Building Sustainability through Mobile Micro Capital.

 Kaustuv Ghosh
  8th-May-2009

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MOBILE WALLETS, MICRO CAPITAL AND ELECTRICITY:

BUILDING A SUSTAINABLE FUTURE

DATED: 9 MAY, 2009.

GRADUATE CANDIDATE

IN

THE MASTER OF ENVIRONMENTAL MANAGEMENT PROGRAMME,

NATIONAL UNIVERSITY OF SINGAPORE, SINGAPORE.

POST GRADUATE DIPLOMA IN COMMUNICATIONS, MUDRA INSTITUTE OF COMMUNICATIONS, AHMEDABAD, INDIA.

GRADUATE IN COMMERCE, CALCUTTA UNIVERSITY, INDIA.

COPYRIGHT:KAUSTUV GHOSH.

THIS PAPER IS A PURELY ACADEMIC EFFORT.

Introduction

It is proposed here that one proceeds from the last paper published on https://www.wesrch.com. In the previous paper, a case was made for the utilisation of mobile remittances as a source of micro-capital for sustainable grassroots industries in developing economies. The argument made was that the substantial flows of revenues from remittances should be tapped deliberately and re-routed into select investment streams, rather than leave these to be utilised only for household income augmentation or conspicuous consumption. In this paper, it is proposed to look deeper into this proposed scenario by taking a hypothetical case of a village in Southeast Asia. We assume that a Filipino worker in Kuala Lumpur may consider an option to invest in a biomass power plant in his village. In the process of this exploration, some possible concepts are raised for future consideration and debate.

The Choice of Investments

How does a person choose what to invest in? One might argue, of course, that every consumer will seek to spend his/her dollar in an effort to maximise his/her utility, within a given budget. But here we can depart from conventional economic argument because the person in question- the remitter-is faced with a very complex choice framework. Firstly, he is asked to consider an investment not in a house or a car or a daughter’s wedding but in a biomass power plant. It is arguable that this is not a conventional investment decision. Secondly, he is the main or one of the main earning members for a family that is not very well off, though it may well be above the poverty line. The implications for him to re-route one ringgit into something other than a household requirement, may be complex and considerable. Thirdly, were he to invest in the power plant, as is suggested, it is also required that the consequences of such a decision be considered.

For the sake of simplicity, it is assumed that the government has started a campaign to persuade Filipinos from a specific region(say, coastal Luzon) to invest some of their remittances in one of a number of options-it could be a biomass power plant(as is the case of the worker here) or organic farming or reforestation or aquaculture. The choices could be many.

The government is assumed to make the rationale for such investments clear to the target audience;they would become co-owners in grassroots-level industries, the return expected over a number of years is substantial(and would be in terms of revenue shares and perhaps dividends), and they would contribute to keeping their lands intact, provide for clean and affordable electricity and keep the productive capacities of their communities from being submerged below sea waters. The potential investors might be provided significant tax breaks and other incentives to encourage them. One factor of motivation may well be the ability to transfer 10 Ringgit at any point of time through SMS from Kuala Lumpur and get, say, a 0.1% stake in the power company(obviously there would be other structural details here such as a cap on what percentage of shares an individual can possess and so on, but those details are left out for the sake of simplicity and focus). This may be reinforced through aggressive marketing campaigns in the neighbouring countries where a lot of Filipinos work. The question is-what is the value that this person and his family place in the power plant and it’s narrated benefits for their community? The theory of endowment argues that when it comes to investing in public goods(which one may describe in this context as the ecosystem), an endowment effect may be demonstrated(Hanley, Kristrom and Shogren, 2009; Horowitz and McConnell, 2002, et al). In other words, the migrant worker and his community would value their local ecosystem enough to invest their hard earned money in the plant and retain ownership of that plant even though the same money might fetch them a better asset in the conventional sense elsewhere(and even if someone else later on might offer a high price for the plant).

Whether the worker and his community do demonstrate this would really depend on a number of factors-the effectiveness of the government communication, the real impact of rising sea levels, etc on the lives of the local community, their sense of empowerment, local folklore and traditions, sub-cultures within the immediate and extended family and so on. One would suggest that this is a clear demonstration of endowment effect for a public good(the ecosystem of the community) but one where the biomass power plant is taken by the citizens to be the surrogate for that same ecosystem. It is proposed that this possibility be examined and critiqued further in another study. One question which needs to be asked is whether there is an impact of frequent infusion of micro-funding through a mobile wallet, on the disparity between the willingness to pay and willingness to accept the surrogate of the public good(the surrogate being the biomass power plant which also directly works to preserve the public good itself). This can only be known from actual observation on the ground.

It is also worthwhile examining how else the individual migrant worker might have utilised that additional dollar that one assumes he would send home to invest in the power plant. He could utilise it for himself(in Kuala Lumpur) or he could save it(to be utilised in Kuala Lumpur later or remitted back home or taken back home) or he could send it home in any case. From a consumer perspective, the ability to utilise a mobile purse is arguably a call for impulsive action. Therefore, it is possible(though far from certain) that such an individual may make an impulse purchase with his mobile wallet.

Whether he would do so(and the amount he would spend) would depend on a number of factors, including what and how much he could get, the persuasion of the communications, the sensory triggers of what he seeks to buy and so on. But the other side of this scenario is as follows-if the people of his native village decided to build a biomass plant with at least some of their own money, where would such money come from? One must consider, in the absence of remitted revenues, the possibility of microfinance. It is assumed here that a set of circumstances exists, whereby the traditional structures of lending(formal and informal) are avoided and a microfinance entity is set up with outside assistance. It is possible that structures such as group lending and joint decision making may help galvanise loans to make the biomass power plant a reality. But, popular as the notion of microfinance may be, one must consider whether this is a silver bullet that can fix the relevant problems at hand. Let us take a step back and consider whether microfinance and micro-lending are synonymous for one another. It does appear so, if one were to consider some contemporary literature(De Aghion and Morduch, et al 2005). Indeed, the emphasis of microfinance today is on making micro credit available efficiently to the poor. The emphasis of this paper, however, is different. Environmental degradation makes no distinction between rich and poor and it may be argued that the relatively well-off tend to lose more in terms of a higher percentage decrease in asset holdings, productive capacity and earnings. This does not spare the poor, either- a sharecropper or labourer is unlikely to find work if the land he tills has turned unfertile or the town he works in has run out of water.

In a global climate change scenario, the task of microfinance to engender the protection and growth of natural resources and productive capacity is no less than the now-traditional role of uplifting the poor. The difference is not only in roles but also in terms of the timeframe. The poor of the micro-credit schemes are omnipresent at the macro level and the task at hand is ongoing-the environmentally poor will become poor in future but their vulnerability needs to be addressed immediately. The instruments of financing in their case can and should be different-for, while they are not immediately economically vulnerable in a lay sense, they may well not have the wherewithal to build a local power plant or carry out soil remediation or build an end-to-end recycling ecosystem. Indeed, the prime reason they need finance now and not later is the urgency of the task at hand(ADB, 2009). The onset of environmental poverty will occur along with a severe loss of economic functioning that may well become irreversible. The utilisation of micro-credit at this stage can only deepen the debt burden on institutions as well as countries which continue to service existing debt obligations. A public-citizen partnership, where the citizen and government contribute to the preservation of the environment and share in the benefits and profits may well be a far more apt model. It is likely to be a matter of debate but micro-credit may have a separate, though by no means less important role, as it does today.

The Mobile Wallet and Sustainable Currency

This brings us back to the mobile wallet. It’s functioning would be central to the ability of the biomass power plant to generate revenues and becoming self-sustaining(and therefore being able to fulfil its key mission). Let us assume that each household that is supplied electricity is metered and pays a utility bill every month. Now we consider a second migrant worker-one whose family is the recipient of this service and depends upon him for subsistence. Clearly, he can receive the electric bill detail directly on his mobile phone as a message and pay using his mobile wallet. Here, he is utilising his mobile wallet to remit money directly to the utility provider, for a household expense. Of course, he could have ensured his wife had that same money so she could pay the bill herself-that is a matter of detail but what is important is to show that telecommunications allows him to be communicated his payment obligations and make those payments in time. It is arguable, then, that the mobile wallet represents a set of complex value-based transactions in society. These include the apportioning a value to a surrogate of a endowed public good, the investment of remitted micro capital into a renewable energy project, the payment for clean energy by citizens using mobile remittance channels and the environmental capital saved or enhanced through such an investment. The mobile airtime or messaging bandwidth, thus, becomes a currency unto itself-albeit governed by globally accepted rules and playing the role only of a substitute for legal tender across borders. Yet, by virtue of all the underlying interactions, its own role increases considerably and its ability to be almost instantaneously available anywhere makes it extremely potent.

Conclusion: It is possible that the very nature of mobile commerce will make it a key contributor of micro-capital to sustainable enterprises. It empowers global citizens, including those who do not earn a lot of money, to contribute meaningfully to the preservation and nurturing of public goods in their communities. It helps the government set up structures of public-citizen engagements where both can contribute together to sustainability. The use of mobile micro-capital, one might suggest, may help in the rise of the sustainable citizenship concept in the future. It must be realised that the battle to preserve habitats and cultivable lands has to be won on the ground through many small initiatives. It is not wrong to focus on poverty as we have known it. It is wrong, however, to believe that there can be only one kind of poverty and only one kind of financing to alleviate it. The mobile phone allows the prospect of floating a global sustainable currency, one which is uniformly understood(whether it is a message, a USSD session or a voice minute) by lay citizens and pegged to a number of underlying sustainability and economic factors(and to existing legal tender around the world). It must also be understood by practitioners of mobile commerce that this is no longer a simple case of providing services to a bank or carrier and obtaining a portion of revenues in return. The banking community may well be compelled to focus on the sustainability issue in the years to come, especially as it directly impacts productive capacity and changes the consumption motivations of consumers radically. Mobile commerce will need to find it's place within that framework to remain relevant.
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Domain: Energy
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