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.

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 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.

This is Part 2 of 2 blogposts about financial inclusion and savings behaviors in teh Philippines: https://www.imtfi.uci.edu/research/2014/opiniano_ang.php

Project abastract: This mixed methods action research from the Philippines that was supported by the IMTFI sought to determine if financial inclusion is a factor for remitters’ and remittance recipients’ investing in the rural hometown. Overseas remittances are a development resource for the countries where overseas migrants come from —but so are the rural communities where they were born. Overseas migrants even maintain a relationship with their rural communities since their families reside there, and they still receive remittances from breadwinners abroad. Is the rural community’s socio-economic and investment conditions conducive for overseas townmates and their households to invest in? But do these rural folk, with or without overseas remittances, have financial aptitude levels that can empower them to save and invest their surplus earnings in the place that they are familiar with? With rural financial institutions also coming in to the picture to lure this segment of the rural market called overseas migrants, are these banks, cooperatives and microfinance institutions capturing this rural hometown’s migrant market?

To answer these questions, the researchers utilized a mixed methods research tool tested in two earlier rounds. Called the Remittance Investment Climate Analysis in Rural Hometowns, RICART is a tool rural birthplaces, migrant organizations, civil society groups, financial institutions and local governments can use to determine ways of luring overseas-based townmates for savings and investments. Quantitative market surveys were done targeting overseas migrants and migrant and non-migrant households who were physically present in the community, and these were subjected to a logit regression to determine probabilities of saving, investing and doing business in the rural hometown. A rapid rural appraisal was also done to get secondary data that is under the guidance of a Local Competitiveness Framework that was developed locally by the Philippine government and some academics. Key informant interviews with local officials also guided the rapid rural appraisal. Finally, a focus group discussion with some migrant household heads helped researchers conduct a phenomenography of the similarities and differences surrounding rural investing decisions by remittance recipients. Putting all these data together through data triangulation enabled the researchers to present a Remittance Investment Climate (ReIC) analysis of the locality, the first-class municipality of Guiguinto in Bulacan province in the Philippines (an hour’s drive north of the Philippine capital Manila).

This mixed methods action research from the Philippines that was supported by the IMTFI sought to determine if financial inclusion is a factor for remitters’ and remittance recipients’ investing in the rural hometown. Overseas remittances are a development resource for the countries where overseas migrants come from —but so are the rural communities where they were born. Overseas migrants even maintain a relationship with their rural communities since their families reside there, and they still receive remittances from breadwinners abroad. Is the rural community’s socio-economic and investment conditions conducive for overseas townmates and their households to invest in? But do these rural folk, with or without overseas remittances, have financial aptitude levels that can empower them to save and invest their surplus earnings in the place that they are familiar with? With rural financial institutions also coming in to the picture to lure this segment of the rural market called overseas migrants, are these banks, cooperatives and microfinance institutions capturing this rural hometown’s migrant market?

To answer these questions, the researchers utilized a mixed methods research tool tested in two earlier rounds. Called the Remittance Investment Climate Analysis in Rural Hometowns, RICART is a tool rural birthplaces, migrant organizations, civil society groups, financial institutions and local governments can use to determine ways of luring overseas-based townmates for savings and investments. Quantitative market surveys were done targeting overseas migrants and migrant and non-migrant households who were physically present in the community, and these were subjected to a logit regression to determine probabilities of saving, investing and doing business in the rural hometown. A rapid rural appraisal was also done to get secondary data that is under the guidance of a Local Competitiveness Framework that was developed locally by the Philippine government and some academics. Key informant interviews with local officials also guided the rapid rural appraisal. Finally, a focus group discussion with some migrant household heads helped researchers conduct a phenomenography of the similarities and differences surrounding rural investing decisions by remittance recipients. Putting all these data together through data triangulation enabled the researchers to present a Remittance Investment Climate (ReIC) analysis of the locality, the first-class municipality of Guiguinto in Bulacan province in the Philippines (an hour’s drive north of the Philippine capital Manila).

This 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 produces 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.

Our study aims to test whether and how mental accounting and default mechanisms improve the ability of poor households to save in the formal financial system, cope with negative shocks, and invest in health and education. We are also interested in testing whether making the financial lives of the poor easier has an effect on their cognitive system, and if this, in turn, affects their welfare. Designing savings tools that help the poor to save is a global challenge that could benefit many. The Mexican antipoverty program Oportunidades delivers conditional cash transfers to its beneficiaries via direct deposits into savings accounts. We plan to exploit this key feature of the program to evaluate the potential of default and mental accounting mechanisms for a vulnerable population. Our results will help design better development policies associated with the delivery of conditional cash transfers programs or other government programs that make regular transfer payments to individuals.  

The popularity and use of Mobile Money is increasing in Africa, indicating a trend towards cashlessness in the continent’s developing economies. The Central Bank of Zambia redenominated the Kwacha (Zambian National Currency) in 2013. This decrease in the volume (but not value) of notes handled on a daily basis at both individual and institutional levels has eliminated the burdens associated with low value currencies. It was unclear whether a more convenient medium of exchange would impact the adoption of Mobile Money, which was introduced to Zambians around the same time. The current study examined the initial impact of the 2013 currency redenomination of the Zambian national currency the Kwacha on Mobile Money use.

Results showed that (i) the new currency was generally favored over the old currency; (ii) the new notes were perceived as easier to use; (iii) the new coins were perceived as burdensome to use and carry around; and(ii) a majority of Zambians did not use Mobile Money in the initial aftermath of the currency rebasement. The initial slow adoption of mobile money was influenced by (i) the limited “payment spaces” in which it could be used, (ii) lack of awareness, and (iii) unclear distinctions between online banking and mobile money for banked consumers. The majority of identified Mobile Money users in our study used it as a means to send remittances.

In the year and a half since the fieldwork was conducted, mobile money use has increased in Zambia, indicating that the accessibility of a more portable version of legal tender alone does not serve as a technology- adoption barrier.