Institute for Money, Technology & Financial Inclusion

Excerpt: How the Afar view state-backed currency vs. livestock

“Commerce in the Afar region has been accompanied by two features of a cash economy: sharp fluctuations in the prices of commodities, and the arrival of an active class of merchants in the region. They agreed that for purchasing more tradable goods, there must be more money and favorable orientation to money as wealth. And these in turn depend on the purchasing and exchange value of money, especially for urban households. With very limited investment options, instead of depositing their money in a bank, backyard goat rearing serves as a store of productive assets and an effective strategy to avoid the fast falling purchasing power of money.

Report AbstractThis report is an investigation into the major changes observed in the pastoral system of the Afar of Northeastern Ethiopia, their shift towards the market and the application of money and technology, and the subsequent changes in gender relations. A combination of ethnographic methods including semi-structured and key informant interviews, focus discussions, and life histories were used to collect data from 89 respondents in five towns. Complementary data were also collected from additional informants through informal conversations with state officials, civic and clan leaders, sages and academics. It was found that pastoralism is gradually dying, and, consequently, women engaging in the market are increasing both in number and significance. However, their success is hugely constrained by various structural forces, notably state policies, failing laws and processes, lack of formal financing, price fluctuation, and absence of appropriate technology. In the face of these challenges, the Afar women continue to effectively commoditize their pastoral products and participate in wage employment. This shift has further enhanced cash income and mobility. In the absence of formal financial agencies, the traditional sources of capital and money transferring arrangements remain important to the livelihood systems of the Afar people.

Does the digitization of money change how individuals and households spend, invest, and save? Specifically, does the form of money (rather than the functionality of mobile money) change perceptions and thus choices? Is there something importantly different about holding 20 taka on your mobile phone rather than holding a 20 taka banknote in your hand? Maurer (2012) raises related questions about perceptions of mobile money as a whole, and here we focus on the way that mobile money shifts specific consumer choices.

Economists generally assume that money is fungible, a dollar is a dollar, a taka is a taka (Morduch 2017). But studies show that the form of money matters. Viviana Zelizer’s The Social Meaning of Money (1994) describes how money obtained through different channels get earmarked for certain purposes and thus may not be viewed as being fungible. That can lead to different monies being spent in different ways. Her focus is not on the form of money (cash vs. check, say, or credit card), but it provides one explanation for differentiation.

Motivated by experiments with US college students by Priya Raghubir and Joydeep Srivastava (2008), we ask respondents about the willingness to pay for set of common goods, distinguishing between amounts when they (hypothetically) purchase the goods in cash versus mobile money. We asked the study participants how much they would be willing to pay for a quantity of fine rice, a good bar of soap, particular pieces of clothing (a salwar kameez and a lungi), a bag of potato chips, and a packet of biscuits (cookies). The aim is to see whether their choices shift when mobile money is at stake rather than cash. We call these “payment effects” to reflect that the form of payment can affect choices.

We anticipated that when consumers think of mobile money, with its more abstract (digitized) form of stored value, they may make different consumption choices relative to those made when the spending is in cash. We asked questions to elicit responses about quantities consumed, quality consumed, and the willingness-to-pay. We relate the choices to education, age, gender, and other demographic characteristics, as well as prior exposure to the mobile money technology.

While the study draws inspiration from the study by Raghubir and Srivastava (2008), which focused on credit cards vs cash, we look at a very different context (mobile money in Bangladesh) and analyze a broader set of covariates (including measurement of time and risk preferences). In addition, we have experimental variationin the amount of prior experience individuals have with the technology, to test for the effects of learning. Moreover, rather than being restricted to a population of college students, we test for these effects in a population where mobile money has just been introduced and is growing fast.

Imagine that someone approached you and asked how much you would be willing to pay for a bar of soap or a bag of potato chips? It seems like a simple question.

You would probably, though, ask which bar of soap and which potato chips? Think a bit longer, and you might be asking “pay for them how?”

Researchers have found that the last question – about the form of payment -- matters. For example, paying by credit card rather than cash changes how consumers spend: Studies suggest that using plastic induces consumers to pay higher tips at restaurants, buy more junk food, and pay more for a chance to see a pro basketball game. These results are not always robust, and studies struggle to separate the liquidity effect of credit cards from the psychological effect of using plastic vs. cold, hard cash. Still, the weight of the evidence suggests that people spend more when using credit cards (or even when thinking about credit cards) for reasons that are at least partly psychological.

We are pleased to share the final report of IMTFI funded research "The Mobile Money Revolution That Has Not Come." The research explores the role of mobile money technology in social protection networks among displaced peasant families in Colombia. 

With mobile money technology being adopted, financial inclusion especially with regard to women and less educated is becoming a reality. In Kenya the high rate of adoption of this technology has resulted in more mobile money accounts than bank accounts. In this study we sought to determine whether mobile money usage influences control of productive resources among women micro entrepreneurs participating in table banking. The Government of the Republic of Kenya has been encouraging female entrepreneurship as one strategy of propelling the nation to the status of a newly industrialized country able to offer comfortable life to her citizens. Success in entrepreneurship is linked to control of productive resources yet this is a gendered aspect that favors men in much of the developing world. It is therefore imperative to document how women control these resources in the business context. A mixed data collection approach was adopted comprising a questionnaire administered to 392 respondents, two object-centered focus group discussions, and in-depth interviews with ten respondents. Questionnaire data were analyzed using frequencies, percentages and correlation coefficient while the rest were analyzed qualitatively.

Important findings related to gender, discretion, and control of resources. Mobile money technology has enabled women micro-entrepreneurs to control productive resources and especially business money. Results indicate that use of mobile money services influenced control of resources, especially those services that are easily integrated into existing social and business arrangements. Further investigations revealed that mobile money services have provided discreet methods of keeping business financial transactions shielded from husbands’ interferences. Interestingly, there was low usage of micro-savings and micro-credit services for table banking activities. Consequently, mobile micro-credit services had no significant relationship with control of productive resources. Qualitative data indicated that men are joining ‘women-only’ groups and are contributing new ideas and perspectives leading to investments in areas that are not traditionally for women.

Overall, findings from our data indicate that recipients of the conditional cash transferplus credit and insurance do not seem to have better parenting and higher adherence to healthy habits than recipients of only the basic conditional cash transfer. In addition,while it is the case that experiencing unexpected transitory income shocks reduces income, the magnitude of the effect is lower for recipients of the conditional cash transfer plus credit and insurance. Finally, when experiencing more permanent income shocks, the quality of parenting by increases for recipients of the conditional cash transfer plus credit and insurance.

In our previous blog post, we described why we mapped how people borrow and send money around before and/or outside the formal financial sector. Our goal was to understand the value that intermediaries bring to financial transactions in Kerala (India) and Shan state (Myanmar). This led us to unearth a vibrant eco-system of intermediaries, who offer a variety of services and are often in competition with each other – a very different picture from the stereotypical idea that a lack of formal financial services is the same as a lack of financial services. The arrival of mobile money and mobile banking takes place in the context of an already crowded market of competitors. Clients have more choice – and digital financial service providers have to demonstrate their value relative to these existing ways of moving money.

Our second question in our fieldwork was about the different kinds of value that human intermediaries create. We have identified five such areas where the involvement of a human intermediary appears valuable enough to clients that they choose that route over using unmediated and/or digital modes of conducting financial transactions. This is part 2 of 2 blogposts.

We set out to explore this question, starting from the viewpoint that if financialintermediaries persist, they must add some kind of value to the transactions they areinvolved with. What is this value, then? To uncover the value that human intermediariesbring to such encounters, we studied the roles they perform in financial transactions. Wethen analyzed which of these roles were amenable to being taken over by mobile moneyand phones, which ones were viewed as strictly linked to humans and why.

To answer these questions, we conducted multi-country field research on financialtransactions in Kerala, southwest India (Srinivasan) and in Shan state, northeastMyanmar (Oreglia). In Kerala, our focus was on fishers and in Shan state, on agriculturalcommunities. In order to understand “who” moves money in these contexts, we took astep back and started from “how” money moves. Separating the “how” from the “who”turned out to be the first step in recognizing that intermediaries do not merely perform afunction that can be accomplished instead with the use of technology. Rather, they createvalue for their customers in complex ways that a functional description such as “moving money from place x to place y” does not fully capture. This is part 1 of 2 blogposts.

Conversations on personal financial practices are sensitive and many times difficult forresearchers to actualize in the field. As many researchers have documented, personalfinancial practices are private. Getting people to talk about them often times requiresgreat effort. Adding culture to these conversations creates a further challenge that seems almost insurmountable. Yet, even with all of these challenges, it is essential tounderstand how culture influences mobile money practices if appropriate policies andprograms are to be put in place.

To get women micro-entrepreneurs conversing on these matters, we designed two charts: a static one (Fig. 1) which we used to prompt participants to think through their financial practices (without intervention on our part) and an interactive one (Fig. 3) which required participants to perform some activities. Our approach was inspired by the IMTFI Fellows workshop held at the IMTFI Insight and Impact Conference on April 22, 2016 and by object-centered interview methodologies featured in IMTFI’s Consumer Finance Research Methods Toolkit.

In Kenya, the rapid increase of mobile money technology presents an opportunity for increased financial inclusion. However, little is known about the use of mobile money by Kenya’s informal sector, the Jua Kali. This study focused on the mobile money technology product M-Shwari offered by Safaricom as an extension of the successful M-Pesa platform. It explored the Jua Kali’s experiences and perceptions with M-Shwari.

Data were collected using qualitative and quantitative methods, including in-depth interviews, focus group discussions, and a demographic survey. The research was conducted in eight Study Sites across four regions of Kenya. The Sites represented semi-urban and semi-rural areas. Overall, 156 in-depth interviews were collected with 84 M-Shwari users and 72 non-users. In addition, 12 focus groups were conducted with both users and non-users.