On Monday, July 12, the Responsible Digital Leadership Project hosted leaders from the Gates Foundation and Innovation for Poverty Action (IPA) for an inspiration session and collaborative workshop. The speaker lineup included Dr. Seth Garz, Senior Program Officer of the Bill & Melinda Gates Foundation, Rafe Mazer, Director of the IPA’s Consumer Protection Research Initiative, Rachel Pizatella-Haswell, Program Manager for the IPA’s Financial Inclusion Program, Kartik Srivastava, PHD candidate at the Harvard Kennedy School & IPA researcher, and Francis Gwer, Financial Sector Policy Specialist at FSD Kenya.
The focus of the session was to view risks of fintech through empirical data rather than theory; oftentimes data brings to service what the eyes may have missed. Evidence shows that efficient and effective targeting provides an opportunity to improve poverty alleviation. Rachel Pizatell-Haswell presented a case study in which the IPA assisted Togo’s government in depositing monthly mobile money transfers to those in poverty during the Covid-19 pandemic. The government used satellite trafficking and mobile phone metadata to determine who qualified for the deposits, then track and deliver the stipends. The targeting scheme is projected to reach two and half times as many beneficiaries from the poorest families compared to the alternative targeting approaches The study proved that efficient and effective targeting can provide an opportunity to improve poverty alleviation. However an ethical question still remains: do the welfare enhancing benefits, namely poverty alleviation outweigh the ethical challenges (dataprivicay, exclusion, bias)?
Rafe Mazer, Kartik Srivastava, Seth Garz, and Francis Gwer presented ways that digitizing identification can be beneficial to governments, individuals, and the private sector alike. Benefits include eliminating duplicate and ghost enrollments, identifying ineligible beneficiaries, enabling new program design options, reducing corruption and leakage, and increasing financial inclusion. But the benefits do not come without consequential risks. Risks include: exclusion errors, privacy and security, technology issues, limited vital statistics, connectivity and lack of digital literacy, and government capacity. Digital ID is high terrain for political controversy. It is an issue that affects billions of people and can result in exclusion from important social services.
The leaders also presented information displaying the impact of digital credit. Data shows that in Kenya digital credit increases likelihood to borrow by 11%, in Uganda digitizing disbursement of microfinance loans via mobile money led to 15% higher business profits and 11% higher levels of business capital, and mobile loans in general are mainly used for household emergencies.
After the presentation researchers broke off into groups of 10 to discuss the information presented during the session in collaborative workshop style. Groups discussed some of the largest consumer risks in digital credit like high and hidden prices, debt stress/multiple borrowing, fraudulent lenders and scams, and barriers to competition. Researchers also considered different models for regulation including definitional issues, statutory vs. self regulation, and principles vs. prescription. Discussions in the workshop included a wide variety of perspectives from diverse expertise, cultural, and personal experiences.