Why the debates that the recent microcredit RCTs are meant to close are going to be endless
| April 7, 2015 | 10:13 am | Uncategorized | Comments closed

Author: Ignacio Mas, Senior Fellow, the Council on Emerging Markets Enterprises at the Fletcher School, Tufts University

We have been handed down a fresh round of evidence on the impact of microcredit from six randomized control trials (RCTs) undertaken by eminent economists (see summary paper here). The results are what most reasonable people would expect: that microcredit is useful for many but by no means transformational. Perhaps the more novel finding is that the impact on average is zero, not negative.

So does this finally settle the debate then, some forty years after Muhammad Yunus’s first (non-random) experimentation with microcredit? Alas, I don’t think so, though it will certainly affect how arguments are pitched henceforth. There are four reasons why evidence from RCTs alone will not close the debate.

First, RCTs are pure empiricism, devoid of any theory. Give a bit of something to some, withhold it from others, and compare. So when the results come out, all one can do —indeed, what the dozens of online commenters on these studies have done— is to interpret them by retrofitting them into one’s own prior theories and mental models. How did the impact happen? Why the differences between men and women, young and old, richer and poorer? Would this work elsewhere in the same way, or if the interest rate were lower? But all we have learned is that six concrete programs are not impactful, on average. The rest is inference and theorizing. We are back to extrapolating on the basis of isolated (now n+6) data points.

Second, RCTs measure impacts on a number of variables: consumption, investment, schooling, female empowerment, job creation, etc. Results are often a mixed bag, so we back up into the problem of how to total up these impact categories to get a net-net impact. There’s now the inevitable suggestion that we should be measuring how people’s happiness is affected, as a sort of grand bottom line. How can we hope to measure ultimate impact if we lack even a basic definition of what we mean by impact?

Third, there’s the question of what we are supposed to make of averaged impacts. We know that debt is not right for everyone, so why would or should debt be held to an average standard of goodness? Surely debt is good for some people, in some circumstances, at certain times. What’s the point of diluting —and possibly cancelling— the benefits to these people statistically? The issue is one of targeting interventions, not passing across-the-board judgments on them.

Finally, for all the sophisticated statistical tools deployed, it all hinges on the quality of the data collected. Given that RCTs are fundamentally an empirical exercise, it is odd that in the dozens of online commentaries on the six studies there hasn’t been much discussion of the empirics itself. The research papers are often not written for people like me to understand (have you tried reading them?), so I am relegated to being a user of the abstract, introduction, and conclusions sections. But what I can read —what we can all process— is the survey questionnaire. I would urge all those who feel they need to have an opinion on these studies to start by reading the questionnaires. Take this one, for example. In your mind, is this fit for the purpose of evaluating the impact of microcredit? Does this meet the lean research standards proposed by Kim Wilson? Try to have the questions answered tonight by your partner or spouse. Then try to imagine what kind of data you’d get if you were going around asking these questions of perfect strangers, showing up at their doorstep unannounced.

The suggestion that such empirical studies can settle the impact question of microcredit is just as naïve as the prior suggestion that the best way to get poor people out of poverty is to get them into recurrent cycles of debt. I agree entirely with the findings from these RCTs. Was anyone really hopeful that the six RCTs would turn out otherwise?

The Cost of bKash (and friends)
| August 25, 2014 | 11:23 pm | Analytics, Mobile Money | 2 Comments

Is being “cheap enough” a 4th Reason Behind bKash’s Growth?

CGAP came out with a brief last month about bKash, the dominant mobile financial services company in Bangladesh, offering three reasons behind how it managed to sign up 22% of the country’s adult population within two years, and was largely responsible for Bangladesh seeing the fastest growth in mobile financial access services accounts in 2013.

Briefly, the reasons are as follows (copy-pasted from here):

  • bKash is neither bank-led or telco-led; it is a purpose-built company to provide mobile financial services.
  • bKash combines a diverse group of investors, but they all at least share a vision for scale.
  • Bangladesh’s central bank has been supportive and flexible in creating a regulatory environment.

Given that Bangladesh has 160 million people, is really densely populated and has a fairly competitive market (20 bKash like licenses exist, for example), it makes for a great incubator of ideas that fail rapidly if they are terrible, or scale sustainably if they are good.

Checking out the tariff details also gave me the sense that bKash is quite affordable – cash-ins are free, transfers to another bKash client costs Tk. 5 (USD 0.06), cash-outs cost 1.85% at the agent and and 2% at the ATM. Is being “cheap enough,” then, another reason for its prolific growth?

Comparing bKash to Peers Globally

Two avenues of exploration came to mind:

  • Comparing how much it costs to use bKash with other funds transfer options in Bangladesh
  • Comparing bKash with similar mobile money offerings in other countries

This post focuses on the second approach. We are going to compare bKash’s tariffs with those of M-PESA (Kenya), MTN (Uganda), Vodaphone (Tanzania), GCash (the Philippines), and easypaisa (Pakistan).

Yes, there are all kinds of caveats we need to keep in mind:

  • The programs are similar, but not the same – other offerings might change the relative value proposition
  • Countries have different mixes of funds transfer options
  • Countries have different demographics and economic conditions
  • The programs operate in differentially evolved mobile payments ecosystems

Nevertheless, since all these services are designed to offer the transfer of small amounts of money relatively affordably and are often taken up by folks who may not be totally linked up with the formal financial sector, it seems like a reasonable exercise to conduct to explore the question, “How are services similar to bKash priced around the world?

Transferring and Cashing-out Costs

We will be looking at three modes of engagement – transferring to another user registered on the same network, to an unregistered user, and cashing out at an agent. As far as I can tell, bKash does not allow transfers to unregistered users, but I included that anyway for these graphs because there one point that is interesting to note, irrespective.

(Note – the figures below are in USD for easier comparison, but clearly countries have different purchasing powers and so the figures are not exactly comparable.)




So, what do we see?

  • bKash charges a flat of USD 0.06, which is by far the lowest registered P2P transfer amongst all six providers, except for the lowest rungs of M-PESA and Vodacom TZ.
  • bKash charges at a proportional rate of 1.85% to withdraw at an agent. MTN Uganda, Vodacom TZ and GCash all charge proportional or almost proportional rates, while easypaisa charges at a somewhat regressive rate, where the fee does not increase as much as it would if it were charged proportionally. M-PESA has a very regressive rate, where the fee stays more or less the same for large sections of funds transfer ranges.

In so far as none of the providers have a very well developed e-payments ecosystem, other than M-PESA, one has to consider both the cost of transferring funds to other users but also the cost of cashing out. Since bKash’s promotional material strongly emphasizes remittances, it stands to reason to keep the charge at a nominal US 0.06, while making most of the returns at cash-out. This encourages increased velocity of e-money in their system.

To see how the cash-out cost stacks up against the rest, we’ll compare the rates as a percentage of funds transferred.

Before we do that, one quick note about the cost of transfer to unregistered clients – note how it is always the highest of the other charges of cashing out and transferring. It’s probably a result of the costs of having to support cross-platform transfers, out of platform transfers, and very probably, as an incentive to keep the e-cash in the provider’s system. Some like Vodaphone and GCash will charge the same amount for cash-outs though, perhaps reflecting their view that cash going out of the system is equally “bad”, irrespective of channel or recipient.

Cashing-out Costs at Agent

We now look at the fee as a percentage of the amount cashed out. In cases where the fee is a flat amount for a range of values, we take the fee as a percentage of the average of the min and max of that range.


The graph is truncated to the USD 10 to USD 200 range because for any value below that, bKash (the magenta line) is the cheapest option by far. However, by the USD 100 mark, bKash has become the most expensive option, bar GCash, which is just 0.15% higher at 2% of cash-out. M-PESA reaches the “cheaper than 1.85%” mark fastest, at USD 16.51.

Is bKash cheap, then, when it comes to cash outs? The numbers tell us that for small amounts, it’s much, much cheaper than any other comparable services around the world. However, because of regressive fee rates, the services catch up somewhere in the USD 15 – 100 range. From the financial inclusion point of view, we often take USD 100 to be a small balance threshold. Going by that, bKash is also pretty financial inclusion friendly.

From the point of view of the universe of clients served by these companies, we would need to know what band most of the clients transact in to be able to say which is relatively cheaper. If most clients operate around the USD 10 band, bKash is the cheapest, while is they operate more in the USD 200 band, then it is the most expensive.

Bottom Line

bKash is the cheapest P2P money transfer option amongst the peer providers we looked at. It is the cheapest cash-out option till about USD 16, and then becomes the most expensive one after about USD 100-200, depending.

Phoning with your bank – the Equity MVNO
| June 30, 2014 | 3:15 am | Uncategorized | Comments closed

Fascinating developments in the Kenyan mobile banking space – Equity Bank announced last month that they would become a mobile virtual network operator (MVNO) sometime in July. What on earth posses a highly successful bank to venture into the mobile business? It’s something between the desire to the last mile (literally) to serve clients, and responding to an existential threat, apparently.

Fletcher’s own Ignacio Mas and Equity’s John Staley make their case for the former in the CGAP blog, Why Equity Bank Felt It Had to Become a Telco – Reluctantly. He notes three reasons – lack of full security, unreliable speed and unfair price – behind becoming an MVNO to enhance Equity’s mobile banking offerings.

There seems to be a very strong additional motivator – MPesa has gatecrashed its way into the very client segment that was an Equity stronghold – low end retail market. This blog post makes a good case for why it’s a response to an “existential threat” from MPesa. MShwari is a savings-and-loan product offered by Safaricom in partnership with CBA, and has been phenomenally successful – it now has more than a million clients. They can save up to KES 100k, and take loans out for KES 20k. Surprising, considering how expensive its loan offering is, with APR clocking at 138% per annum when one conservatively compounds the 7.5% service fee, but it is also extremely convenient, because it allows one to not just save from the phone, but get almost immediate loans through ubiquitous MPesa agents.

What makes Equity think they can morph into part-telco to cater to this market segment? Their track record is not that stellar so far. Equity is no stranger to mobile money – it currently has offerings with pretty much all the major MNOs in Kenya – but their uptake is overshadowed by MPesa’s 73% coverage of the mobile money market. It also tried it’s hand at a partnership with Safaricom through the ill-fated M-Kesho project, but that did not end well. (Some details here and here.)

It does have one advantage though – because it is a bank with many other non-telco related sources of funds, it can cross subsidize the telecom services. Equity declares its desire to price aggressively already:

Mobile transfers will be charged at 1% of the transaction  value compared to the prevailing market charges of 16%. The charges will be  capped at  Ksh  25  per transaction.  Additionally, instant loans will be available at  a maximum of  2%  per month  compared to the 7.5%  per month offered in the market.

And as Ignacio and John point out:

To the extent that Equity customers use the telecommunications services that come along with their new SIM card, that will help to pay for costs associated with the roll out of the MVNO. But Equity does not see it necessary to fight the operator in its core business: all it needs is to break-even on the telecoms part.

Will Equity be able to provide a compelling enough mobile experience for clients to phone where they bank? Is this yet another significant shifting of the sands in the mobile banking landscape as the line between banks and telcos become more and more blurry? Either way, the winner from all this innovation and competition should be the Kenyan consumer.

Behavioral Product Design meets CARD’s Savings Products
| April 28, 2014 | 1:23 pm | Savings, Study - Other | Comments closed

I just came across this great paper from Feb 2014, by ideas42, which describes a behavioral design project undertaken by them and Grameen Foundation to improve savings outcomes for CARD Bank of the Philippines.

They combined in-depth interviews of clients with quantitative analysis of the account balance and transaction data to identify the main barriers to “improving saving outcomes”, and then designed behavioral levers accordingly.

Before we look at the specifics, let’s point out the success of this intervention:

  • 15% higher initial deposits
  • 73% greater likelihood to initiate transactions in new accounts
  • 37% increase in balances

It seems that whatever they did managed to increase how much new savers started  out saving with, encouraged higher engagement with the accounts, and got them to save more in the long term.

What did they do?

First, they identified four primary barriers:

  1. Savers were anchoring themselves to the 100 pesos minimum opening balance, and the 50 pesos  minimum balance required every week. They would start at that value, and then think how much they could save above and beyond that, and not focus on how much they could be saving.
  2. Clients open an account without actually having a plan on how to use the accumulated savings.
  3. CARD has a free program which allows deposit collectors to regularly come to their home or business and collect savings. Yet, many clients did not select this option, very probably because the option is presented to them only when they open the account, but is presented in “muted colors at the bottom of the form”, making it easy to gloss over.
  4. Savings goals are “distant and abstract” – saving for expenses that are far off in time, such as school expenses, or harder to imagine, such as “an emergency” are harder to plan for than the more immediate, day-to-day realities.

With this in mind, ideas42 redesigned CARD bank’s account opening process and developed simple interventions around four behavioral levers:

  1. Set a goal: Get the client to set a savings purpose and amount, use visual representation to make goal concrete, and allow client to decide on some of the savings components, with guidance.
  2. Make a specific plan: Get client to come up with a concrete savings plan – how frequently to save, where to save, and how much to save, and provide the option to receive SMS reminders.
  3. Create a feeling of commitment: Essentially get the client to go through some actions that make the commitment to save “feel real”, such as having both them and the institution sign the plan, complete it in front of peers, even give a gift to symbolize the commitment.
  4. Personalize the experience: Ensure that the plan addresses clients’ needs and abilities, use personal statements and encourage clients to share and discuss their savings plans with peers.

The paper details each of these steps, and it’s quite fascinating – do check it out. Including the Appendices – the data work details are there.

ideas42 is very clear that the results of this study should not be simply transplanted to other situations without thoroughly investigating if they are relevant in that context. Still, one can’t help but wonder about the potential implications of the findings generally.

No-frill accounts have been promoted heavily to further financial inclusion. Relatively large opening or minimum balance requirements were seen as impediments by small-balance savers, as were the slew of fees attached to them. Nevertheless, no-frill accounts often have a small opening balance component, as well as some kind of other performance metric requirement (minimum balance, minimum deposits, maximum withdrawals, etc.) that are designed as much to encourage savings as they are to ensure that accounts are financially sustainable. Does the issue of anchoring suggest, though, that an opening balance requirement or a minimum interaction requirement is having the opposite effect? That, instead of pulling up balances and increasing engagement, they are actually allowing savers to more comfortably “settle for less”?

This process also demonstrated the need to engage the client immediately when they are filling out the initial enrollment forms. These forms are often KYC focused, laborious to fill, and seen more as a formality by all parties. Shifting the focus to the client, and specifically to his or her goals with respect to the product, makes intuitive sense.

It might also help explain why people generally sign up for various promising tools and products, but never quite use them. As FAI recently found out in Bangladesh, with bKash.

Big Banks and Small Balance Accounts – the GAFIS Report
| April 6, 2014 | 5:28 pm | Academic Study, Analytics, Savings | Comments closed

The final GAFIS report is out. “Big banks can’t serve low-income clients because small balance accounts just do not offer a sustainable business proposition” has been a truism since forever, and for good reason. This report takes a good stab at how that doesn’t always have to be the case, and how some of the biggest banks in sizeable developing countries are finding creative, segmented solutions to expanding the envelope of financial inclusion.

Between 2010 and 2013, the GAFIS project engaged five banks – Bancolombia (Colombia), BANSEFI (Mexico), Equity Bank (Kenya), ICICI Bank (India), and Standard Bank (South Africa). Together, they serve 77 million clients, and have combined assets of $250 billion, many of whom are the low-income segment. Obviously not all low-balance accounts belong to low-income clients, but the vast preponderance of low-income clients will have low-balance accounts; hence the focus on making them sustainable.

The final impact was described as follows (p.g. 38):

Collectively, the GAFIS banks have opened more than 4.2 million new accounts in GAFIS-linked products in less than three years. More importantly, they now serve approximately 420,000 “new, poor savers” as a result of the project (see Box I). This number is measured according to the GAFIS project definition, which requires evidence of both savings activity (870,238 accounts) and the poverty status of the account holders (543,119 new accounts meet both criteria); and which also weights the level of attribution to the project according to how directly GAFIS was involved (reducing the 543,119 to 419,654). Even with delays in launching new products at several banks, these growing numbers provide early indication that large banks can achieve scale outreach with their new propositions.

Very importantly, the business case for these 420k new, poor saver accounts was improved significantly through a combination of strategies:

  • Costing methodology adjusted to product and channel specifications: It doesn’t make sense to load up branch costs into an acquisition expense if the product is mostly mobile phone based, for example.
  • Using agent channels, where agents are essentially mom-and-pop stores set up to function as mini-banks: Transactions cost about a fifth as much with agents, where the agent is paid a commission. Account origination costs are in the $1-$6 range at agents, while those at branches are $16-$25.
  • Increasing cross-sell: This might mean serving credit needs of clients, or fees from intermediating inflows from government or other sources of credit payments.

Here’s a summary of what each bank did to improve the business case (p.g. 22):


Still, all this does not make the business case for the accounts a positive one. It does significantly improve it though, from losing $2.79 per account per month, to losing $1.02 per account per month (p.g. 32):


Lot’s more details in the report – do check it out!


The Next Decade, from J-PAL@TEN
| March 4, 2014 | 6:29 pm | Events | Comments closed

About three months ago, J-PAL had a great conference celebrating ten years of incredible work that arguably has furthered evidence-based development work more than any other institution out there. All the videos from the event are available here, but one particular one stood out for me. This session, titled J-PAL: The Next Decade happens right at the end, where J-PAL Directors Abhijit Banerjee, Esther Duflo, Rachel Glennerster and Benjamin Olken discuss what they would like to see happen over the next ten years.

Two things Prof. Banerjee said particularly resonated with me because they speak directly to the technique and underlying motivation for my PhD work, which I paraphrase below.

[9:40 – 10:30] First, he notes that there will much more extensive use of big data – data that is already collected “administratively”, and not with particular programmatic deliberation, such as cell phone call or m-pesa transfer records. One can assume that these will become more easily available This in turn will allow us to test very fine hypothesis with the power afforded by that much data – very small effects can be tested.

[13:05 – 13:55] Second, he expects to move more and more into theory-building based on the data from all these experiments. It starts with taking the results and then fitting it back to the narrative. As experiments accumulate, facts that don’t fit the story help build better stories as they are refined. New experiments are also designed to check the fit to those stories.

Remember that J-PAL is built mostly around RCTs, which take one hypothesis of causal connection within the context of a much larger story, and test that, and only that. To go from there to talking about much more freeform “big data”, and about theory-building as a natural evolution from theory-testing are two major steps away from their bed and butter. Given the complexity of the financial lives of the poor and the increasing availability of such data though, this is certainly a necessary and welcome evolution.


M-Shwari – Unconventionally Affordable at an APR of 138%?
| January 8, 2014 | 10:07 pm | Analytics, Microcredit, Microfinance, Mobile Money, Savings | Comments closed

Mobile money is all the rage these days in inclusive finance circles, and for good reason. Mobile penetration has increased dramatically across the developing world over the previous decade, providing convenient rails for financial services to piggy-back on. It’s cheaper than Western Union and MoneyGram for the client, and cheaper than having to erect brick-and-mortar branches for banks. It’s faster than virtually any other method to send money to a relative in a pinch at the other end of the country, and safer than carrying cash around. And it has spawned an incredible array of services.

One of those is M-Shwari. It’s a savings-and-loan product offered by Safaricom in Kenya, in partnership with the Commercial Bank of Africa (CBA). M-Pesa clients can save into their M-Shwari account and earn interest, and take out short-term loans for a fee. It’s been hailed as a revolutionary product and discussed by the likes of CGAP, GSMA, NextBillion etc. highlighting fascinating aspects of mobile money adoption. And Safaricom promotes it as seamlessly blending convenience, safety and affordability.

I am totally sold on the “convenience” and “safety” elements of M-Shwari, but to buy the claim of “affordability” requires a somewhat unconventional understanding of that word.

But First, the Conventional Take …

So, how much does M-Shwari cost?

The details are in the terms and conditions, but the more readable version for the rest of non-lawyer types is in the FAQ.

Q: Do you get charged interest on your M-Shwari loan?

A: The M-Shwari loan DOES NOT attract any interest. The 7.5% charged is a loan facilitation fee payable only once for each loan taken.

Q: If you have not paid your loan within 30 days, what will happen?

A: Your loan repayment period will be extended for an additional 30 days and you will be charged an additional 7.5% facilitation fee on your outstanding loan balance.

Q: If you pay your loan before the due date, will you still be charged the loan facilitation fee of 7.5% on the loan amount?

A: Yes, the 7.5% is a facilitation fee charged on the cost of processing the loan. Early repayment will increase your future loan limit qualification. Remember your loan limit is dependent on your previous loan repayment behaviour and usage of other Safaricom services such as Voice, DATA and M-PESA.

That’s a 7.5% flat charge on the nominal loan amount, with a maximum term of a month. The nominal and effective Annual Percentage Rates (APRs), “annualized” interest rates if you like, are:

  • Nominal APR: 7.5% * 12 = 90%
  • Effective APR: (1 + 7.5%)¹² – 1 = 138%

For additional details/nuances on APR voodoo please refer to MFTransparency or Wikipedia. XIRR comes to 146%, assuming the 7.5% is collected when the loan is repaid, and 164% if collected when disbursed.

Calling it a “facilitation fee” doesn’t change anything – for a month-long loan, the effective annual cost to the client is 138% or so.

In fact, that it’s a flat fee makes things worse. There is a pretty good reason why the 7.5% can’t be called an interest rate, since interest rates are time-defined. If the cost was actually 7.5% per month, someone borrowing for a fortnight only would be liable for a 3.75% charge. Not so with M-Shwari – you could repay in a day, but you’d still pay 7.5%.  The nominal and effective APRs for a twice-a-month engagement comes out to be 180% and 462% respectively; anything shorter, and the APR is astronomically higher.

We’re hovering dangerously close to the “u” word, don’t you think?¹

Conventional Carrot-and-Stick Included

Two other “features” jumped out from the FAQs:

Q: What is the loan duration?

A: The loan is payable within 30 days. However, you can repay the loan before the due date and borrow again. If you pay the loan in less than 30 days your loan limit qualification will increase.

Q: If you have saved Kshs 5000 in your M-Shwari and have a loan of Kshs 2000 and do not repay within the loan duration (30 days), what happens to the money in your deposit account?

A: – When you borrow the Ksh 2,000, the money in your savings account will be frozen to the loan amount and the loan fee (loan amount Ksh 2,000 loan plus a facilitation fee of Ksh 150).
– You will only be able to access any balance above the frozen amount. The frozen amount will be accessible once you pay the loan. However you can continue to deposit money. Note: During the period the frozen savings will continue to earn interest which will be paid into your M-Shwari at the end of calendar quarter.

M-Shwari thus encourages faster loan repayment, offering an increase in the loan limit as the carrot. CBA sweetens the language even further by noting, “The earlier you repay your loan the better your chances of getting your credit limit increased!”

M-Shwari also seems to be fully collateralized, with both principal and “interest” held in escrow. Good incentive for borrowers to repay, also because they run the danger of being reported as delinquent 90 days after the loan is due, and potentially ineligible for another loan in 7 years. (See CBA FAQ, pages 6-7.)

This is all well and good from a profitability and prudential lending point of view, but it could be argued that simultaneously making the current loan costly and increasing future indebtedness on one hand, and conducting a complete bait-and-switch between savings and credit balances so that there is no net increase in availability of funds to the saver on the other, are not inclusion-friendly “features”.²

The “Affordable” Case

There is no math that can known down the glaring APR of 138%. Context, however, can help explain why M-Shwari has 2.4 million active users within 1 year of operations. Here are some of the reasons I think it’s been so :

  1. M-Shwari is primarily a savings product, with an option to take an emergency loan, as promoted by Safaricom and CBA. The maximum amount one can save is KES 100,000, but the maximum loan amount is KES 20,000.
  2. People are willing to pay fees on short-term loans akin to a service fee. It’s why payday loans can charge $15 for every $100 borrowed in the US. People are also willing to pay a fixed, simple fee compared to a more complicated, constantly adjusting rate, which is why microcredit interest is often charged at a flat rate. There may also be an element of pay-as-you-go, where bank clients are willing to pay a transaction fee each time they use a service, as opposed to pay a fixed monthly ledger fee.
  3. APR is not particularly useful for short-term loan products. No one expects a borrower to roll over 12 times in one year, bleeding KES 90 to access KES 100 through the year – we know even the unbanked are more sophisticated financial users than that.
  4. But most importantly, it’s convenient – it’s on that phone that is attached to your hips, it’s on the M-PESA rails that is ubiquitous in Kenya, and it’s near instant, secure and private. I know I would pay a 7.5% premium for a service like that.

M-Shwari therefore seems to be “affordable” despite having an APR of 138%. With no cash-handling or client interaction costs at branches, a relatively cheap source of capital in deposits from the same clients³, and non-performing loans at around a low 3.8%, this is one partnership that must make for quite nice margins for CBA and Safaricom.


¹ The “u” word is usury, in case you’re still wondering.

² It’s not clear if one can borrow more than one’s savings amount – the product pages and FAQs are deliberately vague.

³ Tiered interest rate is in the 2-5% range per annum.

The resilience of paper in Kenya
| December 7, 2013 | 6:43 pm | Critical Views, Mobile Money | 2 Comments

Author: Ignacio Mas, Senior Fellow, Center for Emerging Markets Enterprises at the Fletcher School, Tufts University

With M-PESA and the whirl of innovations that it has triggered, there is no doubt that Kenyan payments are becoming more electronic. But, at the same time, are they any less paper-based? It’s hard to argue that is the case, if one looks at the Central Bank’s data. (Currency and GDP are from its statistical bulletins, and check volumes are from its Annual Reports; and remember that M-PESA was launched in April 2007).

The value of currency in circulation has remained essentially flat, especially if you discount the 2007 high blip (I doubt that M-PESA’s cash-busting bang was largest during its first nine months of operation). Likewise, the volume of checks is on an exceedingly gentle decline. The average check value has dropped quite significantly, but surely that’s due to competition from electronic funds transfers at the high value end rather than from M-PESA with its small-ticket transactions.


To me this lack of visible impact on paper highlights the two key pending transitions that M-PESA –and mobile money more generally—needs to undergo.

First, customers need to see value in storing their balances electronically. As long as most customers have the practice of withdrawing any electronic money they receive immediately and in full, M-PESA will remain essentially a cash-to-cash service, and as such it sustains rather than reduces the role of cash in the economy.  (My recent mantras: M-PESA is better cash, not better than cash and you can’t go cash-lite on empty accounts.)

Second, businesses need to see mobile money as an easier way not only of paying and getting paid, but also of managing the information around those payments. It needs to link with order management, invoicing, accounting, reconciliations; possibly even inventory and fleet management. Mobile money needs to have the kind of flexible application programming interfaces that allows corporates to handle transaction flows seamlessly within their own systems rather than as a separate universe of transactions. It must solve basic trust issues that arise when there is no prior relationship between buyer and seller. (My recent mantras: solve business paint points around mobile payments and think of cash as a highly-evolved visual-acceptance payment instrument.)

Without these two transitions, to more electronic storage of value and flexible interfaces into business IT systems, mobile money will continue to be an extremely useful extension of the Kenyan payments system, but it will hardly be at the core of it. The core remains very paper-centric.

Ignacio Mas is currently a Senior Fellow at the Fletcher School’s Center for Emerging Market Enterprises at Tufts University, a Senior Research Fellow at the Saïd Business School at the University of Oxford, an Associate with Bankable Frontier Associates, and an independent consultant. You can find further details of his work at: http://www.ignaciomas.com.

Here are 2 maps, be right back!
| December 2, 2013 | 2:47 am | Miscellaneous | Comments closed

Yes, this blog was in a bit of a hiatus. While I put together some more original stuff (and hopefully welcome additional contributors), let me share two maps with you that are pretty cool not just because they are quality products in their own right, but also because of how they were put together.

Source for everything in this post: 5 Maps That Could Help Solve Some of the World’s Most Daunting Problems

My favorite of the five shows the outreach of financial services in Nigeria:

 … the Gates Foundation’s Financial Services for the Poor program launched an ambitious geospatial project in Nigeria. Armed with Black­Berrys and traveling in a grid pattern, 30 surveyors undertook a three-month campaign in Nigeria to pinpoint all of the services available—from bank branches to microfinance institutions to post offices and more. They logged GPS coordi­nates and took photos. … The resulting website gives the best picture yet of how financial services work in a developing economy. Jake Kendall, the Gates Foundation program officer who heads the project, hopes financial institutions will use the map to figure out where to open new locations. It can also guide public policy: Kendall’s team used this map to show the Nigerian central bank governor the need for mobile-based finan­cial services, since it demonstrates that more than half of residents live outside a 3-mile radius of brick-and-mortar options.

A good map inspires curiosity. I find myself asking, how do you get to people who do not have mobile coverage? (Those are the non-purple parts.) Mobile money agents are often touted as a great list mile solution – yet, they often overlap with existing infrastructure, and in a fair few cases, are missing where other delivery channels, such as post offices, are present. Are mobile money agents really that redundant? Are there alternative delivery channels for financial services one should explore?

The second map is of the biggest slum in Kenya, Kiberia (the Wired piece lets you zoom into the map):

African maps are notoriously problematic. Much of the data is old; roads, particularly footpaths, languish unnamed. Africans often navigate by informal landmarks like bars or gas stations, places not represented on standard maps. The slums have it even worse: On Google Maps they figure as blank expanses, in keeping with their reputation as shadowy, marginal places.

Enter Spatial Collective and Map Kibera. These two organizations, a company and a nonprofit, are mapping a Kenyan mega-slum called Kibera—the name is derived from a word meaning “jungle”—according to how its 200,000 inhabitants actually navigate it. The maps started with crowdsourced landmarks important to locals: water taps, schools, pharmacies. Residents with Internet access were invited to add to an open source map; others contributed data by SMS or attended community workshops, where they wrote on giant empty maps.

Spatial Collective overlays these community-generated maps with official data. One project tacked on sewer-line data (depicted here) from Nairobi City Water to find the most valuable spots to build new public toilets. Another mapped community-reported crime data to help the World Bank understand where to place safety interventions like lamps. These kinds of projects make Kibera more legible to its inhabitants and to outsiders.

In addition to the ability to provide efficient placement of new services, the fact that this map was crowdsourced is particularly noteworthy. By collecting information deemed useful to the residents of the slums themselves, whatever work done based on this will presumably be more relevant to them. Incidentally, comments in the article suggest that this is built on OpenStreetMaps’ work in mapping Kibria (http://mapkibera.org/) – that in itself is worth checking out.

Surveys Gone Bad – When “Yes” means “No”
| May 16, 2013 | 8:41 pm | Analytics, Critical Views | 26 Comments

… or, A Story of How a Coding C*Screw-Up Made Bangladesh One of the Least Tolerant Countries in the World. (Spoiler: It isn’t!)

What We Thought We Knew

Yesterday, the Washington Post put out a story, A fascinating map of the world’s most and least racially tolerant countries. In that map, India and Bangladesh stuck out like a baboon’s butt as bastions of intolerance in the world. It’s reproduced below; red implies that more people said they “would not want neighbors of a different race”.


In fact, the percentages are more than a little damning:

India, Jordan, Bangladesh and Hong Kong by far the least tolerant. In only three of 81 surveyed countries, more than 40 percent of respondents said they would not want a neighbor of a different race. This included 43.5 percent of Indians, 51.4 percent of Jordanians and an astonishingly high 71.8 percent of Hong Kongers and 71.7 percent of Bangladeshis.”

Three thoughts occurred to me in this order:

  • Wow that’s an odd basket of countries to be lumped together as the most intolerant!
  • Ouch! Yeah I’m Bangladeshi.. and while I’ll be the first to admit we have our own favorite national stereotypes and periods of ethnographically inspired excitement, least tolerant? Really?
  • I wonder if someone fat fingered on this big time.

Thanks to the fact that both Max Fisher of WaPo and World Values Survey folks freely shared their sources, we can take a dive into the data that generated the map to explore thought #3 to our heart’s content.

The short answer is, yes, someone did fat finger this big time. “Yes” and “No” got swapped in the second round of the survey, which means that 28.3% of Bangladeshis said they wouldn’t want neighbors of a different race – not 71.7%.

26K Facebook likers and 2.5K Tweeters, take note.

Now, the long version for the data wonks amongst you. By the way this piece is restricted to Bangladesh – time, and ability to read primary questionnaire being main constraints.

What the WVS Data Really Says

(Spoiler: Data says it’s confused…)

There were 5 waves of data collection:

  • 1981-1984
  • 1989-1993
  • 1994-1999
  • 1999-2004
  • 2005-2007

Bangladesh has data for the third and fourth wave.

First, lets reproduce the 71.7% number.  We can use the interactive query tool WVS has set up on their website at: http://www.wvsevsdb.com/wvs/WVSIntegratedEVSWVSvariables.jsp?Idioma=I

To get this:wvs_sample1

“Mentioned” basically means “Yes” (we’ll explore this in detail in a bit).

What about the 1996 survey? Here’s the same page with 1996 data (table shown only):


If the oddity isn’t jumping out to you yet, let’s use something a little more visually friendly to compare the 1996 and 2002 numbers. WVS also makes available a Online Data Analysis toolkit at http://www.wvsevsdb.com/wvs/WVSAnalizeQuestion.jsp. With a literal tinkering, we can get to this screen:


“Mentioned” (the measure for less tolerance) went from 17.3% to 71.7%, while “Not Mentioned” went from  82.7% to 28.3%.


a) something WTHBBQPWN&%$#* happened in those 6 years that made 54.4% Bangladeshis do a 180 degree on their tolerance levels, OR

b) the coding got messed up and “Mentioned” is either 82.7% and 71.7% in 1996 and 2002 respectively, or 17.3% and 28.3% respectively.

For a survey size of N = 1,500ish, b) is always your safer bet when no obvious change agent is involved, endogenous or exogenous.

(If you’re Bangladeshi, you’re also probably laughing your behind off at a) since the 54.4% number involves tens of millions of people in a generally syncretistic society where appreciation for that heritage has arguably only increased with the younger generations, but that’s “anecdotal” for the purposes of this piece, so we’ll leave that thought there.)

If your data analysis foo is up to the task, I’d encourage you to check out the raw data itself to confirm that this is also the case there. The dataset is generously available at: http://www.wvsevsdb.com/wvs/WVSData.jsp

I used the STATA file for the “WVS FIVE WAVE AGGREGATED FILE 1981-2005” dataset; you can also choose SPSS or SAS formats if they suit your toolkit better. For Stata, the relevant command is:

tab S002 A124_02 if S003 == 50

Giving the result:

                    | Neighbours: People of
                    |   a different race
               Wave | Not menti  Mentioned |     Total
          1994-1999 |     1,261        264 |     1,525 
          1999-2004 |       425      1,075 |     1,500 
              Total |     1,686      1,339 |     3,025


(S002 is the Wave, A124_02 is the question under study, and S003 contains the country, with Bangladesh being code 50.)

What Should The Data Say?

(Spoiler: Bangladeshis are a tolerant bunch – it’s ok to come visit.)

Ok, now that we are reasonably certain the data is confused, which way will it point once we de-confuse it? For this, we need to turn to the actual questionnaires. These too are available at http://www.wvsevsdb.com/wvs/WVSDocumentation.jsp?Idioma=I.

First, the 1996 survey. The relevant section is reproduced below (Bangladesh_WVS_1996_1.pdf, pg 10):

wvs_sample4The top line is the question, basically asking who the respondent “does not want or would not like to have as a neighbor”.

The first column, উল্লেখ করেছেন, means “Mentioned” – to be selected if the respondent notes a particular group of individuals (V51 – V60) are unwelcome neighbors.

The second column, উল্লেখ করেন নি, means “Not Mentioned” – this is for the more chillaxed bunch.



Now, let’s look at the 2002 survey. The relevant section is reproduced below (Bangladesh_WVS_2002_1.pdf, pg 19):

wvs_sample5The top line has the same question as above, verbatim. The first or second column headers are not the same though.

The first column, প্রতিবেশী হিসেবে পছন্দ করবো, means “Would like [X] as a neighbor” – to be selected if the respondent notes a particular group of individuals (V68 – V77) are welcome neighbors.

The second column, প্রতিবেশী হিসেবে পছন্দ করবো না, means “Would not like [X] as a neighbor” – this is for the less chillaxed bunch.


Yeah… oops!

‘1’ and ‘2’ stand for totally the opposite things in the two surveys.

Unless we are willing to allow that the data input folks consciously converted a ‘2’ in 2002 to a ‘1’ in 1996 to connect প্রতিবেশী হিসেবে পছন্দ করবো না to উল্লেখ করেছেন, I think it’s reasonable to assume that ‘1’ was also coded for “Mentioned”/উল্লেখ করেছেন in the 2002 dataset, leading to a flip in the results for that question for that wave. Spot checks also suggest that this is what would be consistent with surveys from other countries.

With everything righted the right way, here then is what the final numbers look like:


Yes, 28.3%, not 71.7%.


  1. I only looked at the question that was used for the tolerance/intolerance WaPo piece. This inconsistency shouldn’t be extrapolated to any part of the rest of the Bangladesh survey unless one has double checked for that.
  2. I ran this for the Bangladesh dataset only. No idea if any of this applies to any other country dataset – same caution as above applies.