1. INSTITUTE FOR MONEY TECHNOLOGY AND FINANCIAL INCLUSION UNIVERSITY OF CALIFORNIA, IRVINE Harsha de Silva Jinendra Kothalawala Priyanwada Herath LIRNEasia November, 2009 Photo not ours. Source unknown

2. Presentation flow Introduction Research Question and Objective Theoretical Framework Research Methodology Findings; thus far Discussion

3. Introduction: poverty in Sri Lanka Population below national poverty line: 15.2% of 20 million population Urban sector: 6.7% Rural sector: 15.7% Estate Sector: 32.0% Sources: Department of Census and Statistics, Sri Lanka (2006/07) Population below USD 1 per day: 5.6% Source: Central Bank of Sri Lanka (2008)

4. Introduction: mobile usage Phone usage in Sri Lanka Mobile phones: 12 million Fixed phones: 3.5 million Source: Central Bank of Sri Lanka (2008) Phone usage by the BOP Phone access: 73% Urban (75%) and Rural (73%) Mobile phone ownership: 36% of BOP Urban (43%) and Rural (36%) Source: LIRNEasia (2009)

5. Introduction: m-finance systems Started several years ago; mixed success depending on country and business model. Future very optimistic Kenya: M-PESA Philippines: G-Cash, Smart Money South Africa: MTN (planning on 21 African countries), WIZZIT Dozens of mainly African countries beginning Sri Lanka No formal m-finance business yet established

6. Research question and objective Question How do m-transfer services help smoothen consumption expenditure among the poor with irregular income streams? Objective Analyze the impact of m-transfer services, if any, on smoothening consumption expenditure among poor with irregular income streams

7. Theoretical framework Poor in general Large share of expenditure on consumption of necessities Poor with irregular income Earning for day-to-day living Face regular income-expenditure gaps Hardly any capital accumulation; but if so, irregular Smoothening Income-Expenditure Gaps Mean expenditure 0 Time period Income per time period 1234 Irregular income Surplus Deficit

8. Research methodology Target respondents Average individual HH income less than USD 1 per day Have an irregular income pattern Males and females between 18-50 years using mobile phones Three geographical locations Colombo urban poor; Kurunegala rural poor; Nuwara Eliya estate poor Qualitative 18 in-depth interviews: 45 -60 minutes at their residences 6 focused group discussions: 2 hours. Digitally tape recorded (with consent) and transcribed September and October 2009

9. Research methodology Target respondents Average individual HH income less than USD 1 per day Have an irregular income pattern Males and females between 18-50 years using mobile phones Three geographical locations Colombo urban poor; Kurunegala rural poor; Nuwara Eliya estate poor Qualitative 18 in-depth interviews: 45 -60 minutes at their residences 6 focused group discussions: 2 hours. Digitally tape recorded (with consent) and transcribed September and October 2009

10. Research methodology Target respondents Average individual HH income less than USD 1 per day Have an irregular income pattern Males and females between 18-50 years using mobile phones Three geographical locations Colombo urban poor; Kurunegala rural poor; Nuwara Eliya estate poor Qualitative 18 in-depth interviews: 45 -60 minutes at their residences 6 focused group discussions: 2 hours. Digitally tape recorded (with consent) and transcribed September and October 2009

11. Research methodology Target respondents Average individual HH income less than USD 1 per day Have an irregular income pattern Males and females between 18-50 years using mobile phones Three geographical locations Colombo urban poor; Kurunegala rural poor; Nuwara Eliya estate poor Qualitative 18 in-depth interviews: 45 -60 minutes at their residences 6 focused group discussions: 2 hours. Digitally tape recorded (with consent) and transcribed September and October 2009

12. Urban poor. living in congested desperation.

13. Hand to mouth survival Casual labor: street vendors, construction site helpers etc Expenditure on basic needs: mainly food on daily basis, that too skipping meals Daily USD 3 for family of 4; maybe 5-6 for a family of 6 Try not to borrow but live with whatever they get; but take food on loan from neighborhood shop Emergencies get USD 10-15 from friends; worst case USD 50-100 at 10-20% per month If at all save a little for kids

14. Rural poor. living in isolated desperation.

15. Life is difficult… Living off small subsistence tenant or ‘chena’ agriculture Only 10-15 days work, so look for work in village; “anything” ‘Manage’ with what they have Frugality; small family can make do with USD 2 a day “Mostly… keep part of previous night’s dinner for breakfast…” Purchase food on credit from village shop, if no money In desperation would borrow from relatives USD 4-5 ‘Hide’ USD 3-5 somewhere for an emergency

16. Estate poor. living in institutional desperation.

17. Living on estates; tea Marginalized and isolated Estate management responsible for all life aspects Pluck tea when there is work; weather is key; even 2 days/week Purchase or for credit food from estate shops; pay on salary day Malnourished Borrowing brings ‘bad luck’ Yet, borrow from neighbors, friends Community savings-credit scheme Always try to save something for the children; many Totally dependent on plantation

18. Usage of mobile phone Fairly similar use of mobile phones by urban, rural and estate poor Keeping in touch Particularly if relative overseas; middle east Difference due to kind of livelihood Use pre-paid connections Keep costs at minimum Reload USD 0.50-1 per 1-2 weeks Significant SMS use Livelihood wise, the mobile phone helps to get information on availability of work to get market information; prices to find out about tutorials for school children competing at exams etc.

19. m-transfers Phone-to-phone credit transfers do take place Not frequently, but yes Mainly among friends or colleagues Very small amounts; even as low as USD 0.05 – 0.25 Smoothening communication consumption via m-transfers No money to purchase re-load and need to make urgent call Unable to access an outlet to purchase a reload Pay back As return re-load or top-up card Or, as cash Small transactions are costly Relatively high service charge; can be as high as 25-50% But, circumstances compel them to do so

20. Needs differ based on circumstance of poverty Mobile-money can make the transaction size smaller and allow otherwise impossible transactions to take place Congested urban poor Instead of buying vegetables every morning to sell on the streets; can buy twice or three times a day. Can slowly build creditworthiness. Transactions among network of vendors Isolated rural poor Instead of having to travel long distance to purchase full amount of urgent daily needs (so not purchase) can create micro-businesses in sachet marketing in rural areas. Transactions between poor and micro- entrepreneurs Institutional poor Can help break-free from the dependency on the plantation company; can look for work outside and send money to family on the estate. Exchange between poor worker and his (her) family

21. But no difference for saving Mobile-money can make the transaction size smaller and allow otherwise impossible transactions to take place Urban, rural and estate poor Can save small amounts; new possibilities

22. Need formality There is no clear regulation on what can and can not be done in m-finance sphere CBSL ‘working on’; TRCSL silent No operator has formally started a full- scale agent-based scheme But, can pay bills etc (non poor) Credit transfers among friends take place Issues with security How can security of transfers be guaranteed; regulatory mechanism Parties, or potential parties [network operators, mobile users, money recipients and agents] need to accept the system Rules and partnerships must exist to move beyond personal relationships Opportunity among the poor “If someone is willing to accept our mobile money for food items I will be happy to pay with my phone since hunger is unbearable and we need food more than anything else”

23. Need to build awareness Lack of awareness, specially among older people in the rural and estate sectors Lack of awareness Young people familiar with various mobile phone services and are curious in moving forward with m-finance services But, negative attitudes; trust issues Opportunity among the poor “Even though we collect some coins in a till at home for our kids, these savings do not remain in it for long. But we all would be able to save some money for our children’s future if there is a formal saving system through mobile phone.”

24. Improvement in infrastructure Network coverage need to improve and electricity is a problem in the some rural poor areas Agent networks need to be established M-Pesa type model? Opportunity among the poor “Saving and purchasing with mobile money could be a benefit to us if we get an opportunity to do so. But I am not quite sure whether people would engage in this as we do not have a place nearby to “reload” our mobile money”

25. Further discussion Literature focus on ‘transformational’ financial services; but no need to be confined Options: cash, credit card, debit card, mobile-money etc. Adoption Demand side issues Supply side issues

26. Further discussion Literature focus on ‘transformational’ financial services; but no need to be confined Options: cash, credit card, debit card, mobile-money etc. Adoption Demand side issues Supply side issues

27. Further discussion Literature focus on ‘transformational’ financial services; but no need to be confined Options: cash, credit card, debit card, mobile-money etc. Adoption Demand side issues Supply side issues

28. Thank you Harsha.lirne@gmail.com www.lirneasia.net