An Information-Based Approach to Financial Inclusion

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For my Master’s thesis at The Fletcher School, I attempted to outline a framework for information-based approach to development, a term that I credit to my professor at the time, Kim Wilson.  The framework is definitely related to the much more famous ICT4D concept, but it emphasizes that people are empowered by multi-directional flows of information, not by technology.  The key components are:

  1. Data Collection: It is necessary that solid data is gathered, in order to ensure that the information being provided is credible and accurate.
  2. Disseminated: The information must be accessible through multiple forms of media in order to ensure it reaches a significant number of people.
  3. Communication: There must be avenues through which people can communicate and discuss information with networks of other concerned citizens.
  4. Action: In order to lead to empowerment and to citizen agency, the combination of information and communication must be met with opportunities for people to organize and act on the information in order to improve their own lives.

If used strategically, ICTs can facilitate all levels.  Not only can they be used to gather data directly from citizens and disseminate information back to those same people, but they also encourage decentralization, helping people to expand their networks and organize in ways not previously possible.  The thesis explains the theory and processes behind each in detail, and uses the civil society organization Twaweza as a case study for how to operationalize these ideas.

I was more than pleasantly surprised to see very similar ideas echoed and applied to mobile money in a recent paper by Ignacio Mas entitled, “Making Mobile Money Daily Relevant.”  From my experience, mobile money is often viewed academically as a cousin to ICT4D: related, but not in the same family.  However, my own motivation for working in both areas was the same: how can information be used to truly empower those that are currently marginalized, whether they are marginalized from government, basic utility services, or the financial system?

Mas apparently has a similar motivation, and in the paper he makes a compelling argument for why financial institutions and mobile money providers could benefit from taking a more information-based approach to financial services for the poor.  Just as the poor are excluded from other information systems, they also have limited contact with their bank – if they are banked at all, then they may visit a branch once a month and hear a radio advertisement once a month – 2 times per month, and only one chance to receive information from the client. A radically different approach which moves away from off-the-shelf products to services that use information to customize messages to individual financial goals could finally address the key hindrances that keep so much of the world’s population unbanked.

In this model, providers can improve data collection by increasing contact with their clients.  Once clients are transacting via a mobile phone, they are sending more data to the bank.  The bank can then “start thinking about having a conversation with their customers based on their goals and aspirations rather than on the bank’s standard list of products” so that they can disseminate more useful and relevant information to the client.  Messages would no longer need to convince clients about abstract financial concepts; instead, they would only need to understand that by putting a bit of money of away, they are closer to their goal of, for example, paying school loans.  Clients then communicate with their bank and with each other, especially if bank implements virtual ways to mimic the peer pressure leveraged by the group microfinance model.  Examples of virtual peer pressure strategies include savings buddies, social credit rating programs, and incentivizing community-level savings – think SmartyPig or Weight Watchers Online which let people work with friends to keep each other on track to their goals.

Image from SmartyPig.com

Most importantly, these services and the network effect created would provide actionable ways for individuals to manage their own personal finances on a daily basis through the one tool that they already used the most, their mobile phone.  The poor would gain customized services to manage against financial shocks and the banks would gain loyal customers and a plethora of data that can be used to grow transactions.  In summary, Mas has presented a unique, out-of-the-box strategy for applying an information-based approach to mobile money to “put customers in control.”  Hopefully, this paper will catalyze further innovation in making both information and financial services daily relevant to all individuals.

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The Extrovert Ideal?

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I recently came across an interesting book while searching through the New York Times bestseller list, entitled Quiet: The Power of Introverts in a World that Can’t Stop Talking.  It took only a few pages of Susan Cain’s insights on our society’s “extrovert ideal” to send my mind racing with reflections on my own personality, my relationships, and more broadly, on my work in development.

Cain describes how the United States transitioned to this extrovert ideal during the rapid urbanization of the turn of the century, when Americans left their small communities for the city and “found themselves working no longer with neighbors but with strangers.”  She quotes the historian Roland Marchand who observes that, ‘The reasons why one man gained a promotion or one woman suffered a social snub, had become less explicable on grounds of long-standing favoritism or old family feuds.’  This new social situation resulted in American who tried to “sell not only their company’s latest gizmo but also themselves.”   Literature and popular media went from promoting ideals such as citizenship, duty, and manners to attributes such as fascinating, stunning, forceful, and energetic

I was at first a bit skeptical of her argument, but as she provides examples from advertising to psychology during this period of rapid growth of consumer culture, I realized just how right she is about how our society has reinforced the need for all individuals to be gregarious, outgoing, and extroverted, regardless of our natural personalities.  The easy example is the everlasting popularity of the book How to Win Friends and Influence People.  More interesting examples are provided from the field of child psychology which started to treat maladjusted children for such behavior as preferring to spend recess with only one or two friends.  I can now think of countless other examples.  My undergraduate alma mater, University of Virginia, has a top-ranked law program which prides itself on producing “social” lawyers, and encouraging weekend parties and softball leagues as part of the law school education.  All of which fails to recognize that there is value in individuals that prefer one-on-one conversations, express themselves best in writing, dislike multi-tasking, or perform  best  when working alone, all characteristics generally ascribed to introverts.  Cain makes a plausible case for how these trends have led to more worrisome outcomes, such as the popularity of anti-anxiety medicine in modern society, as individuals with introverted traits struggle with feelings of inferiority and not fitting in.

This led me to reflect on our work in development.  As more countries are experiencing the rapid urbanization that United States experienced 100 years ago, it is clear that they are started to experience some of the same negative externalities of development, such as obesity and diabetes, that have afflicted the US and Europe increasingly over the past century.  Should we in the development industry be aware of how we are contributing to these trends? Are we exporting our “extrovert ideal” and thereby potentially many of our social anxieties?

It’s not as crazy as it sounds.  I was recently speaking with a Kenyan manager of a larger international aid program after he had taken a management course.  During the course, they had reviewed communication styles, and he had realized that he was often too direct with his employees.  After the course, he wanted to make an effort to take more time to engage with his staff in everyday communication – for example, asking about someone’s family before launching into the day’s agenda.  He noted that he had learned this direct communication style while working for an American NGO for seven years, but that he knew it did not translate with his staff who were still more accustomed to the community-based values mentioned previously.

I was also enlightened during a recent trip to Zambia with our gender expert at MEDA. During her assessment of project, which is being run through a company managed by international staff, she observed that the extroverted character of many Zambian women could not be mistaken for real voice or power in the largely male-dominated workplace. The insight was overlooked previously by both myself and the company’s staff, arguably because our cultural lens leads us to mistake outgoing personalities for confidence and power. Her observation led to concrete recommendations on how to engage local women more effectively by bringing them into positions of power that honor naturally more introverted characteristics. These recommendations reflect Cain’s argument about how introverts can be effective in all aspects of business by leveraging, rather than suppressing, their personality.

This is not to say that our tendency to promote gregarious personality traits is inherently a bad thing.  Offering people a wider variety of food choices is a good thing; however, it can still lead to obesity.  Just the same, we should be helping more of the people we work with develop management skills, and to move effectively into leadership roles, which do in fact require certain personality traits. At the same, I would argue that we should take time to be aware of how our cultural preferences, such as the extrovert ideal, can cause anxieties in other cultures, just as they have in our own.

On the Future of Mobile Money, or, Why Failure is Key to Economic Development

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Disruption. I was recently catching up on some economic history in a great new book Grand Pursuit: The Story of Economic Genius and was particular motivated by Schumpter’s theories on economic development. In his book Theory of Economic Development, Schumpeter states that the three elements of local and industrial life that drive development are innovation, entrepreneurs, and credit. Development is a “dramatic, chaotic and disruptive process,” and the best thing that we can do to move it along is to provide space for entrepreneurs to operate through an enabling regulatory environment and easy access to credit. Why entrepreneurs?  Because through their ideas and willingness to take risk, they contribute the process of  “creative destruction” which drives economic growth.

Disruption is a large driver behind the excitement and buzz created by mobile financial services or mobile money  in the developing world. The real innovation in mobile financial services is not the phone. In fact, many transactions that are now occurring under the mobile finance umbrella are taking place at an agent location, with the customer and the agent face-to-face and with no mobile phone involved.

Many mobile finance providers operating in countries with low literacy and/or low cell phone penetration are unable to reach certain targeted customers through phone and text-based systems and are therefore abandoning (or possibly postponing) the idea of the mobile wallet altogether, recognizing that this is not the best tool at this moment in time for that demographic. Instead of  cell phones, operators are reaching customers in these countries through paper vouchers, debit cards, and human interactions. So why are will still excited about mobile money?

We’re excited about mobile financial services because it disrupted both the commercial banking and microfinance sectors in a way that is now driving everyone to provide lower-cost services targeted at those previously unserved by any type of formal financial services provider. Commercial banks are clearly threatened by mobile banking. In Kenya, banks are fighting regulators to slow the growth of M-Pesa, a financial product that is targeting customers that these same banks never gave a second thought to until M-Pesa starting making money off of it. The Bank of Nova Scotia (BNS), based in Toronto, has operated in Haiti for 37 years without expanding beyond 4 bank branches, all in relatively wealthy areas of the urban capital of Port-au-Prince. After M-Pesa’s success in Kenya, BNS for the first time sees a reason to expand in the poorest country in the Western Hemisphere, and is devoting time, money, and human capital to do so.

So the secret is out – mobile is not the key to mobile financial services. The key is providing poor people with the same type of convenient, safe, and practical electronic alternatives that wealthier people have been enjoying for years now. The challenge now is to recognize this and make room for to entrepreneurs to take advantage of the space that has been cleared via this disruption. If we don’t ask for immediate success from all implementers, but rather allow for thousands of start-ups and pilots and accept that many of these will fail, we will in fact be supporting the type of creative destruction that has helped economies grow throughout the history of modern economics. Providing safeguards and consumer protection are vital to this process, of course.  However, while protecting the consumer, we should recognize that it is only through experimentation that mobile finance will achieve its potential…whether or not that potential is through mobile phones.

Radio Boukman – the final word on the Ushahidi Haiti Project

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The Ushahidi Haiti Project (UHP) was a temporary organization that was started with a specific purpose – to transfer the knowledge and experience of the Ushahidi deployment in response to the 2011 earthquake to local actors in order to ensure sustainability.  We recently made a small grant with our last remaining funds to a local radio station in Haiti, Radio Boukman.  Why?

A year and half ago we started UHP hoping that we could really achieve some of these over-used buzz words – transferring knowledge, building capacity, working with local partners.  We undertook multiple actions to achieve this aim.  First, we commissioned a full, independent evaluation of the deployment (which can be read here).  Second, we sent several rockstars – Roz Sewell, Rob Baker, Sabina Carlson and Nona Lambert – to Haiti to work with a local company, Solutions, to improve the Noula.ht platform, a platform which visualizes information in a similar manner to Ushahidi.  Sabina and Nona were able to connect Noula to strong partners, including IOM*, and to help to hire local project managers.  This was meant to be the final action of organization known as UHP.

And then a rare discovery – we found a bit of leftover funding that was allocated to the evaluation but that was not necessary because our lead evaluator, Nancy Mock, graciously did her field research while on an unrelated trip to Haiti.  The small amount of money would mean very little to a typical organization.  So we found the exception.

Radio Boukman is nothing short of absolutely awesome.  It is a small radio station in Cite Soleil, the notorious slum in Port-au-Prince which is now a thriving community full of creativity (Sabina is living there now, devoting her life to promoting a more positive image of the neighborhood which is still considered a “red zone” and off limits to most aid workers.)  The radio station is managed and staffed by bright, young Haitians who are working through their own initiative to bring more information to the people in their community on issues from cholera to hurricane preparedness to youth soccer games.

Radio Boukman fits neatly into the mission of UHP.  They work closely with Noula, promoting the shortcode 177 to report various problems to be displayed on the map.  Citizens receive information and can respond by calling into the radio station or texting into Noula.  The small sum of money will help Boukman expand their coverage area to most of Port-au-Prince.    In this way, our final grant supports the very original reason that UHP was started, which was to involve the citizens of Haiti in their own reconstruction by providing information and ways for local voices to be heard.  I have no doubt that Radio Boukman will continue to support this core idea for many years to come.

For more information on Radio Boukman’s projects, visit Citizen Haiti.

*Note that IOM in Haiti is still supporting both Noula and Radio Boukman today through their Communications office.

Cash Transfers and Mobile Money: Making it Work

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(originially posted on the CGAP Technology Blog)

There are many reasons to be excited about mobile phones as a way to distribute cash transfers, such as government payments or NGO cash-for-work programs. First, cash transfers are often sent to groups of people in multiple locations, and it can be easier to reach them via mobile than to bring them together in one place. It is also easier to track payments if they are sent electronically, which can reduce corruption and increase confidence that the right amount of money ends up with the right individuals. A third possible benefit is that relying on a network of mobile money agents who already handle cash will increase security over creating new systems for transporting cash. This was the situation in Haiti, where cash-for-work payments were made on-site at camps, which created a security risk for the bank employees who had to stand with and distribute large amounts of cash in crowded, outdoor locations. For these reasons – the potential to have a more convenient, secure, and traceable method to distribute payments – mobile cash transfers have been attempted in multiple countries from Pakistanto Niger.

Unfortunately, implementation on the ground often proves to be far more difficult than it seems at first glance. The first and most obvious challenge: not everyone has a mobile phone, let alone an account linked to their phone which can accept fund transfers. Despite all of the justified excitement over the rapid growth of mobile phones worldwide, in any given developing country a large minority of people may still not own a phone, and these people are likely the marginalized populations that are often targeted by social cash transfers. In this case, an organization (NGO or government entity) planning to implement such a program has a few choices:

1) Buy everyone phones – Not only is this expensive for the organization or donor, but once you start to give out free phones, there is an incentive for beneficiaries to under-report cell phone ownership  because, well, who doesn’t want a free cell phone?  This isn’t necessary a problem, but it must be taken into account in the planning and budget phases. Any money spent on purchasing and transporting phones is money that cannot be used for transfers themselves, which will decrease either the number of beneficiaries or the amount of funds that each beneficiary receives. Also, the same logistical challenges exist for giving out phones as for handing out cash, since now partners must find a way to acquire and transport phones in addition to organizing beneficiaries for the disbursement of phones. Therefore, this option is more attractive for programs where there will be multiple transfers to the same people over time (read: not one-time disbursements following a humanitarian crisis.)

2) Require everyone to buy phones – The problem here is that the cost of the phone will be a burden on the targeted individuals, who are both deserving of a cash transfer and who have not previously been willing or able to purchase a phone. One option is to create a payment plan where beneficiaries can buy a phone from a certain retailer and then have small payments deducted from their cash receipts until the amount of the phone has been fully paid. The benefits of having people buy their own phone are many, if they can afford it: it is cheaper for the implementing organization, beneficiaries can choose their own phone, and people are more likely to appreciate the phone and utilize it beyond simply receiving their cash if they are paying for it and therefore have a greater sense of ownership.

Even if everyone does have a phone, it is almost guaranteed that they do not all use the same company for their service provider. In this case, in order to send money to an actual mobile account, the organization can go back to options 1 and 2, to provide phones or require everyone to buy a phone (or a SIM, depending on whether the phones are locked) in order to get all beneficiaries using the same provider. However, NGOs with social missions are often hesitant to actively promote the services of one for-profit company over another. In order to avoid this, the organization will have to work with two or three mobile network operators, which will most likely have different payroll systems in place, again creating logistical and financial accounting problems for the implementer and raising the cost of the disbursement. This is currently the only option in Haiti, where both mobile money providers require recipients of funds to register for a mobile money account in order to withdraw funds.

In other countries, organizations can work with a company (such as Mobile Transactions Zambia) to send beneficiaries a mobile voucher, which contains a one-time unique transaction number that the user can redeem for cash at designated agents. In this case, a mobile phone is not necessary – only the transaction number. There are still challenges to this approach:  delivering the transaction number to someone without a cell phone can still create logistical challenges, and the beneficiary must redeem the voucher for the entire sum of the transfer. This latter challenge poses problems for those programs whose objective is more than simply to deliver the cash. If there is a savings or financial inclusion objective, then it might be of interest to have all beneficiaries register for account with the ability to store value.

In conclusion, the benefits of security, convenience, and accountability are all very real; however, they cannot be considered without full recognition of the costs and the challenges involved in implementation. The good news is that most of these challenges are highly likely to diminish over time, as cell phone ownership spreads and mobile money services become interconnected. In the meantime, there are other options for reaching people. For example, in Pakistan, the government distributed cash aid to flood victims via prepaid Visa-backed ATM cards. Until cell phones are truly ubiquitous, mobile transfers need to be weighed carefully against other options that may be cheaper or more practical for distributing cash transfers.

Ushahidi Haiti Project Evaluation Final Report

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The independent evaluators have completed the evaluation of the Ushahidi Haiti Project (UHP), after many months of interviews, sorting through Skype chats, and trying to connect the dots.  The final report foundhere and on the eval website, aims to contribute two things to the CrisisMapping community: first, an understanding of UHP itself, and second, an understanding of the methodologies that can best be used to evaluate and learn from open source projects to provide useful information for future implementers.   We commissioned this report not at the request of any donor but in a real attempt to offer a transparent account of the strengths and weaknesses of the project.  As the evaluation manager, I wanted to take the opportunity to offer some of my own reflections on UHP and what I think it means to us more than one year later.

I remember the day, at least one year ago, when we sat around in the basement of The Fletcher School and discussed the ‘theory of change’ that could describe why we all believed that the UHP was important.  My good friend Sabina Carlson hit it:  “The louder the voices from the ground, the better the response will be.”  The final version of the theory of change in the Terms of Reference for the evaluation was a bit more specific: “Access to accurate and timely information from the ground during post-crisis response periods will enable humanitarian responders to act more efficiently.

The point is the same.  This isn’t about technology.  It’s not about Ushahidi.  It’s about participation.  We believe in open source because we believe there is a better way, we believe that individuals should have louder voices and more ability to help themselves, and that by giving a people a voice we will see better results.  We believe that it is about results, not about the achievements of individuals or organizations, but simply the fact that more people were given a chance to participate.

We all know – I hope – that the Ushahidi Haiti Project was far from perfect and this point is reiterated again in this evaluation.  Yet, this project is significant in that it is one small part of a paradigm shift.   Lives were saved – this is true and a point that cannot be overstated.  And yet the many of the significant results of this project are not seen in the immediate effects, but in the long-term influence that the initiative had in proving that open-source, participatory information gathering can work.

The evaluators rightly refer to the Red Cross/Red Crescent rules of conduct in this report.  On page 11 they cite Principle 7, ‘Ways shall be found to involve programme beneficiaries in the management of relief aid.’  This project was one huge step forward in making this aspiration a reality.  Many more have been taken (Standby Task Force in Libya, for example) and there are many more to come.

The second contribution that I hope for this report is to the process of thinking about how to evaluate open-source projects, difficult by since by nature they are free, public, and open (page 12).  One cannot simply ask participants if they are satisfied, since satisfaction is subjective, and participants are hard to indentify.  This ambiguity is more than welcome – however, the difficulties it presents in evaluation must be embraced and utilized in a way that still allows us to assess projects in a systematic way in order to move the field forward.   Systematic means using metrics, comparing to internationally accepted standards such as the Red Cross/Red Crescent rules of conduct, and being transparent about methods and limitations to data collection.

One last note – one weakness of this report is the focus on UHP at the expense of 4636 and the role of the Haitian Diaspora.  This is partially due to the original design of the evaluation and partially due challenges with finding those people in order to get their responses to surveys and interviews.   This is not meant in any way to downplay the tremendous role that they played.   We are incredibly grateful for all of their hard work.

In addition to Diaspora and Mission 4636, I would like to thank the evaluators for their diligence, Nona Lambert (the internal evaluation manager),  each of the volunteers and those of you that contributed to this report.  The evaluation benefited greatly from the support of Tufts University, including Peter Walker and theFeinstein Center for administrative support and Professor Scharbatke-Church for her evaluation expertise.  I would also like to recognize the work of Solutions, a technology company based in Haiti, on building a locally-driven mapping platform, Noula.ht, which continues to promote the crowdsourcing of data in the country.  We look forward to your comments and feedback.

January 12, 2011

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I wish I could be just a bit more Haitian.

I wish I didn’t worry so much about time, because I knew that in the end, being a few minutes late because you stopped to chat with a neighbor was well worth it.

I wish I didn’t know the concept that ‘good fences make good neighbors’, because everyone that lived near me was considered family and welcomed in my home at any time.

I wish I had the strength to walk miles up a hill carrying pounds of vegetables on my head and a baby on my back.

I wish that in my life and my work I could work as hard as they do everyday just to survive.

I wish that I could dance Konpa, and that music and art could penetrate my life and my culture in the same way it does theirs.

I wish I would wake up every morning and put on perfectly clean clothes and brush my hair, things I don’t do even though I don’t have the perfectly valid excuse of living in a tent with no running water.

We so often think about how Haitians should be more like us – they should be more educated, more organized, more efficient. But today I choose to think about the ways that we might all benefit from being just a bit more Haitian.

I live in Haiti, but I will never be Haitian. I will learn their language, and try, unsuccessfully, to dance Konpa. But, I will be always panicked when I’m running late, and I will worry about the small things because I don’t know what it’s like to worry about the big things. I will never have their rhythm, their grace, their dignity, or their strength. But I will continue to try.