Archive for February 25th, 2011

Below is the prospectus for my senior thesis. It should be finished in the coming months. In the meantime, feedback and comments are more than welcome.

Information and communication technologies have enmeshed the globe in networks, and none is as widespread as the mobile phone, a technology that has billions of users. Development practitioners are increasingly looking to the pervasive device as a facilitator of broad-based human improvement. This project seeks to add to our understanding of the role that ICTs have in the development process through the study of a particularly promising application, the use of mobile phones to deliver financial services or, more simply, mobile money.

The effectiveness of ICT for development is widely disputed. Both those who believe ICT will lead to development and those who disagree can marshal theory and empirics to their side. For example, sophisticated regression analysis identifies relations between rates of mobile telephony and the rate of economic growth, and other studies show individual incomes rising with the introduction of mobile coverage. Others demur, arguing that local contexts and global inequalities can stymie, or even reverse, the benefits of ICT. These competing claims may be mapped:

	Utopians	Dystopians
Macro	E-development, information society and knowledge economy literature	Castells’s “Black holes of informational capitalism”
Micro	Individual income improvements (e.g. Kerala fisherman)	“Social shaping” of technology

Method

The field of technology assessment is wrought with such disputes, often divided between those who look at “broad causal patterns” and those who examine a “tightly focused story [of] complexity and diversity.” In surveying this debate, Thomas Misa argues that understanding the complicated interplay between technology and society requires moving beyond, or, more accurately, in between the macro and micro framings.[1] He argues that meso-level approaches that examine the actors, institutions and processes that intermediate between micro (e.g. firm or individual) and macro (e.g. market or state) are the most promising methods towards resolving disputes such as those plaguing the ICT4D research and policy-making. Similarly, Brey writes of specification where an abstract phenomenon is examined through the study of a specific type.[2]

Meso-Level Case Study: M-PESA

Taking this methodological cue, my thesis will focus on M-PESA, a popular mobile money service in Kenya that serves as a mediator between individual economic experiences and national financial happenings. Kenya’s largest mobile network operator, Safaricom, formally launched M-PESA in March 2007. Users visit authorized M-PESA retail agents to deposit cash that is credited to their personal SIM card. This “e-float” is then transferable via SMS to any other mobile phone, whereby cash can then be received at another agent. Safaricom initially aimed this at the large domestic remittance market, and these peer-to-peer transfers remain its primary use, but with more than 70 percent of Kenyan households using it, it has subsequently expanded to a formal savings account and a payment application for services as varied as school fees and electricity bills. M-PESA is not the first mobile money application, but by scale and prominence, it is by far the most successful and the subject of widespread study and imitation.

Development practitioners are particularly excited about the opportunity M-PESA represents. There is a robust literature that formal financial inclusion, instead of informal lending and savings, can lead to accelerated growth and increased social protections and opportunities. Reducing transaction costs, facilitating remittances, increasing financial security, and accelerating money circulation are all tied to development. Even more basically, Safaricom is a profitable and innovative firm experiencing rapid growth.

The above is important and promising. The challenges facing developing countries are profound and difficult. Innovative solutions are a necessary component of success. But could there be reason to worry? Could mobile money such as M-PESA have drawbacks to the development process?

Development as Freedom + Network Power

For the purposes of this project, the admittedly amorphous, contested term ‘development’ will be defined in the tradition of Amartya Sen’s capabilities approach. Sen conceptualizes of development as enhanced human freedom. As a substantive good unto itself, as well as a useful instrument, it is both the primary goal and means of development. Through expanding economic opportunities, providing additional protective securities, and enabling more effective social opportunities, M-PESA might seem, prima facie, to enhance human freedom.

Like other standards – TCP/IP or the English language – M-PESA facilitates the exchange of goods and ideas amongst users. Standards serve as a coordinating mechanism between disparate individuals and organizations. Further, through the phenomenon of network effects, standards become more valuable as they grow in membership. Grewal links this with the observation that as a given standard grows, it tends to progressively eliminate alternatives. After all, who today uses a fax machine, let alone telegraph?

He calls this “network power” and notes that it “pushes agents to converge on a single, dominant standard” such as the WTO trade rules or TCP/IP.[3] Although individuals may freely adopt a standard because it has inherent advantages (i.e. M-PESA is cheaper than alternative remittance services), once a network reaches a certain size, network power may induce people to give up an alternative standard and adopt the dominant one. For example, speakers of minority languages may choose to learn English, but if they do so because it is necessary for survival, they are not really choosing freely.

In addition to understanding the specific way M-PESA exhibits network power, my thesis will investigate how this promotes and hinders human freedom. As Grewal notes, countering network power is possible; specifically, he identifies three characteristics of a standard that are relevant:

• Compatibility: “acceptance of parallel or simultaneous standards to gain access to a given network.”
• Availability / Openness: “ease with which a network accepts new entrants desiring to adopt its standard.”
• Malleability: openness to piecemeal revision.

Depending on the goals of a network (and its users and operators), these three properties will be aligned and intersect in different manners at different times. As a commercial operation attempting to maximize profit, availability will likely be high (but only to the extent that marginal users are profitable). As a proprietary service that needs to be protective of privacy and security, malleability will likely be low. Compatibility will differ depending on the alternative standard: M-PESA needs to be compatible with cash, but what about competing mobile money services or financial institutions? Although at this stage it is not yet clear to what extent M-PESA exerts network power and its implications for development as freedom, it is possible that policy measures are warranted to ensure broad-based freedom in the networked society.

Different technologies, of course, have different relations with society. Understanding mobile money does not offer a holistic understanding of the role of ICTs in development; however, network power is a phenomenon present in many ICT4D interventions, and mobile money alone is an important trend, so lessons from this specific case will hopefully elucidate future work.

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[1] Misa, Thomas. “Retrieving Sociotechnical Change from Technological Determinism.”  In Merritt Roe Smith and Leo Marx, eds., Does Technology Drive History?  Cambridge: MIT Press, 1994, pp. 115-41.

[2] Brey, P. (2003). Theorizing modernity and technology. In T. Misa, et al. (Eds.), Modernity and technology (pp. 33–71). Cambridge: MIT Press.

[3] Grewal, David S. Network Power – The Social Dynamics of Globalization. New Haven: Yale UP, 2009