Harvesting data: Who benefits from platformization of agricultural finance in Kenya?

Woman_farmer_in_Kenya

By Gianluca Iazzolino and Laura Mann.

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 »

Does one size fit all when it comes to financial inclusion? Scrutinising the effects of class, race, gender, and age

524195139_1c8a3ec97c_b.jpgIn 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 »

Demonetisation in India: From Financial Inclusion to Digital Financialisation

31530585646_0a0e070353_o.jpgOn 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 »

Financial Education in Malaysia: A Driver of Nation-Building or Inequality?

Moonrise_over_kuala_lumpur.jpgA decade has passed since the Global Financial Crisis (GFC) which seems an apt time to begin talking about the event that has pushed the concept of financial education to the core of global policymaking debates. Despite its growing popularity today, financial education has existed in the premise of global policymaking for the past few decades. The benefits of financial education seem endless; poor national financial literacy levels have been blamed for adverse socioeconomic effects such as high national household debt and/or a general irrational exuberance in financial consumption behaviour (see e.g. here). Along the same lines, low national financial literacy rates have been seen as indicative of overall financial instability, the types that have been argued and blamed as causal mechanisms of the GFC. Thus, financial education is held as an empowering dogma, its dissemination seen as providing citizens with the knowledge that would empower them to access financial services in a sustainable and meaningful manner. Read More »

If India gave minimum support incomes to the rich before, it can do the same for the poor. Rahul Gandhi can do it.

rahulghandi.jpgIndia’s opposition leader has recently floated minimum income support. The 1.5% GDP equivalent it requires can be financed through a 3% tax on the richest 3000. It is not just an idealized safety net for the poor – it has been done before, for the super elites. If it works, it can be a model for adoption in other emerging democracies. Read More »

Why positive thinking won’t get you out of poverty

attitude-be-positive-draw-262532.jpgBy Farwa Sial and Carolina Alves

In a recent article in the New York Times, the development economist Seema Jayachandran discusses three studies that used Randomised Controlled Trials (or RCTs) to understand the benefits of enhancing the self-worth of poor people. Despite wide differences in context, all the cases explore the viability of ‘modest interventions’ to ‘instill hope’ in marginalised communities, concluding that ‘remarkable improvements’ in the quest for poverty reduction are possible.

One of the studies from Uganda, for example, argues that “a role model can have significant effects on students’ educational attainment,” so the suggestion for policy-makers might be “to place more emphasis on motivation and inspiration through example.” Another case study of sex workers in Kolkata Brothels argues that “psychological barriers impede such disadvantaged groups from breaking the vicious circle and achieving better outcomes in life,” so small but effective changes that address these psychological constraints can alleviate the effects of poverty and social exclusion.

The underlying theme of these studies is that individuals can surmount the structural challenges of poverty through their own efforts using tools like ‘effective role models,’ the generation of ‘more hope,’ and the ‘improvement of their mental health.’ Positive psychology of this kind and an emphasis on behavior change to meet the goals of individuals have been around at least since the 1950s, first in the popular literature of self-help books and now in academia, where they form part of an increasingly fashionable trend to ‘do poverty reduction differently.’Read More »

Secular Stagnation: Short-term Fixes for Long-term Problems

Unemployed_men_queued_outside_a_depression_soup_kitchen_opened_in_Chicago_by_Al_Capone,_02-1931_-_NARA_-_541927

The concept of secular stagnation, first propounded by Alvin Hansen in the 1930s, has enjoyed an academic – and mainstream – resurrection thanks to Lawrence Summers (2014, 2016), who first advanced the theory as an explanation for the subdued recovery and anaemic growth prospects of advanced economies. A surprising criticism recently came from Joseph Stiglitz (August, 2018), who believes that the theory offers a convenient escape away from assuming responsibility for failed policy during the crisis.  An acrimonious debate between Summers and Stiglitz followed.  

On the face of it, Summers – and Gauti Eggertson – are right: the modern theory of secular stagnation does see a central and substantial role for fiscal policy. The problem, however, lies in the fact that a short-term fix for aggregate demand shortfalls – fiscal policy – is being advanced as a long-term solution of the problem of reduced growth prospects. The central question of what drives investment in a capitalist economy is not addressed.Read More »

Brazil’s Election in the Shadow of the Impeachment

Manifestação_em_São_Paulo_contra_corrupção_e_o_governo_Dilma_em_13_de_março_de_2016_(3).jpg

Earlier this month the final deadline arrived for political parties in Brazil to register their candidates for the presidential election in October 2018. The official launch of candidates allows us to discuss more concretely the political forces and players that will be shaping the election. It means that coalitions, alliances, and vice-president choices have taken place. So we asked, what can be said about the first candidates leading the polls? What are the main political forces underlying this election?

The Brazilian political landscape has been extremely polarised since the impeachment of president Dilma Rousseff in 2016. If the left-right dichotomy has recently been considered blurry or outdated, in Brazil one can argue that, due to the impeachment, this dichotomy has a new face, with the coup winners on one extreme and the coup losers on the other.

The nuances between right and left on the political spectrum have largely been overshadowed due to this dichotomy, with one side leading a moral crusade for a clean and corruption-free country and the other side highlighting the ongoing attack on democracy. The political mayhem reached its peak with Lula’s trial and conviction in April, which has led to a great deal of uncertainty over this period (see recent Lula’s Op-Ed from prison in the NYT).

President Termer may have been able to “keep the markets calm in” throughout such political instability, but Brazil’s economic recovery has been weaker than expected, hardships for many families have increased (see IBGE indicators for increases in income inequality, poverty, unemployment and insecurity) and the country has just set a new record for homicides at 63,880 deaths in 2017, with violence against women also increasing. There is a lot at stake in this election.Read More »