finance - Jimmy Breeze on Diigo

But Uganda’s traditional growing seasons are shifting, so he is worried about droughts or flash floods that could destroy his crop. Michael Gizamba, a local village-phone operator, offers to help using Farmer’s Friend, an agricultural-information service. He sends a text message to ask for a seasonal weather forecast for the region. Before long a reply arrives to say that normal, moderate rainfall is expected during July. Mr Makawa decides to plant his tomatoes.
Rice farmers who had trouble with aphids texted for advice and received a message telling them how to make a pesticide using soap and paraffin. A farmer with blighted tomato plants learned how to control the problem by spraying the plants with a milk-based mixture.
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- More complicated questions (“my chicken’s eyes are bulging”) are relayed to human experts, who either call back within 15 minutes or, with particularly difficult problems, promise to provide an answer within four days. These answers are then used to improve the database.
- Farmer’s Friend is one of a range of phone-based services launched in June by MTN, Google and the Grameen Foundation’s “Application Laboratory”, or AppLab. As well as disseminating advice in agriculture, provided by the Busoga Rural Open Source and Development Initiative, the new services also provide health and market information. The Clinic Finder service points people to nearby clinics, and the Health Tips service explains the symptoms of common diseases.
- Lastly there is Google Trader, a text-based system that matches buyers and sellers of agricultural produce and commodities. Sellers send a message to say where they are and what they have to offer, which will be available to potential buyers within 30km for seven days.
- “There is a big shift from holding a phone to your ear to holding it in your hand,” says David Edelstein of the Grameen Foundation. “It opens the door to information services. It’s not the web, but it’s a web of services that can be offered on mobile devices.”
- Offering agricultural and health information is more difficult than offering a phone service, however, because such information must be localised and must take cultural differences into account. The answer is to work closely with local partners, says Mr Edelstein. Grameen is also experimenting with the idea of “community knowledge workers”—local people who can help others get access to mobile services, reading, translating and explaining text messages where necessary, just as village-phone operators provide access to basic communications.
- Reuters Market Lite, a text-based service that is available in parts of India. Its 125,000 users pay 200 rupees ($4.20) for a three-month subscription, which provides them with local weather and price information four or five times a day. Many farmers say that their profits have gone up as a result.
- Tata Consultancy Services, an Indian operator, offers a service called mKrishi which is similar to Farmer’s Friend, allowing farmers to send queries and receive personalised advice.
- Nokia, the world’s largest handset-maker, launched its own information service, Nokia Life Tools, in India in June. In addition to education and entertainment, it provides agricultural information, such as prices, weather data and farming tips, that can be called up from special menus on some Nokia handsets.
- Services to help farmers have been most widely adopted in China, where China Mobile offers a service called Nong Xin Tong in conjunction with the agriculture ministry, as part of its push into rural areas.
- China Mobile also runs a website, 12582.com, that sends farmers information about planting techniques, pest management and market prices. The service, which costs two yuan ($0.30) a month, sends out 13m text messages a day and has over 40m users.
- Mobile phones are also being used in health care. One-way text alerts, sent to everyone in a particular area, can be used to raise awareness of HIV; sending daily text messages to patients can help them remember to take their drugs for tuberculosis or HIV.
- The mobile service that is delivering the most obvious economic benefits is money transfer, otherwise known as mobile banking (though for technical and regulatory reasons it is not, strictly speaking, banking). It has grown out of the widespread custom of using prepaid calling credit as an informal currency.
- More simply, you could buy a top-up voucher for the amount you want to transfer (say, $10) and then call the village-phone operator or shopkeeper in your family’s village and read out the code on the voucher. The credit will be applied to the phone of the shopkeeper, who will hand cash to your family, minus a commission of 10-20%.
- These methods became so widespread that some companies decided to set up mobile-payment systems that allow real money, rather than just airtime, to be transferred from one user to another by phone.
- The biggest successes in this field so far have been Gcash and Smart Money in the Philippines, Wizzit in South Africa, Celpay in Zambia and, above all, M-PESA in Kenya, which has become the most widely adopted mobile-money scheme in the world.
- Making it easier, quicker and cheaper to transfer money has enormous social and economic benefits. Commissions are lower, and recipients no longer have to pay for transport to towns to make withdrawals. They can also take out funds more easily and frequently. In rural households that have adopted mobile money, incomes have increased by 5-30%, according to Olga Morawczynski, an ethnographer at the University of Edinburgh who has studied M-PESA in detail. It also saves men working in the city having to take time off to deliver the money to their families. The only drawback, say their wives, is that some men now visit home less frequently.
- M-PESA is also used as a form of savings account, even though it does not pay interest. Having even a small cushion of savings to fall back on allows people to deal with the unexpected, such as suddenly having to pay for medical treatment. “An awful lot of people climb out of poverty every year, but a lot drop back in because they have no savings, no buffer, so when something bad happens they have to sell assets and lose a lot of ground,” says Mr Christen. Poor people tend to save by buying livestock, which can get sick or die, or buying gold, which can be stolen, or investing in community-based schemes that may be fraudulent, says Timothy Lyman of the Consultative Group to Assist the Poor (CGAP). Mobile banking offers a more reliable alternative, he says, and could have economic benefits comparable to those of mobile phones.
- There were special factors that made M-PESA more likely to work in Kenya: the unusually high cost of sending money by other methods; the unusually large market share (80%) of Safaricom, the main mobile operator (an affiliate of Vodafone); the regulator’s decision to allow the scheme to proceed, even without formal regulatory approval; and, most intriguingly, the post-election violence in the country in early 2008. M-PESA was used to transfer money to people trapped in Nairobi’s slums at the time, and some people regarded M-PESA as a safer place to store their money than the banks, which were entangled in ethnic disputes. All this makes Ms Morawczynski think that Kenya’s success in mobile banking may not be matched elsewhere. “But I hope somebody can prove me wrong,” she says.
- some banks have realised that teaming up with a mobile operator to launch a mobile-money service will allow them to reach many more customers. After all, mobile operators have far more powerful brands and much greater reach than banks.

27 Sep 09

Financial innovation and the poor: A place in society | The Economist

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economics finance development innovation

the crisis should have given fresh impetus to “social finance”, a movement based on the belief that financial innovation can be used directly to help society’s neediest people.
SoCap09, a conference dedicated to building “social capital markets”. The event was abuzz with novel ideas such as a “social stock exchange” and “sustainable hedge funds”.
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- This is, in effect, a commitment to create a new asset class—impact investing—yielding a financial return alongside a social or environmental benefit.
- The rising interest in social finance is the product of several trends. First, the financial industry and its clients spy a way of making money and doing good at the same time. Many impact investments are in emerging economies, which are expected to grow faster than developed ones. They may be uncorrelated with other assets and thus offer diversification and reduced risk. Impact investments such as the Calvert Community Investment Note (a bond) have performed relatively well during the recent crisis, fuelling demand for them. Bankers also detect a chance to give their image a badly needed polish. Philanthropy plays a part too—especially, it seems, for super-rich investors.
- Second, more people want to do well by doing good. Specialised intermediaries have sprung up, including several “social investment banks”, such as Total Impact Advisors
- Third, there is a growing demand for private capital and skills to be tapped to supply the basics of life and to get small businesses going. Government spending and philanthropy are not enough. Fourth, governments are providing encouragement.
- Social investing is not new. People have been practising it for years. Perhaps the commonest form has been to apply an ethical screen to a portfolio
- The other main forms of social investment have been “community development” (especially low-cost housing), microfinance (loans and other financial services for the poor) and “clean” technology.
- What is new is the interest of mainstream financial institutions and investors. Microfinance has been a particular inspiration to the GIIN set, because what was once a charitable activity has become, in some instances, a highly profitable business.
- A growing number of investors are trying to repeat the microfinanciers’ success, but in equity rather than loans. One example is IGNIA
- A more innovative idea, perhaps, is the “social impact bond”, the brainchild of Social Finance. The idea is to attract private capital into solving a deep-rooted problem that is soaking up public money. Take, for example, reoffending by released prisoners, which costs the British government millions of pounds a year. A social-impact bond could raise money to pay for the expansion of organisations with the expertise to reduce reoffending rates. The more money the organisations save the government, the higher the return the bond would pay investors. This goes beyond a standard public-private partnership, which is expected to provide the same service as the state, but more cheaply. The social-impact bond would reward better social outcomes and not merely cut costs.
- Social Finance thinks that the social-impact bond could be tried out in several public services. Besides being used to tackle reoffending, it could reduce the need for children to be put in residential care, or improve community-based health care, easing the strain on hospitals. The key is to measure performance clearly, so that contracts can be enforced. “With government budgets increasingly tight, this could be a major innovation,” says Sir Ronald Cohen
- Similar ideas are getting attention around the world. Notably, several efforts are under way to replicate an international finance facility for immunisation known as the GAVI bond.
- One idea is to provide a guarantee to charter schools issuing bonds, helping other investors overcome what may be excessive risk aversion. Or the foundation might provide insurance against the non-payment of aid promised by a donor, so that a government will know that, one way or another, the money will come. It is also looking for innovative ways to encourage private-equity and venture-capital investments in, say, infrastructure projects in countries where it is making grants.

Telecoms: The power of mobile money | The Economist

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trends economics development finance mobility phone innovation

an extra ten phones per 100 people in a typical developing country boosts GDP growth by 0.8 percentage points, according to the World Bank.
With such phones now so commonplace, a new opportunity beckons: mobile money, which allows cash to travel as quickly as a text message.
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- By far the most successful example of mobile money is M-PESA, launched in 2007 by Safaricom of Kenya. It now has nearly 7m users—not bad for a country of 38m people, 18.3m of whom have mobile phones. M-PESA first became popular as a way for young, male urban migrants to send money back to their families in the countryside. It is now used to pay for everything from school fees (no need to queue up at the bank every month to hand over a wad of bills) to taxis (drivers like it because they are carrying around less cash). Similar schemes are popular in the Philippines and South Africa.
- The incomes of Kenyan households using M-PESA have increased by 5-30% since they started mobile banking, according to a recent study.
- Mobile banking is safer than storing wealth in the form of cattle (which can become diseased and die), gold (which can be stolen), in neighbourhood savings schemes (which may be fraudulent) or by stuffing banknotes into a mattress. In the Maldives many people lost their savings in the tsunami of 2004; it hopes to introduce universal mobile banking next year.
- why is mobile money not more widespread? Its progress has been impeded by banks, which fear that mobile operators will eat their lunch, and by regulators, who worry that mobile-money schemes will be abused by fraudsters and money-launderers. In many countries mobile money has been blocked because operators do not have banking licences and their networks of corner-shop retailers do not meet the strict criteria for formal bank branches. And some mobile-money schemes that have been launched, such as one in Tanzania, failed to catch on. As recently as a year ago people wondered whether M-PESA’s success was a fluke.
- Some banks, meanwhile, have come to see mobile money not as a threat but as an opportunity, and are teaming up with operators. And phone companies have studied Kenya closely to learn how to establish and market a successful mobile-money scheme. MTN, Africa’s biggest operator, has launched a mobile-money service in Uganda in conjunction with Standard Bank; it appears to be doing well. MTN is fine-tuning its service in Uganda before rolling it out across Africa.
- Instead of lobbying against mobile money, banks should see it as an exciting chance to exploit telecoms firms’ vast retail networks and powerful brands to reach new customers. Tie-ups between banks and operators will help reassure regulators.

23 Sep 09

13 Sep 09

Wall Street Executives After the Financial Crisis - Graphic - NYTimes.com

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people finance economics

27 Aug 09

Business.view: Froth at the bottom of the pyramid | The Economist

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development finance

Nokia: Banking on financial services | Build it Kenny, and they will come...

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technology anthropology development finance

The launch of Nokia Life Tools - initially a suite of education and agriculture-based tools aimed at the Indian market - was a significant step forward for the handset maker, which had for some time been positioning itself not just as a manufacturer, but also as something of a services provider.
So, something else which shouldn’t have come as a big surprise was today’s news of Nokia’s big move into mobile financial services.
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- Nokia Money has been designed to be as simple and convenient as making a voice call or sending an SMS. It will enable consumers to send money to another person just by using the person’s mobile phone number, as well as to pay merchants for goods and services, pay their utility bills, or recharge their prepaid SIM cards (SIM top-up). The services can be accessed 24 hours a day from anywhere, meaning savings in travel costs and time. Nokia is building a wide network of Nokia Money agents, where consumers can deposit money in or withdraw cash from their accounts
- Nokia Money appears to be operator-independent, meaning mobile owners on any network can send or receive payments to anyone else on any other network. This would be a direct challenge to many existing models which require users to switch networks, or to be on the same network as the mobile service they’re looking to use.
- In addition, it looks like Nokia Money users can sign-up without needing to swap out their SIM cards, making up-take of the service considerably more efficient logistically. If this thing were to grow, it could grow fast.
- It’s the addition of Nokia Life Tools - agricultural and educational services - which raises eyebrows almost as much as it raises the bar. How will Nokia’s move into providing agricultural data and advice to farmers effect, for example, the operations of Trade At Hand, DrumNet, Manobi or TradeNet? Will they be partners in any Africa-wide venture? (Nokia do seem to be developing a habit of going-it-alone - more recently with their release of Nokia Data Gathering - rather than working with established, existing open source tools)

19 Aug 09

Don't just howl with rage. Try an idea that does away with banks altogether | Jonathan Freedland | Comment is free | The Guardian

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finance idea

14 Aug 09

USAA Bank Will Let Customers Deposit Checks by iPhone - NYTimes.com

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trends future finance

02 Jul 09

Banking system like South Sea bubble, says senior Bank of England official | Business | guardian.co.uk

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finance economics risk

"One of the South Sea stocks was memorably 'a company for carrying out an undertaking of great advantage, but nobody to know what it is'. Banking became the 21st-century equivalent."
"During the golden era, competition simultaneously drove down returns on assets and drove up target returns on equity. Caught in this crossfire, higher leverage became banks' only means of keeping up with the Jones's. Management resorted to the roulette wheel."
2 more annotations...
- there would have to be much stricter system-wide limits on leverage, particularly among big banks whose stability is crucial to the whole financial system.
- "Epidemiology provides a second key lesson for financial policymakers – the importance of targeted vaccination of these 'super-spreaders' of financial contagion. Historically, financial regulation has tended not to heed that message."

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