institute for money technology and financial inclusion university of california, irvine harsha de...

INSTITUTE FOR MONEY TECHNOLOGY AND FINANCIAL INCLUSION

UNIVERSITY OF CALIFORNIA, IRVINE

Harsha de SilvaJinendra Kothalawala

Priyanwada Herath

LIRNEasiaNovember, 2009 Photo not ours. Source

unknown

Presentation flowIntroduction

Research Question and Objective

Theoretical Framework

Research Methodology

Findings; thus far

Discussion

Introduction: poverty in Sri LankaPopulation below national poverty line: 15.2% of

20 million population Urban sector: 6.7% Rural sector: 15.7% Estate Sector: 32.0%

Sources: Department of Census and Statistics, Sri Lanka (2006/07)

Population below USD 1 per day: 5.6%Source: Central Bank of Sri Lanka (2008)

Introduction: mobile usagePhone usage in Sri Lanka

Mobile phones: 12 millionFixed phones: 3.5 million

Source: Central Bank of Sri Lanka (2008)

Phone usage by the BOPPhone access: 73%

Urban (75%) and Rural (73%)Mobile phone ownership: 36% of BOP

Urban (43%) and Rural (36%)Source: LIRNEasia (2009)

Introduction: m-finance systemsStarted several years ago; mixed success

depending on country and business model. Future very optimisticKenya: M-PESAPhilippines: G-Cash, Smart MoneySouth Africa: MTN (planning on 21 African

countries), WIZZITDozens of mainly African countries beginning

Sri LankaNo formal m-finance business yet established

Research question and objectiveQuestion

How do m-transfer services help smoothen consumption expenditure among the poor with irregular income streams?

ObjectiveAnalyze the impact of m-transfer services, if

any, on smoothening consumption expenditure among poor with irregular income streams

Theoretical framework

Poor in generalLarge share of expenditure on consumption of necessities

Poor with irregular incomeEarning for day-to-day livingFace regular income-expenditure gapsHardly any capital accumulation; but if so, irregular

Smoothening Income-Expenditure Gaps

Mean expenditure

0

Time period

Income per time period

1 2 3 4

Irregular income

Surplus

Deficit

Research methodologyTarget respondents

Average individual HH income less than USD 1 per day Have an irregular income pattern Males and females between 18-50 years using mobile

phonesThree geographical locations

Colombo urban poor; Kurunegala rural poor; Nuwara Eliya estate poor

Qualitative 18 in-depth interviews: 45 -60 minutes at their residences 6 focused group discussions: 2 hours. Digitally tape recorded (with consent) and transcribedSeptember and October 2009

Research methodologyTarget respondents

Average individual HH income less than USD 1 per day Have an irregular income pattern Males and females between 18-50 years using mobile

phonesThree geographical locations

Colombo urban poor; Kurunegala rural poor; Nuwara Eliya estate poor

Qualitative 18 in-depth interviews: 45 -60 minutes at their residences 6 focused group discussions: 2 hours. Digitally tape recorded (with consent) and transcribedSeptember and October 2009

Research methodologyTarget respondents

Average individual HH income less than USD 1 per day Have an irregular income pattern Males and females between 18-50 years using mobile

phonesThree geographical locations

Colombo urban poor; Kurunegala rural poor; Nuwara Eliya estate poor

Qualitative 18 in-depth interviews: 45 -60 minutes at their residences 6 focused group discussions: 2 hours. Digitally tape recorded (with consent) and transcribedSeptember and October 2009

Research methodologyTarget respondents

Average individual HH income less than USD 1 per day Have an irregular income pattern Males and females between 18-50 years using mobile

phonesThree geographical locations

Colombo urban poor; Kurunegala rural poor; Nuwara Eliya estate poor

Qualitative 18 in-depth interviews: 45 -60 minutes at their residences 6 focused group discussions: 2 hours. Digitally tape recorded (with consent) and transcribedSeptember and October 2009

Urban poor . living in congested desperation .

Hand to mouth survivalCasual labor: street vendors,

construction site helpers etcExpenditure on basic needs:

mainly food on daily basis, that too skipping mealsDaily USD 3 for family of 4;

maybe 5-6 for a family of 6Try not to borrow but live with

whatever they get; but take food on loan from neighborhood shop

Emergencies get USD 10-15 from friends; worst case USD 50-100 at 10-20% per month

If at all save a little for kids

Rural poor . living in isolated desperation .

Life is difficult…

Living off small subsistence tenant or ‘chena’ agricultureOnly 10-15 days work, so look for work in village; “anything”

‘Manage’ with what they haveFrugality; small family can make do with USD 2 a day“Mostly… keep part of previous night’s dinner for breakfast…”

Purchase food on credit from village shop, if no moneyIn desperation would borrow from relatives USD 4-5‘Hide’ USD 3-5 somewhere for an emergency

Estate poor . living in institutional desperation .

Living on estates; tea Marginalized and isolated Estate management responsible

for all life aspects Pluck tea when there is work;

weather is key; even 2 days/weekPurchase or for credit food from

estate shops; pay on salary day Malnourished

Borrowing brings ‘bad luck’ Yet, borrow from neighbors,

friends Community savings-credit

schemeAlways try to save something for

the children; many

Totally dependent on plantation

Usage of mobile phoneFairly similar use of mobile phones by urban, rural

and estate poorKeeping in touchParticularly if relative overseas; middle eastDifference due to kind of livelihood

Use pre-paid connectionsKeep costs at minimum

Reload USD 0.50-1 per 1-2 weeksSignificant SMS useLivelihood wise, the mobile phone helps

to get information on availability of work to get market information; pricesto find out about tutorials for school children

competing at exams etc.

m-transfersPhone-to-phone credit transfers do take place

Not frequently, but yesMainly among friends or colleaguesVery small amounts; even as low as USD 0.05 – 0.25

Smoothening communication consumption via m-transfersNo money to purchase re-load and need to make urgent callUnable to access an outlet to purchase a reload

Pay backAs return re-load or top-up cardOr, as cash

Small transactions are costlyRelatively high service charge; can be as high as 25-50%But, circumstances compel them to do so

Needs differ based on circumstance of povertyMobile-money can make the transaction size smaller and

allow otherwise impossible transactions to take placeCongested urban poor

Instead of buying vegetables every morning to sell on the streets; can buy twice or three times a day. Can slowly build creditworthiness. Transactions among network of vendors

Isolated rural poor Instead of having to travel long distance to purchase full amount of

urgent daily needs (so not purchase) can create micro-businesses in sachet marketing in rural areas. Transactions between poor and micro-entrepreneurs

Institutional poor Can help break-free from the dependency on the plantation company;

can look for work outside and send money to family on the estate. Exchange between poor worker and his (her) family

But no difference for savingMobile-money can make the transaction size

smaller and allow otherwise impossible transactions to take place

Urban, rural and estate poorCan save small amounts; new possibilities

Need formalityThere is no clear regulation on what can

and can not be done in m-finance sphere CBSL ‘working on’; TRCSL silent

No operator has formally started a full-scale agent-based scheme

But, can pay bills etc (non poor) Credit transfers among friends take place

Issues with security How can security of transfers be

guaranteed; regulatory mechanismParties, or potential parties [network

operators, mobile users, money recipients and agents] need to accept the system

Rules and partnerships must exist to move beyond personal relationships

Opportunity Opportunity among the among the

poorpoor

“If someone is willing to

accept our mobile money for food items I will be happy to pay with my

phone since hunger is

unbearable and we need

food more than anything

else”

Need to build awarenessLack of awareness, specially among older people

in the rural and estate sectorsYoung people familiar with various mobile phone

services and are curious in moving forward with m-finance servicesBut, negative attitudes; trust issues

Opportunity among the poorOpportunity among the poor

“Even though we collect some coins in a till at home for our

kids, these savings do not remain in it for long. But we all would be able to save some money for our

children’s future if there is a formal saving system through

mobile phone.”

Improvement in infrastructureNetwork coverage need

to improve and electricity is a problem in the some rural poor areas

Agent networks need to be established

M-Pesa type model?

Opportunity among the Opportunity among the poorpoor

“Saving and purchasing with

mobile money could be a benefit to us if

we get an opportunity to do so.

But I am not quite sure whether people would engage in this as we do not have a

place nearby to “reload” our mobile

money”

Further discussionLiterature focus on ‘transformational’

financial services; but no need to be confinedOptions: cash, credit card, debit card, mobile-

money etc.Adoption

Demand side issues Supply side issues

Further discussionLiterature focus on ‘transformational’

financial services; but no need to be confinedOptions: cash, credit card, debit card, mobile-

money etc.Adoption

Demand side issues Supply side issues

Further discussionLiterature focus on ‘transformational’

financial services; but no need to be confinedOptions: cash, credit card, debit card, mobile-

money etc.Adoption

Demand side issues Supply side issues

Thank youHarsha.lirne@gmail.com

www.lirneasia.net