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Mobile Money and Commitment

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Mark Pickens, over at the CGD blog, shares stories of unique saving devices:

One man  – let’s call him Richard – used an ingenious method to save for a new motorcycle.  Whenever he had a bit of extra cash he wrapped it in heavy plastic, waterproofed it with industrial-grade resin, and dropped it into the petrol tank of his current motorcycle. After a year when he thought he had enough to buy a bigger, better vehicle, he had the petrol tank removed and cut open with an acetylene torch to recover the currency. The motorcycle cost USD 750. He paid USD 110 to have the petrol tank cut and buy a new one to make his old motorcycle re-sellable. That equates to negative 14.66% annual interest on his savings.

Why would he do this? Same reason a woman — let’s call her Jennifer – dropped coins into her jerry can of cooking oil. She wants to save money to buy some clothes for her children at Christmas (at which time she cut open the jerry can to get to the money).

For both Richard and Jennifer, the requirement to destroy something they owned created an effective barrier against temptation…The temptation to raid savings is continual and almost irresistible. Unless big barriers are erected.

Can we productize these insights to improve branchless banking services?…

…What if Richard or Jennifer could name the point in time when they wanted their money? What if they could not touch it until reaching their goal?What if Richard or Jennifer could name the point in time when they wanted their money? What if they could not touch it until reaching their goal?…

What Mark is describing here is a commitment savings account.

Innovations for Poverty Action (IPA) is conducting a host of studies on commitment savings. (Full disclosure: I am an employee of IPA.) IPA and its research network have examine demand for commitment and its behavioral explanations, effects on savings balances, use of formal bankingfarmer inputs, quitting smoking, how remittances are spent, employee behavior.

These studies reveal a growing body of evidence that people are indeed willing to use formal commitment savings accounts; even when those accounts entail high implicit costs. I agree with Mark that banks can do a better job of designing financial services for the poor. That is precisely the motivation behind commitment savings accounts.

Where I lose Mark is when he says:

…consumers might be happy to pay for the service. Perhaps not the effective 15% which Richard paid, but 2% to 3%. That’s the same average price many people are paying already on an average mobile money transfer. P2P helps consumers alleviate the pain point of moving money over distance. Is it so crazy to think poor people might pay for a service which helps them effectively move money over time, allowing them to move current income forward to the future to finance much-desired purchases?

One of the attractions of mobile money is that it has the potential to reduce transaction costs. Moving money from one account to another, whether this is through physical deposits of cash or through mobile phone, don’t imply a commitment to save or a savings goal. If anything, mobile money should make breaking your commitment easier.

Thus, as we think about the spread of mobile money. Perhaps we should embrace reduced costs of transactions delivered by mobile money, but, at the same time, we should find methods through people can make it hard to succumb to temptation expenditures.

Written by Niall

May 31, 2011 at 10:15 pm

Empathy and Diversity

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I was raised to believe empathy was what made us human, and that it’s reciprocal: The capacity to stand in another’s shoes and feel for them is one of our great advantages. So I think we’ve got to try to understand why whites seem to believe they’re facing more bias than African-Americans, even if we’re inclined to roll our eyes and either hope it’s a research problem (which I did) or hold on until what whites believe doesn’t matter so much anymore. I trust the next far-more-multiracial generation to feel for older and younger people, whatever their race. I believe that makes us not only human, but American — and I think I have a lot of company in that belief.

That is the concluding paragraph of Joan Walsh’s excellent summary (via Jezebel) of research on the strangely common belief in anti-white bias. Walsh does a fantastic job of summarizing existing evidence. Citing one study, she posits that it may be a framing problem:

In an experiment known as “Me/Not Me,” respondents were asked to quickly rate whether a series of terms having to do with race, ethnicity and diversity had anything to do with them personally. It found that the white students related more favorably to the terms associated with “colorblindness” — equality, unity, sameness, similarity, color blind, and color blindness – than to words associated with “multiculturalism”: diversity, variety, culture, multicultural, multiracial, difference and multiculturalism.

What does this tell us? The study authors (as do I) take for granted that it matters — it would be a good thing — if whites embrace diversity and multicultural initiatives, whether in schools, workplaces and community groups, and they therefore suggest that people designing such programs consider that “whites’ reactions to multiculturalism … are rooted in the basic social psychological need for inclusion and belonging.” Stressing that multiculturalism encompasses the wide variety of white ethnic and class experiences might help. Emphasizing words with positive resonance like “equality” and “unity” might too.

Save “equality and “unity,” I imagine that the other “colorblindness” words could be pretty insulting to people of color. Colorblind suggests an attempt to ignore past and present inequality and disunity as forced upon America by a color (white)-centric society.

I agree with Walsh’s premise and find the concluding paragraph to be entirely on point. Americans must, and I believe will, find a way to accept diversity, variety, culture, multicultural, multiracial, difference and multiculturalism. Not just as words, but, more-importantly, the fundamental social construct that these words reveal.

Written by Niall

May 30, 2011 at 7:39 am

Posted in United States

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Coke in Africa

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Often, in conversation about medical drug distribution, Coca Cola is idolized for its ability to deliver its products to the most remote locations. Certainly, Coke’s distribution network is impressive.  As this story from a recent Business Week edition suggests, Coca Cola is pursuing a strategy that is inclusive of local micro-vendors in Africa.

Kingori’s sundry store—known locally as a “duka“—also sells plastic buckets and mattresses, and is no larger than a small bedroom. Her Gold status brings benefits, like an introduction to Coke’s globally standardized selling techniques. She’s urged by Coke to promote combo meals to boost profits, and so red menu signs supplied by the beverage company suggest a 300-milliliter Coke and a ndazi, which is a kind of greasy donut, for 25 Kenyan shillings. Coke also paid for the red refrigerated drink cooler at the entrance to the shop, which is protected by a blue cage. She’s told to keep it full to draw attention, and to stock it according to a diagram inside: Coca-Cola always at the top, Fanta in the middle, large bottles on the bottom. At stores down Naivasha Road, and throughout the continent and the rest of the world, Coke fridges are stocked in similar fashion.

Coca-Cola teaches these mini-distributors everything about how to run a business—from things as simple as waiting until the midday rush before icing down the Cokes to save resources to how to buy a house with their newfound wealth.

via Longreads

Written by Niall

May 29, 2011 at 11:04 am

Posted in Africa, Kenya

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Using data for effective work

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By a system I mean that the diverse people actually work together to direct their specialized capabilities toward common goals for patients. They are coordinated by design. They are pit crews. To function this way, however, you must cultivate certain skills which are uncommon in practice and not often taught.

For one, you must acquire an ability to recognize when you’ve succeeded and when you’ve failed for patients. People in effective systems become interested in data. They put effort and resources into collecting them, refining them, understanding what they say about their performance.

Second, you must grow an ability to devise solutions for the system problems that data and experience uncover…

That’s from Atul Gawande’s commencement speech at Harvard Medical School, entitled “Cowboys and Pit Crews.”

While Dr. Gawande is speaking directly to physicians, I think that the paragraphs above apply equally well to all professions. The idea is to admit that you can’t you can’t do everything by yourself, to recognize the strengths of others, to promote diversity in your life and work, and to use data to help you understand what you are doing right and what you are doing wrong.

Read the entire speech.

Written by Niall

May 27, 2011 at 6:29 pm

Posted in Data

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Sakawa

Fascinating piece on the culture of sakawa in Ghana (419 in Nigeria).

Internet scamming came to be understood more publicly as ‘sakawa’ only recently.  Before that, back when I started my research in Accra on Internet café use it was more underground.  I talked to Internet café users back then, both scammers and non-scammers, and frequently heard their stories about the ‘big gains’ realized by other local Internet users.  I was told stories about young men getting the credit card of Oprah Winfrey, or using Bill Gates credit card to buy ten laptops. One young man commented on how such people, “don’t even notice the money is reduced.”  These stories (rumors in the way they narrated an event the teller had not directly observed or experienced) had a certain pattern, describing the scam victims often as these superhuman celebrity figures.  These rumors not only presented the promise of gaining money from the Internet, but also restored the morality of these practices in this way of characterizing scam victims as beyond harm.

This reminds me of Sudhir Venkhatesh’s phenomenal Off the Books: The Underground Economy of the Urban Poor and the chapter in Freakonomics that asks Why Do Drug Dealers Still Live with Their Moms?

What proportion of sakawa results in the big payoffs that allow these guys to buy a beemer? And what proportion are Ghanaians with underutilized skills that are sitting around in internet cafes dabbling into sakawa but not finding any major payoff?

And why do these guys believe their benefactors fall for sakawa? Sean provides some explanations.

There’s more than one reason. Some are greedy and naïve and do, in fact, buy into these stereotypical depictions of Africa as believable stories that resonate with how they know things to be in that part of the world. They buy into the stories of corrupt politicians or of spoils of war stashed in a ‘third world’ and therefore unregulated country, of abandoned bank accounts, or smuggled gold.  There are others who are operating from more human and sympathetic impulses, lonely people looking for love (perhaps less sympathetically rather old men looking for very young attractive women). Also altruistic individuals who think they are contributing money to orphans or to a church. What is also interesting is, in many documented cases, how scam victims often get in so deep and are so committed to the scenario they’ve been presented, they seem not to be able to believe that it was entirely made up, refuse to accept that the person they thought they were dealing with doesn’t exist at all.

Written by Niall

May 26, 2011 at 9:03 pm

Posted in Ghana

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Who replaced Laurent Nkunda?

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The perks of being granted a natural monopoly.

Then, in September 2010, came President Kabila’s ban of mineral exports from the eastern Congo. It now appears that Kabila has been trying to secure large, industrial investments in the Kivus mining sector, which has hitherto brought little revenue to Kinshasa actors. (This strategy may have brought fruit this past week, with Malaysia Smelting Corporation announcing large investments in the region). Mining exports came to a standstill throughout much of the province. Minerals, however, continued to flow out of the region, albeit in much reduced volume. According to diplomats working in Goma, Kinshasa and Kigali, these smuggled goods needed military protection to muscle their way through border crossings or across Lake Kivu. Bosco, who commands many of the units controlling these crossings, was the go-to man for many of these operations. According to the same officials, most of these exports passed through Rwanda.

Bosco was becoming increasingly wealthy and powerful. He managed to woo back some of the disaffected CNDP officers, united with Nkunda loyalists to resist redeployment outside of the Kivus.

Bosco’s importance and stature as local military strongman was made even clearer during his involvement in a multi-million dollar gold swindle that took place in February this year. Although the details are still murky, a bunch of international investors was trying to buy gold from Congolese businessmen. The investors – some of whom had dubious reputations themselves – appear to have been swindled out of at least $10 million. Once again, Bosco provided some of the muscle for the operation, although his precise role remains unclear.

From the ever illuminating Jason Stearns at Congo Siasa. I am looking forward to picking up a copy of Streans’s Dancing in the Glory of Monsters.

Written by Niall

May 26, 2011 at 7:36 pm

African Broadband Speed Classifications

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There is a lot of excitment and even more potential from fibre cables encircling Africa.  Currently, the download speeds suggest three groups of countries.

1) Fast, but sporadic – Ghana and Rwanda are the high achievers, basically at US circa 2008 speeds.

2) Moderate, with steady growth: Kenya stands out, but like Uganda and South Africa, it is exemplary of a rather constant growth rate since 1999. Namibia, though showing lower speeds, has also demonstrated stable growth during the same period.

3) Still slow – All other countries are below 1500 kbps. Ignoring some early data noise in Malawi and Madagascar, only Botswana has demonstrated speeds near 2000kbps.

Will there is a bit of oversimplification,  these groupings should help us to understand what policy should focus on. For group 1, it’s suring up stable connection speeds. Group 2, it’s maintaining stead growth rates or achieving a positive shock (EASSy or SEACOM improvements) to get to the level of Group 1. For Group 3, where infrastructure is thinnest, the focus may still be to focus on connectivity.

Zimbabwe and Mozambique don’t fit nicely into any of these categories. Zimbabwe’s data speeds are strikingly low pre-2011, possibly a change in data collection techniques or correlated with the opening of the economy? And Mozambique has progressed and regressed constantly

HT kenyanpundit

Written by Niall

May 25, 2011 at 11:12 pm

Posted in Africa

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