Tag Archives: money

Notes from Money, Real Quick

Money, Real Quick: Kenya’s Disruptive Mobile Money Innovation (Amazon)
Tonny K. Omwansa, Nicholas P. Sullivan

Chapter 2: The Human Network
“The cash merchant is the connection between the ethereal world of e-float and the real world of cash”
“The value they add is trust.”

What other business processes can be described as adding trust? Do uber for x businesses just “app-ify” that trust? Taxis? Hotels?

Maybe that is a way of thinking of what biz/management/technology does: Reduce transaction costs and increase speed, convenience, and safety. Take models that rely on stocks and shift them towards ones that rely on flows.

#notes Old Mobile Money Blog Posts and other links

African startups raised at least $1.3b in 2020, according to Briter Bridges: AfricArena, an African tech accelerator, said African VC investments might drop from $2b to between $1.2b and $1.8b; year-on-year growth calculations are based on scarce historical data, which often results in drawing inaccurate conclusions about the nature and trajectory of their growth


Mpesa: the costs of evolving an independent central bank – But often forgotten is Kenya’s unique circumstances. The M-pesa mobile money system, owned and operated by Safaricom which is 40 per cent owned by Vodafone, was allowed an unchallenged monopoly in the country for a very long time.

To the contrary, if M-pesa has proved useful in Kenya it’s because it has brought digital payment services to areas that were previously unbanked, something that has arguably unlocked trade relationships which never existed before. This in turn has generated new economies of scale which have led to productivity and output growth.

Which leads to the obvious conclusion that mobile money tends to increase the velocity of money, and with it inflationary effects, as much as it increases trade and output.

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To begin with, there’s the issue of liquidity management and the additional cost to the consumer (or someone) of having to hop between multiple platforms. The slow take-up of M-pesa-like systems in other African countries is in part related to the poor economies of scale for users and providers operating in competitive frameworks.

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When the limit is reached — unless the government is prepared to keep borrowing, putting the quality of its own collateral at risk — a telco like M-pesa would either have to entrust its own agents to issue liabilities against newly forged assets in accordance with quality-control and data/information capture conditions or, alternatively, absorb only those assets from the banking network which met its quality and data criteria. On the latter point, M-pesa might even be inclined to share its own data with the banking network, to help them make better loan decisions, and withhold M-pesa liquidity from those that fail to make the grade.

In August 2015, the Kenyan government ended this practice by establishing a formal legal framework for mobile money which banned e-money issuers from earning interest or any other financial return from funds held in its trust and forcing them to hand it over to charity.

There are plenty of EM governments seeking to mimic the “M-pesa” miracle on their own turf in a competitive framework. What few understand is that, unless, like in Kenya, the tech firms are allowed to achieve monopolistic control over the money supply, in a way that cedes state control of state scrip to an external private authority, none of them will prove successful.

Our simple point is M-pesa is not a technology. It’s a stealth political coup by a private operator which profits only from enforcing discipline, control and transparency (via massive data capture) over a wayward system.


Turning mobile money into M0

Mobino’s system aims to cut out as many intermediaries from the debit process as possible by getting you, the customer, to strike up a single direct debit agreement with itself. The company then charges the customer for transactions conducted with partner vendors, whilst the customer deals only with Mobino rather than a multitude of online or retail vendors.


India’s payments revolution

Aadhaar put simply is one of the biggest banks of biometric data in the world. Back in 2010, the Indian government decided it would take full digital fingerprints and an iris scan from each citizen to create a digital identity — this taking the form of a twelve-digit number. About 1.2bn Indians now have a digital identity.

Think of Aadhaar as an “identity rail”, giving banks and fintech companies a secure means to identify would-be customers


Kenya’s mobile money fraud problem

(a.k.a. a type of mobile credit checking system)


M-euro, a lesson in money supply from Kenya (2012)

RAndom thought: Europe is a cathedral, USA is wild west, Africa could be a space ship

There’s actually an element of money creation here. Its origins come from shrewd cell phone users realising there was value in the pre-paid airtime credit they purchased on their phones. So say you bought 60 minutes of airtime on your phone, rather than redeem it you could use it to pay for goods and services elsewhere simply by transferring the credits via the mobile network.

Airtime in this way became base money in its own right, due to its more liquid characteristics. A competing currency to the national shilling, issued not by the central bank but by Safaricom, the company.

So rather than redeeming the credits for talk time, Kenyans abstained to use them as a form of money instead.

You could say, they had created airtime-backed money as a result.

Businesses can operate more effectively: shop-owners don’t need to carry a lot of cash, or to stand in long queues at Banks to transfer money to suppliers. Urban dwellers no longer need to make overnight trips to their rural homes to pay their children’s school fees (or give money to relatives). Women have been empowered because their husbands have a harder time taking their money away. Even macroeconomic policy has become easier because the Central Bank has a better handle on the money in circulation, as mobile money helped to move cash from the mattresses to the market.

In other words, it acts not like a bank, but like a utility.

And since there’s no incentive to hoard, either in a mattress or in a deposit account (because there is no interest), the velocity of M-pesa rises all the time, enriching everyone as it goes.

Indeed, if there’s enough faith in the system, one might envisage a day when Kenyans opt not to redeem M-pesa units for shillings at all. A day which, of course, would probably make Safaricom the single biggest corporate name in Africa (if it isn’t already).


A National Grid for Banking – radical thinking by Errol Damelin, founder, CEO of Wonga.

Radical does not, however, mean it is impossible to achieve. The idea, is in essence, the reverse of privatisation and suggests that the infrastructure, the backbone, the networks of the banking system be placed in public ownership (or at least independent ownership from incumbent FS companies) thus creating a level playing field for businesses to build services on top this infrastructure. A little like the National Grid – for bits, bytes and packets rather than for electricity and Gas.

You could think of this super-bank in the same way as iOS, the operating system for Apple’s iPhones. It is always there, running smoothly in the background, and most people don’t even know about its existence.

LOL, all roads lead to credit: https://en.wikipedia.org/wiki/Wonga.com


Mobino Wants to Prevent M-Pesa from Robbing Kenya’s Government

https://www.benkuhn.net/emco/ : emphasizes honesty, transparency and autonomy




Why central banks should take charge of their digital currencies (2013)

Furthermore, unless you have a good working knowledge of “money”, you might miss the most obvious thing about them, and that’s that in many cases they privatise money issuance and charge you, the customer, a fee for the privilege of using money that already belongs to you (rather than for credit, the way credit cards do).

July 22, 2021 Thursday links

  1. Intraday Timing of General Collateral Repo Markets (Liberty Street Economics): Specifics, Specifics, Specifics! Love the human details this layers on to a niche-ier technical market mechanism.
  2. Three Things I Think I Think – Learning From Bad Inflation Takes (pragcap): Good points about the need for MMT crowd to acknowledge that demand side is probably at least part of the composition of inflation; QE simply shifts composition of money-like assets in real economy, not quantity; and the measures that monetary policy attempts to impact are mainly determined by fundamentals at the primary level, with the fed’s secondary market operations having only marginal effects.
  3. Linus and Lucy: with the Jerry Granelli Trio (youtube): Jerry Granelli was drummer of the Vince Guaraldi Trio and recently died. “People heard the heart in it. Honestly, I turned left creatively with my career after that and never thought about it for a while; jazz musicians are sometimes not as open as they may seem when it comes to people having hits or things crossing over—everybody gets all uppity. But then I matured enough to realize that it went way beyond music. It was the first entry point to jazz for a lot of people. And now that I’ve got my credentials as an artist, I’m proud and delighted to be a part of it.”

Independence from What?

Independence from What? (Just Money). This is a really cool piece.

discuss more fundamental constitutional questions of how we can make central banks more democratic internally and at once more independent, by redefining independence as not against democracy but rather against the executive and financial markets.

Delegating Money Power

Does delegation increase efficiency or simply avoid responsibility to handle things democratically?

…I wonder whether debates over the institutional design of central banks hinge more than we commonly think on prior debates about the nature of money and what we might call “money power”, as well as the specific role of private banks in money creation.” vs administrative law theory.

The power to make money, and the power to decide who gets to make money, is one of the most awesome powers of the modern world. A central bank tasked with managing the amount of credit in a system in which most credit is, in fact, created by private banks faces a peculiar set of constraints that make it uniquely vulnerable to elaborate forms of more or less overt blackmailing. This poses challenges that are distinct from other administrative powers, and the resulting questions concerning the banking system as a provider of credit seem to point us instead toward the political theory of, what Chiara Cordelli has recently called, the privatized state.

Constitutions and Democracy

“If our concern is with better decisions and more just distributive outcomes, why not organize central banks more democratically internally by, for example, ensuring that various segments of society—not least labor alongside capital—are equally represented?”

“we can place central banks on a more democratic footings that would operate independently from the rest of the existing political system. This holds open the promise that central banking can be at once more democratic and yet independent.”

Independence from Finance

But is it possible to reconceptualize independence itself? Instead of assuming that the primary source of interference against which central banks have to be insulated consists in elected officials or the public at large, there are a number of obvious forces that are just as possibly distortive and corruptive, if not more so.

Bourdain, banking, chamas, class, liberalism, and localism

A book club I am in recently read Kitchen Confidential. The memoir is a lot of fun if you liked the tone of Anthony Bourdain’s shows, but there are also a bunch of passages that are sort of cringe (though to be fair he is pretty self-aware of and acknowledges most of these moments). One such acknowledged moment involves him carrying around a katana in college. But one unacknowledged moment is the following passage:

Many of the Spanish- speaking members of the crew took part in an unusual ‘banking’ scheme where each week all the members of a large group would sign over all their paychecks to one guy. The recipient was selected on a rotating basis, and the way it worked, I gathered, was that for about two months or so everybody squeaked by, doing their best to make do without a check, spending little . . . until the day it was their turn, at which point they came into thousands of dollars and could spend like drunken sailors. This practice made no sense to me. It also required an extraordinary amount of trust in one’s fellow cooks. I did not share my comrades’ confidence that Luis, for instance, wouldn’t skip town on a drunk after getting his big payday, and leave the others in the lurch. I held on to my meager paycheck. I had no time to spend it anyway.

Anthony Bourdain’s Kitchen Confidential

When I read this, his interpretation struck me as likely underinformed but I could not quite say why.

After reading this interview about “chamas” in Kenya I now see why! The above is a form of mutual credit, a concept I didn’t know much about.

[Chamas are] groups that started in the 80s, when Kenya was really in a cash crunch. They started off as women’s savings groups, but now they’re open to men as well. There are social bonds – family, church, work. They already know and trust each other. They meet up, and they have something called the ‘merry-go-round’ system. They all pay into a fund, and each time, one of the members takes the whole fund. So it’s a micro saving and micro lending scheme.

Wikipedia says that “Some sources have estimated that one in three Kenyans is a chama member.”

The interviewee explains what is really being provided here: “Yes – we’re just liquidity providers. We just come in and say ‘here – trade!’” (my emphasis). “Just” is doing a disservice in that sentence. Creating formal financial liquidity out of informal communal trust is pretty cool, Bourdain’s mistrust of his crew aside!

This all reminded me of a quote I liked from a recent Interfluidity post on Liberalism and class:

The right to live as, where, and among communities one chooses is only valuable to the degree that it is practical and ethical for a person to exercise that right. Among the affluent, the costs of uprooting oneself from where one happens to start to some other community of ones own choosing are tolerable, both to the uprooter and the community left behind, because affluent people rely upon portable financial capital and impersonal markets for most of their requirements. In less affluent communities, people’s wealth and insurance against adversity are bound up in very personal relationships, which get destroyed rather than transported when a person “abandons” her roots. Professional class Americans follow their careers around the country, relocating between liberal cities and college town with remarkable ease, paying expensively for new child care in each. Working class Americans are much more likely to rely on family to render child-rearing manageable and consistent with their jobs. Among the affluent, elderly parents can be left “on their own”, because deliveries can be paid for, rides can be hired, if necessary more intensive, personal help can be paid for. The downscale elderly rely much more upon unremunerated help from children and church, upon the goodwill of particular human beings. When people upon whom they rely leave, they simply become poorer. For the person who might choose to leave, this cost they might impose pits liberal “rights” against very visceral obligations. A person who has faced that dilemma, and chooses to stay, might understandably view the kind of people who make the opposite choice as selfish.

This points towards a weird tension in attempts to bridge between formal and informal finance. As mutual credit networks formally capitalize social capital that previously wasn’t legible to markets, they simultaneously reduce some “liberal” values like the right to exit (that is geographically move) when one wants, something that people comfortably situated in the formal sector take for granted. Once you are on the community credit merry-go-round, it is hard to get off.


Chamas and community credit seem cool. Some of the above links indicate this stuff works and it also has a certain “farm-to-table locally sourced” appeal. But I wonder if the downside of only being able to receive certain financial services by coordinating with your community comes at a cost. And does that suggest a need for different approaches to financial inclusion.

The transformation of informal social relations into formal financial liquidity creates easily measured monetary value. But how do you measure the cost of being reliant on and responsible to your neighbors for financial services that are normally provided by boring impersonal financial services companies?

Obviously there is a certain charm to a community banking itself. But there is also a certain charm to being able to pick up and leave a place if you want. I genuinely am not sure which of those points of view is more charming. And I don’t think a spreadsheet could ever shoot out the answer to this political question.


So of course Bourdain wouldn’t join his crew’s unusual ‘banking’ scheme. He sat squarely in the formal financial system and would not want the social obligations that come with being part of a chama.

The appeal of community credit is understandable but formal, impersonal financial relationships that can be easily settled can be nice too (see Graeber, Debt, and The Venmo Generation).

Maybe in addition to mutual credit networks that formalize social capital, we need institutions that allow people to separate that capital from social relationships and onramp into the formal sector.

And to be fair, maybe we could use some institutions that help people comfortably in the formal sector deformalize parts of their financial lives. I suspect there are plenty of people who might be interested in finding ways to partially organize their financial lives in a more communal manner. A bit less financial efficiency in exchange for a more locally, communally oriented financial product might be a welcomed trade.

Maybe someday one in three Americans will be involved in a chama. Maybe someday someone like Bourdain would jump at the opportunity to get into the community’s unusual ‘banking’ scheme.

Other notes:

Note 1: On a less “they used AI to recreate his voice!” note, while watching the trailer for the new doc, I liked the ending audio/visual montage with Brian Eno’s “The Big Ship.” Looks like Bourdain was a big Brian Eno fan: https://people.com/food/anthony-bourdain-girlfriend-asia-argento-instagram-photo/

Neville, who won an Academy Award for “20 Feet from Stardom,” his 2013 documentary about backup singers, says it was also Bourdain’s “punk rock attitude about everything” that drew him to explore his life.

“He had the best taste in movies, in books and music,” Neville said. So as the director combed through footage to use in his film, he jotted down every time Bourdain mentioned a song and created a 19-hour playlist.

“It’s all of Tony’s music,” he added. “And it’s Brian Eno and Iggy Pop and Johnny Thunders — it’s all these songs from his whole life, and I gave that to everybody that worked on the film to listen to and the songs on the film come out of that playlist. So the music was another way of getting inside his head.”


Note 2: Just putting it here as a reminder for when it happens… Chamas for Robinhood seems like it could be rocket fuel for meme finance / WSB investing. Your turn to spend the merry-go-round fund, @TheRoaringKitty.