Insights on the psychology of cash money – Demonetization vs Financial Inclusion

The flurry of commentary on the Great Indian Demonetization of November 2016 has thrown up some nuggets of insight worth considering more deeply.

Santosh Desai explores the psychology of cash money in the Times of India blog, linking the need for tangible evidence of income to physical labour, as opposed to those of us with the contextual knowledge to understand the virtual concept i.e. digital currency.

“…there is another aspect of this situation that needs more reflection- the nature of the relationship we enjoy with cash. Cash is not merely a symbolic representation of value. Cash is the idea of value captured and owned. It is the product of labour that is an entity by itself and becomes much more than what it can buy. Sitting on a pile of cash gives pleasure both metaphorical and real.”

“…there is some value that is placed on the device of currency notes over and above the value that it signifies.”

This aspect has not been looked at deeply enough, imho, when financial inclusion is talked about, particularly in the context of digital solutions. I suspect that therein will lie behavioural insights that could conceivably drive design changes that lower the barriers to adoption in the strategies to introduce digital currencies and mobile monies to hitherto unbanked populations.

Earning money needs to be signified concretely. Those whose life’s earnings are in the form of a few high value currency notes, do not decode demonetization in quite the same way as those used to money in its conceptual form. The idea that it is possible to de-legitimise their life’s labour is to shake the foundations on which one’s life is constructed. What if some money is not exchanged? What if some paperwork, that bane of those living on the margins, is incomplete?

What if the mobile phone’s battery dies? Do my hard earned monies disappear like other unsaved data?

Trust in technology is a function of our contextual knowledge – our immersion in an environment saturated with electronic communication and screens of all types and purposes provides us with conceptual frameworks that are entirely different from someone whose daily labour is on the farm, or at a mechanic’s garage.

While those who are financially excluded might not face demonetization i.e. the de-legitimization of their labour, as Desai mentions above, the current attempts to convert their cash intensive habits into digital form via various “cashless” initiatives overlook the psychology of cash. Regardless of locale, those at the margins (the excluded) have high levels of mistrust in the system, through their experiences with institutions and the system, over time and history.

The talk of ‘cashless’ is easy, but it ignores that there is a cultural dimension to the physicality of cash. Digital wallets operate on a transfer of intention, where a promise to pay gets converted into an intention to buy. For this to work at scale, one needs to have become comfortable with the idea of surplus and develop the confidence that money will come without having to struggle or having to think about it all the time. One needs to develop trust in institutions, in a context where the evidence around is overwhelmingly to the contrary.

I suspect that if this subject was explored further, we would discover that where mobile money has succeeded, such as in East Africa, the institution that was trusted was the telco – the mobile service operator, and that the early stages of adoption have a different narrative from that being used currently in entirely new markets where mobile money still struggles to penetrate. India and South Africa are two such places where the unbanked and the financially excluded have reasons of history to develop high mistrust of the systems of the privileged.

To convert one’s worth into worthlessness, even if for a small period is to make everyone nervous. Psychologically, money works on a convention of mutual deception. We agree to call something money, and that is good enough. But to have the thinness of this convention exposed in such a way is to cause great anxiety.

The transition to a cashless future can be made gentler and more accommodating to their fears and concerns, generating a sense of security and commitment, with some empathy for an entirely different world-view and life experience.

Design of Digital Financial Services for Inclusion Needs More Respect and Humility to Succeed

Source: https://twitter.com/SharonKith

In the past week alone, I’ve seen three glaring cases of unquestioned assumptions around the design and implementation of Digital Financial Service (DFS) particularly for financial inclusion, but also otherwise. This gives rise to the question whether the industry is prepared to undertake the mission they have set for themselves.

The first is that their technology, in whatever form – the app, the device, the USSD service – will and should (unquestioned, remember) disrupt people’s behaviour completely. While it is true that using a mobile phone to make a payment instead of cash is a change in behaviour, or rather, habit, it is not the same as type of change as transforming the entire culture to become more individualistic as opposed to communal; or less relationship oriented and more contractually transactional. I am finding the words clumsy to use and hope that one of you reading this has the expert knowledge at their fingertips to better articulate what I am attempting to describe. Hofstede had a clue.

There is a fundamental arrogance in framing the need for human intermediaries in the digital financial service transaction model as a “necessary evil” – sounds like a toddler’s bad habit that they need to be weaned off in order to become adults. The bulk of those who are financially excluded live in cultures where human contact and social relationships within the community are more important than faceless, meaningless transactions by the individual isolated with their techno-utopian device. To expect this to change to conform to your pretty little use case diagram is rather presumptuous, if not downright offensive.

The second is more generalized. Its a blithe disregard for any differences in context and operating environment between the more formal economies and those where the informal sector is the majority. Nobody pauses to question whether there are differences that need to be considered. Its like landing on Mars expecting the same atmosphere. This report on the global emergence of a cashless economy ends with offering 3 implications of 4 megatrends.

If indeed two of these implications are the outcome of the single factor of increasing financial inclusion, then how can they be lumped together with the third implication which is clearly one meant for more advanced consumer markets? The interpretation on transaction volume and pricing behaviour is thus rendered inaccurate as it does not distinguish between the digital payment ecosystem currently prevalent in emerging markets from that existing in advanced markets.

When your fundamental premise has no foundation, your extrapolations and projections will not only be in error, but the unquestioned starting assumptions will snowball along the strategy and product development chain leading to a vast gaping void between your original intent and the actions taken, much less the outcomes aimed at.

Lastly, when it comes to fintech in the African context, there’s a pattern of analysis that is either too basic in its assumptions – mobile phones are good for digital financial services and nobody has actually noticed this fact because we never did; or, too ready to read the worst in a chart or the data. This leads to policy recommendations in 2016, ten years after Mpesa was introduced in Kenya, that offer up such insightful suggestions as “Africa must promote the use of mobiles to include the excluded financially.”

This is rather disheartening for the rest of us who have been watching the African digital financial economy move forward in leaps and bounds, in many ways far ahead of the rest of the world. It also takes the current conversation back to kindergarten level rather than the post graduate courses we could be discussing. Given the advancements already actively engaged with across the continent, isn’t it time that policy researchers took the trouble to come up to speed?

And given the importance of financial inclusion, isn’t it time that the stakeholders actively working on digital financial services took their target audience seriously, with some respect, and wee bit more humility? They might discover their efforts move forward much faster.

Rwanda launches cashless public transport payments – Will they succeed where Google failed in Kenya?

Public transport is going cashless in Kigali, Rwanda, with smart card payments and mobile money schemes being launched simultaneously with much fanfare. Can Kigali succeed where regional giant Kenya failed a couple of years ago?

Nairobi’s attempt to impose cashless payment technologies in public transport (particularly the matatus, ubiquitous white mini buses that ply the roads) began in mid 2013, when tech behemoth Google partnered with Equity Bank to launch the now defunct BebaPay card. What happened next can only be called a case study of how not to introduce service innovation in the informal economy of sub Saharan Africa. And they weren’t the only ones, yet none of the contenders are still operational today.

“So what’s different about Rwanda’s approach, and what are its chances of success?”

The first thing I noticed is that the NFC enabled smart cards are being validated by the device attached to the vehicle, as can be seen in the photograph above.

Read On…

‘Mpesa si pesa’ – mobile money’s collision with informal sector’s cash culture

Ever since mobile money (MM) came along, ‘cashless’ is all the rage in East Africa. Money experts have a sack-full of reasons why mobile money is good for the economy. The truth is, however, making a case for MM is easy – no doubt, but, one perspective that is often left out in almost all the headlines is how people interact with it (MM). In particular, those living or working in rural/peri-urban “informal sector” micro-economies – matatu drivers, Mama mboga, boda boda guys.

Karantina, Kenya [Photo Credit: Niti Bhan]

This segment is important for several reasons

It makes up 55 per cent of Sub-Saharan Africa’s GDP and 80 per cent of the labour force according to Afdb’s Recognizing Africa’s Informal Sector
Sub Saharan markets are mostly dual economies – a mix of formal and informal markets
90% of all transactions in informal markets are conducted in cash money.
The unbanked and underbanked are more likely to be found here

Valuable insights, unlikely to come up in the comfort of an office, have sprung out of my regular interactions with this segment.

Listening to the people

Consider Gichage for instance, a fruit vendor in Nairobi who says

“Mpesa si pesa” swahili for ‘Mpesa is NOT money’,

right after I ask to pay for my 3 mangoes via mobile money. Or, the same look I get whenever I ask to make low value payments for boda boda flights or lunch at mama mboga’s (less than 200 KES/ $ 3).

“Hauna cash?” – Don’t you have cash?

“Utatuma na ya kutoa?” – Will you send with additional fees to cover withdrawal charges?

Almost always, a quick withdrawal into cash at the local MM agent (at a cost of time and money) becomes necessary to settle my bills. The rest of the time, I oblige and pay dearly to have them accept my money.

Gleaning insights from the ground

Here, it seems I am a foreigner because, unlike the fancy malls where I pay with card/cash/mobile money – cash (and social capital) are the norm. What’s more, it is not just within this interaction space, but on the fringes as well where, the infomal crosses path with formal and semi-formal sectors & actors. My electronic money – MM and debit cards – is no good here – arguably, “si pesa”

http://ethnographymatters.net/blog/2014/02/20/a-shift-in-the-business-environment-that-ethnographers-cant-ignore/

Are attempts at replacing cash with digital money, deep down, really about taking on ecosystems? – systems comprising of actors who interact and transact mostly in cash, social capital based debt instruments, community currencies or what have you.

If it is anything like the image above, where cash relationships are a complex web of bubble collisions, then, replacing cash is a greater challenge than we think.

This post is a guest blog by Michael Kimani (@pesa_africa) founder of the African Digital Currency Association

RIP Google BebaPay – Requiem for a cashless payment system

Less than a year after going live, Google is closing down the BebaPay smart card which was introduced as an NFC based cashless payment mechanism for Nairobi’s public transport.

Last year, I’d analyzed the context and the operating environment in which they’d launched their service, on hearing the news that they’d been struggling to gain traction. I’d gone on to add my thoughts on designing services for the informal economy, where a vast majority manage on irregular incomes and transactions are primarily in cash.

Today we note that Kenyan BebaPay card holders have been advised to use up any remaining balance and/or turn in their smart cards for a prepaid MasterCard, issued by the same bank that Google partnered with. We also note that Google had shut down their payments pilot in The Philippines and is apparently planning to step out of the payments space.

This gives rise to food for thought – are they shutting these initiatives down because of a pivot in business strategy away from payments, leaving the way open for MasterCard? Or, and this is of interest to me from the design planning perspective, did their inhouse approach to new product development create a situation where they found themselves struggling to lower barriers to user adoption of their services, and thus led to their decision to withdraw from the entire playing field?

I have the experience of a deep dive or immersion – in the operating environments of both Kenya and The Phillippines – exploring the way people manage their finances whilst juggling their irregular income streams to minimize volatility and plan for their expenses. These new markets are so different from Google’s accustomed playing field that their usual approach to new product introductions may not be the right fit, if indeed they seek to expand their reach beyond their existing sphere of dominance.

On the interwebs, we have become accustomed to the concept of companies that launch products in beta, still buggy and finding their way. Over time, we have also come to recognize Google’s habits of shutting down services, regardless of how much we may weep or wail –> Google’s RSS Reader, for example, is one still missed by many in the old skool.

But once you step away from your tech savvy audience in the broadband segments, to the millions of noobs coming online, with an entirely different contextual knowledge of technology and its practices, I don’t believe you can summarily make the same moves you could have earlier, without there being a bigger backlash.

700,000 commuters have been left stranded in Nairobi, forced to find a replacement for an innovative tech solution that they were forced to adopt in the first place when the government put their cashless policy in place for bus fares.

This is the real world, and these are real people, struggling to make their way home after a hard day’s work trying to make a living.

This isn’t the minor inconvenience of not being able to use Reader’s free service to grab your favourite RSS feeds.

These are also new markets for the Google brand. One where reputation, commitment and longevity matters. These are not your regular customers tied to your GMail or other services, like the rest of us, that we still come back to search or check our mail even if you take away a toy or two from your playground. Particularly if you’re looking to provide a service for the lower income bracket in the developing world.

The Ugandan tech blog Dignited pointed out the demise of Google’s Trader – yet another service meant for the untapped and emerging newcomers to global connectivity – and this implies that a pattern of unreliable behaviour has already established itself in the enduser’s mindset.

They embraced your shiny new bauble you launched for them with such fanfare and then you yanked it away.

This won’t be an issue only for Google, tbh, its a part of the design culture for the digital era. And one, perhaps that needs a momentary rethink when considering the next billions coming online.

There is a larger conversation here, I can tell, on design, process and methodology and its evolution in response to more greatly intertwined world we live in. On the internet, which is now ever more global, the flap of that butterfly’s wing can indeed reach further than you envisioned.

The curious case of Google’s Beba Pay: a mobile payment app that users refuse to adopt

This week, news from Nairobi, that hotbed of mobile money innovation, opened up a Pandora’s box of reflections on payment plans, service design issues and the challenge of technology adoption in the mass markets of the African informal economy. None of these are ‘bad’ things in their own right, but taken together, they have resulted in a perfect storm for innovation planning.

Standard Digital published an article on the 23rd of February, titled “Matatu operators opposed BebaPay“, viz.,

Matatu operators are opposed to the BebaPay — a cashless payment system for commuters. The platform, launched last April by Equity Bank in conjunction with Google, is facing challenges.

A single sentence. Yet when parsed further, it contains many implications for what exactly has been happening in the informal transport sector in Kenya and the potential opportunities as well as possible repercussions for players in the mobile payments space.

The Background

Back in September 2013, the Kenyan government announced a ban on all cash payments for bus fares and this will go into effect on July 1st, 2014. By January of this year, there were debates by reputed bloggers on whether this move was even one that could conceivably be implemented realistically speaking, given that top down imposition of a technology has rarely prospered. Kachwanya said,

Yes cashless payment is much better and I personally have campaigned for it for years. But you can’t say you outlaw cash payment. There things which are good and need to be done but the society needs to evolve before going out right into some of those things. At this point in time cashless payment will be great for some in Kenya, but unfortunately majority of Kenyans are still not ready for such drastic shift. To start with, this should be left for market forces to determine the time and speed of adopting cashless mode of payment and not some sort of directive from the Government.

This is a move to formalize a sector of the informal economy, and conceptually a worthy one where benefits to multiple stakeholders – transport business owners, banks, payment service providers, the tax authorities and the government – are immediate and obvious. The real world challenges of attempting to bridge the formal and informal economies I will cover in a subsequent blogpost.

The Business Case

This has the potential to become an extremely lucrative opportunity for service providers and application platform owners, not to mention the intermediary banks. The formalization of an entire industry, public transport, has meant a new scramble for this legislated pie. Safaricom, the service provider behind MPesa, didn’t need investment in developing new services and simply started signing up bus operators and here are the numbers on the potential ROI,

The Economic Survey 2013 values Kenya’s road passenger transport business, which is dominated by matatus, buses, motorcycles (boda bodas) and three-wheelers popularly known as tuk tuks, at Sh205 billion. This means that providers of electronic payment systems as demanded by the Safaricom and Equity Bank stand to potentially earn upwards of Sh2 billion annually assuming a transaction processing fee of one per cent for payments.

And for Google and Equity Bank, who launched their product 6 months earlier, the opportunity is manifold:

Equity Bank said it is targeting the more than 1.5 million Nairobi residents who use public transport daily.

“This system will help eliminate the cost and risk of handling cash. It will also help formalisation of the transport sector because as banks, we can now fund this sector without fear since we will have the financial status statements of the industry players at hand,” said Equity Bank CEO James Mwangi.

The public transport sector is a key economic driver whose growth could power the economy, but has been held back by the disorderly nature of the industry.

Furthermore, stakeholders such as the matatu owners, are said to be pleased with the aspect of the payment system directly depositing passenger fares into their bank accounts, bypassing the crew of the matatu, eliminating opportunity for fraud, theft, corruption and loss of income.

The Technology and Process

From the same article linked above, here are the relevant snippets about BebaPay:

Equity Bank has partnered with global IT giant Google to introduce a cashless commuter fare payment system that involves the use of pre-paid plastic cards to settle public transport bills. The partnership marks Google’s first introduction in Kenya of its Near Field Communication (NFC) technology, which it has been promoting in some developed economies.

The card-based system dubbed BebaPay is based on Google’s NFC technology, which runs on the Android mobile phone operating system. Users will swipe pre-paid cards against android-based smart phones [with a special app] that will be given to public transport customer attendants.

The cards, Mr Mwangi said, will be available free of charge at Equity Bank service agents, where they can also be loaded with money. The cards can also be reloaded with cash through the bank’s mobile banking platform, without incurring additional cost, or through M-Pesa Paybill.

Matatu owners will be able to access the money paid by commuters immediately, and can access records of their bank accounts in real time through a system interface, allowing them to track the inflows from their vehicles.

The public service vehicle operators will be required to have the BebaPay application on smart phones in order to accept payment from commuters. Commuters on their part will receive free SMS receipts once they make payments.

On the look of its, given the context of the regulatory changes in the operating environment, the lucrative opportunity for a successful service and the ease of use and accessibility of the technology, the solution seems like a no brainer. In fact, both MasterCard and Family Bank have announced the impending launches of their own solutions during this past month as well. A scramble in a teacup, one could say.

The Discussion

So why does the news that matatu operators are unhappy with the system continue to make me hesitate to state that its just a matter of time and people are always unhappy with change and everybody will settle down and stop complaining and get used to it by the time the deadline in July rolls around?

The original article quotes some matatu operators as saying that the system leaves them with no cash in hand at the end of the day, or that they end up in the lockup due to some unhappy cop. Additionally, some are ‘losing’ their android smartphones as a way to revert back to cash transactions.

These are all ‘bad’ things – I use the air quotes deliberately as I am not in the habit of making value judgements on observed and existing user behaviour, merely documenting them as elements of the operating environment in which this system must succeed – and from the matatu owner’s perspective, per the article, the new payment systems will eliminate them.

Matatu Owners Association chairman Simon Kimutai, speaking during the launch of the card in April 2013, said the cashless system would help investors in the industry to control their cash flows and reduce losses that they incur from theft by matatu crews.

Yet, in an aside to a tweet by Emrys Schoemaker requesting a comparison of news articles against reality, one does note how everyone seems to be saying the same key talking points. Whether its the public relations person quoted in the very first article, or other major stakeholders in the subsequent ones, the benefits stated are not only all sounding alike but none of them benefit either of the end users – the operators of the transport vehicles and the commuters.

Where is the user’s voice in this huge shift that will impact their daily bread? And what is the benefit to commuter?

This all too common oversight in traditional approaches to product and service innovation, based as they are on opportunities created by top down regulations, is what has been bothering me all day about the news. The implications throughout have been that because commuters will have no choice but to adopt this new system of payment, all the various providers have to do is throw their services out there and make a big fanfare around the launch whilst signing up as many routes as possible.

The reality, which Kachwanya highlights,

There things which are good and need to be done but the society needs to evolve before going out right into some of those things. At this point in time cashless payment will be great for some in Kenya, but unfortunately majority of Kenyans are still not ready for such drastic shift.

is that even while the public transport industry might be regulated into the formal economy using the technology of mobile payments, there is still the rest of the informal economy, on which the majority of the commuter’s depend upon for their income, to take into consideration. And this one, which is being regulated, is one of the main arteries pumping blood into the that system, as matatus transport those informal business women and men to their markets, transport goods and materials and act as a conduit to the hubbub of the hustle.

Should a Google be thinking of phasing in the payment plan, taking behavioural change and the economic operating environment of the majority of those who must use their service into account?

Have these prepaid commuter card services given a thought to the way cash flows in the informal economy and the purchasing patterns of those who make their living within it?

If the matatu operators are refusing to adopt these services, were any alternatives offered in the system to replace the benefits that the existing cash based offered them?

You instantly remove all flexibility from an ecosystem, leaving it rigid and non-negotiable viz.,

“With the system, you cannot be left with some cash at the end of the day to even buy milk since we depend on salary,” said Peter Mwangi, a conductor on Route 33.

Despite aggressive marketing, BebaPay is still struggling with few matatus embracing it. Normally, the conductors and drivers only remit the amount collected from people who board the matatus at initial departure points.

Flexibility* in time and money is the characteristic that distinguishes the informal economy from teh formal for those who manage on irregular income streams from a variety of sources, and this is also why the prepaid business model is adopted by 96% of all mobile phone users on the African continent.*

Given the stakeholders are the government, the banks, the transport owners and the mobile payment service providers, whose responsibility is it to understand the elements of the informal economy that make it work and seek to identify the touchpoints to bridge the gap between the formal and informal successfully?

When a service fails to be adopted, such as BebaPay, is it the fault of Google’s service design process or Equity Bank’s? Is the problem with marketing or is it with “corruption in the system”?

Or, as I see it, are those the easy answers to this problem and a goodly dose of contextual understanding and user research to support the desk research and boardroom strategies could have offered insights on how to introduce formalization to a hitherto informal yet extremely critical industry?

I’ll explore both the issues from the point of view of the informal (or prepaid economy) and service design and innovation for these environments in subsequent posts.

*From my 5 years of user research documented here.

Spain’s woes show behaviours reverting to patterns from pre-formal economies

This recent WSJ article on the emergence of coping mechanisms among the economically challenged in Spain caught my attention today for a couple of reasons. What struck me first was the fact that time (labour) was becoming a viable alternate to money (cash) and this made me come to this blog to look up the cashless transactions category to see if there were any patterns I could spot or unearth any previous posts on barter systems from the erstwhile first world. I did not.

However, what I did notice instead was far more of a revelation. The behaviours that have been documented by the WSJ are not dissimilar to the existing patterns of fiscal management as seen in many rural parts of the developing world. In fact, one could go as far as to say that people are reverting to the way things were before the formal economy with its credit cards and financial tools came along. For example:

Cooperative economy based on community networks

Ms. Martín, who doesn’t own a car and can’t afford taxis, has relied on other time-bank members to give her lifts around town for her odd jobs and errands, as well as to help with house repairs. In return, she has cared for members’ elderly relatives, organized children’s parties and even hauled boxes for a member moving to a new house.

The time bank not only saves her cash, she says, but also lifts her spirits by making her feel “part of a community that’s taking some positive action during hard times.”

This research project documented something very similar back in The Philippines where community members volunteered their time and labour to help a member build a house, earning “credit” against the day when they would need the same.

Alternative currencies, barter mechanisms and REculture

Besides time banks, they include barter markets springing up in barrios, local currencies designed to spur the flagging retail economy, and charity networks that repurpose discarded goods.

And of course, the community as insurance

“We are inside of a pressure cooker, and all we can do is let some steam off so it doesn’t explode,” says Francisco Romero, head of the municipal employment office in the town Totana, which has launched an urban gardening project, a barter market and a local currency to help its jobless youth.

Carlos Bravo, a 35-year-old information technician who helped launched a small bank in central Madrid this year, says time banks have a different sort of value: helping urban Spaniards rekindle a sense of closeness among neighbors that facilitates asking for favors and other forms of mutual assistance.

“They’re people you can count on,” he says. “And in this time of economic crisis, for people who lack the resources to get things on their own, they know there are people here to give a helping hand.”

In the meantime, the formal economy strikes back, attempting to bite the hand it cannot feed, with mechanisms that have already shown their limitations.

“It’s a step backward not only for a euro country, but also for a developed country,” says José García Montalvo, an economics professor at the University of Pompeu Fabra in Barcelona.

Banks and social currencies, he says, can backfire on the broader economy since the income received from such arrangements often goes undeclared, therefore depriving the government of tax revenue. Social currencies and time banks also preclude taking on debt, adds Mr. García Montalvo, which in moderate levels can help people start businesses and access beneficial goods and services that they can’t afford upfront.

Can we, honestly, in today’s world, look around us and say, with a straight face, anymore, that “Debt is good”? The Spaniards, however, have their heads on their shoulders.

Ms. Martín, the unemployed 22-year-old, says she has struggled to find work in the career she studied for, caring for the physically incapacitated, and has had to settle for temporary jobs. But she sees hope in projects like the time bank and thinks they are the wave of the future in Spain.

“There has to be a change in the mentality for there to be a change in the country,” she says. “We can’t continue to spend resources we don’t have. We have to learn to live with less.”

Perhaps we can all learn something from Spain’s painfully earned experience.

The underlying principle of flexibility

The Economist writes about the proliferation of mobile money across the African continent, high lighting some aspects of its rapid adoption by the local population – 96% of whom are on prepaid or pay as you go mobile subscriptions. A new survey of global financial habits by the Gates Foundation, the World Bank and Gallup World Poll found, among other things, that:

Most mobile-phone transactions are tiny. Market traders, for example, use mobile phones to pay peasant farmers for a single bag of cassava or maize-meal. One of the most successful mobile-phone products in Kenya is a SIM card costing just a few cents—but that is all people need for the occasional transaction.

In the informal economy, where the need to control one’s time (duration, frequency and periodicity) and money (cash or kind) was paramount, and where already the vast majority of mobile phone users are on prepaid accounts, these mobile money transfer systems offer the flexibility that those on irregular income streams need, in order to manage their finances effectively. No credit checks or payslips or reams of banking paperwork involved.

I saw this informality in the social measurements used in the market – rough approximations of quantity and estimates of weight. I wondered in a different post what this willingness to be flexible might imply – where neither the buyer nor the seller were concerned about exact weights and measures, allowing a communal decision on fair price to emerge instead. Now it strikes me that the underlying principle of flexibility is what makes all of these models work.

Some concerns about ‘pay as you go’ lighting solutions in rural markets

Daily chores, rural Kenya 7 February 2012

Having just got back yesterday after immersion in an arid part of rural Kenya, it struck me after coming across yet another solar lighting solution with a pay as you go or prepaid business model that this may become a barrier for many subsistence farmers, most of whom are off the grid and so, are a potential market for such solutions.

Why, when people are already accustomed to small top up amounts for airtime or for regularly charging their phone?

First, because the phone is the asset. Owned in full by the customer. Whereas, I am not yet clear whether the plethora of lights available for use with a mobile payment will eventually belong to the customer or not, and when.

Second, those who live on their land relying on farming to support their families tend to minimize their need for cash money for a variety of reasons. Often they can go without if they must as staples are stored after harvest and barest minimum for survival is usually assured – even if the phone goes uncharged or topped up.

Third, most mobile money transfer systems such as Safaricom’s MPesa, have a fixed percentage of commision on each transfer regardless of amount. This can hurt at the amounts that the majority tend to top up (for example it costs about 20 shillings to charge your mobile phone or your average top up might also be that amount) and I’m sure that the whole benefit of pay as you go business models is the small amount each time. To give context, see the photograph above of the lady of the house walking an hour or two with 20 litres (20 kg) of water in order to save 20 shillings paid to the water seller.

I have felt that this business model was important and critical but now I question it. I have been tracking such models for around 3 years now and can see its value but at the same time, I have begun questioning whether it can be applied in blanket form for any and every thing. Sort of like what happened with sachets – shampoo worked and so did margarine. Next thing you know everything was in a sachet. Not everything worked, there’s research to that effect out there from the Indian Institute of Management, Ahmedabad for those interested.

After this trip, it struck me that people like reaching goals and owning visible assets – be it a cow, a goat or a solar light. Layaway plans are extremely popular – they allow for the same flexibility of putting small bits of cash against a future asset but then, some day, you get to own it. The lack of clarity around when these customers will own all these solar products is disturbing. Why isn’t it being mentioned clearly? Where are the terms and conditions?

Pay as you go may make sense in the context of future ownership but I’m still curious to know how it will all work out in the context of usage, for you can do without your phone but you cannot do without your light at night and early in the morning. Many have said that if they had to choose what to charge first with solar or with available cash, they’d pick light over a phone. Will these products and their programs create such tradeoffs in decision making for their customers?