The Digital World and a Human Economy: Mobile Money and Socio-Economic Development in Africa
Mobile money has enabled financial inclusion, giving people access to transparent digital transactions and the tools to better manage their financial lives. It has also been a gateway to other financial services, such as insurance, savings, and credit. The impact of mobile money has been felt well beyond transactions and accounts: people’s lives have been enriched by greater personal security, a sense of empowerment, and more.
There is a lot to like about the report’s optimism, given that mobile money has greater potential to serve the needs of poor people in Africa and elsewhere than other forms of money that have emerged recently.
Also heartening is the report’s attention to the importance of careful understanding of these needs in order to provide the poor, wherever they are, with appropriate financial services. As much literature on mobile money’s promise does, the report stresses the value of ‘mining’ the data that becomes available to fin-tech companies in consequence of people’s use of the internet. As smartphones become cheaper and their penetration across Africa increases, data-mining will allow service providers to build profiles of individual users’ needs and preferences in order to tailor the services – including loans and insurance – offered them.
Such data-mining is clearly important, particularly as service providers move beyond mobile money’s basic, and earliest, function as facilitator of P2P money transfers. But it is worth noting that GSMA’s report acknowledges that most mobile-money usage in Africa (by volume and value) still comprises money transfers. Mining ‘in-system’ data is unlikely to be sufficient here, and it will also be necessary to gain information about the needs, wants and aspirations of poor people by other means.
A straightforward example is provided by Woldmariam’s first-hand, on-the-ground research in Ethiopia. He discovered that many rural recipients of P2P mobile transfers struggle because they are illiterate. When remittances came in cash, they could distinguish bank notes by their distinctive colours. But they find numbers on a small screen indecipherable, leading Woldmariam to ask if fin-tech innovators cannot come up with an appropriate digital solution.
His research is in line with our Human Economy approach, which starts by asking what poor people do to insert themselves into an economy which is stacked against them. Our research shows that people in Lesotho (as in many other places) save money by forming rotating associations of various sizes. ROSCAs are meaningful to them because they are based on a longstanding local cultural logic which engenders trust. But – as everywhere – trust is sometimes undermined by unscrupulous association members aiming to benefit at their fellows’ expense. To counter this, people try to devise ways to inform all members quickly whenever there is movement of money out of the bank accounts in which they now commonly store their collective funds. So the most important contribution open to the mobile money industry may not be to offer a facility for digital saving on the simple assumption that it will fill a vacuum. Could innovators not build on what is already in place, by assisting people to make existing savings associations more secure?
The mobile-money literature makes great play of the roll-out of exciting new innovations. But since P2P transfers still dominate in Africa, it makes sense to pay considerable attention to those aspects of this infrastructure which could be improved. Our research in Lesotho shows that people battle with the lack of liquidity in agent networks – they cannot ‘pay in’ or ‘pay out’ readily because the small agents in rural areas do not have sufficient float on hand to meet their requirements. The literature talks about a shift across Africa from small, independent agents to agency banks as the principal actors in agency networks. But whether involving the banks more closely is a good idea is an open question. From our vantage, we are deeply aware that the big banks played no small part in killing mobile money, and its potential to serve the poor, in South Africa.
The ‘business case’ for mobile money?
Like most of the literature, the GSMA report is built on the ‘business case’ for mobile money. There is a certain, undeniable logic to this case: if private business couldn’t profit from mobile money it would be unlikely to enter the field. But it is worth remembering that as recently as fifty years ago, the need to make a ‘business case’ for everything, including the fight against global poverty and inequality, was by no means as pronounced. The dominant understanding then was that the purpose of the economy, seen as so many national economies, was to improve the lives of the citizens of nation-states, and that private business, the state and the people should co-operate, and make compromises, to that end.
This vision was realised most fully in Western Europe and North America after World War II, but it found echoes behind the Iron Curtain, and also became the goal to be striven for in the newly-independent states of Asia and Africa. But it has fallen by the wayside since the 1970s, replaced by the notion that success in attaining socio-economic goals in a global economy depends on private business retaining its position as a ‘winner’. Hence the need for elaborate promises that initiatives such as the development of mobile money will lead to ‘win-win’ outcomes from which business will benefit as much as the poor.
But whether the poor will benefit as much as business is a moot point. The present era produces abundant evidence that big business, in particular, does not play by the rules. The ‘free market’ is corporate ideology, and in practice the corporations collude in all manner of ways to rig the market against the interests of competitors, states, and the people. This is not necessarily true of all businesses: small fin-tech start-ups are bound to be more attuned to their prospective customers than large corporations which are beholden to shareholders with limited liability and no local knowledge. South Africa had a golden opportunity to use mobile money to distribute social grants to millions of new recipients after 2012. Instead the state contracted distribution to a large financial company which opened a bank account for every recipient, and gave its subsidiaries access to the information in each account in order to target recipients for particular services.
Small wonder that, in this case, the much-vaunted instant loan facilities simply added to the debt burden on the poor.
Conclusion Our ‘human economy’ approach starts with an emphasis on what the billions of poor people in Africa and elsewhere do off their own bat to insert themselves into an unequal global economy. Since they know their own circumstances better than even well-intentioned outsiders ever will, building on what they do for themselves is probably the best way to address the challenge of poverty and inequality.
On the other hand, poor people cannot solve these challenges alone. They need the input of big bureaucracy and big money, but allies from these camps are not easy to find. Hence the need for critical, but not dogmatic, scrutiny of the discourses by which states and corporations seek to explain their actions to address these problems. In this regard a ‘human economy’ approach looks carefully at the ‘business case for mobile money’ and its assurances about ‘win-win’ outcomes.
Our argument is that states, and state-aligned institutions such as Central Banks, could play a positive role in the development of mobile money by taking notice of the points raised in this article.
About the Authors
Dr. Sean Maliehe is an economic historian and ethnographer of commerce and 'mobile money'. He joined the Human Economy Research Program as a postdoctoral research fellow in January 2016 having arrived in 2012 as a PhD student. Sean's postdoctoral research is based on the emergence of 'mobile money' in southern Africa. He explores the development of 'mobile money' in Lesotho and South Africa, and uses the township of Diepsloot (north of Johannesburg) as his ethnographic site.
Prof. John Sharp is the South Africa Director of the Human Economy Research Programme, Senior Research Fellow in the Centre for the Advancement of Scholarship, and Emeritus Professor of Social Anthropology at the University of Pretoria.