness and beauty, where workers often must pay a fee for using the commercial space and bring their own equipment and supplies.  Such workers must often even pay  fees for keeping the place of employment clean, and half of their wages may go to the owner of the commercial space.  Unlike the "temptation costs" described in the previous panel, on this panel Echeverry and  Herrán depict highly disciplined workers willing to invest in the site of employment.  Nonetheless these workers may be extremely disenfranchised.

This team before had worked with "bottom of the pyramid" workers outside of the formal system, but those adopting what  Echeverry and Herrán call "the formal disguise" in many ways are just as desperate as those they had studied before who were using technology through gaming networks and "betting on chance."  Among these barely legal formal workers 43.3% were self-employed, 46.4% earned below the minimum wage, and 50% lacked social security coverage.  The team focused on 24 informants and took a direct approach in public spaces and via referrals with video ethnography and semi-structured interviews trying to the understand the scope of problem.  By interrogating "different views and perspectives," they characterized their work as "exploratory research" about contrasting behaviors and identifying underlying factors driving behaviors, such as values, attitudes, and perceptions.

The group focused on identifying those with contrasting behaviors with a 360 degree view of human personalities that included the careful planner, the risk taker, the person ending a career, the formally trained worker, the submissive economic actor, the spontaneous personality, the risk averse, the independent, the apprentice, the tech-enthusiast, and the technology averse.  By identifying common patterns among diverse people, researchers hoped to identify common strategies and attitudes reflected across personality types.  Informants talked about work, money, and risk with researchers and described an environment of "in and out mobility" instead of "upward mobility."  Such workers depended on using word of mouth and referrals for finding jobs, reliance on social networking, trust, honesty, and willingness to work.  Such workers constantly battled the fact that temporary employment makes it difficult to establish relationships.

This population of vulnerable workers seemed to be avoiding account deductions.  They were not using mobile money, because they realized that the bank takes money, and they also wanted to continue staying below the "fiscal radar" to reduce costs.  Researchers observed a pattern of withdrawing all money on payday and a complicated mental logic in regards to risk.  Their subjects were willing to make certain kinds of investments, even if they did not map onto the conventional architecture of financial inclusion.  These workers might expend pocket money to get better healthcare or divert savings into building home additions for future rental as a retirement strategy.  They might funnel saving towards equipment with hopes of enhanced employment opportunity, but more living those savings went toward financing the inevitable with planning for their own mortality.  In other words, many had little hesitation about shouldering the costs of funeral insurance – in light of their knowledge that this is an event that they know will happen.  Unlike the relatively transparent investment schemes in funeral insurance,  Echeverry bemoaned the fact that 90% of the people subsidized 10% of those who used government services, which fostered a further lack of trust in the system.  Instead workers assumed all risks and operational costs as a consequence of flexible and emerging contracts.  Often workers had to splurge on costly training courses as well.  Echeverry opened by likening many of the country's educational investments to DeVry-style extraction.

Echeverry noted that children become a priority when people are so exhausted and desperate.  The parents researchers studied were willing to do anything for their offspring.  They also were extremely dependent on communication networks, especially those that involve access to word-of-mouth information.  Researchers marveled at the fact that most people in the population they studied had smart phones, which were a "tool for the job."  In fact,"many of them had phones better than ours."  To stay competitive and reduce costs, many opted out of mandatory requirements.  The Inspira team described them as "quite organized," and asserted that "most of them do financial planning."  For such labor-intensive poverty vulnerability the "concern isn’t healthcare but not being able to work."  Thus most can barely afford mandatory insurance services, which would come to about 15% of their income.  Rather than rely on a risky calculus around public health and modern medicine, they were more likely to focus on "protecting oneself from risks" in other ways, including by relying on "religious elements," such as obeisance to the patron of jobs and workers.  Echeverry said that she observed similar behavior in her own nephew around the game Magic the Gathering, which is likewise about rules for "special powers.  These workers in casual labor markets feel compelled to "insure yourself with saints."

Because of government turnover and policy reinvention, researchers have had to delay the implementation phase of research.  Their current action items for lawmakers emphasize an agenda for worker-centered change, which includes the following elements: 1) Offer incentives to compensate for social protection benefits, 2) Provide social dialogue tools that bring together dispersed workers and employers, 3) Offer tools and services that ensure a better future or  living conditions for children, 4) Leverage referrals and social networks into employment services, 5) Make loans or credit eligibility visible to the user, 6) Recommend related products or services into the experience of payroll accounts, such as insurance or investments, 7) Promote add-on complements to mandatory insurance at a minimum, 8) Structural social security reform to include lowering costs through customization, and 9) Promote alternative investments.

To emphasize pragmatic approaches and direct attention to new opportunities for the business sector, the Inspira research team also catalogued a number of "innovation opportunities" that follow from worker-centered principles.  First, researchers discouraged companies from thinking about desktop computing as a platform for Internet and emphasized analogies to social network sites and mobile applications.  For such workers digital recommendations serve a number of purposes, and mobile technologies can also congregate dispersed, independent, and flexible workers to facilitate exchange of services and spread opportunities.  This approach would help workers make informed decisions, and stay up-to-date on legal, insurance and financial topics.  Second, in thinking about money matters, researchers urged financial service providers to offer savings incentives toward specific goals.  For example, in explaining eligibility for loans, allow prospective borrowers to visualize pre approved loans.  Third, companies could develop micro-insurance to provide alternative products that personalize one-sized-fits-all mandatory insurance or respond to specific needs that might be constantly present in workers' imaginations, such as eldercare or high school as expenditures.  Fourth, innovations could emphasize closing the loopholes created by flexible labor laws designed to help Colombians to become competitive in the global market.  Mobile technologies can help workers meet in a place for business relationships, social dialogue, and financial and risk management services.

Listening to Echeverry, I was reminded of the work of Lilly Irani about the flexible workforce that provides so-called "Mechanical Turk" services too difficult for automated computerized AI to be tasked to do.  Irani has had technology workers rate employers to turn the table on systems that before could only rate workers.