Lessons from the NBER Project on African Economic

Lessons from the NBER Project
on African Economic Successes
David N. Weil
Brown University and NBER
NBER Africa Project
• 5 year project, funded by Gates Foundation,
administered by NBER
• Directors: Sebastian Edward, Simon Johnson, me
• 40 sub projects, 85PIs
• 2 pre-conferences, 3 “research conferences”
(Cambridge 12/09, Accra 7/10, Zanzibar 8/11)
• Finished papers available as NBER WPs
• Will be 3 or 4 books
www.NBER.org/AfricanSuccesses
Goals
• Inform policy making in Africa and elsewhere.
• Strengthen research base on Africa. Build
links between African researchers and those
outside
• Make serious study of Africa a more
mainstream endeavor for applied economics.
• Bring new researchers to the study of African
development.
www.NBER.org/AfricanSuccesses
“Successes”
• We are interested in what is going well
– new technologies
– new industries
– successful health interventions
– increases in market integration
– better functioning institutions
– successful post-conflict transitions.
• This is not a requirement
www.NBER.org/AfricanSuccesses
Agriculture / Food
•
Agriculture, Roads, and Economic Development in Uganda
Douglas Gollin and Richard Rogerson
• The Determinants of Food Aid Provisions to Africa and the Developing
World Nathan Nunn and Nancy Qian
• The Decline and Rise of Agricultural Productivity in Sub-Saharan Africa
Since 1961 (Ghana) Steve Block
• The Sahel's Silent Maize Revolution: A Case Study of Maize Productivity
in Mali Using Farm-level Panel Data
Jeremy Foltz
• From subsistence to cash crop agriculture: The role of contract farming in
sugar cane production in Kenya
Sendhil Mullainathan
www.NBER.org/AfricanSuccesses
Mobile Phones
• New Cellular Networks in Malawi: Correlates
of Service Rollout and Network Performance
Taryn Dinkelman, Emily Oster, Rebecca
Thornton, Deric Zanera
• Mobile-Banking: The Impact of M-Pesa in
Kenya
Isaac Mbiti and David N. Weil
www.NBER.org/AfricanSuccesses
Health, Fertility, and Education
•
Evaluating the Effects of Large Scale Health Interventions in Developing
Countries: The Zambian Malaria Initiative Nava Ashraf, Günther Fink, and David
N. Weil
•
Fertility Responses to Prevention of Mother-to-Child Transmission (PMTCT)
Scale-Up in Zambia Nicholas Wilson
•
Demographic Pressure and Institutional Change: Village-Level Response to Rural
Population Growth in Burkina Faso Harounan Kazianga, William Masters, and
Margaret McMillan
•
Impact of Nigerian Conditional Grant Initiative on the Health-related Millennium
Development Goals Elizabeth Brainerd, Jens Hainmueller, and Michael Hiscox
•
Stimulating Demand for AIDS Prevention William Dow
•
What drives success in children's educational outcomes in poor villages in rural
West Africa, the case of Guinea-Bissau? Peter Boone and Simon Johnson
www.NBER.org/AfricanSuccesses
Political Economy / Conflict
• Healing the Wounds: Learning from Sierra Leone's Post-war Institutional
Reforms Katherine Casey, Rachel Glennerster, and Edward Miguel
• Decentralization and Its Consequences in Africa: Fiscal Competition and
Redistributive Politics in Benin Martial Foucault, Grégoire Rota-Graziosi,
and Leonard Wantchekon
• The Political Economy of Government Revenues in Postwar ResourceRich Africa (Liberia and Sierra Leone) Victor Davies and
Sylvain Dessy
• Intra-Elite Dynamics in African Countries Ilia Rainer and Francesco Trebbi
• Politics and Institutions in Sierra Leone
Daron Acemoglu and James Robinson
www.NBER.org/AfricanSuccesses
Finance / Capital Allocation
•
The Return to Capital for Small Retailers in Kenya: Evidence from Inventories
Michael Kremer, Jonathan Robinson, Olga Rostapshova
•
The Financial System in Burundi: An Investigation of its Efficiency in Resource
Mobilization and Allocation Léonce Ndikumana, Janvier Nkurunziza, and Prime
Nyamoya
•
Is capital allocated efficiently within the African countries? Sebnem Kalemli-Ozcan
and Bent Sorensen
•
Were the Nigerian Banking Reforms of 2005 A Success ... And for the Poor? Lisa
Cook
•
Resolving the African Financial Development Gap (Kenya) Franklin Allen, Elena
Carletti, Robert Cull, Jun "QJ" Qian, Lemma Senbet
•
Enabling Microenterprise Development in Sub-Saharan Africa through the
Provision of Financial Services Pascaline Dupas and Jonathan Robinson
www.NBER.org/AfricanSuccesses
Government Regulation and Transfers
• Deals versus Rules: Policy Implementation
Uncertainty and Why Firms Hate It
Mary Hallward-Driemeier and Lant Pritchett
• State versus Consumer Regulation: The Case of
Road Safety in Kenya James Habyarimana and
William Jack
• Fifteen Years On: Household Incomes in South
Africa Murray Leibbrandt and James Levinsohn
www.NBER.org/AfricanSuccesses
Market Integration / Efficiency
• International and Intra-national Market
Segmentation and Integration in West
Africa (Niger, Nigeria)
Jenny Aker, Michael Klein, and Stephen
O’Connell
• The Unofficial Economy in Africa (Kenya,
Madagascar, Mauritius)
Rafael La Porta and Andrei Shleifer
www.NBER.org/AfricanSuccesses
Gender Issues
• Gender and Social Protection Programs in Developing Countries: A
Randomized Evaluation of Conditional and Unconditional Cash
Transfers in Rural Burkina Faso
Richard Akresh, Damien de Walque, and Harounan Kazianga
•
Family Ties, Inheritance Rights and Successful Poverty
Alleviation (Ghana) Edward Kutsoati and Randall Morck
•
Discussion Sessions Coupled with Microfinancing May Enhance
the Role of Women in Household Decision-Making in Burundi
Radha Iyengar
• Girl Power: Conditional Cash Transfers and Female
Empowerment (Malawi)
Sarah Baird, Ephraim Chirwa Jacobus de Hoop, and Berk Özler
www.NBER.org/AfricanSuccesses
Country Studies
• Cape Verde and Mozambique as Development
Successes in West and Southern Africa
Jorge Braga de Macedo and Luís Brites Pereira
• Mauritius: African Success Story
Jeffrey Frankel
• Tanzania: Finally, a Success Story
Sebastian Edwards
www.NBER.org/AfricanSuccesses
International Trade
• AGOA Rules: The intended and unintended development
consequences of Special Fabric Provisions(Lesotho)
Lawrence Edwards and Robert Lawrence
• African Export Successes: Surprises, Stylized Facts and
Explanations William Easterly and Ariell Reshef
• The Returns to the Brain Drain and Brain Circulation in SubSaharan Africa: Some computations using data from Ghana Yaw
Nyarko
• Can African countries move from agriculture directly to services
(such as tourism)?: A cross-regional study including successes in
Tanzania and the Seychelles
Diego Comin
www.NBER.org/AfricanSuccesses
Mobile Banking :
The Impact of M-Pesa in Kenya
Isaac Mbiti, Southern Methodist University
David Weil, Brown University and NBER
Introduction
• Mobile phone adoption in sub-Saharan Africa
has increased dramatically over the past
decade.
• Followed by proliferation of unique and
innovative mobile phone based services and
development projects
• M-pesa is a service of Safaricom –Kenya’s leading
mobile phone operator
• Introduced in 2007
• Provides very simple services to mobile customers on
Safaricom network.
– Deposit Money, Withdraw Money
– Transfer Money to anyone with a phone
• Charged on a per transaction basis.
• Now 18,000 agents (vs 1,000 banks and 352 ATMs)
Transaction Costs
Transaction
Range (Kshs)
Charge
(Kshs)
Min
Max
Deposit
100
35,000
0
Send money
100
35,000
30
Withdraw money 100
2,500
25
by M-Pesa
2,501
5,000
45
registered user
5,001
10,000
75
10,001
20,000
145
20,001
35,000
170
No min balance. Max account balance is 50,000 Kshs.
Maximum daily transaction value is 75,000Kshs
Current exchange rates 1USD = 80 Kshs
Finacess survey 2006 & 2009
Why has the adoption been phenomenal?
• Predominant use of M-Pesa has been in person to
person transfers. (domestic remittances)
• Ethnographic work by (Morawcynzski 2008)
respondents reported the following advantages of
M-Pesa
–
–
–
–
Cheaper
Safer / more reliable
Quicker
More coverage- (lots of M-pesa agents)
Who is Adopting M-Pesa?
• Probability of adoption is higher for:
– Males
– Urban residents
– More educated
– Wealthier individuals
– Banked Individuals
– Employed in non-farm sector
– Mobile phone owners
Survey Data: Frequency of Use
Frequency of Use
Percentage users
Percentage transactions
Daily
1.6
32
Weekly
14.4
41
Monthly
32.7
21
Irregular
51.3
6
M-Pesa:Potential Economic Impacts
• Could change pattern and amount of remittances
• Increased competition in money transfers sector and perhaps banking
sector
– Impact on Western union etc
– How will banks respond to (perceived) “threat” of M-Pesa
• Could M-Pesa provide “basic financial services” for the poor?
– Is M-Pesa complement or substitute for formal banks?
– Could serve as a rudimentary saving vehicle
– Impact on Financial access
• Macroeconomic effects?
– Implications for measuring money supply?
M-Pesa and Remittances
• Increased competition in money transfers
sector and perhaps banking sector
– Examine the impact on M-Pesa on prices of
Western Union and MoneyGram
– Describe banks response to (perceived) “threat” of
M-Pesa
Costs of Other Money Transfer Services
• To send $100 it costs about:
– $15 via western union
– $6 via postal money order
– $12 via Moneygram
– $2-3 via Akamba bus (0-10kg parcel)
– $20 wire transfer
Compared with:
– $2.50 via M-pesa (non-registered user price)
Sources: Kabbucho et al 2003, individual company websitesi
Effect of M-Pesa on Prices of Competition
Macroeconomic Aspects of M-Pesa
• Some simply monetary economics (ala Sherlock Holmes)
E-money loop
velocity
•
Data on Withdrawals
•
Implicit Interest Rates
The E-Money Loop (Irving Fisher: Cash Loop)
Agent
cash
Agent
e-float
cash
User #1
User #2
e-float
deposit-transfer-withdraw  Loop = 1
deposit-withdraw (e-wallet)  Loop = 0
“money” (repeated circulation)  Loop>1
e-float
User #3
e-float
Estimating the E-Money Loop
Steady State: Loop Length = transfers / deposits
= 2 (transfers / [deposits + withdrawals])
•
Safaricom tells us monthly P-P transfers
•
(deposits + withdrawals) available in one paper
Jul-07
Aug-07
Sep-07
Oct-07
Nov-07
Dec-07
Jan-08
Feb-08
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Mar-09
Apr-09
May-09
Jun-09
Jul-09
Length of the E-Money Loop
1.2
1.15
1.1
1.05
1
0.95
0.9
0.85
0.8
Length of E-money loop ≈ 1
Consistent with:
• Almost all transactions are deposit-transfer-withdraw
or
• Roughly equal numbers of
deposit-withdraw (e-wallet)
deposit-transfer-transfer-withdraw
Transactions Velocity
• Average number of person-to-person transfers per unit time for a unit
of currency.
•
Different than income velocity, which is commonly measured.
Agent
Mr. A
Agent
Mr.B
3 days
Mr. C
Agent
Agent
Mr. D
1 day
• M-Pesa
=
data sleuthing
203 (ksh./user) × 3.73 million users (August 2008)
757 Million ksh. outstanding e-float
3,761 outlets (Safaricom data)
50,000 ksh. /outlet in till (assumed)
= 188 million ksh in till cash
 569 million ksh. on customer phones
8.32 billion ksh. person-to-person transfers
Velocity = 14.6 P-P transfers / month
Velocity = 14.6 / month
• Implies average unit of e-float transferred every 2 days
• Presumably a mix of many units that exist for less than
one day, and a few that stay on phones for a while
•
Implications for measuring money supply
Distribution of Withdrawals
Distributions of Withdrawals
Implied Discount Rates
• Vast majority of withdrawals are by frequent withdrawers
• Many withdrawals are small (1,000 ksh. or less)
• Little if any bunching at price notches
We think that this implies many users could economize on
transaction costs by “bunching” withdrawals.
They don’t do so because of discounting
•
Assume that user receives W every month.
•
Cost for withdrawing either W or 2W is C
• W=1,000
C= 25 
r = 2.6% per month (36% per year)
Distribution of Deposits by Last 2 Digits
00
05
_10
_15
_20
_25
_30
_35
_40
_45
58.6%
0.3%
0.4%
0.1%
1.1%
9.5%
4.0%
0.1%
0.3%
0.1%
_55
_60
_65
_70
6.8%
2.6%
0.1%
2.2%
_75
_80
_85
_90
_95
1.2%
0.4%
0.1%
0.1%
0.0%
Other
_50
0.02%
11.7%
Note: Based on 6188 deposits of less than 2600 shillings
Some Open/Interesting Issues
• How do we interpret high discount rates? Cash tax?
• Cash management problems of agents – implied
discount rates.