Institute for Money, Technology & Financial Inclusion

This is the 2-page executive summary for the IMTFI White Paper Report: The New Financial Architecture and the Public Mobile Money System in Ecuador

Current Ecuadorian President Rafael Correa’s broader political program called the “Citizens’ Revolution,” has prompted a restructuring process of its domestic financial architecture through a combination of legal reforms, new public policies, and the transformation of the national payments system. As part of this endeavor, a new mobile money (MM) system is being introduced to diversify the available forms of payment. The high percentage of Ecuador’s unbanked population (70.5%) in comparison to the increased permeation of cellphone coverage in Ecuador (16.9 million cell phones for 15.4 million people) indicates the tractability of this project at the national level. The MM system will be executed and administered by the Central Bank of Ecuador(BCE), making it the first ever publicly mandated and Central Bank-administrated mobile payments scheme to be implemented in the world. MM is thus conceived as a liability of the state, with all the qualities and functions of legal tender.

Inspired by 21st century socialism, this MM system is based on the idea that money and systems of finance and payment are public goods. The BCE’s objective is to avoid the privatization of MM because other cases have indicated that mobile operators tend to become the sole providers of services, generating monopolistic and oligopolistic practices. Guided by a constitutional mandate to remake Ecuador’s economy as a “popular and solidarity economy” the CBE’s MM model seeks public benefit, financial inclusion of marginalized populations and poverty reduction. The project expects its main users to be savings and credit cooperatives, community organizations, family businesses, informal economic actors, and others who have been traditionally excluded from the banking system.

This is the 2-page executive summary for the IMTFI Working Paper: The Impact of Pure Mobile Micro-financing on the Poor: Kenya's Musoni Experience.

Musoni (‘M’ for mobile and ‘Usoni’ for future) is a microfinance institution in Kenya that offers all its services exclusively through mobile technology. Most other MFIs have established brick and mortar operations and mobile money (MM) only complements their traditional ways of serving clients. Musoni is the first in the world to achieve this kind of cashless automation and has provided a paradigm shift in the way MFIs operate. This innovative approach eliminates some administrative costs and makes transactions more efficient for both consumers and the MFI. Musoni’s clients are poor workers, some of whom run small businesses. The clients sign up in groups and seek low value loans from the MFI. Musoni believes that customer loyalty increases when the frequency of client group meetings is reduced leaving customers with more time to themselves and for their businesses.

This is the 2-page executive summary for the IMTFI Working Paper: What Drives Behavioral Intention of Mobile Money Adoption? The Case of Ancient Susu Saving Operations in Ghana.

The susu (deposit) savings scheme has traditionally been an important, effective way for low-income and financially-excluded people in Ghana to save money. It is not cost-effective for formal banking institutions to handle large volumes of small deposits or to physically provide service to isolated rural areas, and the cost of sending savings deposits to banks is prohibitive, effectively precluding poor people in urban and rural areas from using them.

Susu savings schemes provide a convenient, informal, flexible, and cost-effective mechanism for individuals to save money on a regular basis. The rotating savings andcredit association is a type of susu scheme in which an operator reaches an agreement with a user regarding the amount to be collected, frequency of collection, and operator’s commission. Collectors for the susu operator ‘walk’ to visit their users (on foot, bicycle, or motor bike) on a daily or weekly basis to collect their savings, and record it on a card often kept by the users. This is convenient for both parties, and creates a social contract based on mutual trust and obligating the user to physically give the money to the collector, and the collector to visit the user to collect it and then return the accumulated savings to them at the end of the month. No legal documentation is involved.

This is the 2-page executive summary for the IMTFI Working Paper: Patterns of Financial Behavior Among Rural and Urban Microfinance Clients: Evidence from Tamil Nadu, India.

Over the past decade, development planners in India and beyond have increased their efforts at targetting financial inclusion as a means of poverty alleviation. However, the nature of poverty and deprivation, the livelihoods, and the financial needs of the poor vary widely across rural and urban India. The study by IMTFI researchers Lakshmi Kumar and Jyoti Prasad Mukhopadhay seeks to identify some key differences in the financial behavior of the rural and urban poor as an essential step towards designing more targeted financial tools. The study used financial diaries to collect data on income, consumption, savings, loans, and insurance from a sample of poor households over a period of six months.

This is the 2-page executive summary for the IMTFI Working Paper: Social Networks of Mobile Money in Kenya.

Kenya is one of the few countries in the world where mobile money is a part of everyday life. There are more than 30 million mobile phones in a country of 40 million people and 20 million mobile money accounts. Sibel Kusimba and her team worked with 300 Western Kenyan town and village residents and also involved Kenyans in Chicago who send remittances back to these communities.

Mobile money is often described as “banking.” Yet most unbanked people in Western Kenya consider mobile money a powerful social tool as much as an economic one – an adjunct to their mobile phones, through which they create relationships by sending money and airtime gifts. “Banking” to many in Kenya conveys the opposite idea – that of affluent people putting “out of circulation” large amounts of money.

A mobile money remittance is a way of storing value until it is returned through a reciprocal gift. Though designed for person-to-person transfers, mobile money is used in savings groups, to circulate resources in families, and to amass contributions at ceremonies. “Sent” money contributes to a circulating resource pool that others can draw upon for a variety of needs.

This is the 2-page executive summary from the IMTFI White Paper, “embracing informality: designing financial services for China’s marginalized”.

This is the 2-page executive summary for the IMTFI Working Paper: Effects of Mobile Money on the Savings Practices of Low-Income Users - the Indian Experience by Mani Nandhi.

In 2011, 65% of India’s population did not have access to a bank account. Nevertheless, India’s socalled “unbanked” save by other means for everyday expenditures and emergencies. Traditional forms of saving include leaving money in gulaks (Fig. 1), with trusted friends or relatives, or in savings clubs. Many of these practices, however, are often risky or inefficient.

From Ghana to Papua New Guinea, mobile money services have emerged as a safer and more efficient savings mechanism. Mobile money provides a means of financial inclusion for the unbanked. In India, there are now six mobile money services enabling banking at very low cost.

This is the 2-page executive summary for the IMTFI Working Paper: Understanding Social Relations and Payments Among the Poor in Ethiopia.

Most studies of mobile money for the poor pay little attention to the complex relationships of people on the ground with money and financial services. In order to better inform the design of new mobile money systems for the purpose of financial inclusion, this research project by Woldmariam F. Mesfin investigates social relationships and payment practices among the poor in rural Ethiopia. A study of existing payment practices in Ethiopia is pertinent especially given the recent proliferation of various mobile money initiatives. Two key questions face mobile money professionals and scholars of financial inclusion alike: How will these mobile money initiatives reach out to the local population? How will they incorporate existing (albeit unbanked) financial practices?

In order to inform new designs for mobile money products and services about local financial institutions and practices, this study explores the ecology of social payments—informal savings and loans institutions, monetary and non-monetary gifts, payments to people with power and to deities—while identifying some key challenges to fulfilling these payments.

This is the 2-page executive summary highlighting comparative costs of transferring money through formal and informal channels from the IMTFI White Paper, “Mobile Money in Haiti: Potentials and Challenges”.

Time and cost constitute one of the key barriers to circulating goods and money in Haiti.

For the banked, the lines and time it takes to access banking services have given rise to a variety of strategies to negotiate and sometimes avoid the lines. Banking in Haiti requires planning, money, and social networks as who you know at the bank can also make a difference on how fast one receives service. Most bank and transfer services operate in major cities and towns. For individuals who reside in places where these services are not available, sending and receiving money can be an expensive and time consuming undertaking.

The vast majority of Haitians are “unbanked”, and thus save and circulate money outside of the formal banking system. Many of the unbanked live outside of Port-au-Prince and rely extensively upon informal social networks and alternative infrastructures to move money.