Viewing all posts with tag: Mobile Money  

IMTFI Conference Highlights Latest in Mobile Money Research

One of the issues we follow closely at FAI is the rapidly expanding use of mobile money in the developing world.  As Jean Lee recently noted, a growing body of research on mobile money has a lot to say about its potential to smooth risks and facilitate transfer programs. . . .

In the interest of keeping a finger on the pulse of the latest results from the field, FAI's Managing Director Timothy Ogden and Deputy Managing Director Laura Freschi recently attended IMTFI's Fifth Annual Conference for Funded Researchers . . .  . . .

Read More

Regulatory Regimes Matter for Mobile Money Usage

At a recent Microfinance Club of New York event with Michael Joseph, the former CEO of Safaricom in Kenya and now the Director of Mobile Money for Vodafone, Joseph cited regulatory barriers as the principal reason that mobile money has not taken off in India, the largest market in the world and his current project. A new paper from Eva Gutierrez and Sandeep Singh at the World Bank confirms his intuition, finding evidence for the importance of regulation for mobile money usage by combining the World Bank’s Global Findex database with cross-country variation in regulatory regimes. . . .

The authors argue that both regulatory certainty — stability in regulation — and regulatory openness — policies that favor the introduction of new technologies — are necessary for mobile money adoption. They construct an index of regulatory favorability towards mobile money and look at the relationship between their index and actual end user behavior using the Global Findex to track outcomes for 35 countries, finding that overall, regulation is a significant factor in explaining mobile money usage among both the banked and unbanked . . .  . . .

Read More

A Roundup of Recent and Ongoing Mobile Money Research in Economics

A growing body of research on mobile money has a lot to say about its potential to smooth risks and facilitate transfer programs, but a definitive experimental study on what it means for the financial lives of the poor remains undone – a gap we would like to fill with our future work at the Financial Access Initiative. . . .

In recent years, mobile technologies have rapidly expanded in the developing world, bringing information and other transformative services with them to the previously isolated and the poor (Aker and Mbiti, 2010; Aker, 2010; Jensen, 2007).  Rapidly adopted in most developing country contexts, mobile technologies have the potential to serve as a broad-distribution platform for other services and products.  For example, a growing literature looks at the potential for mobile technologies to serve as a vehicle for the delivery of information and reminders in a variety of contexts, including for loan repayment and health . . .  . . .

Read More

Payments from Domestic Migrants Dwarf International Remittances

Despite a lot of excitement about global payments, we are just beginning to learn the most basic facts about them– how much money is sent by whom, to whom, where, and how.  International remittances flows could reach $515 billion by the year 2015 and are slowly starting to receive the attention they deserve from policymakers.  Now, a new set of Gates reports on payments in Africa and Asia shows that domestic remittances may far surpass international remittances in frequency and magnitude . . .  . . .

Read More

Fighting Poverty, Profitably: A New Report on Payment Systems

A recent report of the Gates Foundation, from their program on Financial Services for the Poor, highlights payment systems as a way of “Fighting Poverty, Profitably” – as the report says in its title.  Payment systems, according to the report, “could serve as the connective tissue for bringing a broader array of financial services to the poor”. . . .

The report brings together the existing data on payment systems to analyze how potential payments service providers could profitably extend their services to underserved populations in developing countries.  They identify four cost and revenue centers – accounts, cash-in-cash-out, transfers, and what they term “adjacencies” – in their framework, and argue for revenue models built on three of the four (cash-in-cash-out, transfers, and adjacencies) to best give companies an incentive to serve the poor. . . .

In countries that have already embraced mobile payment systems, such as Kenya, some of the most exciting action is occurring in adjacencies . . .  . . .

Read More

A New Agenda on Remittances, Payments, and Development: 12 Better Research Questions

Migrants send a lot of money to developing countries—several times more than foreign aid. Researchers and policymakers have seized on these very large flows and built an agenda to understand how these remittances can foster development. Indeed, you most often hear remittance flows compared to aid flows. . . .

Something fundamental is wrong with this agenda however. Researchers tend to study remittances as if they were windfall income, like aid or oil revenue, that arrives like manna from heaven. This leads researchers toward the kind of questions you might ask about windfall income: Are remittances spent on ‘good’ things like investment and education? Do families and countries become ‘dependent’ on remittances? . . .

Read More

Why Aren't Users Paying with Mobile Money?

On the Center for Financial Inclusion blog, Ignacio Mas and Beth Rhyne are discussing a central question in the evolution of electronic payments in developing countries: why aren't people using it to pay? Even in countries like Kenya with very high rates of adoption of a electronic payment platform, the vast majority of money that goes into the system come back out into physical cash in 24 to 48 hours. Ignacio makes a case that electronic payments systems need to be more integrated into other financial behaviors, like savings and credit, before they will be used for routine payments. The reason is fairly simple: unless you are storing value in the electronic system (as with a savings account) using the electronic system for a payment involves at least one extra step to turn cash into electronic form. . . .

Beth responds that if people are receiving their income in electronic form in the first place, like benefits payments or paychecks, and the merchants they frequent take payment in electronic form then there is good reason for users to keep their money in the electronic system. Using Ignacio's same logic, cashing out involves an extra step if the inflow is electronic and the outflow can be electronic. Beth's argument is one of the reasons organizations like the Better than Cash Alliance are focused on encouraging governments to use electronic payments to pay salaries or benefits to households . . .  . . .

Read More

New Research from the American Economic Review

The American Economic Association (AEA) recently released the Papers and Proceedings issue of its journal American Economic Review, which presents selected papers from the AEA's annual meeting. The AER is one of the premier economics journals and has very broad coverage. For instance, you can learn everything you never knew you wanted to know about income and church attendance in nineteenth century Prussia. Happily, this volume also includes a number of papers relating to mobile money, credit, savings, and insurance. . . .

Mobile Money . . .

In their study, William Jack, Adam Ray, and Tavneet Suri investigate how households using M-PESA interact with and exploit their informal networks when making transactions. The authors find M-PESA users have more remittance activity, make transfers over distances greater than 100 km, and have more reciprocal transactions than non-users. . . .

While Jack et al. looked at volume of transactions, David Weil and Isaac Mbiti used aggregate data in their research on the velocity of mobile money. One of the more intriguing findings is that withdrawals are made frequently and in small amounts, even though users can reduce fees if they group withdrawals. As the use of mobile money grows in other countries (M-PESA recently launched in India, for instance) it will be interesting to see how similar these (and previous) findings are in different cultural contexts. . . .

Gender and Finance . . .

Using data from over 30,000 firms in 90 developing countries, Elizabeth Asiedu, Isaac Kalonda-Kanyama, Leonce Ndikumana, and Akwasi Nti-Adde analyze whether gender is a determinant in financing constraints and access to credit for firms. They find that indeed, female-owned firms are more likely to be financially constrained than male-owned counterparts but only in the sub-Saharan African region. There is no gender gap in other regions but small firms are more likely to be financially constrained than larger firms, and foreign-owned firms are less likely to be constrained than domestically owned firms. . . .

Moving from the macro to the micro level, Carolina Castilla and Thomas Walker investigate gendered dynamics of intra-household financial decisions in their paper. In a field experiment in Southern Ghana, researchers conducted public and private lotteries with cash and in-kind prizes to observe the effects of these windfalls on household allocations. They found “husbands' public windfalls increase investment in assets and social capital, while there is no such effect when wives win. Private windfalls of both spouses are committed to cash (wives) or in-kind gifts (husband) which are either difficult to monitor or to reverse if discovered by the other spouse.” . . .

Risk . . .

We return to Kenya with Michael Kremer, Jean Lee, Jonathan Robinson, and Olga Rostapshova in their study on behavioral biases and firm behavior. Among a sample of Kenyan shopkeepers, those with lower math skills were less accepting of small-scale risk and were also less likely to have larger inventories than those with higher scores. There are some interesting observations in the paper on the connection between loss aversion and microfinance, suggesting that small business owners are less likely to access microcredit if risk averse and social safety nets could possibly help increase investment in these enterprises. . . .

Similarly, Ahmed Mushfiq Mobarak and Mark R. Rosenzweig look at risk in the context of the Indian insurance market, specifically rainfall insurance. Their findings show that when insured farmers took greater risks, wage levels increased but so did the volatility of labor demand, creating a threat to landless workers. When offered the choice, landless workers also purchased insurance when contracts were offered to farmers. . . .

Savings

Lastly, Suresh de Mel, Craig McIntosh, and Christopher Woodruff report the findings of their field experiment in rural Sri Lanka that tested the efficacy of various methods of collecting deposits in formal bank accounts. Although their research shows frequent, face-to-face collection increases aggregate household savings, collections using community lock boxes affected the number of transactions but not the overall level of savings. . . .

Payments, Cash and Geographic & Economic Mobility

Right now there is a lot of talk about allowing more geographic mobility to enable more economic mobility--in other words, easing immigration restrictions. There is powerful evidence that enabling more migration (internal and external) would be a powerful tool to fight global poverty. . . .

But there is a different kind of geographic and economic mobility that is worth thinking about--the geographic and economic immobility of cash.  . . .

A just-for-fun project to track the movement of specific dollar bills as they move from place to place and person to person has yielded very interesting data on this issue in the United States. Back in 1998 the Where's George project started encouraging people to log the geographic (by zip code) location of their cash before spending it . . .  . . .

Read More

Beyond Business: Rethinking Microfinance

In just 30 years, the microfinance movement has reached 200 million people who had been deemed "unbankable." That's a stunning success. But the narrative that drove this success has implicitly shut the vast majority of the unbanked out of the system. That's why it's time to change the story, and our minds, on how microfinance works, argue FAI's Jonathan Morduch and Timothy Ogden in Foreign Policy. They suggest that the fundamental need of poor households is tools to smooth out volatile and uncertain cash flows, not credit for business investment . . .  . . .

Read More

Gender and Mobile Money

The mobile money revolution has been greeted with great excitement in some circles for the potential it holds to increase financial access for the world’s poorest. Women may especially benefit from expanding financial inclusion through mobile financial services (MFS). Women not only handle a lot of cash to provide for household needs in many societies, but they may be explicitly or implicitly discouraged from using bank branches.  A new report (sponsored by Visa and the GSMA mWomenProgramme) by FAI affiliate Daryl Collins explores just this theme. In “Unlocking the Potential: Women and Mobile Financial Services in Emerging Markets,”  Collins and her coauthors explore the untapped potential of woman as a strategic consumer base for MFS providers. . . .

A summary of the report’s conclusions . . .  . . .

Read More

New Paper Highlight - More Benefits of Mobile Money: Lowering the Cost of Remittances

One way to cope with an emergency is to borrow money from family and friends. But that typically doesn’t work when a disaster strikes a whole area. Sending and receiving money over larger distances, when transferring cash from person-to-person is impractical or impossible, can be very expensive. There are a litany of costs, from communications, to finding and traveling to agents, to the actual financial cost of the transfer. And don’t forget the cost of delay—in an emergency, delays in receiving needed funds can have big consequences. . . .

One way mobile payments could have substantial short-term benefits for poor households is by speeding up and lowering the cost of emergency transfers and remittances. A new paper by William Jack and Tavneet Suri provides evidence that mobile payments are doing just that . . .  . . .

Read More

What's Next: Five Factors – Beyond Mobile Money – that will make Financially-Inclusive G2P a Reality

What’s next? Jamie Zimmerman says it's the opportunity to make government-to-person payments a major vehicle of financial inclusion. . . .

Mobile money and electronic payments have leaped to the fore of many financial access conversations.  Take the launch of the Better Than Cash Alliance (BTCA) and the recently released latest Bill & Melinda Gates Foundation (BMGF) strategy as prime examples. Some (Tim Ogden of FAI, Jesse Fripp of SBI and I for instance), have suggested tingeing the optimism over payments with  caution, citing several hurdles that we must still overcome, and questions we must answer, before payments can become a financial access success story . . .  . . .

Read More

What's Next: Financial Access in 2013

The microfinance space has never been a dull place. As the tumult of the last few years—debates about effectiveness, industry crises and crashes in several countries—seemingly dies down, it’s a good time to speculate about what’s next. It seems clear that “business as usual” in terms of rapid growth and expansion paired with unvarnished enthusiasm and uncritical praise is not what’s next. . . .

So what is? . . .

Over the next few weeks we’ll be running a series of blog posts from folks at FAI and around the financial access world offering their takes on what’s next. Some are calls to action, others are predictions, and others pose the important questions we need to answer now. If you’d like to contribute, send us a tweet @financialaccess. . . .

Herewith are my thoughts on “What’s Next?” . . .  . . .

Read More

Who Pays for Transactions? How Much?

One of the many important questions in the transition to mobile and/or electronic money is who will bear the costs associated with using the system. This question is particularly salient since the Kenyan government announced it was planning to begin taxing mobile money transfers, adding to the cost of the system. The Kenyan government seems to believe that operators will absorb the cost of the tax, but others suggest that it will be passed on to consumers, "picking the pocket of the poor." . . .

Who will bear the cost of the tax and the other costs of operating mobile money systems? On a theoretical basis, this is an easy question to answer: the people who benefit will bear the costs—if those costs are lower than the benefits. In economic theory, it is even irrelevant who is initially charged for the costs, as costs will be passed on to those willing to pay to receive the benefits (known as tax incidence). . . .

Practically, it’s a hard question to answer because we have very little information on the true costs and benefits of any money system . . .  . . .

Read More

The Promise of Electronic Payments

A few weeks ago I wrote that a transition to electronic payments will not be a boon to poor households unless the financial systems that undergird payments become more focused on serving poor households. It’s vitally important to think of the value and benefits of electronic payments within a system. . . .

A couple of recent news stories highlight what a financial system enabled by electronic payments can do, even without the active cooperation of traditional banks. . . .

In the last two months, both Amazon and Google have launched programs to extend credit to small business customers. Amazon is making loans available to people who sell through the company’s website to finance larger inventories heading in to the Christmas shopping season. . . .  . . .

Read More

What It Takes To Make Electronic Payments Better Than Cash

I attended the Better than Cash Alliance launch this week at the Ford Foundation. The alliance’s goal is to accelerate the transition from cash to electronic payments in developing countries. For a good overview of the process, benefits and challenges of the transition, see this white paper from Bankable Frontier Associates (which is one of our partners in the US Financial Diaries project). For an in-depth discussion of the alliance, see David Roodman’s post. . . .

At the launch, and in general when people talk about moving to electronic payments from cash, some of the key benefits cited are transparency and transaction records. But on my way back to the office from the event I had an unpleasant experience that reminded me that while these benefits are possible with electronic payments, they are by no means guaranteed . . .  . . .

Read More

A Tether to Harness the Power of Remittances

Remittances represent an important source of income for millions of households around the world. The size of remittance flows, as compared to a country’s own domestic output, can reach numbers as high as 30% (that’s in Tajikistan, if you’re wondering.)  This has led economists and policymakers alike to ask whether remittances can be relied upon to spur development. One way this might occur is if remittances are more likely to be spent on productive investments, increasing the domestic income-earning potential of households . . .  . . .

Read More

Jake Kendall: The Year in Microfinance

What has been the biggest event in the financial inclusion space over the last year?  . . .

The shift in the field’s thinking to recognize the poor’s deep need for payments capabilities on par with other financial needs. . . .

A year or two ago, had you polled the financial inclusion field and asked whether they thought that a person to person money transfer service (like M-PESA) would have a significant welfare benefit for poor households, on par with credit, savings or insurance, the majority would have said “no.” Most would have said that a mobile money type service is important for the potential to enable the other financial services, and may be somewhat useful to the extent it lowers the cost of moving money around, but would have said it’s not likely to be all that effective in improving household welfare in meaningful ways . . .  . . .

Read More

The last mile and the last yard: What’s needed to get mobile money over the threshold

A lot of today’s research is focusing on tweaks to financial contracts and marketing with the aim to improve take-up and impact. The grail is big gains generated by small changes. . . .

But big impacts often require much more than tweaks. That’s especially true for mobile money, in which scale and interconnectedness really matter. . . .

Mobile money systems seek to create an ecosystem within which money is passed around and stored in electronic form. It’s hard to get such an ecosystem going, but M-PESA in Kenya shows us how once  it gets big enough it can become a powerful snowball. Critical mass thresholds are associated with two types of transactions that are particularly problematic . . .  . . .

Read More