Harsha de Silva

I’m looking at mobile payments from an economics angle. The idea here is to understand the volatility of cash flow of the poor. Then the prevalence of m-commerce to smoothen consumption. Then finally how to increase use of m-commerce solutions.

As a logic for this, you’re looking at people with irregular income streams. They have work some days, don’t other days. These guys have volatile cash flow and it’s very dissimilar to the people sitting in this room. We’re trying to see if mobile 2.0 services can be used to smoothen the expenditure.

The idea here is, look at the poor people here, sometimes they skip meals. Is it possible to use the service, the phone such that they don’t have to skip a meal. We’re looking and males and females, 18-50, with irregular income streams.

Congested Desperation

This [photograph] is the kind of thing we’re talking about. We’re sitting on the railway track, and that is the living room. The house is smaller than half this stage, and there are four people living in this house. They don’t have land to grow their vegetable plots, they’re congested in these little shacks. It’s really hand to mouth survival, mainly casual labor, pavement hawkers, guys like that. Almost the entirety of their earnings is to purchase food, that too by skipping meals. We’re talking $3-4 per family of 4. Food is very important. We sometimes don’t think of how important food is because we always have food on our table.

People say they don’t have money, they go to the store they borrow food. In emergencies they take loans from loan sharks at high interest. But they say, if I can save anything, I would like to do that, for my children.

Isolated Desperation

This is another type of poor. They are living off subsistence agriculture. Only 10-15 days work so the look for any work in village. If no money they get food on credit, and again always talking about their children.

Institutional Desparation

These are plantation workers, they’re completely dependent on the plantation. Very dependent on the weather, and also work in town. Once again they would like to save something for their kids. Three times I’ve repeated that, I think that’s the killer application.

M-Transfers

There is smoothening of consumption, but for communication. Among friends, when they’re short of cash, they exchange credit. Payback can happen in cash or kind. The transfers are very small, so the transaction cost is very high.

Where are the possibilities for m-transfers? I don’t think there’s any major service here or in India. One of the things we need to understand is that there’s no common template. We need to understand how and for what reasons the transfers take place. The urban poor are dealing with vendors, the rural poor interact with vegetable sellers, the estate poor make local remittances.

One this everyone does is saving small amounts. The transaction cost of saving 200 Rupees in a bank, the transaction cost may be higher than 200 Rupees. But people in these countries do save.

Way Forward

Why has Kenya succeeded? Why has South Africa done well? Our research shows that very few people here are even aware that these services are even possible. We need to have some sort of formality around this. The other main thing is the infrastructure, the agent network. Here, every second shop sells reloads. How many shops buy reloads?

From a market point of way, there is no liquidity. For a market to work properly there need to be buyers and sellers. Here there are only sellers. The first thing, I feel, that needs to happen is for people to put up boards saying ‘I buy reloads’. If I buy reloads, I make the market.