by Gianluca Iazzolino, Firoz Lalji Centre for Africa, LSE
Sintesi
La diffusione dei servizi finanziari digitali e, in particolare, della moneta virtuale nelle economie emergenti africane è ampiamente documentata. L’autore fornisce infatti numerosi esempi concreti del loro utilizzo e discute i molteplici benefici che essi possono apportare. Tuttavia, sembra che i benefici di tali sistemi non siano stati omogeneamente distribuiti da un punto di vista sia territoriale che sociale. Di conseguenza, in alcuni paesi la moneta digitale si è largamente diffusa, mentre in altri stenta a decollare. Allo stesso tempo, stanno sorgendo dubbi sul grado di inclusione sociale che essa porta con sé. L’ efficacia ed il grado di inclusione sociale dei sistemi finanziari digitali dipendono infatti dal contesto specifico ed è verso questi orizzonti che la ricerca futura dovrebbe dirigersi.
In the outskirts of Hargeisa, the capital of Somaliland, an unrecognised country in the Horn of Africa, livestock traders can purchase camels, cattle and goats by simply transferring the agreed amount from the mobile handset of the buyer to the one of the seller. The transactions are performed through the mobile money service Zaad, offered by the local mobile network operator (MNO) Telesom. On the other side of the continent, in Senegal, the beneficiaries of the national social protection programme, Bourse Familiale, are able to receive their social security allowance directly on the mobile wallets made available by Orange, a leading MNO in West Africa. In Eastern Uganda, initiatives are being rolled out to digitise the value chain of two major cash crops, coffee and tea, and enable farming cooperatives to do without, or at least reduce, using cash. Eventually, Kenyans with no access to the electric grid can pay for the lease of solar-powered appliances, and gradually move up the energy ladder, with small payments remotely performed through the mobile-based service M-Kopa.
These are just a few examples from Africa illustrating how mobile phones are being used to access a broad range of financial services. Since Safaricom, an MNO, first launched M-Pesa in Kenya in 2007 to allow the transfer of money via mobile handset, there has been a booming amount of interest in the development of mobile money and, more broadly, digital financial services (DFS) for people for which banks were physically far away (because living in rural areas, for instance) or considered out of their reach (because seen as ‘only for the rich’). Today, it is hard to overestimate the popularity of DFS across emerging economies. Billboards advertising the services of MNOs (and typically depicting stashes of cash flying frictionless between mobile phones) punctuate urban and rural areas in Africa, South Asia and Latin America. Sub-Saharan Africa is leading the way, accounting for most of the 271 mobile money deployments tracked by the GSMA, the MNO industry association.
The GSMA is part of a constellation of organisations and think-tanks, including CGAP, the Better than Cash Alliance, and UNCDF MM4P, bringing together private and state actors to extend the reach of financial services to the world’s unbanked population. This mission is driven by the assumption that accessing financial services like credit and insurance is a critical step to achieve a variety of developmental goals. A ‘financial inclusion’ narrative has thus emerged from the conversation of international organisations, central banks, banking institutions, MNOs, payment providers, and a new, and fast-growing, breed of financial technology companies (Fintech). Taking stock of the limits, and shortcomings, of microfinance, this perspective has gained traction by building upon the momentous diffusion of information and communication technologies (ICTs), and mobile phones in particular, across emerging economies, positing that mobile money would leapfrog brick-and-mortar banks in developing countries such as mobile phones did with fixed lines. This has led, on the one hand, to the design of products to cater to the needs of low-income customers, keen to transfer money at a cheaper price than they used to with traditional money transfer operators, or avoid carrying cash in unsafe places; on the other, to policies, regulations and programmes to facilitate the creation of a conducive environment for DFS.
Over the past ten years, this landscape has gone through profound changes. While M-Pesa had thrived in a regulatory loophole (an MNO providing financial services was uncharted waters for the Kenyan Central Bank), regulators have recently started catching up. Banks, initially caught by surprise by the foray of mobile money, have eventually entered the game, partnering with fintechs and leveraging the opportunities opened up by the diffusion of smartphones (which allow users to access financial services not only through a SIM card, but also through an app). Technological innovations, such as the blockchain, a technology based on distributed ledgers, are being integrated into the design of services to facilitate remittances.
Most assessments of DFS have hitherto focused on the positive implications for different segments of customers, highlighting benefits such as facilitating and reducing the costs of long-distance transactions, allowing greater privacy to women (who can thus keep their savings in their own mobile wallet), and enhancing the transparency of the payments (a particularly significant aspect in the case of cash transfers). Moreover, the diffusion of mobile money has contributed to the creation of local jobs, mostly in agent outlets (as of December 2014, there were 124,000 M-PESA agents in Kenya). However, as the hype around mobile money in emerging economies is gradually settling down, more nuanced evaluations of the long-term socioeconomic implications are emerging, vis-à-vis new evidence that is forcing DFS pundits to reconsider their assumptions and approaches.
An overarching lesson drawn in recent years is that context matters, and that a recipe that has proven successful in a place cannot be replicated elsewhere without adjustments. Take Kenya, where 25 million people (out of a population of 45 million) had performed at least an operation on M-Pesa as of December 2014. The Eastern African country is often touted as a successful example of the appeal of DFS for the unbanked, but it also shows that local specificities have to be accounted for to explain both adoption and resistance to mobile money. For instance, while East African mobile money users tend to perform operations from their mobile wallet, in French-speaking West Africa most transactions are performed over-the-counter (OTC), or through the help of an agent. In other countries, mobile money has struggled to take off (this is the case of Nigeria) or has failed altogether (such as in South Africa).
A particularly pressing topic that needs further investigation is whether the benefits brought about by DFS are evenly distributed or, instead of the win-win situation often portrayed, the digitisation of payment risks entrenching pre-existing inequalities and exclusion. Indeed, international regulations require financial providers to adopt strict Know-your-customer (KYC) policies, which entails that those who want to open a mobile money account should produce a formal piece of identification. However, in most emerging economies women lag behind men in ID ownership – a fact that contributes to explaining the strong gender imbalance in accessing financial services. The gap between urban and rural areas, although reduced, still exists, mostly because private actors need a solid business case to invest in physical and human infrastructures (such as agent networks), and this may be lower in hard-to-reach areas (such as mountainous or desertic areas) or among groups typically transacting amount too low to be captured electronically (such as subsistence farmers or small-scale pastoralists). The expectations that digital money will increasingly replace cash have so far proven misplaced: even in Kenya, most payments are still single-loop (which means that users tend to withdraw as soon as they receive a payment into their mobile wallet). Cash still dominates in settings in which gifts and contributions lubricate social interactions. Recent studies on frugal innovation (a category which refers to business models and services for the Bottom of the Pyramid, and encompassing also mobile money) and informal workers have emphasised the risk of adverse incorporation, in which control and value extraction are simply shifted from local informal intermediaries to corporate actors. Customer protection is bound to become an increasingly relevant topic as more advanced services are launched on the market. For instance, mobile-based lenders such as M-Shwari, Branch and First Access operate through apps that a prospective borrower would download on her mobile phone. The providers should be authorised to access data on social contacts (both on the mobile phone and on social media such as Facebook), financial practices (number of payments made and received, the average balance in the mobile wallet) and more general behaviours (the mobility of the user traced through the GPS). The data are thus analysed by algorithms that create a credit score and assess the level of risk of the user. The possibility to draw on the trails left behind by digital users enables financial providers, for the first time, to minimise the risk associated with lending to customers operating in the informal economy and with irregular income. However, algorithms ingrain some assumptions: for instance, having many friends on Facebook with a bad credit history would affect one’s credit score and therefore the possibility to get a loan. Moreover, there appears to be a correlation between digital credit and reckless borrowing, as suggested by the news, appeared on Kenyan newspapers in November 2016 that a record number of Kenyans had been blacklisted for outstanding mobile loans of less than 200 KSh (1.6 euros). There is no lost irony that those who were just digitally ‘included’ had been shortly blacklisted (and thus unable, at least for a while, to keep borrowing).
A research agenda on the current state of mobile money, and on its future, should, therefore, revolve around the increasing datafication of financial inclusion at the bottom of the pyramid, intended as the extraction of value from the mining, the processing and the marketisation of personal data. To what extent poor financial consumers are aware of the data produced by their digital behaviours? How can policymakers design customer protection regulations that return to customers full control of their data? And what is the articulation, and the frictions, between social and financial inclusion?
