Development

Seeing Like a Slum: Towards Open, Deliberative Development

written by kevindonovan

I have an article in the most recent version of the Georgetown Journal of International Affairs that makes an effort to connect the open development movement to some theories of political sociology without which I think transparency initiatives are likely to run into trouble, perhaps even leading to regressive outcomes.

Efforts like open mapping of low-income places or budget transparency websites are now quite trendy in development circles. One of the primary goals of these initiatives is to make “legible” what was previously inscrutable (e.g. the location of public health facilities or public spending on provincial education). To borrow from James Scott of Yale University, my worry is that “a thoroughly legible society eliminates local monopolies of information and creates a kind of national transparency through the uniformity of codes, identities, statistics, regulations and measures. At the same time, it is likely to create new positional advantages for those at the apex who have the knowledge and access to easily decipher” the transparent environment (Scott 1998).

These questions of differential power dynamics – and the way openness will be harnessed by different entities to their own interests – are often absent from the technically-driven conversations about the value of transparency. Furthermore, not all transparency is created equally: openness in government processes versus community mapping are substantially different concerns, but often get lumped together in the new push for open development.

While the paper didn’t include time to substantively address solutions, I argue that theories such as Peter Evans’s concept of deliberative development should be a strong component of any development initiative working on transparency and openness.

A prepublication version of the paper is available for download here.

Interested readers should also see the World Bank’s papers on the topic which take a thoughtful tact of linking technical and legal openness to political participation. 

Does Mobile Money Harm the Poor?

written by kevindonovan

[The following piece originally appeared at Mobile Active]

The unprecedented diffusion of mobile connectivity around the globe has caused much excitement from development practitioners, especially those seeking to advance financial inclusion. And as with any excitement, there is bound to be detractors. Jamie M. Zimmerman and Sascha Meinrath of the New America Foundation have put a forceful stake down in that camp with regard to mobile money. They have sparked undoubtedly a useful debate but their cautionary piece on why mobile money “is hurting huge swaths of the developing world” ultimately missteps.

Zimmerman and Meinrath argue that despite having significant benefits to users, mobile money is out of reach for broad swaths of the world’s poor because (a) connectivity is not universal and (b) mobile money has “remarkably high fees”. Taking Kenya as one of the countries on the avant garde of mobile money availability and adoption, they fear that mobile money “may, in fact, be driving a new wealth divide… leaving [Kenya’s] poor in even more dire straits.”

However, their well-intentioned but dour speculation misses key features of the financial landscape in developing countries and misinterprets fundamental characteristics of mobile money.

There is a measure of truth to their argument. It is true that mobile connectivity is not universal.  The most recent data available (PDF) from the Kenyan regulator, for instance, puts mobile coverage at only 86% of the population, and this doesn’t account for the frequent complaints of “dead zones” in the country. Additionally, mobile phones are not ubiquitous and lack of device ownership is the largest reason for not adopting M-PESA.  However, as mobile phones are becoming cheaper all the time and given the widespread practice of sharing phones, access is less of an issue over time. And, yes, it is true that M-PESA is offered as a for-profit service, with users incurring fees.

But in rushing to defend the poor from sluggish regulators and extractive mobile operators, Zimmerman and Meinrath miss the big question: is mobile money better for the poor relative to the available alternatives?

In the half-dozen or so markets where it has reached scale, the answer is almost certainly yes. Mobile money has grown because it is by-and-large demand-driven, filling a role desired by citizens in countries as diverse as the Philippines, Pakistan and Kenya. And instead of “remarkably high fees”, mobile money services like M-PESA are profoundly cheaper than alternatives.

More than just a lack of money, poverty involves a lack of access to the instruments and means through which the poor could improve their lives. The real promise of M-PESA is not that it will “combat global poverty” or “save the poorest of the poor” (as strawmen headlines put it), but rather that it creates a generalized platform on which a wellspring of new start-ups, services and opportunities (see a recent survey of that proliferation in Kenya). The new mobile infrastructure is being used to deliver reliable, secure and efficient services – financial and otherwise – that were fundamentally out of reach for most Kenyans ten years ago. No one realistically believes mobile services are the solution, but it is clear that they will increasingly be used as a component of many solutions.

But what about the “poorest of the poor” that Zimmerman and Meinrath laudably emphasize? Is it true that M-PESA’s fees are “prohibitive to those living below the poverty line – currently about 50 percent of the Kenyan population”? Prima facie, of course not, since the service has been adopted by more than fifty percent of Kenyan households. Certainly, a proportion of Kenyans are unable to adopt M-PESA for the reasons suggested, and in a forthcoming piece I argue that we mustn’t lose sight of universal access and service goals. But non-adoption of M-PESA does not leave “a substantial portion of the nation’s poor in even more dire straits.”  Indeed, because you do not have to register and it is free to receive money, many rural Kenyans who make up its poorest citizens are actually able to benefit from it. Further without focusing on the systemic efficiency and productivity gains (PDF) that mobile money entails, critics miss the forest for the trees.

Of course we should “fight the tough regulatory battles necessary” to attain universal service, but Zimmerman and Meinrath do not suggest anything specific. In fact, their example country Kenya is widely considered to have one of the more enlightened and forward-thinking regulatory regimes. Innovative policy from the Central Bank and Communications Commission of Kenya are a big reason mobile money took off. Referring to Kenya specifically, two close observers of Africa’s ICT development – Professors Jenny Aker and Isaac Mbiti – note that “The right national policy can therefore benefit poor consumers.”

E.J. Hobsbawn once wrote that the poor work “the system to their minimum disadvantage.” Mobile money is helping them to do so. While it could be less proprietary, more accessible and, yes, cheaper, impatient ambition is more likely to neuter a beneficial service than lead to positive changes.

 

The Political Economy of M-PESA

written by kevindonovan

During my senior year in Georgetown’s Science, Technology & International Affairs program I worked on a thesis on the political economy of M-PESA. I’m currently editing a much shorter version for publication, but thought I would post the longer, pre-publication version. It is available for download here.

Abstract

The role of information and communication technologies in development is contested between those who believe it will facilitate broad-based human development and those who believe it is at most, impotent, and at worst, counterproductive. This paper takes a meso-level approach to specify the impact of a large-scale mobile phone-based financial service in Kenya, M-PESA. When analyzed through the related theories of freedom of Amartya Sen and Philip Pettit, the impact of M-PESA is of a dual nature. In many ways, new forms of empowerment are possible through mobile money, but adoption of the standard also leads to limitations on choice and new forms of dominance. Institutional arrangements that are most likely to minimize the trade-offs of mobile money are recommended.

Your feedback would be very welcome.

Mobile Money in the Developing World: The Implications of M-PESA for Development, Freedom and Power

written by kevindonovan

Below is the prospectus for my senior thesis. It should be finished in the coming months. In the meantime, feedback and comments are more than welcome.

Information and communication technologies have enmeshed the globe in networks, and none is as widespread as the mobile phone, a technology that has billions of users. Development practitioners are increasingly looking to the pervasive device as a facilitator of broad-based human improvement. This project seeks to add to our understanding of the role that ICTs have in the development process through the study of a particularly promising application, the use of mobile phones to deliver financial services or, more simply, mobile money.

The effectiveness of ICT for development is widely disputed. Both those who believe ICT will lead to development and those who disagree can marshal theory and empirics to their side. For example, sophisticated regression analysis identifies relations between rates of mobile telephony and the rate of economic growth, and other studies show individual incomes rising with the introduction of mobile coverage. Others demur, arguing that local contexts and global inequalities can stymie, or even reverse, the benefits of ICT. These competing claims may be mapped:

	Utopians	Dystopians
Macro	E-development, information society and knowledge economy literature	Castells’s “Black holes of informational capitalism”
Micro	Individual income improvements (e.g. Kerala fisherman)	“Social shaping” of technology

Method

The field of technology assessment is wrought with such disputes, often divided between those who look at “broad causal patterns” and those who examine a “tightly focused story [of] complexity and diversity.” In surveying this debate, Thomas Misa argues that understanding the complicated interplay between technology and society requires moving beyond, or, more accurately, in between the macro and micro framings.[1] He argues that meso-level approaches that examine the actors, institutions and processes that intermediate between micro (e.g. firm or individual) and macro (e.g. market or state) are the most promising methods towards resolving disputes such as those plaguing the ICT4D research and policy-making. Similarly, Brey writes of specification where an abstract phenomenon is examined through the study of a specific type.[2]

Meso-Level Case Study: M-PESA

Taking this methodological cue, my thesis will focus on M-PESA, a popular mobile money service in Kenya that serves as a mediator between individual economic experiences and national financial happenings. Kenya’s largest mobile network operator, Safaricom, formally launched M-PESA in March 2007. Users visit authorized M-PESA retail agents to deposit cash that is credited to their personal SIM card. This “e-float” is then transferable via SMS to any other mobile phone, whereby cash can then be received at another agent. Safaricom initially aimed this at the large domestic remittance market, and these peer-to-peer transfers remain its primary use, but with more than 70 percent of Kenyan households using it, it has subsequently expanded to a formal savings account and a payment application for services as varied as school fees and electricity bills. M-PESA is not the first mobile money application, but by scale and prominence, it is by far the most successful and the subject of widespread study and imitation.

Development practitioners are particularly excited about the opportunity M-PESA represents. There is a robust literature that formal financial inclusion, instead of informal lending and savings, can lead to accelerated growth and increased social protections and opportunities. Reducing transaction costs, facilitating remittances, increasing financial security, and accelerating money circulation are all tied to development. Even more basically, Safaricom is a profitable and innovative firm experiencing rapid growth.

The above is important and promising. The challenges facing developing countries are profound and difficult. Innovative solutions are a necessary component of success. But could there be reason to worry? Could mobile money such as M-PESA have drawbacks to the development process?

Development as Freedom + Network Power

For the purposes of this project, the admittedly amorphous, contested term ‘development’ will be defined in the tradition of Amartya Sen’s capabilities approach. Sen conceptualizes of development as enhanced human freedom. As a substantive good unto itself, as well as a useful instrument, it is both the primary goal and means of development. Through expanding economic opportunities, providing additional protective securities, and enabling more effective social opportunities, M-PESA might seem, prima facie, to enhance human freedom.

Like other standards – TCP/IP or the English language – M-PESA facilitates the exchange of goods and ideas amongst users. Standards serve as a coordinating mechanism between disparate individuals and organizations. Further, through the phenomenon of network effects, standards become more valuable as they grow in membership. Grewal links this with the observation that as a given standard grows, it tends to progressively eliminate alternatives. After all, who today uses a fax machine, let alone telegraph?

He calls this “network power” and notes that it “pushes agents to converge on a single, dominant standard” such as the WTO trade rules or TCP/IP.[3] Although individuals may freely adopt a standard because it has inherent advantages (i.e. M-PESA is cheaper than alternative remittance services), once a network reaches a certain size, network power may induce people to give up an alternative standard and adopt the dominant one. For example, speakers of minority languages may choose to learn English, but if they do so because it is necessary for survival, they are not really choosing freely.

In addition to understanding the specific way M-PESA exhibits network power, my thesis will investigate how this promotes and hinders human freedom. As Grewal notes, countering network power is possible; specifically, he identifies three characteristics of a standard that are relevant:

• Compatibility: “acceptance of parallel or simultaneous standards to gain access to a given network.”
• Availability / Openness: “ease with which a network accepts new entrants desiring to adopt its standard.”
• Malleability: openness to piecemeal revision.

Depending on the goals of a network (and its users and operators), these three properties will be aligned and intersect in different manners at different times. As a commercial operation attempting to maximize profit, availability will likely be high (but only to the extent that marginal users are profitable). As a proprietary service that needs to be protective of privacy and security, malleability will likely be low. Compatibility will differ depending on the alternative standard: M-PESA needs to be compatible with cash, but what about competing mobile money services or financial institutions? Although at this stage it is not yet clear to what extent M-PESA exerts network power and its implications for development as freedom, it is possible that policy measures are warranted to ensure broad-based freedom in the networked society.

Different technologies, of course, have different relations with society. Understanding mobile money does not offer a holistic understanding of the role of ICTs in development; however, network power is a phenomenon present in many ICT4D interventions, and mobile money alone is an important trend, so lessons from this specific case will hopefully elucidate future work.

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[1] Misa, Thomas. “Retrieving Sociotechnical Change from Technological Determinism.”  In Merritt Roe Smith and Leo Marx, eds., Does Technology Drive History?  Cambridge: MIT Press, 1994, pp. 115-41.

[2] Brey, P. (2003). Theorizing modernity and technology. In T. Misa, et al. (Eds.), Modernity and technology (pp. 33–71). Cambridge: MIT Press.

[3] Grewal, David S. Network Power – The Social Dynamics of Globalization. New Haven: Yale UP, 2009