Drawing realised by artist Pawel Kuczy艅ski for Serena Natile’s book

I came to the study of fintech as a feminist socio-legal scholar researching the gender dynamics of South-South migration. While doing fieldwork in Kenya for my PhD in 2012, I came across M-Pesa, a mobile money service used by locals as an instrument for transferring money from urban to rural areas. From the start of my research in 2011 to the completion of my PhD in 2016, ongoing studies on M-Pesa were mainly celebratory. It was acclaimed as an innovative instrument for poverty reduction, development, and gender equality and was enthusiastically supported by donors and international financial institutions such as the World Bank and the International Monetary Fund (IMF), as well as by tech entrepreneurs and corporate philanthropy. Its success story was so uncontested that I decided to change my research question to focus on the gender dynamics of digital financial inclusion, rather than on my initial interest, migration.

The key narrative of M-笔别蝉补鈥檚 success in terms of gender equality was, and still is, that it facilitates women鈥檚 access to financial services, providing them with a variety of opportunities to improve their own livelihoods and those of their families, their communities, and ultimately their countries. In the specific case of M-Pesa, a basic-mobile-phone-enabled money transfer service is considered more accessible and available than transferring money via mainstream financial institutions such as banks, and more reliable and secure than informal finance channels such as moneylenders or the handling of cash via rotating credit and savings associations (ROSCAs). This claim is based on three assumptions: first, that women have less access to financial services than men have; second, that women would use their access to finance to support not only themselves but also their families and communities; and third, that digital financial services are better than informal financial channels because they overcome the limits of cash, ensuring traceability and security. These assumptions motivated advocacy and investment in digital financial inclusion projects and the creation of ad hoc programmes and institutions, all strongly focused on the question of how digital technology can be used to facilitate women鈥檚 access to financial services.

During the time of my fieldwork in Kenya, empirical research on M-Pesa was very common. (FSD) Kenya, an institution funded by Western donors and the Bill and Melinda Gates Foundation to contribute to Kenya鈥檚 financial development and address constraints to financial inclusion, was actively collaborating with local and international researchers and producing numerous studies on the uses and potential of mobile money for women. As I discuss in my , M-Pesa, unlike some development projects, was characterised by not a lack but an overproduction of data. However, none of the studies contextualised the story of M-Pesa within the broader historical and contemporary gendered structures and power relations that define and regulate the global economy and the international development project.

The individual and groups (chamas) of women using M-Pesa that I interviewed were all accustomed to being asked questions about how they benefited from mobile money. A general answer that was always reported in M-Pesa success stories was that mobile money allowed them to manage money more efficiently and to juggle different tasks such as housework and micro-entrepreneurship. For this reason, the increasing number of women using M-Pesa as a more accessible financial service was presented as a success story in terms of gender equality. However, on asking the same women different questions about their everyday lives it became clear that the equation of access to M-Pesa with gender equality was a lot more complex than it appeared. To use any financial service such as M-Pesa requires money in the first place, and women鈥檚 main concern was about not managing money but having money to manage. They wanted a regular and stable source of income, for instance via secure employment, to be able to pay for food and water, school fees, housing, healthcare, electricity and all other basic services, particularly in the absence of public social infrastructure and state support. This is the main reason why informal financial institutions such as ROSCAs remained essential in women鈥檚 everyday lives, even as the use of M-Pesa spread. In ROSCAs women put together resources to support their livelihoods based on a system of trust, solidarity and reciprocal accountability. Women鈥檚 strong awareness of global and local structural injustices urges them to create grassroots mechanisms to satisfy their immediate needs while continuing to protest and strike for their rights.

Beatrice Karore is the founder of (Grassroots Women) Initiative, and a community mobiliser and human rights defender in Mathare, Nairobi, Kenya. 

While M-Pesa did not replace ROSCAs, it was integrated into grassroots practices; for instance mobile money is used to facilitate small payments and store money in the M-Pesa e-wallet, despite the fact that mobile money is not designed or regulated for use as a savings account. The integration of a digital financial service such as M-Pesa into informal practices can be seen as a doorway to expanding capitalist logics into spaces previously outside the purview of capitalist markets, making such spaces vulnerable to value-extraction via fees and data. The women in my focus groups were well aware of these dynamics but had no power to change them, and often have no choice but to accept them or attempt to play the market鈥檚 game. Various products and services built on the M-Pesa platform target fundamental needs such as access to water, healthcare, electricity and education, providing credit-based flexible arrangements that allow small, irregular repayments. These products and services are funded via complex institutional and financial arrangements that involve public and private institutions including governments, donors, international institutions, the private sector, and corporate philanthropy. The arrangements are grounded in market logics and claim to create incentives for the private sector while contributing to social development. However, such initiatives do not improve access to increasingly privatised and marketised resources and services, and they make access to key services conditional on financial inclusion, creating further gendered problems such as indebtedness and generational vulnerability.

The gendered disadvantage in financial inclusion is perpetrated by the uncontested assumption that access to financial services leads to gender equality. This results in policies and institutions focusing on how to include the excluded rather than addressing the more important and complex question of why financial inclusion is gendered as well as racialised and based on class, socioeconomic and migration status, coloniality, and geopolitical location. In my research I consider this an essential question if we are to understand whether and to what extent new digital financial inclusion services such as M-Pesa can contribute to gender equality. Interrogating how unequal gender relations are embedded in processes of financial exclusion and narratives of inclusion involves using gender as an analytical and methodological tool to understand where inequalities lie in the global economic and legal order. Examining coloniality in this context, as the long-standing patterns of power that emerge in the context of colonialism (Mendoza, 2016), is not just a conceptual choice but is driven by the need to understand the gendered dynamics of financial inclusion and exclusion and why and how women have become the target of financial inclusion policies.

Colonialism created a situation which subjected people of the Global South to Western domination via the occupation of their land, extraction of their natural resources, and exploitation of their labour. Indigenous people found their norms and institutions erased or filtered (e.g. via the non-repugnancy clause: the requirement that colonial law be in keeping with the law of the colonisers鈥� home country) in the interest of Western economic interests and ideologies, and this is evident if we use gender as an analytical framework. As the Kenyan scholar Achola Pala Okeyo (1977) explains, while men and women under colonialism shared a similar subordinate structural position in relation to the dominant culture, colonial rules had differential impacts on them, shaping gender relations. The colonisers鈥� commodification of land and introduction of property law undermined more collective forms of ownership in favour of patriarchal relations that saw men as the household heads and holders of land titles (Manji 2006, Maathai 2008). The monetarisation of economic relations and introduction of the wage economy targeted men as paid workers (albeit in discriminatory and exploitative colonial settings) and the family breadwinners, relegating women to the position of secondary unpaid workers (Boserup 1970). This contributed to the framing of women as responsible for unpaid household and community labour, dependent on men for money and hence excluded from financial services. This also explains why women in formerly colonised countries are so predominant in informal employment and informal finance, because while excluded from formal economic institutions they had to be able to survive in a capitalist monetarised system built on that exclusion.

The end of colonialism did not lead to the fair redistribution of resources and opportunities that the women fighting colonial power had hoped for. Nationally, many local elite rulers did not dismantle colonial gendered structures but used them for their own power and purposes. For instance according to Kenyan feminist scholars, the government used ideas related to 鈥楢fricanisation鈥� (a concept critiqued by Fanon (1961) as distinct from decolonisation) to discriminate against women (Nzomo 1993, Oduol and Kabira 1995, Otieno 1998, Maathai 2010). Despite women having played a key role in the struggle for independence from colonial rule, they were 鈥榙omesticated鈥� (Rogers 1980, Mies 1986), denied political power and access to wealth. For instance the second Kenyan President, Daniel arap Moi, encouraged women to join the Maendeleo ya Wanawake Organisation (MYWO, 鈥楶rogress for Women鈥� in Swahili) which was founded during the colonial era by a group of Western administrators and their wives who sought to improve the status of Kenyan women according to dominant Western values with the purpose of educating them to become good mothers and housewives (Oduol and Kabira 1995).

Women in formerly colonised countries found themselves at the lower end of the power distribution both nationally and internationally. The demands of anticolonial campaigns in the 1950s鈥�1970s from the Non-Aligned Movement, the (NIEO), and particularly of the invisible women鈥檚 grassroots movements (Basu, 1995) for a just international system based on reparation and redistribution were dismissed in favour of an order aimed at protecting Western economic interests and ideology. In this international order, and in the development narrative underpinning it, women in formerly colonised countries have been portrayed progressively as victims, as recipients of aid, and as icons of change invested with the responsibility for developing their communities and countries. Following Ester Boserup鈥檚 1970 report on women鈥檚 exclusion from economic development, first women鈥檚 inclusion () and later gender equality () became central in international development discourse. Despite this, the voices of women from formerly colonised countries remained excluded from official international fora, a space dominated by white Western men, and were often subordinated to Western women in alternative fora such as the (Oyewumi 1997, 2003). This meant that in practice they had no power to resist international policies such as the neoliberal structural adjustment programmes (SAPs) of the 1980s鈥�90s that pushed them to the lower end of the global income distribution.

, Hofburg Palace, Vienna, Austria, 1969

The negative impact of SAPs on women has been widely documented by feminist scholars (see for instance Elson 1989, 1991). Compulsory privatisation and reduced government spending on social services increased the burden of women鈥檚 unpaid labour. In the context of the SAPs the internationalisation of microcredit 鈥� small collateral-free loans to collectively-liable groups of women to start income-generating activities 鈥� became a common gender equality policy that replaced state funding and was perfectly compatible with neoliberal ideas of marketisation and entrepreneurship. However, in reality microcredit rarely allowed women to start a remunerative business that could change their socioeconomic status, as the micro loans only allowed micro-entrepreneurship, with which local markets were already saturated and for which there was limited demand. Very often microcredit loans were used to pay for essential resources and services that became inaccessible for many women at the lower end of the income distribution following the adoption of neoliberal policies. In other words, microcredit was offered as a market-based solution for exclusions caused first by colonialism and later by development, while taking advantage of established colonial infrastructure and power relations.

Private-sector-enabled digital financial services such as M-Pesa are no different. Fintech is presented as a solution to exclusions created by colonialism and development interventions, but is itself a product of coloniality. Fintech adds an additional layer of inequality to financial exclusion: technology. is embedded in unequal relations of power and wealth, with Western states and corporations having the resources to define the trajectory and purpose of technological development. In addition to issues created by microcredit such as over-indebtedness and gendered stigma and abuse (Goetz 1996, Rahman 1999, Kabeer 2001, Mayoux 2002), digital finance creates new possibilities for exploitation and extraction, (e.g. via fees and data), expanding the number of actors from digital providers to various private-sector actors who profit from creating new little-regulated mobile money products and services. For these reasons the argument I develop in is that fintech does not contribute to gender equality because it does not address any of the causes of gendered financial exclusion but rather enhances unequal power relations. Promoting the narrative that digital financial inclusion contributes to gender equality, creates problems that need highlighting.

First, this narrative does not recognise digital financial services as a product of global asymmetries of wealth and power that are embedded in and reproduce gendered inequalities. These asymmetries are evident at different levels of the system: M-Pesa was institutionalised via a public-private partnership between the aid branch of a former colonial government (the UK Department for International Development, now assimilated into the Foreign Office) and the UK-based multinational corporation Vodafone, which was enabled to expand and acquire African telecoms by the SAP鈥檚 requirement for privatisation of national industries; the intellectual property of M-Pesa was registered in the names of Vodafone and the UK-based tech company Sagentia, rather than that of the local provider Safaricom; the development of the M-Pesa platform has been left unregulated for years in order not to hinder technological innovation, resulting in the proliferation of extractive products and services built on its platform; and the M-Pesa platform is privately owned, with profits made by Safaricom, Vodafone and international shareholders. Specific gender-equality projects are funded via corporate philanthropy rather than investing the profits created by M-Pesa in public social infrastructure and support to address gendered disadvantage.

Second, the claim that digital finance contributes to gender equality removes attention from the actual causes of gendered financial exclusion and the need for serious local and international redistributive interventions. These would include regulating international trade, investments and finance in the interest of people rather than profit; establishing an international and national taxation system that funds universal social security; ensuring workers鈥� rights and living wages and salaries; and cancelling the external debt imposed on countries of the Global South with SAPs, allowing them public resources for welfare rather than forcing them to rely on conditional aid, philanthropy and exploitative investments. Such measures should prevent Western countries and corporations taking advantage of the global economy (e.g. through the use of cheap labour, materials and markets) with no contribution to the wellbeing of the global population.

Third, the logic of opportunity created by fintech results in an unequal distribution of benefits and risks between digital financial providers and users, with important implications for gender equality. The digital financial inclusion-gender equality nexus is based on the idea that women need to take advantage of the opportunities created by digital finance to improve their and others鈥� livelihoods; however, as feminist political economy and the concept of social reproduction teach us, this generates a further layer of responsibility for women: the responsibility for transforming opportunity into success without any support in the form of income, social security or social infrastructure; while for the providers, including all the actors involved in the fintech business, digital finance represents a secure source of profit via fees and data.

This analysis has shown that 鈥榙ecolonising fintech鈥� should be a contextual purposive action rather than a cosmetic claim. It requires historicising the analysis of the fintech infrastructure and its institutional arrangements with a clear commitment to building grassroots power to create anti-colonial futures, aiming to end socioeconomic injustice via a radical redistribution of wealth and power.

is a feminist scholar based at Warwick Law School, University of Warwick. Her research engages with socio-legal inquiry, international political economy analysis, and feminist methodologies to examine issues of coloniality, social reproduction, and maldistribution and, more broadly, the relationship between law and social (in)justice.

This post is part of the mini-blog series Decolonising for Whom? Recentring grassroots struggles and voices in the 鈥榙ecolonising fintech鈥� narrative and the ongoing blog series Decolonizing Economics.

References:

Basu A. (1995) The Challenge of Local Feminisms: Women鈥檚 Movements in Global Perspective. Boulder, San Francisco and Oxford: Westview Press.

Boserup E. (1970) Women鈥檚 Role in Economic Development. London: Allen and Unwin.

Elson D. (1989) The Impact of Structural Adjustments on Women: Concepts and Issues in B Onimode (ed) The IMF, The World Bank and the African Debt, Volume 2: The Social and Political Impact. London: Zed Press.

Elson D. (1991) 鈥楽tructural Adjustment: Its Effect on Women鈥� in T Wallace and C March (eds) Changing Perceptions: Writings on Gender and Development. Oxford: Oxfam.

Fanon F. (1961) The Wreched of the Earth, London: Penguin Books.

Goetz A. M. (1996) Who Takes Credit? Gender, Power and Control over Loan Use in Rural Credit Programs in Bangladesh. World Development 24(1), 45-63.

Kabeer N (2001) Conflicts over Credit: Re-evaluating the Empowerment Potential of Loans to Women in Rural Bangladesh. World Development 29(1), 63-84.

Maathai, W. (2008) Unbowed: One Woman鈥檚 Story. London: Arrow Books.

Maathai W. (2010) The Challenge of Africa. London: Arrow Books.

Manji, A. (2006) The Politics of Land Reform in Africa. London: Zed Books.

Mayoux L. (2002) Women鈥檚 Empowerment or Feminisation of Debt? Towards a New Agenda in African Microfinance. London: One World Action.

Mendoza (2016), 鈥楥oloniality of Gender and Power: From Postcoloniality to Decoloniality, in The Oxford Handbook of Feminist Theory, Oxford: OUP.

Mies M. (1986) Patriarchy and Accumulation on a World Scale: Women in the International Division of Labour. London: Zed Books.

Nzomo, J. (1993) The Kenya鈥檚 Women Movement in a Changing Political Context, in S. Khasiani and E. Njiro (eds) The Women鈥檚 Movement in Kenya. Nairobi: Association of African Women for Research and Development.

Oduol W. and Kabira W. (1995) 鈥楾he Mother of Warriors and Her Daughters: The Women鈥檚 Movement in Kenya鈥�, in A Basu (ed), The Challenge of Local Feminisms: Women鈥檚 Movements in Global Perspective. Boulder, San Francisco, Oxford: Westview Press.

Okeyo, Achola Pala (1977) 鈥楧efinitions of Women and Development: An African Perspective鈥� Signs. Journal of women in culture and society 3(1).

Otieno W. W. (1998) Mau Mau鈥檚 Daughter: A Life History. Boulder, CO: Lynne Rienner Publishers.

Oyewumi O. (1997) The Invention of Women: Making an African Sense of Western Gender Discourses, Minneapolis: University of Minnesota Press.

Oyewumi O. (ed) (2003), African Women and Feminism: Reflecting on the Politics of Sisterhood. Trenton: Africa World Press.

Rahman, A. (1999) Women and Microcredit in Rural Bangladesh. Boulder, CO: Westview Press.

Rogers B. (1980) The Domestication of Women: Discrimination in Developing Societies, London: Kogan Page.

By and

Over the last few years 鈥榙ecolonisation鈥� has become an increasingly popular subject in Western academia. Broadly considered the process of recognising and undoing the intellectual and institutional structures that enabled and maintain the reproduction of imperial power, calls for decolonisation have opened uncomfortable debates about epistemological privilege, forcing us to confront biases and injustices and to revisit hidden histories and visions for the future. While these debates remain essential, particularly at a time of political authoritarianism, racism, and violence, they also highlight the contradictions in Western academia between decolonisation as a fashionable conceptual trend and its real commitment to justice.

In formerly colonised communities, generational consciousness of colonial oppression and struggles to recover land, property, wealth, and political institutions have created a lived experience of the long-term consequences of colonialism, usually conceptualised as 鈥榗oloniality鈥�, that is not a concept but a reality. This experience has shaped movements and protests in the Global South, including within universities. An example is the movement in South Africa, which followed the significant decline of government subsidisation of universities with discriminatory consequences for the disadvantaged Black population without historical wealth and economic privilege. Similar protests concern the recognition of and fight against pillars of colonial power including philanthropists such as British colonialist Cecil , who accumulated wealth by appropriating land, enslaving people and extracting resources, and used that wealth to shape knowledge production.

Other significant protests involve resistance against such as Western financial infrastructures, corporations and international institutions i.e. the International Monetary Fund (IMF) and the World Bank. A  recent example is the ongoing youth-led (Gen Z) round of protests in Kenya , motivated by demands to reject the IMF-supported that, if approved, would have imposed a fresh round of government cuts to basic services and austerity measures on Kenyans. The young people protesting in the streets of Nairobi showed awareness of the colonial legacy and long-term impact of the 1980s structural adjustment policies (SAPs) on the lives of people 鈥� particularly those at the lower end of the income distribution, and demanded economic sovereignty as the only way to achieve social justice. The protests were successful in impeding the adoption of the Bill, but many young people paid with their lives, as the government deployed a deadly military response to the protests. 

The demands for decolonisation are based on ending economic and epistemological oppression, two interrelated aims, each grounded in colonialism. Reclaiming knowledge and the economic means that allow its production and dissemination has always been at the centre of decolonisation as an opportunity to remake societies, nations, and the world itself for the better. In its fight for justice, decolonisation is a grassroots struggle against colonial and neo-colonial rulers and rules, as well as against all global and local actors and structures that enable and reinforce those rules. For this reason, grassroots voices need to be at the centre of any decolonisation project.

This series of blog posts reflects on the turn to decolonisation in a particular area: fintech. Defined as the application of digital technologies in retail finance, fintech has become increasingly popular in developing countries following the success of M-Pesa in Kenya. M-Pesa, a mobile money service launched in 2007 via a public-private partnership between the UK-based multinational corporation Vodafone and the UK Department for International Development (DFID, now the Foreign, Commonwealth and Development Office), was rapidly adopted by the vast majority of the Kenyan population. Fintech initiatives such as mobile money have been created at the intersection of finance, technology, and development, allowing them to develop without stringent regulatory requirements. Fintech is promoted by international organisations, philanthropic foundations, companies, governments, and various non-governmental institutions as a quick fix for underdevelopment, exclusion, and inequality.

While it started as a field embedded in business logics, development interventions and corporate philanthropy, fintech has become a centre of academic inquiry and is increasingly scrutinised by scholars, who have pointed out how its and structures define patterns of uneven development and value extraction. While such critique makes an important contribution to understanding the asymmetries of power embedded in fintech and its extractive practices, many of its critics, although claiming to be aiming to recentre the voice of people at the margins, are disconnected from contextual details and accuracy of how digital finance interacts with local practices, activism and resistance that inform grassroots demands for decolonisation. This raises the fundamental question of the purpose of a decolonial approach, and in whose interest, decolonisation is being pursued.

To address these questions, we trace the 鈥榙ecolonising fintech鈥� argument back to grassroots struggles and people鈥檚 voices through two stand-alone blog posts. As two scholars working on fintech from different perspectives and with different positionalities but sharing the same concerns, we offer some reflections on the need to recognise that critiques of the coloniality of fintech come first of all from grassroots struggles, activism and resistance and not from Western academia, and this should be the starting point of any claim or attempt to 鈥榙ecolonise fintech鈥�.  The aim is to encourage a self-reflexive approach to making decolonisation part of the ongoing anticolonial struggle rather than a cosmetic phrase that is detached from the lived experience of coloniality, inequality, and racism.

The blog posts are as follows:

1. On recentring women鈥檚 grassroots struggles to decolonise fintech narratives. By Serena Natile
2. On recentring people鈥檚 voices to decolonise fintech narratives. By Joy Malala

Dr is a feminist scholar based at Warwick Law School, University of Warwick. Her research engages with socio-legal inquiry, international political economy analysis, and feminist methodologies to examine issues of coloniality, social reproduction, and maldistribution and, more broadly, the relationship between law and social (in)justice. Serena is the author of (Routledge, 2020) and leads the projects and .

Dr is a legal scholar based at Warwick Law School, University of Warwick. Her scholarship considers financial systems and practices that enable people to flourish despite marginality and global limits. She examines social justice implications for law and policies governing credit and other forms of financial relations by taking seriously the many ways we try to finance the lives we want. Her research poses questions about how our visions of a good life can be imagined when existing financial systems do not support this by thinking through financial crises and systems that create inequalities and looming debt formations. She is the author of  ( Routledge, 2018) and leads the project .

This blog post is a part of the Decolonising Economics blog series.

Informal savings group in Tarime district, Tanzania. Photo: Daivi Rodima-Taylor

Self-help groups can be found in many areas of Africa鈥攊ncluding the chama groups of Kenya, isusu of Nigeria, and stokvels of South Africa (Ardener and Burman 1995). Their customary rotating credit arrangement is also popular among African diaspora communities (Hossein 2018; Ardener 2010). A significant rise has occurred in these groups at the wake of the neoliberal restructuring reforms of the 1980s-90s, with a decline in formal sector employment and state-funded producer cooperatives. At present, these mutual support groups are targeted by FinTech platforms as well as conventional banks with various financial products and software apps. My recent research explores of the contentious interplay between the formal and informal finance in these emerging digital interfaces in Africa. It studies the intersection of FinTech with the social economies of African mutual help groups in Kenya and South Africa, situating this dynamic in longer-term colonial legacies and present-day policies of extractive financialization (Rodima-Taylor 2022).

Informal mutual support groups with their saving-credit patterns have long served as an inspiration for the development industry. The initially successful micro-finance model drew on pre-existing reciprocities and mutually negotiated liability in largely informal contexts. However, as the microfinance formula shifted from socially situated lending towards 鈥榝ast-scaling鈥� and universalizing group lending in an expanding range of localities, the industry was faced with repayment crisis (see Haldar and Stiglitz 2016). The recent conceptual shift from microfinance to digital financial inclusion foregrounds mobile payments and fee-based service delivery, with payment industry also experimenting with new sources of value such as customer data (Maurer 2015). Microloans have remained an important part of the digital financial inclusion enterprise, with poorly regulated lending apps fueling over-indebtedness. As informal savings groups and mutual support associations have become central in the livelihoods in many low-income communities, I suggest that more attention is needed to the intersection between the self-help groups and FinTech initiatives in the global South.

Local Economies of Self-help

I suggest that these networks of mutuality should be explored as situated in local economic histories and social structures, but also as embedded in broader political economies. As my earlier three-year ethnographic fieldwork in northeast Tanzania revealed, a variety of self-help groups have become widespread among the Kuria people (Rodima-Taylor 2014, 2013). These built on the norms of cooperation that had emerged in the distant past for sharing agricultural labor, but were also active in non-agricultural ventures such as carpentry, brick-making or tailoring, managed a farm plot or retail kiosk, and frequently had a rotating savings arrangement. The groups provided new opportunities for women and young people marginalized from the traditional men鈥檚 sphere of cattle wealth. Group contributions also mediated transactional cycles relevant to social reproduction, such as bridewealth contributions, and marriage and funeral ceremonies.

Similar self-help groups (locally called chama) are proliferating in neighboring Kenya. The savings groups are widespread among both genders and many of them also manage joint business projects (Mwangi and Kimani 2015; Nyataya 2016). It is estimated that one in three Kenyans belongs to a chama, and many are members of several (Gichuru 2014). Such groups are also widespread in South Africa, where informal savings groups (called ) emerged in the era of colonial displacement. In 2019, 10 million people saved through stokvel groups and 45% of the population belonged to an informal burial society (Shipalana 2019). It is that there are over 800,000 active stokvel groups in South Africa.

I suggest that the evolution of informal savings groups should be seen in the light of the legacies of colonial extraction in these historically 鈥榳hite settler鈥� societies. Stokvels emerged with the labor migration of many Black South Africans to the country鈥檚 gold and diamond mines in the early 1900s, then spreading with the urban migration of Black women as domestic and industrial workers. The groups provided economic security and quasi-kin networks for the labor migrants. The proliferation of informal saving groups in Kenya can similarly be viewed as embedded in the colonial legacies, such as appropriating land and labor by the British East Africa Protectorate. The legacies of labor appropriation did not disappear with the end of the colonial rule: traditional forms of harambee self-help were politicized and scaled up for large public works. In the aftermath of the neoliberal restructuring reforms of the 1980s-90s and with a decline in formal sector employment and marketing, people increasingly sought to regroup into small, informal collectivities鈥�chamas (Kithinji 2019; Ngau 1987).

Plural Infrastructures of Digital Finance

Informal means of financial access continue to flourish in the economies of both countries. Mobile money鈥攁 mode of formal financial inclusion鈥攆eatures as a central means of mediating payments in informal social networks in Kenya, helping people to deal with financial needs and emergencies. While there exist some banking products oriented towards savings groups, these often encourage substantial group deposits with a goal to apply for formal bank loans, and appear in tension with the nature of chama groups where loans are seen as flexible and interwoven with diverse livelihood domains and activities. The mismatch between the practices of these informal groups and formal banking has not disappeared with the digital advent. An increasing number of FinTech firms, sometimes in partnership with Kenyan banks, are working on digital solutions for chama groups. At the same time, there is evidence of a continued importance of offline activities and social networks in the new digital finance space in Kenya. FinTech initiatives such as digital crowdfunding rely on multiple channels and diverse modes of communication, combining in-person funds mobilization, bank-based and mobile payment, social media, and instant messaging (Chao et al. 2020).

In Kenya, FinTech has brought along an overabundance of poorly regulated digital credit and resulted in extensive blacklisting of defaulting borrowers. Digital loans are based on automated eligibility decisions, frequently relying on data scraped from borrowers鈥� phones and social media. Digital credit uptake has been higher among casual workers in the informal sector (Gubbins and Totolo 2018). Digital solutions for chama groups could easily become another step in that progression.

It is significant that many of the digital solutions in the country leverage mobile money, largely supplied by the leading mobile telecommunications provider, Safaricom. While mobile money and its providers are central to Kenya鈥檚 FinTech platform economy, mobile money itself is heavily dependent on cash and on institutions mediating it, such as informal savings groups as well as mobile money agents who often work part-time and underpaid. FinTech platforms in such markets thus depend on diverse peopled infrastructures, leveraging and possibly expanding economic informality and underpaid labor.

This calls into question the assumption that FinTech in Africa advances inclusion in formal market spaces. Instead it could be seen as producing new hybridizations of informal and formal, and inclusion and exclusion, in local financial practices. New financial technology companies build on consolidating and transforming existing market structures due to rapid scaling and network effects, with developing oligopolies changing the competitive basis of retail finance (see Langley and Leyshon 2020). FinTech initiatives in Kenya build on the mobile money platform M-Pesa, often exposing savings groups to poorly regulated digital loans. In South Africa where mobile money platforms play a significantly smaller role, formal inclusion is mostly bank-based, while also utilizing retail stores and funeral insurance companies as points of contact with low-income consumers. Many formal sector initiatives seek to offer various loan and investment products to the groups. As stokvels have emerged as a means to juggle economic insecurity, attempts to adjust them to investment purposes have seen limited success. The platformed economy of FinTech in South Africa that increasingly seeks to connect stokvels with diverse private-sector lenders and investment funds may potentially expand over-indebtedness in the communities long disadvantaged by apartheid-era inequalities.

Ambiguous Formalizations

Efforts to formalize these groups in both countries have largely been limited to group bank accounts, geared to mobilize savings to apply for bank loans oriented towards 鈥榩roductive鈥� investment. Informal savings groups that functioned as important collective risk management devices have therefore been increasingly subjected to indebtedness to formal finance. In both countries, people perceived debt from mutual help groups differently from formal sector debt. While the latter was viewed as an indicator of poverty, the same amount of debt from a savings group was often seen as social investment. All the while, savings groups in both countries were shaped by colonial legacies and enduring racial and economic inequalities that forced people to turn to these local inventions to balance their meager and irregular income.

In both cases, FinTech has not eliminated reliance on cash. In Kenya, the network of agents and cash-out points is likely to grow with the scaling of mobile money as it is integral to emerging FinTech initiatives. In South Africa, cash remains important in low-income communities as stokvels operate heavily in cash. Similarly, the virtual medium is unlikely to completely replace in-person meetings as oral negotiation of group affairs remains an important feature. The FinTech platform economy in such contexts builds on existing infrastructural elements such as mobile phones and local retail outlets, but is also dependent on diverse peopled infrastructures, such as informal savings groups, and mobile money agents with their support networks (see also Rodima-Taylor and Grimes 2019).

With the rise of FinTech platforms that leverage universalizing group templates, an increasing standardization of the ties of mutuality in savings groups may occur. The informal groups could become more vulnerable to expensive credit offerings by 鈥榲irtualizing鈥� their group management. Digital group management systems could facilitate the access to these institutions by ill-regulated lending apps, further commercializing their social purpose. The peculiar constellation of private capital and financial technology around digital platforms may facilitate the appropriation of these social networks for private profit, with local cosmologies of mutuality recruited for another round of instrumentalization for governance.

All the while, the resilience and adaptability of the informal savings groups may also offer hope for positive solutions. Inventively adapting traditional forms of labor cooperation to changing circumstances, the groups could be viewed as another expression of African technology innovation and creative resilience. While Africa鈥檚 FinTech enterprises face numerous challenges in the global marketplace dominated by the ideals and norms of the Silicon Valley, more attention is needed to local innovative start-ups and locally inspired solutions at the burgeoning technology hubs across the continent. And more context-specific analysis of the local informal economies would help us avoid the reification of 鈥榮elf-help groups鈥� as a novel development tool of the digital era, and as a panacea for the widespread exclusion low-income communities from salaried employment and fair financial access.

References

Ardener, S. 2010. Microcredit, money transfers, women, and the Cameroon diaspora. Afrika Focus 23(2), 11-24.

Ardener, S. and Burman, S. (eds). 1995. Money-Go-Rounds. Oxford and Washington DC: Berg Publishers.

Chao, E. et al. 2020. Crowdfunding in Africa: Opportunities and Challenges. In Shneor, Zhao and Flaten (eds.) Advances in Crowdfunding. Palgrave MacMillan.

Gichuru, M. 2014. Strategic planning in investment groups (chama) in Nairobi county. MBA thesis, University of Nairobi.

Gubbins, P., and Totolo, E. 2018. Digital credit in Kenya: Evidence from demand-side surveys. FSD Kenya.

Haldar, A., and Stiglitz, J. 2016. Group lending, joint liability, and social capital: Insights from the Indian microfinance crisis. Politics & Society 44(4), 459-497.

Hossein, C. 2017. Fringe banking in Canada: The collective economies of Toronto鈥檚 鈥楤anker Ladies鈥�. ANSERJ 8(1), 5-19.

Kithinji, K. 2019. Revitalizing the promise of Harambee. ASC-TUFS Working Paper, Hosei University.

Langley, P., and Leyshon, A., 2020. The platform political economy of FinTech: Reintermediation, consolidation and capitalisation. New Polit. Econ., 26(3), 376-388.

Maurer, B. 2015. Data mining for development? Poverty, payment, and platform. In Roy, A. (Ed.) Territories of Poverty. University of Georgia Press.

Mwangi, J. and Kimani, E. 2015. Factors influencing participation of men and women in informal finance groups. Int Journ Hum Soc Stud. 3(1), 42-48.

Ngau, P. 1987. Tensions in empowerment: The experience of the “Harambee” (self-help) movement in Kenya. Economic Development and Cultural Change, 35(3), 523-538.

Nyataya, I. 2016. Women self-help groups enhancing women鈥檚 development processes in Kenya. IJRSA, 2(2), 18-25.

Rodima-Taylor, D. 2013. Gathering up mutual help: Relational freedoms of Tanzanian Marketwomen. Social Analysis, 57(3).

Rodima-Taylor, D. 2014. Passageways of cooperation: Mutuality in post-socialist Tanzania,

Africa, 84(4), 553鈥�575.

Rodima-Taylor, D. 2022. Platformizing Ubuntu? FinTech, Inclusion, and Mutual Help in Africa. Journal of Cultural Economy, DOI: 10.1080/17530350.2022.2040569

Rodima-Taylor, D., and Grimes, W. 2019. International remittance rails as infrastructures: Embeddedness, innovation and financial access in developing economies. Review of International Political Economy 26(5), 839鈥�862.

Shipalana, P. 2019. Digitising financial services: A tool for financial inclusion in South Africa? SAIIA Occasional paper 301.

听is a social anthropologist, and researcher and lecturer at the African Studies Center of Boston University. Her research interests include financial inclusion, human economies, infrastructures, and land.听 She tweets at听.

Digital and mobile finance applications have boomed in Kenya over the last decade. Mobile money, Vodafone鈥檚 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. from Tavneet Suri and William Jack 鈥� suggesting that the advent of M-Pesa had directly moved 194 000 households, equivalent to 2 percent of the country, out of extreme poverty 鈥� have been triumphantly cited across a wide range of and policy documents. The rapid adoption of mobile and digital finance, according to advocates, has allowed Kenya to 鈥樷�� the developmental constraints of its existing financial system. In the words of : 鈥榥ew technologies solve problems arising from weak institutional infrastructure and the cost structure of conventional banking鈥�.

There are good reasons to question this rosy narrative, as recent critics have demonstrated compellingly. Among others, raise a number of important methodological and other objections to Suri and Jack鈥檚 claims, and shows how narratives of 鈥榠nclusion鈥� mask the perpetuation of gendered patterns of exclusion and inequality. Wider applications of fintech in Kenya have come in for critique as well. highlight emerging patterns of digitally-enabled over-indebtedness. trace the emergence of monopolistic corporate power enacted through the extension of digital platforms (including for finance) in Kenyan agriculture. 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, 鈥榣eapfrogging鈥� 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 鈥樷�� 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.

These persistent patterns of uneven development matter because they go to the heart of claims about the contributions of mobile and digital finance to development. In an article , I show how, far from 鈥榣eapfrogging鈥� existing infrastructures, the digital finance boom has worked through and even reinforced patterns of uneven development inherited from Kenya鈥檚 distinctive mode of settler colonialism.

The settler-colonial origins of uneven financial development

If we want to understand the pattern highlighted above — a predominantly urban financial system disproportionately centered on Nairobi and Mombasa — we need to understand the long-run interplay of the financial system and the political economy of settler colonialism in Kenya.

The commercial financial system in Kenya developed alongside and in relation to the colonial export economy. The first colonial banks were established in the late nineteenth century in coastal trading entrepot Mombasa. In the first decades of the twentieth century, they followed the development of the Uganda railway (running from Mombasa to Lake Victoria) inland. Nairobi was established in 1899. It was selected as the site for a major railway depot, largely because it sat roughly midway between Mombasa and Kampala in Uganda.

Following the completion of the railway, colonial officials sought to open ostensibly 鈥榰n-used鈥� land in the highlands surrounding Nairobi to white settlement. The advent of settler agriculture, and an associated market in fervent land speculation, encouraged the expansion of the banking system to Nairobi in particular and to surrounding highland areas.

Land titles played a crucial role here both as instruments of racial stratification and as financial infrastructures. As notes, 鈥楰enyan land policy was鈥� racialised at its inception鈥�, with land titles reserved for White Settlers and Africans increasingly confined to 鈥榬eserve鈥� areas.

Alongside their role in processes of racialized dispossession, the role of land titles as specifically financial infrastructures also strongly shaped their development. Notably, land rights were initially conditional on 鈥榩roductive鈥� use, as the state sought to minimize land speculation. This was quickly overturned as settlers complained that such restrictions inhibited their ability to use purchased land as collateral. Colonial officials, keen to enable wider access to credit, quickly complied. In short, while racial restrictions remained in place, other restrictions on property titles were quickly removed specifically in order to facilitate their use as means of assessing credit risk.

The intersection of credit infrastructures with racialized structures of property relations in this sense was also crucial to the political economy of settler colonialism. It was not simply ownership over land, but also the control this granted over access to credit — and hence over inputs and machinery — that enabled settler control over African labour.

The financial system that emerged from these developments was dominated by three banks controlled from London, accounting for roughly 80 percent of banking assets. Until 1950, bank branches in Kenya were predominantly located in Mombasa and Nairobi, and virtually all in 鈥榃hite Highland鈥� areas. Although there has been considerable expansion of banking networks into other areas since the 1950s in particular, the centrality of Mombasa and Nairobi as key poles of financial activity has clearly persisted up to the present.

This tells us something first of all about how fintech does and doesn鈥檛 鈥榙isrupt鈥� existing financial systems, and about how colonial legacies are reproduced over time. It鈥檚 useful in the first instance to keep in mind that financial markets are made up of material flows that move through durable infrastructures — backgrounded material means of assessing risks, settling payments, calculating values. These include things like physical branch networks linked together by road, rail, and electronic communications, as well as embedded practices like using property titles as a means of assessing credit risks. In Kenya鈥檚 case these financial infrastructures are also 鈥樷�� in the sense highlighted by Wangui Kimari and Henrik Ernstson — 鈥榚ntangled colonial practices that have racialism immanent to them, and which continue to occur in an, ostensibly, postcolonial state鈥�.

Mobile and digital finance in Kenya has mapped closely onto the financial infrastructures initially laid in the development of the financial system under colonial rule. Indeed, it has arguably 鈥榮ucceeded鈥� in large part because of those close links. A key difference between mobile and digital finance in Kenya and other countries is that the vast majority of digital lenders in Kenya are established banks. But if mobile and digital finance succeeded in large part because of its ability to 鈥榩lug in鈥� to existing financial infrastructures, it has also as a corollary been constrained by the spatial limits of those infrastructures.

A brief history of failed reforms

Yet, colonial infrastructures do not mechanistically determine contemporary development. Indeed, these patterns of uneven development have been subject to recurrent (if largely failed) efforts at reform.

There were tentative efforts to change entwined systems of credit allocation and property relations support African agriculture as early as the 1930s, with the colonial state seeking both to expand its fiscal base and contain growing political threats. These were ramped up in the aftermath of the Mau Mau rebellion — an armed revolt led by the Kenya Land and Freedom Army, which was brutally repressed by the colonial state.

Agricultural reforms formed a key part of the colonial response to the rebellion. Roger Swynnerton, then-Assistant Director of Agriculture in Kenya was appointed to propose a strategy for agricultural development in 1953. A core element of Swynnerton鈥檚 proposals was the expansion of formal land titling to 鈥楢frican鈥� areas, facilitating the use of such titles as collateral. The thrust of Swynnerton鈥檚 reforms, in short, was to reform the ways that Africans held land in ways that would be more compatible with existing financial infrastructures. In practice, though, the lending operations of Kenyan banks were refocused on short-term commercial loans in Nairobi and Mombasa, rather than on direct lending to riskier agricultural activities.

Formal decolonization ultimately did little to alter this situation. Postcolonial elites largely of the colonial economy, particularly around land and property relations. This was compounded by the large-scale flight of settler capital. Especially given the absence of mineral rents on which the Kenyan government could draw, this created a growing dependence on attracting foreign investment. A key result of this enforced deference to foreign private capital in the early years post-independence, though, was that the financial sector remained dominated by the big British banks, which continued to collectively control more than 80 percent of financial assets. These banks, as noted above, provided little credit for African enterprise in general and for agriculture in particular. The World Bank concluded in 1975 that 鈥榠t appears that commercial banks direct their funds from rural to urban areas and, above all, to foreign-owned firms in the formal sector鈥�.

The Kenyan state essentially constructed a parallel agricultural finance sector in an effort to respond to these limits. The Agricultural Finance Corporation (AFC) was established in 1963, alongside an extensive system of cooperatives. These played a prominent role in agricultural lending. Several external and internal factors led to the collapse of this system by the 1980s. Agricultural production was disrupted by a series of major droughts starting in 1974-5, culminating in a particularly severe and protracted agricultural crisis in 1983-4. This coincided with increasingly volatile global prices for key exports, and increasing fragmentation and competition for agricultural land.

Kenya was ultimately one of the first states to undertake a programme of structural adjustment, starting in 1980. This led to significant restructuring of the financial system. The state-backed system for agricultural credit was drastically scaled back. Neoliberal reforms, if anything, deepened the urban concentration of commercial lending. Restrictions on interest rates were removed in 1991, leading to increasingly volatile borrower rates, accompanied by growing concerns about bad debts at major banks, and increasing restrictions on credit.

Structural adjustment exacerbated the stratification of land and agricultural production. Currency devaluation and the marketization of inputs led to spikes in prices for seed and fertilizer, and the restructured financial system restricted available sources of credit for smallholders. These conditions were exacerbated by the intensification of conflict over agricultural land. All of this has happened as urban working classes were deeply affected by structural adjustment, particularly by the retrenchment of public sector employment and the devaluation of the Kenyan shilling.

Access to credit and the proliferation of indebtedness, in this context, have (re)emerged as critical policy concerns from the early 2000s. The development of mobile and digital financial systems ultimately proved to be a crucial area of intervention. As Florence Dafe , there was some early resistance from commercial banks to the development of M-Pesa, but this was largely allayed in the early 2010s as banks were encouraged by the CBK in particular to adopt mobile money systems.

From 鈥榣eapfrogging鈥� to radical restructuring

The digital finance boom, in short, can also be viewed within a longer series of state-backed efforts to remedy the social and spatial unevenness of the financial system. Past efforts have failed because of an unwillingness (or structural inability) on the part of the state to meaningfully challenge private, capitalist control over the financial system itself, and over land and other key productive resources.

Maybe more importantly, then, this case tells us that financial development in itself is likely to reinforce existing patterns of uneven development. The forms of social and spatial unevenness baked into the 鈥榠mperial remains鈥� (per Kimari and Ernstson) of Kenya鈥檚 financial infrastructures are unlikely to change without a more radical restructuring of existing systems of property relations and exploitation and the state forms through which they are sustained. Fintech is not a substitute for the democratization of control over land, or for meaningful social protection and public provision.

Nick Bernards is an Assistant Professor in Global Sustainable Development at the University of Warwick. He tweets at .

Photo: . By Development Planning Unit (DPU) at the University College, London.

The economic impacts of the COVID-19 pandemic have resulted in major setbacks in addressing global poverty levels. The significant delays in reaching a number of the Sustainable Development Goals and the 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 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 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鈥攅ven 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.     

On the one hand, we have seen the emergence of who have called for lasting structural improvements and funding commitments through progressive taxation policy. have indeed found that the pandemic has shifted attitudes around social protection, addressing concerns around dependency, and providing models for the design of longer-term solutions. As Ursula Huws (2020) has argued, the pandemic has provided a once in a generation opportunity to remake the welfare state and address exclusions of the past. On the other hand, we have a highly influential, and certainly better funded, coalition of financial institutions, technology companies and development institutions who see this as an opportunity to further the inclusion of the poor into financial markets.

Consider global accounting firm Deloitte鈥檚 to both the pandemic and the rise of militant protests over police brutality in the United States:

The challenges created by the global pandemic and recent racial and social injustice events have increased awareness of inequities and financial instability across the globe. They highlight the need for financial institutions to make a global commitment to advance financial inclusion to meet the needs of an underserved market.

This idea, that financial inclusion is a panacea to multiple forms of inequality, is shared by a range of international institutions, philanthropies and financial technology companies. It is an alliance that Gabor and Brooks (2017) describe as a fintech-philanthropy-development complex (FPD), which has long advocated for the inclusion of the 鈥榰nbanked,鈥� into financial markets and the development of digital payment systems to reduce reliance on physical cash. What unites these actors is a belief that poverty is best addressed by changing the behaviours of the poor, by encouraging them to save, invest and make savvy financial decisions.

One of the problems with this approach is that it has been difficult to demonstrate the developmental impacts of financial inclusion. As Mader (2018) has argued, one could convincingly argue that economic growth, improved education and rising income levels lead to financial inclusion rather than the other way around. For this reason, there is a growing interest in hitching the financial inclusion agenda to social protection measures, particularly cash transfer payments. This has been supported through a shift from cash to electronic payments described as Government to Persons payments (G2P). Positioned as an efficient and cost-saving solution for developing countries, the G2P strategy has provided openings for financial technology companies to benefit from government tenders, gain access to new clients, and gather credit data in the process.

Existing distribution systems have long used financial and banking infrastructure, and in some cases biometric registration systems, but this has not led to what advocates describe as 鈥榝inancial deepening鈥�. In short, many transfer recipients simply use their accounts as a mailbox, withdrawing all their funds soon after they are deposited. In South Africa, where I have conducted fieldwork on CT distribution, around of transfers are withdrawn in cash in the first five days of the month. In a context of rising food costs, most people spend their money on necessities such as food, transportation, and health. As Bernards (2019) has argued, the process of constructing financial markets among the poor has been challenging as the reason that the poor may need credit is the same reason that they are a bad credit risk, namely low wages and economic precarity.

In response to this, the World Bank and Gates Foundation launched the in early 2020. The initiative is aimed at going beyond fiscal savings and using cash transfers to accelerate financial inclusion. If previous distribution models relied on governments opening bank accounts for recipients, the G2Px model is aimed at developing a payments architecture that allows recipients to choose where and how they would like to access their funds. By doing so, financial service providers come to see recipients and not governments as their clients, which will provide stronger incentives to develop financial products for these markets. In short, the G2Px approach is about promoting innovation in the Fintech economy by expanding market opportunities for these companies among the poor.

Improving social protection systems can, of course, be facilitated by digitization initiatives that allow states to get money to people fast. But, once again, the G2P paradigm envisions no real material changes in the amount people receive, the conditions attached to them or in the wages they earn. Rather, the of G2P advocates is to 鈥渢ransform the relationship between citizens and the state.鈥� This involves fundamental changes in how social welfare works. The G2P approach envisages clients with access to an array of financial services rather than citizens with a right to universal social protection. At the ideological level, this is not significantly different from the hoary old arguments about welfare and dependency. In its new guise, welfare recipients are financial subject who should save, invest in suitable financial services, and practice good economic behaviour to get themselves out of poverty.

We are witnessing a fundamental realignment in global development policy. While cash transfers have long been seen as an effective solution to poverty and livelihood shocks, they are now seen as a tool to advance the financial inclusion agenda. While this is not an entirely new phenomenon, the pandemic has provided openings to reinvent poverty finance and accelerate financial deepening across these markets. This is seen as a 鈥榳in-win-win鈥� situation for governments, the poor and finance capital, but it contains significant risks. As the South African case demonstrates, the privatization of the CT distribution infrastructure provided opportunities for business to use welfare payments as collateral on loans, further entrapping the poor in debt relations (Torkelson 2020). It also provides the FPD complex with valuable opportunities to advance financial literacy initiatives and gather data on how people spend their money.

This approach stands in stark contrast to the push among a range of civil society actors for a more robust and comprehensive social protection systems. In and South Africa, for example, there is renewed interest in implementing a basic income grant and interest in developing progressive taxation policy in the form of a wealth tax. Informal worker organization has called for adaptive and gender responsive social protection system that recognize that women鈥檚 care work often lowers their average incomes. As the reminds us, what is important about cash transfers is not only the fact that they have been an effective anti-poverty tool, but that they generate new political claims and hold the potential to fulfil redistributive goals. These goals, however, confront a well-funded and influential development industry that, despite limited evidence, positions financial inclusion as the key to addressing poverty. The stakes are simply too high for this position to win out over more equitable and transformative demands. 

References

Bernards, N. (2019). Tracing mutations of neoliberal development governance:鈥楩intech鈥�, failure and the politics of marketization. Environment and planning A: economy and space, 51(7), 1442-1459.

Gabor, D., & Brooks, S. (2017). The digital revolution in financial inclusion: international development in the fintech era. New political economy, 22(4), 423-436.

Gentilini, U. (2021). . World Bank Blog.

Gentilini, Ugo, Mohamed Almenfi, Ian Orton, and Pamela Dale. (2020). . Washington, DC: World Bank.

Huws, U. (2020). Reinventing the welfare state: Digital platforms and public policies. London: Pluto Press.

Mader, P. (2018). Contesting financial inclusion. Development and change, 49(2), 461-483.

Torkelson, E. (2020). Collateral damages: Cash transfer and debt transfer in South Africa. World Development, 126, 104711.

Christopher Webb is a at the London School of Economics and a Research Associate at the . He tweets at .

Photo: Jan Chipchase.

On 8 June, El Salvador鈥檚 Legislative Assembly voted to pass the (Bitcoin Law), with a majority vote of 62 out of 84. The legislation was presented to the Assembly days after President Nayib Bukele , 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鈥檚 current currency. Since the bill鈥檚 passing, and have expressed interest in recognizing bitcoin as legal tender.

Rather than China鈥檚 or Venezuela鈥檚 , 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鈥檚 reserves, held in the Central Reserve Bank of El Salvador. Rather, (BANDESAL) worth US $150 million will guarantee convertibility to dollars as a safeguard against bitcoin鈥檚 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鈥檚 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 鈥溾�� 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.

El Salvador鈥檚 Dollarization

Following the end of El Salvador鈥檚 civil war in 1992, the country embarked on a period of structural reforms to achieve macroeconomic stability. These reforms included privatization of the banks and telecommunications system, a fixed exchange rate between the Salvadoran col贸n and the United States dollar in 1993 and the passage of numerous laws ensuring bank transparency. Full dollarization of the economy in 2001 was seen as a way of and a method of both keeping control on inflation and attracting foreign investment.

While inflation was indeed kept low, FDI as a percentage of GDP tended to be lower in El Salvador than in other Central American economies. argued that the move was largely done to appease the entrepreneurial, financial and import backers of the ruling right-wing ARENA party, who by the turn of the millennium had largely replaced El Salvador鈥檚 landowning oligarchy. In an interview on the subject, Bukele himself claimed that dollarization was a means of 鈥溾��.

Many Salvadorans complained that the process of dollarization happened far too quickly and without popular consent. A prominent negative effect of dollarizaiton in the informal economy was the phenomenon of 鈥渞ounding up鈥� new dollar prices; as the exchange rate was 8.75 colones to one dollar, businesses and vendors outside of the formal economy (where the Law of Monetary Integration specified that prices could only be rounded up to the nearest cent) began rounding up their products to the nearest dollar. As one woman recounted to Central American media organization : 鈥渇rom one day to the next, the bundle of onions went from five colones (equivalent to 57 cents, at the time) to one dollar. We lost 43 cents in rounding.鈥�

After 20 years of dollarization, why is El Salvador now adopting bitcoin as a legal currency? While the mentions employment opportunities and true financial inclusion, it is the desire to increase economic dynamism that seems to be the most important factor to Bukele, who is keen to secure new forms of FDI in the context of , slowdown in economic growth and deteriorating investment prospects. That Bukele chose to announce the introduction of the bill to the Bitcoin 2021 Conference in Miami is evidence of the law鈥檚 presentation as an appeal to international finance.

Bitcoinization and Crypto FDI

In a , Bukele set out a few reasons for why crypto investors will flock to El Salvador following the nation鈥檚 adoption of bitcoin as a legal currency: the good weather, lack of property tax, absence of capital gains tax on bitcoin and the promise of permanent residence for crypto investors. Such conditions will likely draw interest from some of the world鈥檚 crypto-millionaires, as permanent residence will be guaranteed to anyone investing 3 bitcoins (around US$ 100,000 at the time of writing) into the Salvadoran economy. By way of a comparison, effective national property tax in the United States is 1.1% and capital gains tax on property (which bitcoin is currently classed as by the IRS) can be as high as 20% on long-term held assets generating profits above certain rates.

The overture to high-tech investment makes sense given the current structure of El Salvador鈥檚 FDI. The Central Reserve Bank that the communications and information sector recorded the highest FDI growth rate in 2020, totaling US $1.36 billion. Foreign capital has already mobilized since the law was passed, with digital wallet company partnering with El Salvador to develop government-backed wallets which will be provided to all Salvadoran adults, pre-loaded with US $30 worth of bitcoin. ATM company has also announced investment of US $1 million to roll out 1,500 bitcoin ATMs across the country. El Salvador is no stranger to bitcoin investment – the small beach town of experimented with small-scale bitcoinization through the foundation of Bitcoin Beach, a project funded by an anonymous donor to promote payment for goods and services, wages and bills through bitcoin.

But how much 鈥渋ndependence鈥� will El Salvador achieve through bitcoinization? Despite its libertarian origins, the Bitcoin network has become increasingly centralized in recent years as more and more computing power is needed to mine blocks with an ever-decreasing reward. Large amounts of bitcoin are held on exchanges that make profits from purchases of cryptocurrency and request identification and bank documentation from prospective users. Recent efforts to create a to 鈥減romote energy usage transparency鈥� are also demonstrative of further centralization of Bitcoin. As geographer and political economist Jaya Klara Brekke , such a situation of is worlds away from the decentralized vision of cryptocurrency held by the early cypherpunks.

A further barrier is the developing regulatory framework of Bitcoin in the United States, where President Biden is currently eyeing proposals . Given that the Salvadoran economy relies heavily on remittances (estimated to make up ), further regulation and taxes could well affect remittance flows from the United States to El Salvador. Given the reliance of Bitcoin on concentrations of huge mining capacity and increasing regulatory efforts aimed at curbing its rise, the arguments in favor of bitcoinization on the basis of financial inclusion and independence make little sense.

Another recent development has been the effect of prominent individuals to drastically alter the price of bitcoin through spreading so-called 鈥渇ear, uncertainty and doubt鈥� (FUD). Following Elon Musk鈥檚 that Tesla would no longer allow payments using bitcoin citing environmental concerns, the cryptocurrency market cap crashed from an all-time-high of over US$ 2.5 trillion in May 2021 to its current valuation of US$ 1.3 trillion. Bitcoin has seen its value more than halve from the all-time-high of over US$ 63,000. For retail investors placing savings into digital assets in the hope of long-term gains in future bull runs, such fluctuations are par for the course; but for a Salvadoran vendor in the informal economy relying on bitcoin as a means of exchange, such crashes could have far more profound implications. While dollarization gave control of El Salvador鈥檚 monetary policy to the Federal Reserve, bitcoinization will pass control to cryptocurrency speculators and large-scale mining companies.

Bukele is a younger, more forward-looking representative of international capital than his predecessors, one less tied (and perhaps even antagonistic) to the formalities and institutions of the Washington Consensus. Indeed, the World Bank with the bitcoinization process and IMF Spokesperson Gerry Rice warned of the 鈥溾�� that bitcoinization will entail. Bukele also faces opposition from representatives of capital in his own country: Javier Sim谩n, former president of the National Association of Private Enterprises (ANEP), that bitcoin is a 鈥渟mokescreen for covering up corruption鈥� and that its adoption as a currency is a 鈥渂ad idea鈥�. In an era where trust in the US dollar is waning, particularly over concerns of inflation, it is not surprising that developing countries are turning to nominally decentralized alternatives such as Bitcoin. But given the project鈥檚 focus on external investment, it is likely that bitcoinization will do little to lessen the dependence of El Salvador on the United States. Bukele will need to be wary that he has not simply swapped dependence on the institutions of Washington DC for the tech entrepreneurs of Silicon Valley.

Guy J. Cowman-Sharpe is a PhD student in the Department of Politics and International Relations at the University of Sheffield in the UK. He tweets at

By Ali Bhagat and

A recent article in the takes aim at 鈥楬ow Big Tech Won the Pandemic鈥�, 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鈥攁nd reaped unprecedented profits in the process. As the Times put it, 鈥榯he pandemic created a peculiar economy that benefited some people and industries, including in technology, even as it battered others.鈥� 

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 and this is a dominant reading within critical political economy which has been at pains to point out how laissez-faire regulatory environments鈥攑articularly in the United States鈥攈ave 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鈥檚 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鈥攁nd been shaped by鈥攖he 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 , particularly through consumer debt, policing, and imprisonment. 

As is well known, neoliberalism has yielded specific forms of state intervention to discipline and normalize the surplus population and to regulate social insecurity. Filling the void left by the retrenchment of social and welfare spending, these forms include Jamie Peck鈥檚 workfare, Susanne Soederberg鈥檚 debtfare, and Lo茂c Wacquant鈥檚 prisonfare. As the technology industry has inserted itself more deeply into consumer credit markets and surveillance activities, it has augmented both debtfare (which normalizes and encourages reliance on private sources of credit to augment wages and regulate social insecurity) and prisonfare (which criminalizes poverty through policies that extend the reach of the police, courts, jails, and prisons). And, as the two vignettes below show, it has done so in ways that not only support the ongoing efforts of the neoliberal state, but that also underpin the growth and profitability of Big Tech itself. 

Techfare and the Business of Consumer Finance

The penetration of Big Tech into the realm of consumer finance has clear parallels with what Gabor and Brooks (2017) call the . Gabor and Brooks argue that fintech has accelerated the financial inclusion of the poor and enhanced financial institutions鈥� ability 鈥�. Big Tech, too, is adopting these logics of financial inclusion: the technology giants have vast stores of user data and trusting consumer bases that have allowed them to extend financial services globally. For instance, the total alternative credit model鈥攁 combination of fintech and lending by Big Tech companies鈥�. In Asia, Africa, and Latin America the presence of Big Tech credit grew rapidly, coinciding with the decline of fintech credit volumes due to market regulation in China. 

Amazon, Apple, and Uber are all venturing into the business of consumer finance鈥攁nd they are set to be major players in the field. A report by , for example, estimates that a formalized Bank of Amazon would cause U.S. banks to lose approximately $100 billion, with a potential customer base of 70 million, rivalling major banking giants like Wells Fargo. Apple has launched a credit card with Goldman Sachs that targets consumers with lower spending power. A forecast estimates that 15% of the 900 million iPhone users will sign up to the Apple Card by 2022, supplying Apple with a new revenue stream in the face of declining iPhone sales globally. Similarly, Uber recently unveiled Uber Money鈥攁n offering whose initial targets are Uber drivers themselves鈥攚hich includes a debit account, wallet, and Visa credit card that encourages spending on Uber鈥檚 products, including rides, food delivery, and electronic vehicles. As these brief examples show, Big Tech is encroaching upon the spaces of traditional consumer credit, offering alternatives to traditional lending practices鈥攕ometimes in conjunction with, but also separately from, big banks.  In the financial sector, techfarism disproportionately targets young and low-waged people. This is due in part to the low barriers to entry, lack of transaction fees, and a commitment to greater transparency than traditional banks. Big Tech鈥檚 foray into finance is yet in its early days and remains shrouded in secrecy. But the financial data procured from users in these various ventures will undoubtedly contribute to the profit-generating arsenal of these companies that are in constant search for new revenue streams.

Techfare and the Business of Surveillance

For the past several years, neoliberal states and Big Tech companies have been working hand-in-hand to produce new forms of surveillance and criminalization. One of the highest profile examples of this is the proliferation of facial recognition technology鈥攁n arena where racial capitalism and inequality dovetail with ongoing issues surrounding policing, incarceration, and the targeting of Black and brown people in the United States. For instance,  Amazon鈥檚 foray into facial recognition and Clearview AI鈥檚 entanglements with various security-related departments in the U.S reveals a clear link between the state鈥檚 security apparatus and Big Tech.

Here, however, we want to focus on Amazon’s $1 billion acquisition of Ring鈥攁 smart doorbell maker鈥攚hich has allowed Amazon to expand into home security services, and provides a useful tie-in to the retailer鈥檚 staple source of revenue (home deliveries). Ring primarily acts as a video doorbell that allows residents to watch their front door for packages and packages, and also monitor the safety of their home. More insidiously, however, Ring has recently launched its Neighbours app, which has been branded as a community safety tool that lets residents view real-time information on crime, fires, and other indices through various video capturing from Ring doorbells in their community. In 2019, posted by Ring鈥檚 founder, Jamie Siminoff, revealed that Ring works with over 405 law enforcement agencies who have access to the footage of all Ring cameras through the neighbour portal app. In effect, the Neighbours app has helped to expand law enforcement鈥檚 surveillance capability, and it is a potent example of the society-led surveillance of criminality that invariably targets the racialized poor.

Conclusion

Our snapshots surrounding consumer finance and surveillance act as central examples of arenas where techfare augments extant modes of neoliberal regulation in the face of social insecurity. In aligning with debtfare, we are interested in how the vacuum left by welfare retrenchment and the decline of traditional financial actors has paved the way for Big Tech to become a player in consumer finance through new , credit cards, and other lending services that explicitly target low-income earners. In relation to prisonfare, we also highlight how Big Tech profits off of surveillance by extending the carceral state to the level of the neighbourhood and the household. Facial recognition is often seen as a public safety tool. But its potential to erode privacy and criminalize vast numbers of people while generating both revenue and data for Big Tech is an important direction for future research.

Ali Bhagat is a Lecturer in the Department of Politics, University of Manchester. He tweets at @.

is a PhD Candidate in the Department of Geography, University of British Columbia

Photo by the .

A conversation with and Dr. Juvaria Jafri and Dr. Aasim Sajjad.

is Professor of Political Economy at the National Institute of Pakistan Studies, Quaid-e-Azam University and a founder of the Awami Workers Party (AWP).听 His research has focused on state theory, informality, colonial history, rise of the middle classes and social movements in Pakistan. His latest book is 鈥�.

听 is a Lecturer in International Political Economy at City University. Her research is on financial development in Pakistan, including inclusive finance, fintech, and impact investing strategies. Her latest co-edited book is

Introduction

The full impact of the COVID-19 pandemic on developing countries is still unfolding. While many countries have managed to achieve some stability in eliminating the spread of the crisis, others are struggling on various fronts. In South Asia, India has received much global attention owing to the violence of a hasty lockdown which was imposed without warning and an accompanying social safety net. Other countries in the region including Bangladesh, Srilanka and Nepal also continue to grapple with the existential question of how to ensure that contagion control does not come at the expense of destroying livelihoods.听

In this interview we focus on the situation in Pakistan. We invited Aasim Sajjad and Juvaria Jafri to address some questions related to the current situation in Pakistan. The following four questions were designed to provide a glimpse of how the pandemic is impacting the existing socio-economic structure of the Pakistani economy particularly focusing on class inequality, fin-tech as a potential solution and the activist and citizen-led first historic demand for a long-term welfare package.听

The Impact of COVID-19: The Before and After听

Farwa Sial: Juvaria and Aasim, thanks for agreeing to be part of this discussion. Can we start with a brief overview of the state of the current pandemic in Pakistan? We would like to know a bit of context to the current situation.

Juvaria Jafri – Let鈥檚 look at the most obvious number related to Covid-19 first; the death toll. For Pakistan the death toll is up to 3,229 while testing indicates that there are up to 165,062 cases of the virus (June 2020). These numbers 鈥� their data quality and politics of their production 鈥� are highly contested; opposition parties have been critical of these figures for being underestimated. And it鈥檚 also important to remember that for most intents and purposes Pakistan is no longer under lockdown so these numbers will almost certainly surge.听

Economically, the pandemic will hit Pakistan鈥檚 pressure points. The fiscal deficit could reach double digits after initial projections of 7 per cent; GDP growth as the economy is estimated to contract by 1.5 per cent and possibly more; and the incidence of poverty 鈥� based on听 the headcount ratio 鈥� is expected to rise from a quarter of the population to as much as a third as 3 million or so become unemployed.听 Lifting the lockdown is for averting economic catastrophe, but there is very little to indicate that this is a viable strategy; unless of course the virus is proven to be not as deadly in Pakistan as it has been elsewhere.听

From this situation, I think there are some questions to mull over. What is the meaning of the trade-off between the lockdown and the economy? What is it about the domestic and global economic structure that has allowed the question to be presented as a choice?听

Aaasim Sajjad: Pakistan鈥檚 political economy 鈥� and I emphasise the political 鈥� is deeply inegalitarian. Over the past few decades, as the economy has been opened up to flows of capital, livelihoods of the rural poor have been devastated, which has accelerated mass influx into urban areas 鈥� in short, casual labour/self-employment are the norm in both urban and rural settings. As is now common knowledge, the shutdown of the global economy has severely impacted the labouring poor, wherever they may be. Given the paucity of data on so-called 鈥榠nformality鈥�, it is impossible to establish with great certainty what the exact fallouts will be, but already a figure of 20 million job losses are being floated 鈥� and bear in mind that many working people do not fall into the category of 鈥榝ormally employed鈥� to begin with.听

It is in this context that the government鈥檚 limited emergency relief measures must also be evaluated. The extension of the targeted cash transfer programme (which goes by the name of , formerly 鈥楤enazir Income Support Programme鈥�) to address the fallouts of the pandemic on the working poor is a necessary step, but far from sufficient, both in terms of amounts as well as simply reaching the most vulnerable 鈥� both a function of administrative incapacity as well as political will.听

To return to Pakistan鈥檚 political economy, even during the pandemic the military establishment has reinforced extractive and punitive logics, especially in ethnic peripheries. More generally fiscal imperatives revolve around 鈥榥ational security鈥� while big business lobbies 鈥� in real estate as well as agro-industrial sectors like wheat and sugar 鈥� easily evade the tax net and, in fact, are at the apex of the decision-making hierarchy.听

Middle-Classes and COVID听

Farwa Sial: Aasim, your latest book analyses the phenomenon of the Middle Classes in Pakistan. First, is there a particular pattern to the rise and dominance of middle classes in Pakistan? Can you and Juvaria also address the impact of the pandemic in relation to class inequality.听听

Aasim Sajjad: Pakistan鈥檚 class structure is complex, but you are right to note that a certain 鈥榤iddle class鈥� has become increasingly more influential in recent decades. Having said that, there is a long historical lineage of educated middle classes supporting and, indeed, staffing an authoritarian state apparatus. Contemporary middle-class formations owe a lot to neoliberal globalisation; a growing and influential segment of society boasts middle class lifestyles and articulates its politics through digital means. Established upper middle-classes as well as a large youthful demographic which aspires to climb the social ladder have been vocal supporters of Imran Khan鈥檚 Pakistan Tehreek-e-Insaf (PTI) party, and similar parallels can be found in countries also experiencing a youth bulge and adopting neoliberal economics wholesale (e.g. Modi in India).

It is important to bear in mind, however, that middle class political mobilisations that revolve around vacuous slogans like 鈥榝ighting corruption鈥� as well as hate mongering against domestic and foreign 鈥榚nemies鈥� reflect a crisis of the political-economic order rather than its success. The pandemic will exacerbate inequality and so it can be expected that more dissent will emerge from within the youthful and tech-savvy demographic that ascribed to Imran Khan鈥檚 populism. Only time will tell whether an alternative political imaginary that challenges hate-mongering and brings together a wide coalition of social forces, middle class as well as working people more generally.听

In sum, class and other forms of inequality that will worsen due to the pandemic can, ultimately, lead to more of the same 鈥� authoritarianism, rapacious exploitation of nature, profiteering for big business lobbies 鈥� or it will bring together the proverbial wretched of the earth with elements of the middle classes who want at the very least to temper the logic of capital with investments in public health, education, housing and other basic needs. The dominant ideology which undergirds an atomised middle-class aspiration of 鈥榮urvival of the fittest鈥� may have been badly exposed by the pandemic, but until there is a coherent political coalition that can compel a rollback of the market and investment in universally accessible public services, this middle-class aspiration will not be displaced, the crisis-ridden system continuing to rumble along, lurching from one shock to the next.

Juvaria Jafri : Yes, the pandemic in Pakistan has been a missed opportunity to build coalitions across social forces primarily because there has been no discussion about how the virus cannot be effectively countered unless everyone participates. There have been critiques of the PTI government for not enforcing lockdowns and social distancing rules, but not many of their economy centric decision making. This is unfortunate because the PTI鈥檚 welfare driven mandate could have been put into practice here. The Ehsaas scheme which I have written about previously was a starting point 鈥� albeit problematic 鈥� for stronger, broader safety nets but has been underutilised.

Fin-tech as a response to COVID

Farwa Sial: Juvaria, you recently wrote about the potential of fintech to address some immediate issues surrounding pandemic control in Pakistan. Why is that important? Aasim, we would also like to know your thoughts on the implications of such technological innovations including in relation to concerns such as data privacy.听

Juvaria Jafri: The initial response of Pakistan鈥檚 federal government to the pandemic relied heavily on fintech to keep the most vulnerable in society from starving whilst in lockdown. The most vulnerable in Pakistan are the poorest, who rely on daily wages and have no savings or formal safety nets to fall back on. So when an听 was announced in late March, the government allocated Rs150 billion (拢734 million) in cash support for the poorest 12.5 million households or . This was to be disbursed using fintech. Anyone who felt that they fell in the vulnerable category were asked to send a text message with their national identification number so that the database could verify if they are eligible for assistance. Those who were eligible would then be directed to a centre to collect cash support.听

Now you can point out this system of disbursement is not fintech because it does not involve financial institutions. Bank branches were involved in managing the cash transfer from the government to individuals but not in determining eligibility. But the system of selection which relies on scoring individuals to decide if they are poor enough replicates credit scoring practices. In this case, the text messaging system relied on using the government bureaucracy database National Database & Registration Authority (NADRA) to see who should not receive cash support. The Ehsaas Kafalat evaluation approach used here means taxpayers, car or motorcycle owners, and people who have travelled abroad multiple times听听for the new coronavirus emergency assistance.

Fintech is useful for practices where it is clear who is to be included and who is to be excluded. While there is a consensus now that the measures were inadequate 鈥� hence the pressure to end the lockdown 鈥� we can also see that the NADRA system is extremely powerful. It could be used for instance to disburse cash payments to much a wider section of society, or even to everyone; as would be the case if Pakistan ever decided to adopt a universal basic income.听

Aasim Sajjad: I agree that cash transfers are most effective when disbursement is enabled by cutting-edge technology. Yet it is worth bearing in mind that both financial systems/institutions and data gathering system/Big Tech are part of the problem in a broader sense. Universal Basic Income (UBI) is an ameliorative mechanism within the confines of capitalism, and transcending the crisis-ridden logics of capital are, for myself, the only meaningful political-economic horizon. Technology presents a quandary because it contains the potentialities for humanity to transcend the problem of material deprivation once and for all. But within the confines of the current system, technology is actually a tool of domination 鈥� it is a pillar of advertising and what Marx called commodity fetishism, and at the same time through the collection of our personal data serves the purpose of social control. What advocates call the problem of 鈥榙ata privacy鈥� is only the tip of a very large iceberg.听

So, the challenge is to use established means and mechanisms to address immediate challenges yet always remaining alive to the longer-term ramifications of these mechanisms. Which is to say we must continue demanding reforms within the system whilst continuing to proffer radical overhaul as our long-term horizon.

Rescue Packages: Universal Basic Income听

Farwa Sial: Aasim you and the Awami Workers Party (AWP) and others are leading the debate on a rescue package which goes beyond the pandemic. What are the demands and how will it address inequality in Pakistan?听

Aasim Sajjad: As I have already noted, we position ourselves with all social and political forces that advocate for basic needs like health, education, housing and a basic income to be provided free and indiscriminately to all. This is not as simple as saying that market needs to be held in check by the state 鈥� the market-state dialectic has framed the evolution of capitalist modernity for 500 years, and throughout the past 30 years, the state in postcolonial countries like Pakistan has actively aided and abetted multinational capital in its capture of natural resources as well as the commodification of all sectors of the economy, including the basic needs I鈥檝e just listed. This means that we want to emphasise not only universal policies like a UBI along with other public services, but bring into focus the very logic of statecraft itself, which, especially in Pakistan鈥檚 peripheries (both geographical and the working poor in metropolitan areas), are essentially still colonial in nature.听

What this means is that the idea of a responsive and accountable state has to be normalised. The last thing we want is for there to be resignation that basic needs can only be met under 鈥榚xceptional鈥� circumstances like a pandemic. This would mean that we accept the neoliberal ideological pivot that there is no collective imperative to meet the needs of all citizens (because of fiscal constraints, a lack of administrative capacity, or any other variety of mainstream 鈥榮tate failure/incapacity鈥� arguments). Worse still would be the prospect that the state instead enhances its capacity to coerce and discipline 鈥� indeed, that such a punitive mandate is its raison d鈥檈tre. Indeed, the very problem is that the postcolonial state continues to treat too many of its own people as subjects, rather than citizens. At best it wants to make them into captive consumers of commodities, but minus political, economic and cultural freedoms.听

So therefore, while demanding schemes such as UBI in the here and now, we believe it is necessary to push for a very reorientation of the state in the medium to long run. We want a state that is a people鈥檚 democracy, not a national security obsessed apparatus that is largely unaccountable. Of course capitalism is a global system that impinges on the political choices available to any particular body-politic, and so Pakistan鈥檚 specific context cannot be divorced from the global political economy as such. To reiterate: our horizon continues to be framed by short-term considerations, but ultimately founded upon the necessary long-term transformative visions that emphasis the dignity and freedom of all human beings, a model of 鈥榙evelopment鈥� through which humanity and nature co-exist harmoniously, and a transcendence of the commodity form through the active harnessing of human intellect (including technology).听

Juvaria Jafri: I want to follow up on Aasim鈥檚 point about UBI. There was some exuberance around this in the early days of the pandemic but I haven鈥檛 seen anything meaningful since then. There is in fact historical evidence that a UBI is consistent with a Madina Ki Riyasat, (Constitution of Media) as it was used during the first Islamic Caliphate in the 7th century. There are a few questions around the viability of a UBI in Pakistan. One, can we afford it? Two, how can it be disbursed? And three, how can it be effective?听

The question of affordability is perhaps the most straightforward one and depends on the amount to be disbursed and its frequency. Keep in mind that we are discussing a universal basic income so it would have to made available to all citizens, or possibly all residents, of Pakistan, regardless of their wealth or incomes. The idea is that those who don鈥檛 need it won鈥檛 claim it, and even if they do it will feed back into the local economy. The precise numbers are important here of course because for instance a PKR 12,000 monthly UBI claimed by 50 million households would be about a sixth of annual GDP; more than annual tax revenues. In some countries UBI payments are linked to revenues from natural resource extraction but this is not viable in Pakistan. A possible option is funding from external sources, or even an agreement that debt relief on existing loans would be channelled into UBI. In the absence of such measure the government in Pakistan, via the central bank, could use their standard budgetary finance mechanism which involves the issuance of debt. The alternative, more radical approach, would the one that has come out of Modern Monetary Theory (MMT) discussions and holds that it is possible for governments to create money without going in debt. This is complemented by recent work on CBDCs or central bank digital currencies. Under such an arrangement, banks could instantly transfer digital cash by creating deposits on their own books. There are of course inflationary concerns but there are no studies as yet to indicate how big an issue this might be.

These measures have a strong fintech component which brings us to the second point; how can UBI be disbursed. The Ehsaas emergency cash transfers offer some precedent by showing how databases can be utilised. But an actual UBI could take this further by (1) enhancing the digital aspect of such transfers and encouraging transactions to stay within the banking system, and (2) ensuring that a cash transfer is made to every biometrically through a 听subscriber identification module (SIM) card; this would also avoid double payments. The third point is about how effective a UBI would be. For a UBI to be effective a key assumption that needs to be dropped is that it would be constrained by fraud; that undeserving persons would be beneficiaries. While this might happen, it is important to place the emphasis on deserving groups benefiting instead of on undeserving persons exploiting the system. Beyond that it is necessary for the government to regulate the supply chain of essential goods, particularly food and fuel, to limit inflationary pressures, particularly from speculative activities.听

Farwa Sial听is a post-doctoral researcher working on听the听听Project at the Global Development Institute, University of Manchester. She tweets at听.

In his acclaimed poem “America” from 1956, Allen Ginsberg warned about the new vices of American society. Beyond the clear demonization of communist ideals, the star of the beat generation warned about the growing influence of the media on the thinking of individuals.

With globalization, the commodity fetishism disguised as the American dream entered not only the minds of the citizens of the United States but the rest of the globe. In addition, with the financialization of the economy, the debt culture also surpassed the American borders, reaching the countries of the Global South.

There is no day when the media does not bombard us with advertisements that promote a consumer culture, inciting us to acquire goods that we cannot afford with our income. This is where credit plays the role of a “savior entity” through which we can satisfy our deepest desires. However, unlike the developed countries, which have high levels of access to financial services, the underdeveloped countries are subject to a subordinated financialization that limits the possibilities of households and non-financial companies of acquiring a loan and, consequently, complicates the satisfaction of our consumerist spirit and the development of the productive sphere. The notion of subordinated financialization was first proposed by Jeff Powell听() to designate the specific way in which financialization manifests itself in underdeveloped economies. The level of access to financial services that a country has is known as financial inclusion, however, in the case of Mexico, this level is so low that we are facing financial exclusion.

Financial exclusion in Mexico

Let鈥檚 look at some basic data. In Graph 1 we can see the percentage of individuals who have a credit card in Mexico and eight developed countries. All the developed countries that appear in the graph had a percentage higher than 50%, except for the Netherlands, which had a proportion of 39.10%. However, this value is much higher than Mexico鈥檚, which barely reached 9.52%.

What would be the cause of this exclusion? Taking a small step back, we can try to find the root of the problem in the modus operandi of the institutions responsible for lending to individuals: the banks. Focusing our attention on Mexico, let鈥檚 consider which banks are operating in this country.

Before moving on to the data and in order to delve a little into the new way of operating of the big banks in times of financialization, it is convenient to remember that, in 2011, when the Financial Stability Board published the first list of (G-SIFIs), a select group of banks assumed the status of too big to fail and therefore, the perception of risk diminished for this select group of financial institutions.

The question now would be, can we talk about banks too big to fail in Mexico? Table 1 shows the composition of the Mexican banking sector, where the top 5 banks 鈥揃BVA Bancomer, Santander, Banamex, Banorte and HSBC鈥� together reached 6,834,944 million Mexican pesos at the end of 2018, equivalent to 36.73% of that year’s GDP. The only national bank that appears on the list is Banorte which, in terms of its percentage of participation in the banking sector, 12.41%, is much smaller than the first bank on the list, BBVA Bancomer, which in 2018 represented the 22.05% of total bank assets. On the other hand, Santander’s parent company is in Spain. Banamex (recently renamed Citibanamex) is a subsidiary of Citigroup, the largest financial services company in the world, and the headquarters of HSBC is in the United Kingdom. The names of these four banks will seem familiar to us if we have looked at the of G-SIFIs, published by the Financial Stability Board in 2018. Indeed, the four main foreign banks that operate in Mexico form part of the select group of financial institutions too big to fail.

It is, therefore, necessary to ask ourselves, why the predominance of large banks in the Mexican banking system has not been reflected in a larger increase in access to financial services. Banks operating in Mexico impose restrictions when granting credit so that only people who prove to have a medium or high monthly income are granted a loan. It鈥檚 well known that banks tend to not lend to low-income individuals to reduce the risk of default in the case of a recession, but what risk? Are they not supposed to be too big to fail? One explanation could be that being immune to risk, banks that are too big to fail are more concerned with participating in complex financial operations than by increasing their credit portfolio to citizens. This new business model of banks, in which its income became more dependent on commissions for the purchase and sale of securities, and part of its profitability comes from shadow banking operations, involves higher risks than traditional lending.听

To wrap up, banks too big to fail have a strong presence in the Mexican banking sector. However, the participation of foreign banks has failed to promote financial inclusion to an adequate degree, given that Mexico鈥檚 population still has a low level of access to financial services. It therefore becomes clear that subordinate financialization involves not only the lack of funding of non-financial companies but also the financial exclusion of individuals.

References

Financial Stability Board (2011), .

Financial Stability Board (2018), .

Powell, Jeff (2013), . PhD Thesis. SOAS, University of London.

Giovanni Villavicencio听has a degree in Economics from the Universidad Nacional Aut贸noma de M茅xico. .

By听and

A recent article on the 鈥�鈥� by Dr. Rachel Meager (LSE) has received much praise over the past few weeks. Meager deploys Bayesian hierarchical modelling to provide a new take on the argument in favour of a reformed system of microcredit. Her work builds on the data provided by six randomized control trials (RCTs) conducted by Abhijit Banerjee and colleagues (see ). Meager makes an attempt to exculpate the microcredit model from the awkward fact that its impact on the poor has been very much less than originally envisaged. She also claims to show that the critics have overstated the negative impact of microcredit. Microcredit should therefore continue to be a policy intervention, she goes on to say, but there need to be changes in the operating methodology for a more meaningful development impact to be possible in the future.

While seemingly a well-meaning attempt to explore the impact of microcredit, we were struck by the way that her overall argument appears to seriously misunderstand, and it definitely misrepresents, the existing research on microcredit as a development instrument.

Meager begins by looking at the various 鈥榤icrocredit meltdowns鈥� that have regularly occurred around the world, starting with Bolivia in 1999. These, she claims, arose thanks to the inefficient lending practices of even the best-intentioned microcredit institutions. Perhaps the problems arise, she speculates, because 鈥渓oans (…) have to be repaid frequently鈥�? Or maybe it is because of a low take-up of loans, which she attributes to microloans 鈥榥ot being as desirable鈥� as many hoped they would be. Or perhaps it is because most microcredit institutions are forced to charge high interest rates in order to 鈥渃over the costs of administration鈥�? Meager seems to be suggesting that well-meaning microcredit institutions simply do not have sufficient knowledge of what their clients really want and need, nor do they make sufficient surpluses in order to lower their admittedly high interest rates, and that these operational factors are responsible for the growing number of disasters that have affected the global microcredit industry. Crucially, this might mean that things can be corrected by giving better advice and technical support to microcredit institutions so that they can better help the poor.[1]

惭别补驳别谤鈥檚 explanation here is entirely unconvincing. She claims that 鈥�microloans often have very high interest rates to cover the costs of administration鈥� when it is actually clear that in all but a handful of the remaining non-profit microcredit institutions, high interest rates are purposely deployed in order to generate high profits (, ). In fact, there is largely consensus about who is mainly responsible for the 鈥榤icrocredit meltdowns鈥� and client over-indebtedness that increasingly disfigure the global microcredit industry today 鈥� the often very knowledgeable CEOs and senior management of leading microcredit institutions. Reckless lending is now seen as an increasingly overt problem in, if not a defining characteristic of, the global microcredit industry (; ; ; ; ,听).

Furthermore, several of the six case studies by Banerjee and colleagues upon which 惭别补驳别谤鈥檚 own analysis is based, are themselves flawed. Simply covering administration costs does not appear to be what most of the microcredit institutions they examined had in mind. Rather, generating profit was usually the priority. For example, Angelucci, Karlan and Zinman () focused on Banco Compartamos, Mexico鈥檚 largest microcredit bank. Their paper entirely ignores the fact that Banco Compartamos has enjoyed spectacular profits for many years and, moreover, that the profits were largely channeled into the spectacular salaries, bonuses and dividends that were enjoyed by the co-CEOs, senior managers and core investors (see ). Also ignored was any serious discussion of the reckless lending practices that were deployed by Banco Compartamos in order to generate such spectacular profits and which, as a direct result, have plunged many poor Mexican women into serious over-indebtedness ().

The Bosnia case study by Augsburg, De Haas, Harmgart, and Meghir () is similarly flawed. The authors omit any meaningful discussion of the reckless lending strategies, naked profiteering and outright fraud that combined to cause the destructive meltdown of Bosnia鈥檚 microcredit sector in 2009-10 (see ). Sweeping these important issues under the rug was perhaps necessary in order to come to the required positive evaluation [2]. Tellingly, almost all of the most damaging downsides to the microcredit model that should have been raised in the case studies by Banerjee and colleagues, were largely ignored () [3]. Accordingly, because it was built upon the flawed foundations of the work undertaken by Banerjee and colleagues, right from the start 惭别补驳别谤鈥檚 own findings were inevitably going to be flawed and biased.

We also found puzzling 惭别补驳别谤鈥檚 belief in the veracity of the RCTs deployed by Banerjee and colleagues. Her contention is that she can explain some of the anomalies in the results of these otherwise valuable RCTs using Bayesian hierarchical modelling. On the surface, this sounds a laudable goal. However, it is now becoming increasingly accepted that drawing on RCTs is a fundamentally flawed way of assessing impact (e.g. ; ; ), including with regard to analysis of microcredit impact (see ). Among other things, the RCT methodology omits downside impact factors that are quite critical to obtaining a genuine assessment of microcredit impact, such as exit, displacement and market saturation (Bateman, Duvendack and Loubere, 2019). If 惭别补驳别谤鈥檚 analysis was to have carried any real weight it might have been better to have some discussion of these and many other flaws in the RCT methodology, and perhaps an attempt to correct for these failings. But she chose not to do this.

We should also point out that Meager is also being quite unfair, if not unethical, when she refers to the existence of critics but refuses to name them or reference their work, still less objectively discuss what exactly their ideas and findings are. Of late there is no shortage of carefully argued outputs on the failings of microcredit as a poverty reduction and development policy (for example, ; ; ; ; ), several of which have clearly influenced the debate (see Zietinger, 2013). These analysts were all ignored, and so the casual reader thus has only 惭别补驳别谤鈥檚 opinion as to what these and other critics are 鈥榬eally鈥� saying. Sadly, this deceptive tactic is widely adopted today by mainstream economists and international development institutions (), perhaps most notably by the World Bank [4].

But by also deliberately ignoring the serious downsides to microcredit that have been consistently pointed out by many critics, just as Banerjee and colleagues did before her, it is simply not correct for Meager to claim that 鈥淭here is little evidence that microcredit generally harms borrowers as was feared by some critics鈥�. Especially when some of the most high-profile advocates for microcredit are now changing their mind about its poverty reducing power (notably Morduch (), one might have expected a greater degree of willingness on the part of Meager to engage with the possibility that significant downsides to microcredit exist and should be at least discussed.

Finally, it is surprising to us that Meager ends with a plea to ‘find alternatives to microfinance’, after essentially having embarked on a determined (but, we believe, failed) mission to rescue it from its increasing obsolescence.

Footnotes

[1] Indeed, an entire sub-industry within the microcredit movement, termed Social Performance Management (SPM), already exists to do just this: to educate MFIs that apparently do not know any better regarding how they can best help their poor clients, including by not over-indebting them 鈥� see

[2]听The Bosnia evaluation was headed up by the then Deputy (now Head) of Research at the European Bank for Reconstruction (EBRD), which also financed the project. With the EBRD being the main promoter of, and also the main investor in, the microcredit sector in Eastern Europe since 1990, a negative evaluation of its huge effort in this sector was quite out of the question.听

[3] It is not the first time that Banerjee has misrepresented such events in this manner. For example, he led the effort by a group of high-profile economists to misrepresent the roots of the Andhra Pradesh 鈥榤icrocredit meltdown鈥� that took place in India in 2010 (see ). While very clearly a reckless lending-driven crisis created from the early 2000s onwards by the CEOs of the 鈥榖ig six鈥� microcredit institutions (see : ), Banerjee et al. sought to pin the blame instead on the Andhra Pradesh government for passing a law in late 2010 that seriously curtailed lending. Their claim was ludicrous and not unlike blaming the 2008 financial crisis on the Troubled Assets Relief Program (TARP) passed in October of 2008 which was, of course, exactly like the move by the Andhra Pradesh government, a response to an emerging crisis and not the cause (see also : 18, footnote 10).

[4] World Bank outputs are infamous for overwhelmingly referencing the work of the World Bank鈥檚 own employees or, at a pinch, work by like-minded economists within their orbit (e.g. their regular collaborators, consultants and conference participants).

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is a Visiting Professor of Economics at the Department of Tourism and Economics, Juraj Dobrila University of Pula in Croatia.

is听Senior Lecturer in Development Economics at the University of East Anglia, UK.听.