Viewing all posts with tag: Mobile Money  

The You Seem Vaguely Familiar Edition

Editor's Note: You're not hallucinating, experiencing a weird time warp or flashback. But maybe I am.  
- Tim Ogden

1. What the hell?
Yes, this is a new faiV, for the first time since [checks notes; checks notes again; checks calendar on current date; checks calendar on current date and year; hangs head in shame and disbelief] June, 2021. So, you (and I) could hardly be blamed for asking "What the hell happened?" The answer is complicated but mostly prosaic: my time has been focused on a seven-country financial diaries study, and three or four other field work projects that we've been running or participating in. But it's also that the world that the faiV existed in and was a part of has changed a lot. Here I don't mean the pandemic etc., at least not directly. I mean that the world of information creation and sharing has changed dramatically. As we contemplated reviving the faiV at various times in 2022 and 2023, we kept running into barriers like: what platform should we be using? What's getting through email filters now? How do we gather the information to write a faiV? Where are people posting now? 

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Part 1 on The Role of Digital Money in Financial Inclusion

In this edition of the faiVLive, the Financial Access Initiative’s Tim Ogden and Jesse McWaters, the Global Head of Regulatory Advocacy at Mastercard, explored basic frameworks for understanding the differences between the rapidly growing types of digital currencies. They covered new and evolving digital means of exchange, how they interact, and what that means for pro-poor financial inclusion.

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Week of June 26th, 2020 (faiVLive)

This week’s faiV was a faiVLive — a webinar featuring a panel of experts discussing the future of digital financial services and inclusion.

Thanks to everyone who joined our faiVLive webinar about the future of Digital Financial Services on June 26th. If you weren’t able to join us live, you can watch a recording of the webinar through this link.

About the webinar:

The pandemic has raised the profile of digital financial services, which have enabled amazingly rapid distribution of social support funds and may provide a path forward for delivering financial services safely and at scale. But there are important questions left to consider about the roll-out and ultimate impact of DFS. This edition of faiVLive brings together expert practitioners and researchers to address these questions, ranging from the impact of DFS on MFIs to digital security. 

Moderator:

Timothy Ogden, Managing Director of the NYU Financial Access Initiative

Featuring:

Support:

This faiVLive is supported by the Mastercard Impact fund, and in collaboration with the Mastercard Center for Inclusive Growth

Week of April 3, 2020

Editor's Note: The only two predictions I feel I confident in making right now are that a) we will find some new phrase for opening a conversation other than "How are you?" or at least some new way to answer the question, and b) that the trend of putting webcams on the bottom of a laptop screen is over. Thanks to all of you who reached out in reaction to the abbreviated version of the faiV last week focused on my concerns about the future of microfinance in the US and globally. Please keep sending information and thoughts my way.

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Week of December 13, 2019

1. Global Development: In my early days of blogging global development and philanthropy stuff, the Millennium Villages Project--and specifically the controversy over claims of impact and whether to measure impact at all--were a really big deal. In a true blast from the past, the impact evaluation of a Ghanaian MVP  has finally been published and found little to no impact. Little to no impact on core welfare indicators and little to no impact on spillovers or "cost-saving synergies." That impact evaluation only happened because Michael Clemens and Gabriel Demombynes went to the mat to convince DfID not to fund expansion unless it included independent evaluation. Here's a thread from Demombynes on that, and one from Clemens. It's worth noting that the MVP not only actively resisted impact evaluation but threatened Clemens and Demombynes with a lawsuit to stop their efforts.
I've been thinking about this a lot in relation to criticism of the RCT movement around the recently awarded Nobel prizes. This paper isn't an RCT--it's a Diff-in-Diff with matched villages and propensity score matching! The point is the distance we have traveled in terms of demanding credible evidence on development interventions in a very short period of time is underappreciated. It was less than a decade ago that literally the highest profile development intervention in the world was insisting that there was no need for an impact evaluation, a control group, etc. and there was actual controversy over that position. And I do think that the randomistas are largely responsible for that change where the debate is about the relative credibility and cost-benefit of different approaches to measuring impact, and external validity of findings, not on whether to engage in credible impact evaluation.
There are other controversies from the global development past that are resurfacing, if only in Justin Sandefur's Twitter timeline. Justin--I presume because he's going to be teaching a development class at Georgetown this spring--has been asking some interesting questions and getting some interesting responses. Like, given the credibility revolution, and follow-on work, how should we think about Paul Collier's The Bottom Billion? Or how separable are Peter Singer's support for altruism, e.g. The Life You Can Save, and his support for murdering disabled babies. I guess I tipped my hand on how I feel about the latter. I can't exactly be objective here as the father of a 13 year old who, in a Singerian world, could have qualified for "elimination." Justin links to an amazing essay by Harriet McBryde Johnson that I had forgotten, but am very glad I read again--you should read it too regardless of whether you have or not. The question is one I'd been able to ignore for a long time--cognitive dissonance is powerful--and I'm grateful to have been forced to think about it again.

2. Digital Financial Services: Usually when we talk about digital financial services it's about delivering a specific financial service via digital channels. But here's a paper on digital delivery of guilt about the use of financial services. Specifically, it's an intervention where people are shown a Nollywood movie whose plot is driven by "bad" choices in relation to borrowing and saving. They find that watching the movie does induce people to open savings accounts but not to use them to, y'know, save. That's consistent with a lot of the research on savings (some of which was highlighted by the eMFP team last week). Clearly there are lots of nudges that can get people to open accounts and even to save in them, but those nudges rarely lead to meaningful ongoing use or significant savings balances.
There are exceptions of course, and here's a post from the A16Z FinTech blog that highlights a few of them. There's a common theme: savings encouragement works when it removes the consumer from the equation, or uses their bad decision making for good. Kinda dark, huh? Of note here is the idea of "self-driving money"--customizing the services and products to the needs and often irrational behavior of particular customers. It's a great concept, but there is a key question missing: where are the financial services firms that are going to automatically help a customer into a product that is less profitable but better for the customer? And in case you didn't know, financial services firms are already customizing products based on consumer biases: by sending credit card offers that are more likely to be profitable for the issuer.
On a more traditional digital financial services footing, here's a discussion of digital remittances and the lack of progress toward remittances that stay digital. I continue to find it remarkable that keeping transactions digital--e.g. not having users cash out--is assumed, without any explanation, to be obviously good for users. It's a particular case where the DFS community seems to consistently be ignoring the signals that customers are giving them. The explanations for why people don't stay in digital never seems to consider the most obvious answer: there's no benefit to the user. When there is actually benefit to customers of staying digital I have no doubt that they will do so.

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Week of December 6, 2019

1. Trends: Futurism has always come more easily to technologists than policy wonks (probably because it’s easier). But big gatherings are a good chance to look ahead to how the whole inclusive finance ecosystem, getting more complex each year, will evolve. e-MFP’s annual survey of financial inclusion trends – the Financial Inclusion Compass 2019 – was launched during EMW2019, and tries to do just this. If there were a single theme to this paper, it’s the disconnect between, on the one hand, individual stakeholders with their own interests and objectives, and on the other a collective confusion, a ‘soul-searching’ of sorts, for financial inclusion’s purpose amidst the panoply of initiatives and indicators in a sector of now bewildering complexity.

Digital transformation of institutions ranked top, a theme that dominated last year’s European Microfinance Award (EMA) and EMW, with Graham Wright’s keynote call for MFIs to “Digitise or Die!” (and see also the FinDev webinar series on the subject). Client protection remains at the forefront, (second in the rankings, see point 4 below for more going on here) and client-side digital innovations, despite the ubiquitous hype, is only in third overall – and only 7th among practitioners, who actually have to implement FinTech for clients. Do they know something that consultants and investors do not? Among New Areas of Focus (which looks 5-10 years down the track), Agri-Finance is clearly top. The Rural and Agricultural Finance Learning Lab, Mastercard Foundation and ISF Advisors’ Pathways to Prosperity presents the current state-of-the-sector. It’s worth looking at. Finally, Social Performance and/or Impact Measurement is 5th out of 20 trends. There’s too much to choose from here. But the CGAP blog on impact and evidence digs into the subject from a whole range of angles. And check out Tim’s CDC paper [No quid pro quo!--Tim] from earlier this year on the impact of investing in financial systems. Good to see that financial regulators are also giving this the attention it needs.

Finally, finance for refugees and displaced populations generated a lot of comments in the Compass - and was the biggest jumper in the New Area of Focus rankings. It’s been a big part of EMW for the last few years; climate migration was the theme of the excellent conference opening keynote by Tim McDonnell, journalist and National Geographic Explorer, and there’s lots of recent data (here in a World Bank blog) showing refugee numbers at (modern) record levels. Migration of course is inextricably linked to labor conditions. Low paid and low quality work drives migration [maybe we should have more research on migration as a household finance strategy--Tim]. For more on the ‘World of Work’ in the coming century, see below.

2. Climate Change: There may be more evolution in climate change/climate finance than any other area of financial inclusion today. From our side, the European Microfinance Award 2019 on ‘Strengthening Climate Change Resilience’ wrapped up last month, with APA Insurance Ltd of Kenya chosen as the winner for insuring pastoralists against forage deterioration that result in livestock deaths due to droughts . Forage availability is determined by satellite data, via the Normalized Difference Vegetation Index (NDVI). A short video on the program can be seen here.

The severity of climate change and the increasing impact it has on the world’s most vulnerable hardly needs outlining here. Progress has been excruciatingly slow. But a new report by the Global Commission on Adaptation, headed by Bill Gates and former U.N. Secretary-General Ban Ki-moon, aims to change that. Released in September 2019, it mapped out a $1.8 trillion blueprint to ready the world to withstand intensifying climate impacts. The Commission launched the report in a dozen capitals, with the overarching goal of jolting governments and businesses into action.

A bunch of recent publications illustrate the overdue acceleration of responses. The Economist Intelligence Unit’s Climate Change Resilience Index is pretty stark reading. Africa will be hit the hardest by climate change according to the Index – with 4.7% real GDP loss by 2050 (well supported by the rankings in the ND-Gain index from Notre Dame Global Adaptation Initiative (ND-GAIN), which summarizes countries’ vulnerability to (and readiness for) climate change. The EIU index shows that institutional quality matters a lot in minimising the effects. The paper also presents three case studies that highlight the importance of both economic development and policy effectiveness to tackle climate change. It’s worth a (fairly frightening) read. So is AFI’s new paper “Inclusive green finance: a survey of the policy landscape”, which asks and answers why financial regulators are working on climate change, how they have been integrating climate change concerns in their national financial inclusion policies and other financial sector strategies, and how they are collaborating with national agencies or institutions. Blue Orchard has also just published "Rethinking Climate Finance" which points to a US$400 billion shortfall by 2030 in climate finance, just to keep global temperatures within the 1.5 Celsius limit. The authors advocate various blended-finance products to encourage private sector investment, which, their survey reveals, is woefully low considering how significantly those investors perceive climate change risk to their portfolios.

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Week of November 12, 2019

1. Good Economics: I’m pretty jealous of the luck that the editor who signed Esther and Abhijit to write a new book with a big picture view of economics and development and managed to have it scheduled to come out just a few weeks after they won the Nobel has (or alternatively I’m not jealous at all of the eternity of suffering they will have from selling their soul to make this happen). It is pretty remarkable timing regardless of how it came about.
The official release isn't until later this week, but there’s already a good amount of stuff out there, and the book seems likely to generate a lot of conversation. Here’s an excerpt that outlines their perspective on migration (it’s good and there should be more of it). Here’s an excerpt of their perspective on trade (it’s not as good as you’ve heard). Here’s a thread from David McKenzie contrasting the two.
I’m told a review copy is headed my way, and if so I’m sure I’ll have more to say about the book in future weeks.

2. Global Development: It feels like quite some time since I’ve been able to feature some big picture things happening in the development space. So here’s a round-up of some pretty diverse things on that front.
David Malpass has been in charge at the World Bank for long enough to start seeing some changes. Here’s a perspective on how the annual meetings were different this time around. And here’s a piece on how Malpass seems to be trying to shift toward more attention at the individual country level than on global or regional issues. I guess no one will be surprised if the Bank does little on the climate change front while he is in charge.
It’s been well more than a decade of pretty remarkable economic growth on average in sub-Saharan Africa. In some countries that has meant substantial progress on reducing poverty headcounts; in others not so much. Via Ken Opalo here’s a paper that proposes an explanation for the pretty bi-modal distribution of countries that have made progress on poverty and those that haven’t. Spoiler: Acemoglu and Robinson and those who like path dependence stories probably agree.
Bolivia is in crisis right now with real uncertainty about what the next few weeks, much less months, will hold. It would be interesting to see a systematic review of outcomes for countries where there have been coups and ones where there's been "sort of" a coup. But Bolivia is in remarkably better shape than some of the other countries in Latin America that elected populist lefitsts around the same time. Here’s a Twitter conversation between Justin Sandefur, Dany Bahar and Alice Evans (and later Pseudoerasmus weighs in) on the pretty unique set of economic policies and macro-conditions that account for that.
China’s efforts to play a large role in developing countries has been a topic for awhile now. But there’s still a lot of questions about what exactly China’s influence and impact on developing countries will be. Here’s a CGD piece on what the Belt and Road Initiative will look like in 10 years.
Russia is the new scary story in African "investment." A few weeks ago Russia hosted a summit with leaders of African countries. So what does Russian involvement in Africa look like? Here's a claim that Russia is sending mercenaries to Libya with the intention of increasing migrant flows to Europe to destabilize countries there. What are the chances that the Banerjee and Duflo chapter on migration will be wildly influential and cause the Russian strategy to backfire?
On the migration front, here’s Michael Clemens and Jimmy Graham on how demographics are going to change the flows of migrants to the United States from Central America--I don’t think they factor in the possible impact of Russian mercenaries.

3. Digital Finance: Here are some important stories about digital finance that you may not have noticed. If that sounds like a familiar opening, well, yes, OK, I’m going to hammer on this theme for a bit--be prepared it’s likely to be a regular fixture, at least until I feel like it’s gets regular enough attention in conversations about fintech, mobile money and other things digital.
Nikkei--the Japanese financial news organization and owner of the FT--lost $29 million in a phishing scam. UniCredit--the Italian bank--exposed 3 million customer records in a data breach. Web.com, one of the largest domain name registrars in the world, was hacked a few weeks ago and exposed 22 million records. What'sApp was also hacked, apparently by an Israeli firm that proceeded to spy on 1400 people in 20 countries.
Anyone feeling confident that microfinance institutions or even major mobile money providers are really immune to these security breaches that are affecting even highly sophisticated companies spending multi-millions on cybersecurity? If you are, please print out this tweet and tape it to your monitor.
OK, here's something not on the security question: a paper on the economic effects of money based on Spanish history: whether or not shipments of silver made it back to Spain from the New World had a big impact on the literal supply of money. So what does this have to do with digital finance? I think it's a useful explanation for the Jack and Suri finding about the growth effects of mobile money in Kenya.

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Week of October 25, 2019

1. US Household Finance (and Great Convergence/Corrupted Economy): If you've been paying attention to global news, you have no doubt deduced a pattern that many are remarking on: mass protests in many countries that are linked in more than trivial ways to the cost of living, corrupted economies and frustration with a subverted political process: Chile, Ecuador, Lebanon, Hong Kong are just a few. Here's the New York Times on that pattern with discussion of similar situations in nearly 10 more countries.
In the sense that these episodes of mass unrest stem back to "pocketbook" issues the United States is an outlier--not that the cost of living and unequal access to opportunity aren't issues--but that they haven't yet lead to mass uprisings. There are lots of reasons for that of course, including relatively low unemployment and at least some consistent economic growth. But the underlying issues just aren't that different. Here's a new report from the JP Morgan Chase Institute on how much savings US households need to weather the typical ups and downs in their income and spending needs. There's a lot to dig into in the report, and I'm still not convinced we understand volatility enough to offer prescriptions, but this is a big step in the right direction. The report finds that US families need 6 weeks of take-home income to weather a simultaneously income dip and expense spike, and that 65 percent of households don't have that.
For a more personal take on how budgets are being squeezed, here's the NYT with a in-depth look at four households' budgets.

2. SMEs: The way I see things there are two research questions at the top of the agenda: 1) What distinguishes SMEs/entrepreneurs that grow, and create net new jobs and long-lived profitable businesses (I honestly care less about high growth because I care more about short- and medium-term income effects), and 2) What are the barriers specifically for women in becoming one of those types of entrepreneurs.
There are two new-ish papers I came across this week, one on each of those questions. First, here's a paper that tries to establish some objective criteria for distinguishing between "necessity" and "opportunity" entrepreneurs, using their prior work history as the main data source. Using data from Germany and the US they find that opportunity entrepreneurs start more growing businesses (surprise!) and that 80 to 90% of entrepreneurs are opportunity entrepreneurs. The relevance to places outside of a handful of developed countries with well-functioning and tightly-integrated labor markets notwithstanding, I don't find the approach particularly convincing. I can think of lots of different ways to conceptualize what job history means in terms of "opportunity" vs. "necessity" and it doesn't take into account that a lot of "opportunity" entrepreneurs are likely just wrong about the opportunity (or their necessity). But it's a useful paper for thinking about these issues.
The second paper is a new working paper from Seema Jayachandran that I just came across this morning, so I haven't had a chance to really look at it yet. But based on the abstract, it's definitely worth taking a look at. She "reviews the recent literature in economics on small-scale entrepreneurship (microentrepreneurship) in low-income countries" with "special attention to unique issues that arise with female entrepreneurship."

3. Digital Finance: Here are some important stories about digital finance that you may not have noticed. A major German manufacturer is still down more than a week after being hit by a ransomware attack. Seventeen iPhone apps have been removed from the app store after researchers discovered they were using a clever way to hide and deliver malware. Two of the most popular VPN providers in the world were hacked recently. A new information-gathering trojan is rapidly gaining popularity with hackers, in part because it's "malware as a service" where you can rent server space and get technical support all for just $200 a month.

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Week of September 27, 2019

1. Jobs: I've written a good bit here on the "Great Convergence" from the perspective of financial inclusion--that the US and middle-income countries have more in common in that domain than they have ever had--but another version of the "Great Convergence" is the common focus on jobs in countries across the per-capita income spectrum.
It's useful to put the current convergence in historical perspective--the recognition that creating jobs was critical and that "national champion" industrial development was not creating them played a large role in the development of the microfinance movement. The failure of microcredit to produce much beyond self-employment alternatives to casual labor has brought job creation, and especially job creation through SMEs, back to the top of the agenda of international development. At the same time, the failure of richer economies to produce very many "quality" jobs in the 10 years since the Great Recession (and arguably since the 1970s) or for the foreseeable future has put the question of jobs at the top of the list of concerns for policymakers in those countries.
Paddy Carter, the director of research for CDC (UK, not US), and Petr Sedlacek have a new report on how DFIs and social investors should think about job creation that lays out some of the issues (e.g. boosting productivity can both create and destroy jobs) quite nicely. MIT's "Work of the Future Task Force" also has a new report, this more from the perspective of policymakers in wealthier countries, with a call to focus on job quality more than job quantity. Stephen Greenhouse has a new book on dignity at work, which of course has a lot to do with job quality. Here's a talk he gave recently at Aspen's Economic Opportunities Program.
Seema Jayachandran has a new working paper on a specific part of the jobs conversation: how social norms limit women's labor market participation and what might be done about that. For me it also opens the question about microcredit-driven self-employment being a higher "dignity" job for women in many contexts than the jobs that are available to them otherwise. More on that in a moment.

2. Household Finance: I don't have a lot of links here, just some thoughts from conversations in the last few days. But to kick things off, Felix Salmon had a nice gibe at financial literacy this week that had my confirmation bias going. But in hindsight, I actually disagree: teaching financial literacy actually doesn't seem to be that hard based on the many papers that show that running a class leads to passing a financial literacy test. The hard part is making higher financial literacy pay off in terms of changed behavior. But there I agree with Felix's basic point: higher financial literacy doesn't lead to improved decision making for the poor or the wealthy. The wealthy just have more structure and protection (both formal in terms of regulation and practices at private firms who know better than to routinely screw profitable customers, and informal in terms of slack and cushion) from bad choices. On the flip side, Joshua Goodman has a new paper in the Journal of Labor Economics that finds that more compulsory high school math leads African-American students to complete more math coursework and to higher paying jobs (there's a nice little estimate that the return to additional math courses makes up half of the gains from an additional year of school).
Part one of "more on that in a moment" is that Seema with a rockstar list of development economists (Erica Field, Rohini Pande, Natalia Rigol, Simone Schaner and Charity Troyer Moore) has another new paper on whether access to, deposits into and training on using a personal bank account affects women's labor supply and gender norms. They find that it does increase women's labor supply and shifts norms to be more accepting of women working. Here's the indispensible Lyman Stone with a somewhat skeptical take on the interpretation of the data.
Finally, in a conversation with Northern Trust this week about their financial coaching work (see a recent summary here) a really fascinating insight came up: people in the coaching programs seem to have much more success when "saving" is framed as "debt reduction" than when it's framed as "saving." These sort of things always grab my attention because Jonathan's paper Borrowing to Save was a seminal piece for my interest and thinking in financial inclusion. But it also got me thinking: what would happen if retirement savings programs were framed as debt + loss aversion? Specifically, if when you started a job, the employer said: "I'm loaning you $10K, deposited into an IRA and you owe me $x monthly, until you pay it off--and if you don't I take it back." Obviously you couldn't run an experiment like that in the US because of regulations, but is there somewhere you could? Maybe someone has already done it? Let me know if you have any thoughts.

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