Category: Fintech

The colonial geographies of Kenya’s fintech boom

Nick BernardsLeave a comment

Digital and mobile finance applications have boomed in Kenya over the last decade. Mobile money, Vodafone’s M-Pesa system in particular, is ubiquitous. Kenyan banks and smaller start-ups have led the adoption of a wider range of mobile and digital financial applications.

For promoters of fintech as a tool for development, Kenya is a paradigm case. Estimates from Tavneet Suri and William Jack – suggesting that the advent of M-Pesa had directly moved 194 000 households, equivalent to 2 percent of the country, out of extreme poverty – have been triumphantly cited across a wide range of media reports and policy documents. The rapid adoption of mobile and digital finance, according to advocates, has allowed Kenya to ‘leapfrog’ the developmental constraints of its existing financial system. In the words of one author: ‘new technologies solve problems arising from weak institutional infrastructure and the cost structure of conventional banking’.

There are good reasons to question this rosy narrative, as recent critics have demonstrated compellingly. Among others, Milford Bateman and colleagues raise a number of important methodological and other objections to Suri and Jack’s claims, and Serena Natile shows how narratives of ‘inclusion’ mask the perpetuation of gendered patterns of exclusion and inequality. Wider applications of fintech in Kenya have come in for critique as well. Kevin Donovan and Emma Park highlight emerging patterns of digitally-enabled over-indebtedness. Laura Mann and Gianluca Iazzolino trace the emergence of monopolistic corporate power enacted through the extension of digital platforms (including for finance) in Kenyan agriculture. Ali Bhagat and Leanne Roderick show the emergence of new forms of racialized dispossession and exploitation through efforts to extend fintech applications to refugees in Kenya.

On a more basic level, ‘leapfrogging’ narratives have to contend with the fact that the geography of Kenyan fintech looks a lot like that of the financial system more generally. The fintech boom is predominantly an urban phenomenon, and especially concentrated in Mombasa and in and around Nairobi. Data from the 2019 national ‘FinAccess’ survey shows that 6.6 percent of respondents currently or had previously used of mobile lending services, and 6.4 percent reported the same of digital lending apps. The corresponding figures among urban residents were 17.2 and 11.4 percent. The proportion of residents in Nairobi Metropolitan Area and Mombasa using mobile money services (25 percent) and digital lending apps (18.2 percent) is more than double the respective use rates of mobile (12.3 percent) and digital borrowing (7.1 percent) among urban residents elsewhere.

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Financial Inclusion and the Future of Social Protection Policy

Christopher WebbLeave a comment

The economic impacts of the COVID-19 pandemic have resulted in major setbacks in addressing global poverty levels. The UN predicts significant delays in reaching a number of the Sustainable Development Goals and the World Bank reports a two-decade reduction in eliminating extreme poverty. In this context, almost every country in the world has expanded, adapted, or developed new social protection measures. Some 1.3 billion people were assisted through this expansion of social protection over the course of the pandemic, from stimulus cheques to caregiver benefits to supports for informal workers (Gentilini et al., 2020). By far the most popular form of support were direct cash transfers (CT), with many governments expanding coverage or eliminating conditionalities entirely.

Like many observers, I was initially hopeful that these expansions would provide opportunities to address the significant gaps in our social protection systems, particularly as the most vulnerable (women, informal workers and migrants) are often excluded. Unfortunately, this does not seem to be the case. Pandemic specific transfer programs lasted, on average, only 3.3 months, with only 7% extended beyond this (Gentilini 2021). Prior to the pandemic, some 4 billion people lacked social protection coverage. The limited duration of these measures, coupled with the long-run effects of disrupted employment, means we are effectively back to where we started—even as the pandemic shows no signs of abating in much of the world.

What has emerged instead are significantly different approaches to adapting the welfare state in a context of continuous and ongoing livelihood crises.     

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Who will Benefit from the Bitcoinization of El Salvador?

Guy Cowman-SharpeLeave a comment

On 8 June, El Salvador’s Legislative Assembly voted to pass the Ley Bitcoin(Bitcoin Law), with a majority vote of 62 out of 84. The legislation was presented to the Assembly days after President Nayib Bukele announced his intention to make bitcoin legal tender, speaking via video broadcast to the Bitcoin 2021 Conference in Miami. Effective from 7 September, all businesses in the country will be required to accept bitcoin alongside the United States dollar, El Salvador’s current currency. Since the bill’s passing, legislators in Panama and financiers in Mexico have expressed interest in recognizing bitcoin as legal tender.

Rather than China’s digital renminbi or Venezuela’s petro, El Salvador will not be pursing the creation of its own cryptocurrency. Bukele is adamant that at this stage Bitcoin will not make up any of the nation’s reserves, held in the Central Reserve Bank of El Salvador. Rather, a trust in the country’s development bank (BANDESAL) worth US $150 million will guarantee convertibility to dollars as a safeguard against bitcoin’s volatility. In doing so, the BANDESAL trust would make sure that the price of a commodity does not widely fluctuate between point of purchase and completion of transaction.

In Bukele’s address he made mention of the lack of financial inclusion for Salvadorans being a motivation for the law. In a country where informal employment makes up around 70% of the labor force, anonymous peer-to-peer cash transfers without the formal requirements of a bank account or the high charges of Western Union make sense as an alternative. Bukele has also expressed his hope that the move will make El Salvador “less dependent” on the United States, given that dollarization ceded monetary independence to the Federal Reserve. But given the increasing centralization of Bitcoin and its reliance on big tech money, it is far more likely that bitcoinization will merely make El Salvador dependent on a different section of US capital.

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The Techfare State: The ‘New’ Face of Neoliberal State Regulation

alibhagatLeave a comment

By Ali Bhagat and Rachel Phillips

A recent article in the New York Times takes aim at ‘How Big Tech Won the Pandemic’, highlighting how in the last year alone, Amazon, Apple, Google, Microsoft, and Facebook posted a combined revenue of more than $1.2 trillion. While the pandemic has resulted in the loss of both work and life the world over, companies like Amazon have managed to expand their warehouses and their cloud computing infrastructure—and reaped unprecedented profits in the process. As the Times put it, ‘the pandemic created a peculiar economy that benefited some people and industries, including in technology, even as it battered others.’ 

But as many commentators have pointed out, the explosive growth of the tech giants must also be understood in relation to more overtly political conditions. It may be true that the technology industry has maintained a liberal, progressive, and socially equitable visage throughout the pandemic, even as it has subtly extended its multi-tentacled reach into new physical and digital spaces. Indeed, we know by now, that Big Tech has long thrived on regulatory evasion and the exploitation of legal grey areas and this is a dominant reading within critical political economy which has been at pains to point out how laissez-faire regulatory environments—particularly in the United States—have allowed the tech industry to sniff out and exploit new sources of profit, including those that have arisen as a result of the COVID-19 crisis.  

In this literature, then, the tendency is to assume that it is an absence of state intervention that has underpinned the technology industry’s growing economic (and political) power. With our conception of techfare, however, we aim to push beyond these explorations of how Big Tech evades state control. Instead of focusing on state absences, we set out to highlight an equally significant dynamic: how the technology industry has become deeply entwined with the activities of the neoliberal state. 

Our research agenda is centred on one key question: how has the dramatic post-2008 growth of the American technology industry interacted with—and been shaped by—the neoliberal regulatory projects that have prevailed during this time? In pursuing this question, we focus on one pivotal arena of neoliberal statecraft in which Big Tech companies increasingly participate, but where their presence has gone largely unnoticed: the disciplining of the relative surplus population, particularly through consumer debt, policing, and imprisonment. 

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