Over the past decade the expansion of digital-financial inclusion through innovations in financial technology (fin-tech) has been identified by the World Bank, the G20, USAID, the Bill & Melinda Gates Foundation, and other major international institutions, as a key way to promote development and alleviate poverty in the Global South (GPFI, 2016; Häring 2017; World Bank, 2014). Perhaps the most influential and widely reported publication pushing forward this narrative is an article examining M-Pesawritten by US-based economists TavneetSuri and William Jack—and published in the prestigious journal Science—entitled ‘The Long-run Poverty and Gender Impacts of Mobile Money’. M-Pesa isa mobile phone, agent-assisted platform for transferring money from one person to another. It was originally developed with funding from DFID and has quickly become a darling of the digital-financial inclusion movement. In this particular article,the authors make the far-reaching claim that ‘access to the Kenyan mobile money system M-PESA increased per capita consumption levels and lifted 194,000 households, or 2% of Kenyan households, out of poverty’ (Suri and Jack, 2016: 1288).
Suri and Jack’s article in Sciencehas sent ripples through the global development community and has served—as perhaps was intended—to solidify support for upping the promotion of digital-financial inclusion initiatives across the Global South. Importantly, the article’sclaims of unprecedented poverty reduction have been uncritically picked up by all of the international development agencies and microcredit advocacy organisations, as well as by many mainstream economists, so-called ‘social entrepreneurs’, tech investors, and media outlets. Much like microcredit in the 1980s, fin-tech and digital-financial inclusion is now very widely seen as a key—if not the key—to reducing global poverty and promoting local development.
In this post we summarise our recent article entitled ‘Is Fin-tech the New Panacea for Poverty Alleviation and Local Development?’ (Bateman, Duvendack, and Loubere, 2019), which challenges Suri and Jack’s findings, and urges the global development community to take a second, more critical look at their study. We argue that the article contains a worrying number of omissions, errors, inconsistencies, and that it also employs flawed methodologies. Unfortunately, their inevitably flawed conclusions have served to legitimise and strengthen a false narrative of the role that fin-tech can play in poverty alleviation and development, with potentially devastating consequences for the global poor.Read More »
With the rise of financial inclusion as the new buzzword in global development circles, it has replaced earlier items on the reform agenda such as financial modernisation or financial deepening. By their very nature financial inclusion projects are inherently political – their underlying rationale is to change who has access to what forms of credit and at what conditions. Financial inclusion is both a multi-scalar and multi-faceted phenomenon. Needless to say that its dynamics play out differently in different countries and regions. However, before uncritically embracing the financial inclusion agenda as a means to achieving a more equitable economic order, more attention should be paid to what constitutes a fundamental set of questions: who includes whom, in what and on whose terms? In this blog entry, I want to highlight some of the key issues that have emerged in relation to Islamic finance. Read More »
Getting access to credit is a critical challenge for small-holder farmers all over Sub-Saharan Africa . A new breed of financial-technology firms (fintech) promises to address this issue, claiming that digital technologies can lower the barriers for borrowers and cut transaction costs for lenders. As part of our ongoing project on digitisation and data in US and Kenyan agriculture, we have been examining these claims, studying how tech companies translate them into business initiatives and exploring the implications for knowledge production, economic growth and value redistribution.
In rural Kenya, fintech innovations are premised on greater efficiency and transparency and inspired by narratives of digital disintermediation. Similarly to what argued for migrant remittances by Vincent Guermond in a previous post of this blog series , digital lenders harness data (extracted through digital infrastructures) and algorithms to make farmers more legible and, therefore, more predictable. In order to expand their pool of data, Kenyan fintechs are increasingly embedding themselves into inter-connected digital infrastructures, or platforms. These platforms provide farmers with end-to-end solutions, and thereby bundle together financial services with the provision of agricultural inputs and information extension services. In so doing, lenders recalibrate and harmonize their risk-assessment procedures, and construct an ideal type of farmer whose financial behaviours and importance in the local value chain can be clearly pinned down.Read More »
How are things “datafied?” This blog post aims to answer this question by offering a critical reflection on a wide range of recent initiatives that attempt to “datafy” remittances, i.e. leverage migrants’ and recipients’ money as a means to facilitate access to digital financial products and services for individuals and households, with a specific focus on Ghana. A handful of scholars have started to critically assess the political economy of the “financialisation of remittances”, calling into question an agenda that is animated not by the needs of migrant men and women but rather the political and financial concerns of a broad coalition of global and national actors relating to the socio-spatial expansion of markets (Datta, 2012; Cross, 2015; Kunz, 2013; Hudson, 2008; Zapata, 2018). Here, I want to focus on the yet neglected aspect of the construction of these remittance markets, rather than treating financialization as “an explanation in and of itself” (Fields, 2018:119).
In recent decades, market-based solutions such as financial inclusion have become more popular in developed countries to reduce inequalities and boost wealth and incomes of the poor. There is no better example of this than the recent thrust of low-income families, women, ethnic minorities, and the young into the subprime mortgage lending expansion in the USA since the early 2000s. Higher access to formal loans for these households was argued to enable them to climb the magical ladder of homeownership and achieve their American Dream. But as we know, the picture didn’t turn out to be quite so rosy.
10 years since the Great Recession, many families are not seeing recovery as the impact of the crisis was substantially harsher for the subprime borrowers (Young 2010; Henry, Reese, and Torres 2013). Financial inclusion in the subprime period turned out to be predatory. In this post, I explore how things went wrong when policy makers failed to account for the institutional conditions in the US economy, which led to dramatically different experiences of financial inclusion across social classes, gender, race, and generations.Read More »
Microfinance has been widely hailed as one of the most innovative tools for fighting against poverty. It has generated global attention over the last two decades, especially since the UN declared 2005 the ‘Year of Microcredit’ and the 2006 Nobel Peace Prize was awarded to microfinance pioneer Muhammad Yunus and the Grameen Bank. This led to a significant expansion of the sector in the last decade. According to the World Bank (2015), the microfinance industry is estimated to have $60-100 billion in loans outstanding, and several thousand microfinance organizations reach an estimated 200 million clients. 32.5 million of these clients are in India and 90 percent of them are women.Read More »
Late developers are nowadays confronted with the problem of having to earn foreign currency to finance structural transformation under extremely unfavourable conditions. The dependency on forex is rooted in the international financial architecture and represents a major pitfall for countries trying to catch up. However, this structural impediment to transformation is not paid much attention to by the dominant development economics.Read More »
On 8th November, 2016, the Indian government announced that it was banning the use of 500 and 1000-rupees currency notes from midnight, effectively scrapping 86% of India’s currency notes by value. The Indian public would have to change the outlawed currency notes for new ones at bank counters by the end of the year.
In the following months and years, the move, which came to be known as demonetisation, caused immense suffering to the Indian public and damage to the Indian economy. So, why was it carried out? In an upcoming paper, Daniela Gabor and I seek to demystify demonetisation by locating it within wider changes in the Indian economy—changes that started in the financial inclusion space but are now reverberating across the entire financial sector. We refer to this process of change as digital financialisation.Read More »