Livelihood & Economic Development

Can Cash Compete with a Pig?

Editor's Note: This is the second blog in a three-part series co-authored by Ali Ndiwalana, Lisa Kienzle and Ignacio Mas on mobile money. Post #1 can be found here.

What are the rewards or incentives and mechanisms that are needed to help poor customers set aside money to meet their financial goals? Banks in Uganda are taking numerous measures to capture the market – from offering unusually high interest rates (Crane Bank is advertising 20% on fixed-deposit accounts) to introducing lottery schemes that offer houses and cars for new savings account customers (e.g., Vimba with Bank of Africa or Fuuka binojjo with Housing Finance Bank).

But even this fierce competition and significant incentives, the majority of Ugandans still prefer stuffing cash under their mattress or converting their cash into in-kind assets such as chicken, pigs, goats and cows. Lack of access to formal financial tools is just one reason for this preference. There is something fundamentally important that the banks have not considered when cultivating their incentive schemes: The rewards offered by these assets are hard to beat.

Take the example of the pig, which produces three cycles of eight piglets, or 24 piglets, per year. A grown pig can be sold for 200,000 UGX ($80), which amounts to a return of 4.8 million UGX, or a bit more than $2000, per year minus the cost of their upkeep. Not bad for some swine! These in-kind investments also regularly produce other goods that can be consumed or sold – for example, chickens produce eggs, and cows and goats produce milk.

Within the context of such returns, cash can never really be king in poor communities because it does not quickly multiply or consistently produce anything of palpable value. What you see is what is printed on the note. It is only what you can buy with it in the market that changes. And with food inflation as high as 42%, cash is quickly losing its value. So why would anyone in their right mind keep their value in cash in the context of such high returns? More importantly, how can we design appropriate financial products in communities where it pays off to be “cash lite”?

04.26.12 olga_moraw Livelihood & Economic Development

Cheaper and Easier Remittances in the Americas? Boom Mobile Banking

When it comes to mobile money, the hype is on these days. There are more and more mobile money services in an increasing number of countries. Success is highly dependent on many factors, including: reach, reliability, user retention, ease of use, the availability of agents, number of customers, geography, mobile infrastructure and landscape, technology used, language, cost, and banking and telco regulations. Here, we hear from Bill Barhydt, CEO of m-Via, the company behind the new mobile banking service Boom. Boom allows people in the U.S., Mexico, Haiti, and Guatemala to create bank accounts, and send and access money via a basic mobile phone.

While Barhydt did not disclose numbers of Boom users, transactions, and total amount of transactions since the service formally launched in November 2011, we do learn more about how Boom works across the Americas.

What is Boom?

Boom taps into a market of remittances sent from the U.S. to Mexico, Haiti, and Guatemala. Traditionally, remittances - payments from diaspora back to the home country - are often made via wire transfer, check cashing, or payday loan services, all of which incur additional fees for the sender. Boom enables people in the U.S. to send any increment of money via a mobile phone. “To my knowledge, it’s the first cross-border mobile banking service in the U.S,” Barhydt says. “We’re replacing this cash-based world with a bank-based world, and the right way to do this is via mobile phones.”

Barhydt says that Boom addresses a number of problems associated with remittances currently: It lowers the cost of sending money between immigrants and their families, and it improves their safety by reducing the risks of handling cash. It also creates new commerce capabilities, as users can receive payment for signing up others for the service.

02.07.12 MelissaUlbricht Livelihood & Economic Development

How to Set Up an SMS System

SMS is everywhere, in an amazing diversity of applications. From enabling 'instant protest' in the Philippines, Spain and Albania, to election monitoring in Ghana, Lebanon, and Sierra Leone to HIV/AIDS education and support in Mexico and South Africa, we've seen that 160 characters can make a difference. This How-To covers the basics of setting up an SMS campaign system, looking at different approaches to suit your goals, budget and technical expertise.

What do you want the system to do?

Before you start, it's important to have a clear vision of how you want to use the system, and who the target audience might be. You should also do a level-headed audit of the resources available, including funding as well as staff time and technical expertise. If this doesn't look promising, take heart! Sometimes the most effective systems are the simplest, and you don't need a big budget for many types of SMS campaigns.