How do you manage your finances when you don’t have access to a bank? It’s not a question that troubles most people in the UK, but for people in remote parts of the world it’s a very real concern – especially when receiving your government benefits involves taking time off work to travel to the nearest city and queue for days to receive the cash.
This is just one of the financial issues facing thousands of people who live in communities on the outskirts of Piura, in north-western Peru, a country where less than a third of people have a bank account. Many of them are poor and rely on money from relatives working abroad, but the commission fees charged by money transfer companies further erodes their low incomes.
However, a team from the Department of Economics at Middlesex is hoping to tackle these inequalities by helping to roll out an innovative mobile phone banking system in the Piura region and beyond, based on Vodafone’s famous M-Pesa model.
Peru’s brand new ‘BiM’ platform enables fully-interoperable digital financial services across mobile networks and financial service providers, and is jointly operated by the government, financial institutions and telecoms companies, making it accessible to all. With a basic mobile phone and a pin number, subscribers can cash-in and out, check their balance, conduct person-to-person transfers, top-up their mobile airtime and send electronic money to anyone, even if that recipient isn’t signed up with BiM.
“I hope we can help some people to improve their lives" - Professor Pablo Brañas-Garza
Although the technology is in place and seems like the perfect solution, there is one key sticking point: a phenomenon known as ‘the take-up problem’. And that is where Professor of Behavioural Economics Pablo Brañas-Garza and his colleagues Dr Ericka Rascon-Ramirez and PhD student Balint Lenkei come in. Jointly with a Peruvian consultancy Videnza, they have been asked to design a randomised controlled trial to investigate the most effective method of encouraging people to adopt BiM.
“People ignore new technology, even if they will benefit from it,” explains Professor Brañas-Garza.
Alongside the collection of baseline data, they have used advanced computer modelling and GPS to place more than 2,000 participants into four ‘treatments’ and ensure spatial randomisation. Those in group one (the control) will not receive any intervention. Those in group two will have the software placed on their phones, while those in group three will also get training in how to use it. In addition, the members of group four will receive frequent reminder SMS messages about BiM and its benefits. The results will enable the government and international organisations to conduct more effective financial literacy campaigns across the country and ensure that Peru is no longer among those countries with the lowest levels of use of financial services in Latin America.
“It’s a good chance to learn about these people’s difficulties,” says Professor Brañas-Garza.
“I hope we can help some people to improve their lives.”
Mobile phone shop in Peru - Photo by Nicolas Nova (Creative Commons 2.0)