Part of our mission at FAI is to frame policy and regulatory issues by synthesizing evidence from existing research and generating new evidence where it's lacking.
Join FAI’s Tim Ogden in conversation with Jesse McWaters, the Global Head of Regulatory Advocacy at Mastercard, to explore some basic frameworks for understanding the differences between the rapidly growing types of digital currencies. Through this session you’ll gain a better grasp of new and evolving digital means of exchange, how they interact, and what that means for pro-poor financial inclusion. . . .
Read MoreFrom the start of the outbreak, digital finance providers were seen as a solution to some of the effects of COVID-19. Mobile money providers potentially offer a safer alternative to cash and some governments immediately turned to digital solutions to distribute much needed cash relief. That digital providers offered creative solutions under pressure is laudable, but perhaps not surprising, as most digital services are born from an opportunity to improve a dysfunctional system. . . .
Read MoreBy Tim Ogden and Greta Bull
This blog post was originally published on CGAP.org. . . .
COVID-19 has unequivocally arrived in the developing world. Hundreds of cases have been reported across Latin America and South Asia, and now there are at least 30 countries in Sub-Saharan Africa reporting infections. South Africa and India both announced yesterday that they would go into lockdown for three weeks, and others may soon follow. With health-care systems ill-equipped to cope with a pandemic, there are many reasons to believe that the effects of the virus in these countries will be even more damaging than in the developed world, with higher mortality rates. . . .
Read MoreIn the past, we've talked about peer effects and low adoption rates of mobile money banking accounts in Bangladesh. Our research exploring these issues (as well benefits for migrant workers) is in full swing! It is a randomized evaluation, which means that half of the sample is randomly assigned to a control group, while half of the sample is randomly assigned to the treatment group, which receives training and assistance with signing up for mobile money accounts.
In this video, co-investigator Dr. Abu Shonchoy audits the training by re-interviewing a woman who was part of the treatment group to make sure that the training was thorough and made the service understandable to the participant . . . . . .
This week, The Wall Street Journal featured a pair of articles on current issues in microfinance. The first highlights the varied strategies governments across Asia are employing to promote financial inclusion, including mobile technologies and India's policy of universal bank accounts. However, some are concerned about the $80 overdraft feature of these accounts, and liken the potential risk of indebtedness to the past failures of microfinance. FAI's Executive Director Jonathan Morduch notes that indeed, microfinance's impact on poverty alleviation to date has been "disappointing" . . . . . .
Read MoreThis post written by Shamsin Ahmed and Kazi Amit Imran . . .
Bill and Melinda Gates’ 2015 annual letter bets that over the next 15 years mobile banking will have a transformational effect on the lives of the poor. In Bangladesh, about 70% of the population is unbanked, yet an equivalent percentage of the population—not necessarily the same people though—has access to mobile phones. Put two and two together and mobile money is a no-brainer from our perspective. . . .
Since the launch of the first mobile money product in 2011, mobile banking has been made possible in part by the efforts of the government’s mandate to create a ‘Digital Bangladesh’, and the subsequent policy support from the Central Bank to promote the growth of the mobile finance industry . . . . . .
Read MoreToday, the GSMA Mobile Money for the Unbanked (MMU) programme releases its 2014 State of the Industry Report on mobile financial services. Published annually, the report provides industry practitioners with insights into the important developments taking place in mobile money, mobile insurance, mobile savings and mobile credit. . . .
The mobile financial services sector continued to expand in 2014, boosted by the creation of more enabling regulatory frameworks in several markets. With 255 mobile money services in operation across 89 countries, mobile money services are now available in over 60% of developing markets. Today, mobile financial services are firmly established in the financial sectors of the majority of the developing world, serving new business areas and enabling a wider range of digital payments . . . . . .
Read MoreThe past few weeks have seen plenty of ruminations about Uber’s potential invasions of privacy and the amount of data Google collects from its users. The concern is that these companies could use this data for nefarious purposes (although your definition of nefarious may vary). An Uber executive, for instance, suggested that the company could “dig up dirt” on journalists who wrote negative stories and hinted that they’ve already tracked the movements of at least a few reporters to date. . . .
Felix Salmon writes that this is only the beginning of a wave of privacy scandals. What I found most remarkable in the various columns, threads, and postings is that I didn’t see a single mention of credit card companies or other financial institutions . . . . . .
Read MoreI write this from Dhaka, where I am visiting for the second time to help get our mobile banking impact evaluation in motion. I am not here alone, however, and I wanted to devote this post to introducing the truly outstanding Bangladeshi economists, research staff and organizations who are our partners in this research study. . . .
First, we are uniquely privileged to be working with Dr. Hassan Zaman as a co-principal investigator on this study. Dr. Zaman is the chief economist of Bangladesh’s central bank, although he will soon be returning to Washington, DC to take a director-level advisory position on South Asia at the World Bank. He spent much of his career prior to Bangladesh Bank at the World Bank and earlier worked for BRAC. He has generated a body of policy and academic work that reflects a diverse mix of interests in development, including on development and finance, and will lead the World Bank’s work on poverty reduction and human development in his new role . . . . . .
Read MoreRecent work from CGAP and Continuum Innovation in Pakistan calls extreme illiteracy a “hidden hurdle” to financial inclusion. When people are unable to read or understand digital transactions they are less likely to trust digital products, constraining a viable avenue for access to financial products. In many cases illiterate people have to rely on an agent to complete their transaction and many remain wary of such services. The scale of this challenge is immense: UNESCO estimates the worldwide illiterate population at almost 800 million. . . .
Many researchers have proposed ways to make financial services, and digital financial services in particular, more accessible to illiterate people. One idea comes from Woldmariam et al., who propose a new user interface that allows mobile money users in Ethiopia to identify currency notes on screen . . . . . .
Read MoreIn early April we blogged about BRAC’s new Innovation Fund for Mobile Money, which solicited ideas from the public for pilot projects using mobile money technologies to deliver services. The seven winners have now been announced, and project descriptions are on the BRAC blog as well as the Innovation Fund website. . . .
The winners span a variety of sectors, but all seek new ways to use mobile money to serve the needs of the poor. Here are the descriptions of the winning projects from BRAC. We’ll report on the progress of these projects from Bangladesh, where we’re carrying out an experiment on the impact of mobile banking, this summer . . . . . .
Read MoreOne of the most promising innovations in the digital payments space has been on the delivery of government benefits through electronic payments systems in developing countries. Now, an impact evaluation of digitization of government payments in India by Karthik Muralidharan (UCSD), Paul Niehaus (UCSD) and Sandip Sukhtankar (Dartmouth) finds encouraging results. . . .
In one of the largest randomized impact evaluations to date – covering 19 million people – Muralidharan and colleagues study the recent rollout of the “Smartcards” project in the state of Andhra Pradesh in India. The Smartcards project introduced biometrically-authenticated electronic benefit transfers into two large Indian social welfare programs: the well-known National Rural Employment Guarantee Scheme (NREGS) and the Social Security Pensions (SSP). The research team worked with the government to implement a randomization of the order in which districts received the program, allowing for a rigorous evaluation of program impacts half way through the implementation . . . . . .
Read MoreOn a recent trip to Bangladesh, one question kept pestering me: if mobile bank accounts are so good for the poor, why haven’t they adopted them already? After all, financial products and services for the poor have the potential to improve lives, but only if they are actually adopted and used. . . .
I traveled to Bangladesh to set up a randomized controlled trial to test for the impacts of mobile banking on financial management, food security, health and self-reported well-being for poor households . . . . . .
Read MoreTwo weeks ago I attended a Payments Bootcamp put on by Glenbrook Partners (a 2-day class they hold several times a year) to learn more about how the payments industry works behind the scenes. There is a lot to learn. Two days allows more than just scratching the surface, but not much more. While the class is focused on the payments infrastructure in the United States particularly, the material illuminates the evolution of mobile money and digital payments in the developing world. . . .
A better understanding of the economics of the payments industry provided the foundation for a new longer-term research project on the future of digital payments innovation in developing countries. But one thing that immediately grabbed my attention was a conversation from the first day about why the payments system in the United States is so complicated and opaque (for instance, it is now virtually impossible for a small merchant to know what fees they will pay for a credit card transaction). According to Carol Coye Benson, a Glenbrook partner teaching the course, the root cause is the stubborn refusal of consumers to be overtly charged for payments. The attitude seems to be that no one should be charged for using “their own money" . . . . . .
Read MoreOn my recent trip to Bangladesh, I had the good luck to cross paths with and chat over dinner with Maria May and Amanda Misiti, two members of the Social Innovation Lab at BRAC who are engaged in advancing the organization’s mobile money agenda. Founded in 1972 in a rural village in Bangladesh, BRAC is one of the world’s largest and most influential nonprofits, serving by its estimates over 135 million people in need . . . . . .
Read MoreLast month the Mobile Money for the Unbanked group at GSMA released their state of the industry report for 2013. They’ve been collecting data on mobile money since 2010 so a more complete picture of changes in the industry is starting to emerge, and this year for the first time they’ve added other mobile money products like insurance, credit and savings, which make up a growing piece of the mobile money pie. Though we try to keep up on what’s new in mobile money, some of the findings surprised us. . . .
We hear that people these days are into quizzes (admit it, you already know which Game of Thrones character you are). Now get out your pencil and paper to tally up your scores, and see how much you really know about the global mobile money industry . . . . . .
Read MoreLately I've been noticing a lot of writing about innovation inanely citing Steve Jobs (“People don't know what they want until you show it to them”) and/or Henry Ford (“If I had asked people what they wanted, they would have said faster horses.”) quotations about customers not knowing what they want. An example last week, in an otherwise reasonable piece about how to measure economic progress, caused my frustration to boil over. . . .
I think this perspective on innovation rears its head a lot when it comes to financial services for poor households which is concerning because it is 90% (at least) dead wrong. . . .
Let’s start with the Ford quotation. First, it’s apocryphal . . . . . .
Read MoreMobile money supporters often tout the benefits of using transfer services to facilitate remittances. Many users are migrants who made the financial investment to live in a Western country and send financial resources back home. But that is only part of the story. According to a 2010 UN report , the number of South-to-South migrants (73 million) in 2010 was only slightly less than South-to-North migrants (74 million) worldwide. In Africa, one-tenth of remittances come from within the continent, and South Africa (a destination country) sees most of its remittances flow to neighboring countries. Where the people go, the money follows. The World Bank estimates the value of South-to-South remittances between $17.5 billion and $55.4 billion, or in other terms, 9 to 30% of all remittance traffic to developing countries. . . .
Sending these payments is not cheap – the average global money transfer fee is 9% while the average fee to send funds within South-South corridors is 12% . . . . . .
Read MoreIn Kenya, 70 percent of long distance payments from one individual to another are made electronically. Seventy percent of payments from governments and businesses to individuals are also made electronically. From 2006 to 2009 when M-Pesa—the Kenyan mobile instrument for all these payments—was expanding, the total number of person-to-person electronic transactions shot up rapidly, by 215 percent. . . .
What would happen if the rest of Sub-Saharan Africa looked like Kenya? A just out from McKinsey, based on Gallup data funded by the Gates Foundation, looks into that future scenario. . . .
The focus of the report is the opportunity for potential payment providers to earn more revenue (estimated at 2 percent of transaction volume). Projections show revenues from electronic payments across the continent would grow 50 percent, to $15-$16 billion a year. This news comes with something of a puzzle. With the opportunity so large, why have most other countries not followed in Kenya’s footsteps? . . .
Read MoreHow would you describe a savings account where your money is occasionally stolen, eaten by mice, or washed away by floods? Merchants in Dharavi, the largest slum in Asia, describe it as “safe.” . . .
That’s what Deepti KC and Mudita Tiwari found when they interviewed sellers, suppliers and buyers in Dharavi, home to 5,000 informal businesses that create goods worth more than 600 million dollars a year, in the heart of Mumbai. . . .
Far from being poor peddlers of trinkets, the sellers of Dharavi—particularly those who make relatively expensive leather goods—routinely move thousands of dollars in a single day. They have sophisticated financial lives, often including formal bank accounts, and many have smart phones. KC and Tiwari—like many researchers studying financial inclusion in the developing world—posit that increasing take up of digital transactions “is essential to achieving inclusive financial growth in India” . . . . . .
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