When the Nobel Prize for Peace was awarded a few years back for alternative finance (in this case, microlending bank Grameen and inventor Mohammad Yunus), this caught people by surprise. Economics maybe, but why peace? There is an alternative payment system called M-PESA in Kenya that has made the case (spotted here by Philipp):
M-PESA flows reversed during Kenya’s political crisis, with rural users sending money to urban contacts.
As I noted in a previous post - “Why has M-PESA become so popular in Kenya?” M-PESA was used predominantly for the transfer of remittances in the two research sites. Usually these flowed from urban centres like Kibera to rural villages like Bukura. However, there was a reversal in such flows during the post-election crises in Kenya. Urban migrants were receiving money and airtime from their rural relatives.
During this period, money and airtime cards could not be physically transported across the country. Many of the roads were blocked by rioting youth, and the railway was dismantled. This was problematic for many of the urban migrants. They needed money to escape the threat of ethnic violence, and airtime to communicate about their situation.
Some of the migrants received such support from friends and relatives in the village, who transferred both money and airtime via M-PESA. Others withdrew cash from M-PESA if they had a balance in their account. Most banks remained closed during the violence, which further made it difficult to access money. Some agents located in urban areas, which were affected by the violence, confirmed this finding. They asserted that the demand for services was high during this period. They further explained that the nature of transaction had changed—urban customers were making withdrawals rather than deposits.
In times of trouble, the standard mechanisms are attacked. Rioters target merchants and especially banks. So what works? Well, alternative methods spring up.
It doesn't so matter what the alternative methods are, as long as they are alternatives. In this sense, the world's banking strategy of cartelising the payments mechanisms is a recipe for collapse, because we are enforcing a legal monoculture. When the monoculture hits a virus, all transactions catch the cold and the economy goes to bed.
The same thing happened in 1998 or so when the Russian financial crisis happened. The Russian banking sector met its Battle of Kursk and collapsed, taking their payments abilities with them. A rough upstart called Webmoney was luckily up and going, and was able to transmit sorely needed payments across Russia and further. At the end of the crisis, it was the last man left standing, because it wasn't one of them.
So when you see regulation and cartelisation against alternative finance systems, ask for a guarantee of stability from the those supporting the anti-competitive activity. Of course no such is worth the paper it is printed on, but somehow we have to get the message through that lightweight alternative finance is good for us all, and monoculture is bad for us, unless you happen to be the predominant organism that is taking over the organ of economy.Posted by iang at July 6, 2009 01:04 PM | TrackBack