Tales of the unbanked: M-PESA and gift economics

According to the World Bank, 60% of adults in the developing world (totalling around 3.5 billion people) do not have a formal bank account. These are the ‘unbanked’ – an unpleasant term that evokes the ‘unwell’ and ‘undead’, as if being bankless were a threat to human life. Perhaps it is. A significant proportion of the unbanked shuffle about on less than $2.00 a day. These earnings hardly justify a trip to the nearest bank branch, which may be a day or more’s journey away. The unbanked certainly can’t afford to pay bank fees. They have families to feed and debts to pay. The money disappears soon enough. When we factor in the constant state of crisis that these people endure, we can see why selecting between banks is a first world problem.

For the unbanked, survival is the problem. Gifting is the solution, more often than not.

In 2007, the Kenyan mobile operator Safaricom, working with its parent company Vodafone, proposed its own solution to the problem of the unbanked. This was M-PESA – the world’s first text-based mobile money service. Rural Kenyan farmers may not have bank accounts but many of them do have mobile phones. Why not enable them to access banking services in a text-based format, so that they can pay bills and send cash by texting? Sparking off this intuition, Safaricom launched M-PESA, a mobile wallet run on a special SIM card inserted into a mobile phone. Once plugged in and loaded with airtime, M-PESA enables users to open a bank account, transfer money, and buy and exchange airtime with their friends, all through a text-based medium.

‘Relax, you’ve got M-PESA’, the campaign copy purred. M-PESA courted middle class Kenyans with confidence and aplomb. For the rural poor, however – the segment of the population that M-PESA had been designed to help – it was a different story. Safaricom had put together a great product and marketing campaign, but it hadn’t considered how M-PESA might impact on local gift economies. M-PESA didn’t quash these economies – it accelerated them. No one, apparantly, had seen this coming. Cash is for saving and spending, right? Who on earth would give it away? The unbanked, that’s who.

M-PESA is touted as a breakthrough success in the mobile money revolution, bringing banking services to populations without reliable internet access. Behind this story lurks another, less salubrious, tale: a tale of the hostile struggle between the cash and credit economy and traditional gift economies, a struggle that is usually ignored in the annals of Western history. Typically, when these two economic systems intersect, the former destroys the latter. The history of colonialism is rife with instances of cash, wage, and credit systems upsetting the carefully calibrated play of exchanges that sustains traditional gift economies, degrading indigenous cultures in the process. The tale of M-PESA is unusual insofar as things went the other way. A tool designed to facilitate entry into the cash economy was incorporated into a gift exchange. This didn’t work out well for anyone. But the story offers, at least, some insights into gift economies that can be useful for people who are engaging with these structures and trying to understand them. It highlights the differing conceptions of money in the cash-credit and gifting regimes. It underscores the finely balanced dynamic of gift exchanges, so easily upset by the encroachments of capital. And it foregrounds the ‘dark side’ of gift economies – the inescapable obligations to tribe and kin that can trap people in a cycle of poverty.

I’ll draw out these lessons at the end of this post. First, let’s find out what happened when M-PESA met gift economics.

In the Western business press, M-PESA is a new frontier. ‘It is like magic’, gushes The Economist. ‘By clicking a few keys on a mobile phone, money can be zapped from one part of Kenya to another in seconds’. When researchers ran the data on M-PESA, however, they noted a dispiriting pattern. Middle class Kenyans were successfully using the service to accumulate savings, pay bills, and transfer funds. For them, mobile money was a godsend. Not so for the rural poor. The poor weren’t accumulating money at all. They were hemorraging it. The problem wasn’t M-PESA itself – it was the cultural and economic context in which it was being used. Instead of turning phones into tools for banking, M-PESA had become a tool for gifting. Obligatory gifting. Incessant gifting. M-PESA turned gift exchanges into manic parodies of themselves. Far from giving the poor an ‘in’ to the cash economy, it had supercharged local gift economies, accelerating the exchange of gifts and driving participants to the brink to penury.

To appreciate what happened here, we need to step back and reflect on the cultural mechanisms of survival for the rural poor. People often marvel how it is that the poor can survive on less than $2.00 a day. The fact is, in many places, people are not solely dependent on their cash income, but rely for support on social networks of kin and community and the gifts that are constantly circulated through these networks. Gifting ensures the health and wellbeing of local communities. It also enables individuals to develop status and reputation. By freely circulating cash and other goods about their community, individuals build lasting relationships with their friends, family, and neighbours, while ensuring their status as a reputable member of the tribe. Status is very important, in this context, and not just for maintaining face. Status is social capital and social capital is wealth. Woe betide the individual who refuses to share their money and stows it in a mobile bank account. They accumulate savings at the cost of damaging the social ties that they’ll need to draw on come the next drought. What financial capital they acquire is offset by a massive loss in social capital. Ultimately, individuals need the social capital that they accumulate through giving gifts much more than they need the services of a bank.

This need can become a trap. Ultimately, in traditional gift economies, sharing is not a matter of charity – it is an obligation. Giving does more than sustain communities – it binds them together as social units. If you want to be part of the community, you need to give. When M-PESA came on the scene, encouraging rural Kenyans to divert their money out of gift economies and into personal bank accounts, it directly impacted on the dynamics of exchange that held local communities together. M-PESA could have severed the ties of exchange, fragmenting these communities. Instead, the service was swept up into the play of exchanges, accelerating the system considerably.

M-PESA triggered a frenzy of gifts. Rural Kenyans were caught in the frenzy by the power of social obligation. Every call came loaded with implicit expectations of gifts: the transfer of money or mobile airtime. The gift economy was spiralling out of control and the people within it had ‘nowhere to hide’.

Prior to M-PESA, Kenyan gift economies were regulated by distance and time. To exchange gifts with other members of the community, individuals needed to meet face to face, which limited the practice to family gathering and community meetings. M-PESA changed the playing field. Now, drawing down on social capital was as easy as dialing a number. Your brother has taken ill? Relax, you have M-PESA. Text the extended family and they’ll transfer funds into your account. It is just as easy to accumulate social capital using mobile money. Courting a village girl and keen to impress her with your wealth? Transfer some airtime into her mobile account. She’ll expect it anyhow, since thanks to M-PESA, sharing airtime has become de rigeur among young Kenyans.

M-PESA made gift exchanges too easy. The upshot for the rural poor in Kenya, as the Institute for Money, Technology and Financial Inclusion (IMFTI) laments in its 2013 report, is that mobile money is ‘a curse more than a blessing’. No doubt many young Kenyans sign up to M-PESA in the hope that it will help them shrug off the shackles of social obligation and step forth on the path towards Western-style prosperity. Unfortunately, as Brendan Greenly observes in Bloomberg Businessweek, ‘[y]ou can’t suddenly stop financing through your family or abandon the social rituals attached to gifts just because you’ve bought a phone’.

So much for the experiment of bringing mobile money to the Kenyan rural poor. What lessons can we learn from this story to help us navigate the new world of gift economics that is emerging with the rise of social sharing?

The first lesson concerns the dark side of gift economics. Gift economies work when participants acknowledge the social obligations that arise with the exchange of gifts. There are always obligations associated with gifts. Each gift imparts an implicit sense of obligation upon the giftee: not to compensate the giver, and certainly not to repay them for the gift, but to acknowledge them as someone to whom a debt is owed, a debt that must be repayed through a reciprocated gift. Mostly, this game of gift and counter-gift is benign. To take an example from online sharing: if you send me a link to an excellent article, I will feel obliged to respond in kind at some point down the line. It is not so much that I owe you for the gift; it is more that I value you for being the giver of gifts. My obligation to you is to affirm the process that you have begun. And so I give to you in return, not exactly to repay a debt, but to keep the valued exchange in motion.

This kind of reciprocal gifting has a positive social effect. It forges a mutual sense of community and works to consolidate weak-tie relationships. The gift exchange can become pernicious, however, when participants are totally dependant on one another’s gifts. If we are exchanging food, and I have no other option but to source my meals from the gift exchange, I become, in effect, a prisoner of the gift exchange, forced to participate in it whether it benefits me or not. This is effectively what happened to rural users of M-PESA.

To avoid cultivating an unhealthy sense of obligation in gift exchanges, we should ensure that gifting is based in a sense of abundance, not scarcity. If the exchange doesn’t inspire a sense of joy and plenitude in participants, something is wrong. A healthy gift culture should be a culture of co-creation, not a culture of co-dependance. Ideally, participants should see the exchange as an opportunity to share, learn, grow, and flourish together. Participants should also have the option of leaving the exchange if it no longer empowers them. A disempowering gift is not a gift at all; it is a kind of tax that one pays to a community in order to stay part of it.

These points are generally taken for granted in the informal gift exchanges we engage in today in online and offline social environments. We are fortunate, in the first world, to be able to gift from a place of relative freedom and independence. Nonetheless, if we are concerned to create optimal environments for reciprocal gifting, these are important points to keep in mind.

The second lesson we can take from M-PESA concerns the value of money in gift economies. To be precise, it concerns how treating money as a gift changes its value, and transforms how we calculate the return on our gifts-as-investments. In the cash and credit economy, the value of money is determined by its purchasing power in the marketplace. To determine the value of our money, we simply need to find out what goods and services people are prepared to exchange for it. In a gift economy, money is valued differently. Money retains its market value. Yet, it is freighted with social meaning in addition to its market value, which can make it a valuable commodity indeed. The same $20.00 that will buy me a sheaf of corn may earn a greater rate of return when given away. If you are deeply in need of $20.00, my gifting this money to you may inspire you to return a dozen sheafs of corn when the harvest comes in. So giving money away can be a good investment. Strategic gifting of money, in particular, makes good economic sense. Dispensing a cash gift to the right person at the right time vastly increases the value of the money that is given away, and increases our chance of receiving an exorbitant gift in return.

The third lesson we can take from M-PESA concerns our perspective on gift economics generally. The story of M-PESA reflects the systemic bias against gift economics that runs through all market-based societies. No doubt the architects of M-PESA were aware that unbanked Kenyans habitually exchanged gifts of money and goods with family, friends, and neighbours. The fact that no one assumed that M-PESA could be commandeered as a vehicle for gift exchanges, however, suggests that these people perceived gift exchanges not as real economic structures, but as a kind of stopgap measure that would crumble and fade the moment that people had the opportunity to engage in market exchanges.

What transpired with M-PESA revealed that this assumption is false. One wonders if a lesson has been learned, or if the architects of the system persist in their dismissal of gift economics. Certainly, this attitude is rife in the West. When you talk to people about gift economics, they generally interpret you as talking about charity or acts of altruism. Our lack of understanding of gift economic systems will become increasingly problematic for us as time goes on, since gift cultures are emerging all about us. Gift economies are springing from the cracks of an intransigent and embedded system of market exchanges, disrupting old business models and forms of organisation. The situation, in a sense, is the inverse of what happened with M-PESA. Yet, the results stand to be equally surprising. Are you prepared for the changes that will ensue in an era of gifts? A little knowledge goes a long way. As ever, advantage accrues to those who understand the lie of the land.