What Kenya can teach its neighbors about improving the lives of the “unbanked” | Hacker News Reader

What Kenya can teach its neighbors about improving the lives of the “unbanked”

vox.com

64 pointsluu57 comments

> Instead, she takes out her phone and texts a password and a request for money.

How many times do people need to be told that their assumptions about mobile phones and security are completely wrong. Phone numbers can be reallocated (sim jacking), all communications can be intercepted (by design), smart phones are not themselves secure - especially an older/cheaper phone.

> A few minutes later, she meets a man with a cellphone and receives cash from him [..]

I imagine there being some issue with meeting random strangers.

> Agents function like an ATM: You go up to them and give them cash to get money deposited in your mobile money account, or transfer money out of your account to get cash.

This requires a lot of trust. The entire point of having banking infrastructure is to remove the need for trust. Like crypto, with no oversight, how do you know your local 'phone bank' is not a rug-pull?

In general I think that whilst on the surface this system seems great, it actually makes an incredibly vulnerable group of people even more vulnerable.

(Slightly less related, but still worth discussion.)

If you think being "unbanked" is only a problem for less-developed Countries... What if the reason you don't have a bank account is because the government froze your account due to you supporting a peaceful protest [1]? What if your government decides your social credit score is too low to allow you to have financial services [2]?

[1] https://www.cbc.ca/news/politics/ottawa-protests-frozen-bank...

[2] https://nhglobalpartners.com/china-social-credit-system-expl...

Justice in these countries isn't quite the same as what you're used to.

In, say, America or Western Europe, you'll call the cops and they'll say "uh huh okay" and you'll just have to hope they'll launch an investigation. ATM skimmers are a common problem and basically jack shit is done about them. Muggings still happen and people aren't often caught.

In poorer countries, especially ones where basic infrastructure like banking is inaccessible, often it's easier to just tell a neighbor what happened. The community will go out and "get justice" on your behalf.

I'd honestly feel much safer stealing a whole paycheck in the US than I'd feel trying to steal a dollar in Kenya. Scams are still happening, but the risk is much higher if you're caught hurting someone from your community.

I have a friend from a developing country.

One night someone broke in to their house and stole a high value item (maybe $2K US). The next day they reported it to the police. The police indicated they knew who it was. A few days later the perpetrator was found shot to death.

It was well understood by everyone in the family and community that the police just went out and "handled it". My guess is the cops essentially thought "Come on, not this guy again" and summarily executed him. From what I understood they left his body in a pretty visible place - obviously to send a message.

Another friend (from a different developing country) casually tells stories of bribing cops. When I acted surprised at first he said "The United States is the only country I've been to where bribing the cops isn't cool".

As you say - justice in these countries isn't quite the same as what many of us are used to.

> The community will go out and "get justice" on your behalf.

Works great until the person who steals something is well liked enough or scary enough that the community doesn't want anything to do with it.

Same thing happens with cops though.

Or if they're mistaken about who the culprit was.

The local man is not any bank. He is more a converter of digital money to hard cash. Lets say the woman asks his bank app to withdraw X amount. Bank app will say go to this (or nearest) man and give him this code. Man gets the code, enters in his side of app, and sees the digital money in account, gives the hard cash. He does same in reverse for others who want to deposit money. At any point, maybe daily or weekly he either puts excessive cash in bank branch, or gets cash from bank branch.

Note that app is not any phone app, its more like USSD codes and or SMS banking. The man acts like a human atm, and money & kyc details are with bank or operator. Airtel mobile company used to operate M-pesa in 2007 when I was there. Basically assume if ATT opens a mobile banking division, with just USSD & SMS codes.

>like a human atm

If only there was a word for this concept

I mean, yes, a teller. But a traditional teller is more like employee of a bank. A stand alone atm machine has more resemblance.

This man will have a place/shop already, like tire repair, tea/snacks, mobile repair, clothes shop etc; & then Airtel asked them to be their M-pesa agents, as a side business.

"This requires a lot of trust. The entire point of having banking infrastructure is to remove the need for trust. Like crypto, with no oversight, how do you know your local 'phone bank' is not a rug-pull?"

I think that a system that encourages trust among people is orders of magnitude better than the traditional banking. https://ourworldindata.org/trust

>This requires a lot of trust. The entire point of having banking infrastructure is to remove the need for trust. Like crypto, with no oversight, how do you know your local 'phone bank' is not a rug-pull?

Isn't the entire banking infrastructure based upon social trust? I'm confused at how you can say crypto requires alot of trust yet traditional banking does not... One is based upon mathematical principles, the other on social ones. Of course traditional banking is large and well supported, but it is still inherently a social system which requires trust.

Even cryptocurrencies (Bitcoin, Ethereum, etc.) uses social trust when crises happen. You occasionally see forks being made when a major scam or attack has happened and most people agree that rewriting (or maybe recreating might be a better term) the history of the blockchain is acceptable.

The mathematical principles that crypto uses is ultimately just a tool to mediate human interactions. There is nothing that is set in stone; if enough people developing the block chain agrees there can always be a change of the rules and protocols of the system. You see it less with Bitcoin (which is very conservative about changing things) and more with Ethereum (which is more prone to do experiments and changes). But the potential for change is always there.

So one of the major problems I with most cryptocurrencies is about off-chain governance: that how decisions are made related to the rules of the system is incredibly opaque. How does consensus get reached among cryptocurrency developers? Is there enough communication between developers and the people using the currency, so the users can understand what are the effects of changes that are made in the system? Can users voice about concerns about the system and have the ability to change what developers do? At least Ethereum does have some formal processes on how people can submit proposals to changing the VM, but there is still a significant gap between technical contributions and the more pragmatic concerns ordinary users might have (e.x. about deflation or the POW/POS debate).

> How many times do people need to be told that their assumptions about mobile phones and security are completely wrong. Phone numbers can be reallocated (sim jacking), all communications can be intercepted (by design), smart phones are not themselves secure - especially an older/cheaper phone.

Would you go all that effort to steal a couple dozen dollars? No. The amount of money to be stolen is simply too low to make fraud worth the effort. We're talking about poor farmers in rural areas of Kenya, not Western Bitcoin millionaires.

> This requires a lot of trust. The entire point of having banking infrastructure is to remove the need for trust. Like crypto, with no oversight, how do you know your local 'phone bank' is not a rug-pull?

The local agent is not a bank, they are an agent. If the agent pulls the rug on you (which, again, would be unwise of the agent given that the amount of money is so low), you either complain at M-Pesa or you round up a couple neighbors and rough up the agent.

It is the agents that require trust: they are known to hold some currency and receive all kinds of visitors. Agents that screw their community don't tend to be agents for long, and you can take that any way you want.

Cash is only as safe as the device you hold it in.

> What if the reason you don't have a bank account is because the government froze your account due to you supporting a peaceful protest

Not to get off topic, but the protest was not peaceful, and donating to people who are openly calling for the overthrow of the government is likely to get you in trouble with said government.

Regardless, the bank account freezes are temporary as far as i understand (emergency act expires in 30 days) so really not the same thing.

So, I know what this article is about without reading it :) M-Pesa, Swahili for M-Money, the first 'M' stands for Mobile. Very much a game changer, in some ways Kenya is now ahead of the 'developed' world, it's not just its neighbors that it can teach, but the rest of us as well.

I put developed in quotes because I don't like this artificial division, Nairobi is as much a world capital as say Bucharest is. You probably would not recognize its skyline as African without context.

Since I happen to be sitting in a tall Nairobi office, here's a view from the Apollo Agriculture office. (All of our customers payments are in Mpesa as well.)

https://ibb.co/bQtLYFT

My first thought is that it looked like driving into Minneapolis (https://en.wikipedia.org/wiki/Minneapolis) from the South on I35 :-)

Probably feels a lot different though. It was -9F when I woke up.

Are you guys still using voice calls to educate farmers? That is one of the neatest things I have ever seen.

Yah, absolutely. We generally take a full court press approach here, using a mixture of voice calls, physical fliers when a farmer picks up, and sms nudges.

Neat!

You probably would not recognize its skyline as African without context.

I might, but that's mostly because I've met a lot of other immigrants here in Norway - a good number have been from various parts of Africa so I've been exposed to a great deal of city pictures.

I lament that a lot of imagery from Africa - that is presented to Americans, anyway - as a whole are set in so-called "backwards" villages. They aren't really false, per se, but continually setting up pictures like this leaves out so much nuance.

Have you been in Bucharest? Skylines are not everything. What about slums and general infrastructure? I find it hard to believe that Nairobi is comparable to Bucharest.

Even cursory glance on economies reveals that Bucharest has almost 4 times larger GDP per capita compared to Nairobi, cca 20k EUR to 6k EUR in Nairobi.

To be honest I think that Nairobi has a higher ceiling than Bucharest because of its region, Bucharest is maybe not even the most developed city in Romania, let alone a larger region.

I’ve lived in both. I’m not sure they fit within the same category as they face a different set of challenges and opportunities. However, they are both wonderful and vibrant places.

I've lived in Bucharest for a couple of years and know the country very well.

And you found those cities comparable?

As most of these things come: in some ways, but not in others. Bucharest too has terrible poverty (but it's getting better, slowly), but it is much stronger connected to a far wealthier part of the world and part of the EU so a lot of work is being done that will probably be out of reach for Nairobi for the next couple of decades at least.

Both cities are their nations capitals, both have tremendous historical baggage to contend with. And Bucharest is continuously one major earthquake away from disaster. Nairobi has the bigger population by about a factor of two. Infrastructure is better in Bucharest, but not as much as you might think.

And on a somewhat larger scale: both countries have been under the boot of another power for a long time and are still suffering from that in many ways. Both countries also have very high levels of corruption, though, Kenya has it entrenched at a much higher level, and obviously this has major effects on doing business in their respective capitals.

One could criticize of the very notion of progress. It hinges on a tacit assumption there is some destination toward which all civilization will inevitably converge. It's really difficult to motivate why that would be.

> One could criticize of the very notion of progress. It hinges on a tacit assumption there is some destination toward which all civilization will inevitably converge.

I don't see this as being obvious. I can write integers that are progressively larger and larger without converging on some final value, so why should progressing society have to have a convergence value? I think the assumption that societal progress implies convergence says a lot more about the worldview of the person with that opinion than about progress itself.

It's the word progress itself that carries the connotation of a destination. A boat adrift at sea isn't making progress even though it's changing its position at random. A ship crossing the ocean toward a port is making progress, and that progress is measured not in how far it is from its origin, but how close it is to its destination. If it takes a circuitous path, it hasn't made more progress, it's merely taken longer.

Obviously this is getting a bit into the weeds, but from looking up the word "progress", that doesn't seem to necessarily be the case. Merriam Webster gives almost the opposite as its first definition: "to move forward : proceed", and "proceed" says "to come forth from a source : issue". It seems pretty well established that progress can also mean to _come from_ a distinct place rather than only meaning arriving at a distinct place. I agree that it can sometimes mean a convergence will occur, but it also sometimes doesn't, so any assumption of that definition in terms of societal progress would be reflected by the reader.

Progress is like "wellness." If you have a bleeding gunshot wound, you are not well. But if there is nothing obviously wrong, are you well?

If half your population is malnourished and lacks basic services like banking and these statistics improve, that's obviously progress. It's much harder to pin down what progress would be for a country like the USA or Switzerland.

This still assumes that countries naturally will evolve banks and populations inevitably become well fed through some nebulous process. It's really not possible to appeal to something like darwinian evolution, as it really only cares about memetic propagation and fitness to the current environment.

I'm not saying that these things aren't good, I'm questioning how it's possible to motivate the notion that it is inevitable for civilizations to converge to have these things.

If it isn't, then I think we should come to terms with the fact that we think other countries are backwards because they are different from us, and we think the reason they are different is that they haven't thought things through yet. This is perhaps not a fashionable line of reasoning, but my point is that just ignoring what hides behind the notion of progress doesn't make it go away.

If I understood your argument correctly than it applies more to the Amish than to poor countries because some things are definitely a sign of progress, like ending malnourishment, supplying shelter and curing basic diseases.

Where I agree with you is that not every progress is progress to everyone, for example the above mentioned Amish usually refuse medical treatments in old age but are open to it when they are in the productive age. Would it be progress for them to undergo cancer treatment when they are 80? Maybe, maybe not. Is it progress when they get clean environment for childbirth? Definitely.

Progress toward what?

Well being, lower stress and suffering.

Right, didn't we already have that as paleolithic times? No pollution, can just forage for a few hours and then mostly chill. Seems these cavemen have progressed farther than we have.

That works until your population has grown so much your people start illegally logging protected forests for slash and burn agriculture because they have nothing to eat. The conventional solution is natural predators for population control. We have to do population control in our head.

I think there are many obvious holes in your choice of example, but your overall point stands. Let's look at America. Are people healthy and unstressed? The wealthiest nation in the world--obese, chronically ill, depressed, suicidal. If this is progress, I want whatever is not progress.

That's a myth of a noble savage, a lot of prehistoric people died in childhood, childbirth, from broken bones, had no safety etc.

Prehistoric people died as many times a lifetime as contemporary man.

What they didn't have to worry about was mortgages, inflation, losing their jobs, the destabilizing political situation in Eastern Europe, global warming, QAnon, the vanishing bees, health insurance, and so forth.

They died much earlier and more painfully and their life was full of stress.

> You probably would not recognize its skyline as African without context.

Yeah, it's kind of scary how indistinguishable business districts' skylines are these days.

I used to find myself forgetting a country I'm visiting during a chain of business trips. It's surprisingly hard to find when in taxi traveling through generic business district. RL Geoguessr.

The city centre, sure.

But it also has — or at least had, homes and roads can be built fast in the right conditions — this: https://goo.gl/maps/bjCwPj4UnarttC7p9

(My ex took me to Kenya in 2015, one of her Narobi friends lived in an area that looked much like this)

> It was a combination of the right technology, at the right time, rolled out in the right way, with the right decisions from the Kenyan government to allow the system

Right, the government was too slow to regulate this system before it got popular.

When a country has financial infrastructure but people are not allowed to use it, the main selling point of a new system is escaping centralized control.

> Right, the government was too slow to regulate this system before it got popular.

The thing is, there seems to have been no major incident requiring regulation. Almost all government regulations are not proactive but reactive, simply because of the "prevention paradox"... the most well-known case is fire codes, where the common saying is that they were written in (a lot of) blood.

And as long as M-Pesa doesn't get used to finance terrorism, the provider disappears into thin air with all the funds or mass hacking leads to people losing their savings, why should a reasonable government risk too much regulation and thus the protest of the people?

If the government was reasonable, there'd be no need for an alternative banking system.

Traditional banking systems require resources that are pretty expensive. You need somewhat decent roads, electricity for ATMs and branches everywhere, public transport so that people can go to a bank... M-Pesa and friends just piggyback on the existing phone network.

When I visited Kenya a year ago, and I was surprised how M-Pesa was the primary means of payment. That was light years ahead of my native, European country, where in many places nothing but cash goes. Even the Maasai have widely adopted it.

For all it's positive PR, banking the unbanked who are less financially savvy and have weak institutions to protect them, has also made them prime targets for predatory banking practices. Similar to western countries, high yield loans target the most financially vulnerable, but unlike the US, Kenya doesn't have consumer protections or adequate bankruptcy laws.

More details:

https://www.bloomberg.com/news/features/2020-02-12/tech-star...

I would love to be able to mobile banking type stuff on a dumb phone, but services on SMS and the like and 2g/3g are dead in the west. Have to have more expensive new-fangled BS to be a member of society.

I’ve long felt that new technologies hitting undeveloped areas could lead to better outcomes than the slow accretion that the West had. Of course, this also requires Western intelligence agencies not killing every new leader with an idea.

https://www.bhimupi.org.in/

A kinda similar thing which revolutionized money transfer in India.

This is a government initiative, is it not?

After having "Truist" close my account without telling me (but still let me deposit a ton of money into it) I think you might be better of without a bank account. All they do is fuck around with you and they're never open.

Crypto absolutely is the future weather the well connected people in the FED and their customers like it or not.

Imagine thinking banks are a good thing

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