Private money in Mombasa

Fellow GMU graduate Mwangi Kimenyi has an interesting piece (co-written with David Muthaka) on the creation of the Bangla-pesa, a voucher currency used in a slum called Bangladesh in Mombasa.   The currency is called the Bangla-Pesa (pesa is the word for money in Swahili) and the vouchers are really beautiful.  Here is one example:


For other denominations, click here.

The idea behind the voucher currency is to help residents, who often face a lot of income volatility, essentially smooth consumption. The authors give a description of how it works:

“Businesses that are members of the Bangla Business Network enroll in the program, which distributes an equal number of vouchers to each member. In addition, all the members agree to honor the vouchers as means of exchange. Now when all or some of the traders experience downturns in their business, they can make business transactions among themselves with Bangla-Pesa. Given that the bicycle operator needs to purchase some groceries, he will give the grocer BPs (amount depending on quantity of groceries). The grocer accepts the BP vouchers and gives him the groceries he needs. When the grocer needs to get somewhere via bike, she can go to the bicycle operator (who is also a member of the Bangla Business Network) and take a ride using her BPs. The transactions do not have to take place simultaneously. This is not a barter trade system because the vouchers are used to make transactions for many goods and services among all members of the business network. As a result, the traders in this slum are able to engage in a whole range of transactions using Bangla-Pesa.

Initial results show that Bangla-Pesa is making a real difference in members’ lives.  A survey showed that 83% of the members reported an increase in sales due to the vouchers, while only .05% report lower sales.  The vouchers make up a good amount of the transactions these participants make, about 22% of daily sales.

The authors note that these types of programs can increase community participation and spirit, although they raise some interesting questions to consider before recommending widespread adoption of vouchers: Could such use of a localized currency weaken linkages with other communities and the larger economy? What might be the impact on the economy if many other slums in country or city adopt their own complementary currencies? Is this a program that should be restricted or regulated? Is it a case of “bad money” driving “good money” out? 

Fore more information on Bangla-pesa, click here.

Working out the online (educational) kinks

I wrote yesterday about exciting educational reform in India and the UK (Grannies in the Cloud).  Recent news from San Jose State University make it clear that online education is still a work in progress.

Earlier this year, SJSU teamed up with Udacity to offer remedial math and stats courses to anyone could paid $150.  They have since suspended the experiment after the fail rates were off the charts.  About 85% of the students that signed up actually completed the class, which is a high number, but the pass rates only ranged from 20-44%.  Apparently about 75% usually pass the same courses in a non-online setting.

Forbes has a good article detailing some of the reasons that the program might not have worked so well. Ironically, the title of the piece is “Failing Fast,” which I assumed to be (cruelly) referring to the students who failed the course but actually refers to Udacity.

I’m glad that the university is going to work with Udacity to rethink the program and try again in 2014.  A lot of the trouble with the courses seemed to stem from the fact that they were put together in a rush without adequate thought and preparation.

Education in the Clouds

It’s fascinating to see how technology is changing education.  It’s not clear which forms will pan out, but it’s fun to see what people are coming up with to expand education.

Recently I read about Sugata Mitra’s new idea for education in the clouds.  Mitra is a Professor of Educational Technology at Newcastle University and he is most well known for his “Hole in the Wall” experiment in 1999. In the experiment, he installed a “child-height computer in the wall of a Delhi slum. Children worked out its functions for themselves, leading to Professor Mitra’s idea of a self-organised learning environment, or Sole.”

Now he is building on that idea by forming cloud schools with an army of “grannies”.  Using the $1 million dollars he won from TED 2013, he is working on the creation of 7 schools, 5 of which will be in India and 2 in the UK. The idea is mostly geared to remote schools in poorer countries, where students may not have teachers, much less access to computers.  Mitra also wanted to experiment with a couple of good schools as well, however, to see if cloud schooling could make a difference there.

So what is the role of the grannies?  Mostly they are retired schoolteachers who will “suggest research topics to children and encourage and praise their learning, without actually teaching them. Professor Mitra hopes that the grannies will be able to supervise everything in the cloud schools remotely, including physical features such as lights and windows.”

There will be seven schools to begin with. Here is the rundown:

Area 0: the flagship, most expensive, cloud school. A hexagonal glass pod to be built in Gocharan, a village in West Bengal, India.

Area 1: the most remote cloud school, to be built from mud and grass in Korakati, a tiny village in the Sundarbans mangrove swamps in the Ganges Delta, West Bengal.

Area 2: in an existing room in the village of Chandra Koma, around 200km from Calcutta.

Area 3: in a yet to be identified urban slum in Delhi, India.

Area 4: in a yet to be identified urban slum in Pune, India.

Area 5: in a converted classroom at George Stephenson High, Killingworth, England.

Area 6: in an arts centre at Greenfield Community College, Newton Aycliffe, England.

The one thing that I found a bit freaky is that each area will have a large screen where a “life-size image of a supervising “granny” will be projected.”  I’d find that a bit weird if I were a student and a bit awkward if I were the granny.

 All in all though, this is an interesting idea and I will be following it to see what kind of results Mitra finds.
h/t @drpaulinedixon

Department of duh

Of all the interesting articles out there about the capture of the Zeta cartel boss and what it means for Mexico’s drug war, this headline takes the cake on least insightful and most obvious:

Mexican Capo Tried to Escape While Being Captured

Wow, I’m shocked. That’s some hard-hitting journalism. I would have never guessed.

Return to sender?

When Kevin and I visited Madagascar several years ago, we had a tremendous guide who was really smart and really curious about the world.  Unfortunately, he had little access to books, so we sent him a couple that he requested when we returned (one on the Grand Canyon, a French-English dictionary, and one on North American snakes).  I was concerned whether the package would arrive though because there were no traditional addresses in his village.  He told us to put his name and description, guide at Tsingy at Bemaraha park, plus the name of his village.  Shockingly, it arrived because he was able to go to an internet cafe in a bigger town months later and email us a thank you.

The lack of addresses didn’t totally surprise me in Madagascar, an extremely poor country, but I just discovered that this is a problem that plagues many Latin American countries as well. The Christian Science Monitor has a piece about Latin American countries starting to try to rectify the situation. Here is their description of the situation:

“Opposite the church, 500 meters north of the cedar tree, the blue house with a wooden porch.” In many parts of Latin America, these are not just the directions you might be given by a friendly local, but an actual postal address. 

Costa Rica, Panama, and Nicaragua are among the countries that use landmarks, such as schools, parks, or even fast food restaurants, to locate houses and businesses in bizarre address systems that make mailmen “more like detectives,” said one regional newspaper last month.” 

Ecuador and Colombia have recently embarked on an effort to standardize addresses and reduce the problem of lost mail.  It is estimated that 1.71 million mailed items were lost by the Ecuadorian postal service last year (and $75 million of wasted gasoline on “failed deliveries”).  In Costa Rica, about 25% of all mailed items do not arrive at their destination, a cost to the economy of more than $700 million (a 2008 study).

My two favorite tidbits of the article are the following:

1. An envelope once arrived to the capital city of San Jose’s central post office headquarters addressed: “To the man who is sometimes outside the post office.” That letter did apparently reach its intended recipient.  

2.  Making post efficient in a country with no such tradition will require a “change in culture,”– right down to teaching people “that mailboxes are for putting post in, not trash,” says Ecuador’s National Postal Agency’s (ANP) director Maria de los Angeles Morales, who has overseen Ecuador’s $1.2 million project.

Intrepid Entrepreneurs

Entrepreneurs everywhere need almost a blind optimism in their vision or they probably would never undertake the investment in the first place.  In Somalia, though, this is probably even more true. While entrepreneurship is crucial to a Somalian economic recovery, it is not for the faint of heart.

The New York Times had a great piece in the magazine called Somalia’s somewhat friendly skies. Not surprisingly, the roads in the country are either of very poor quality or non-existent: “Somalia has only a handful of passable roads — and most of those are patrolled by bandits and militias.” 

So what does an enterprising young entrepreneur do?  Start an airline of course:



I love the optimism of the tagline:  the happy way to fly.  Some beg to disagree:

“One passenger described one of Jubba’s Antonovs as a piece of “Soviet dereliction” in which a family of five sat piled into three seats. “We had to board an old Russian plane. In total darkness,” an online reviewer wrote of his “flight from hell” to Hargeisa, the capital of the self-declared republic of Somaliland. “The seats had no seat belts, there are luggage and 20 boxes on back seats, not secured. . . . Avoid by all costs.”

The founder of Jubba notes that all planes have seat belts now and that this negative review is probably from a Somalian rival airline (!).

There have been some tough times for Jubba Air and its employees (see some salient examples below) but if Somalia does turn around, they are well placed to take advantage of the good times.

a. “Whenever we fly to Mogadishu, we give them combat pay,” Warsame said. “And they never stay. They land and leave as fast as they can.” Jubba pays the captain, co-pilot and flight attendants “around $100 extra” for each landing they make in Mogadishu; the bonus goes up after they make the trip several dozen times. [Note: $100 doesn’t seem like much in combat pay and I don’t understand the reasoning behind the bonus going up after 24 landings].

b. “Until late 2011, Al Shabaab controlled 9 of 16 districts in Mogadishu, some within firing range of Aden Abdulle International Airport. Pilots were instructed to ascend & descend rapidly over the ocean, and to avoid flying at low altitudes over the warrens of the city. The rebels have since been mostly driven out, but pilots still perform the same maneuver.”

c. “Domestically, Jubba has inaugurated Antonov flights to Baidoa, a central Somalian town known as “the City of Death” during the devastating famine of the early 1990s; and Kismayu, a strategic southern port held by Al Shabaab until last November, when Kenyan AMISOM troops drove out the militiamen. Kismayu is still unstable, with two clans feuding violently for control of the port’s lucrative charcoal trade. But Warsame said that the demand for access to the city was so high that Jubba decided to take the risk. “It is impossible for people to travel there by road, because of explosive devices and ambushes,” he told me. “So many people said, ‘We need a flight to Kismayu.’ We sent in some staff, they inspected the runway, they talked to the local people and they said it was O.K.” [Note: the local people saying it was ok would probably not be enough to convince me to fly there]

Whether you are an airline entrepreneur or an airline customer, Somalia is definitely not for the faint of heart.

Your “Pacto por Mexico” update

New President Pena-Nieto’s main accomplishment so far has been the surprisingly (at least to me) durable, Pacto por Mexico, a grand coalition of all three main parties (Pena-Nieto’s PRI, the PAN and the PRD) dedicated to making sweeping reforms.

Even though their only concrete accomplishment so far was to throw Elba Esther “La Maestra” Gordillo in jail, given the combative and divisive nature of current Mexican politics, it’s kind of cool that they are still hanging in with the program.

But all is not well with the Pacto.

Issue number one is alleged voting irregularities and vote buying by the PRI in the recently completed state level elections.

At a news conference on Sunday in Mexico City, PAN Chairman Gustavo Madero and PRD chief Jesus Zambrano slammed the PRI for not complying with prior calls to safeguard the polls but said they would remain in the pact if their conditions, aimed at cleaning up elections, were met.

In exchange for remaining in the pact, Madero and Zambrano said they expected the government to perform an “exhaustive” investigation into the July 7 elections, assigning blame to candidates and parties that illegally used public funds to finance campaigns.

They also asked the PRI to approve in an extraordinary session of Congress a pending political and electoral reform aimed at combating bad practices ahead of the next elections, among other measures.

Issue two is the looming PEMEX reform fight. The state oil monopoly is starved for investment. Foreign money is banned and since PEMEX is a cash cow for the state, its earnings do not go into R&D, or capital improvements. As the Economist magazine points out, letting in foreign money and broadening the tax base would help make PEMEX into a more efficient and profitable company and benefit the Mexican economy

However, it’s hard to see the PRD going along with such measures, and Pena-Nieto may have to choose between keeping the grand coalition or trying to ram through energy reform just with a “coalition of the willing”.

The Economist suggests that perhaps the PRI could trade the electoral reform the PRD wants for the PEMEX reform the President wants. That would be quite a feat, a true win-win for Mexico.


The dark side of social capital

In 2001, Robert Putman published Bowling Alone: The Collapse and Revival of American Community, which described how social capital had been decreasing over time in the US.  In a great play on words, Shanker Satyanath, Nico Voigtlaender, Hans-Joachim Voth have a NBER working paper called Bowling for Fascism: Social Capital and the Rise of the Nazi Party in Weimar Germany, 1919-33.

I had never considered the possibility that social capital could have a dark side, but it makes perfect sense. The paper is fascinating and I think I’ll add it to my development syllabus under the social capital and trust section.

Social capital – a dense network of associations facilitating cooperation within a community – typically leads to positive political and economic outcomes, as demonstrated by a large literature following Putnam. A growing literature emphasizes the potentially “dark side” of social capital. This paper examines the role of social capital in the downfall of democracy in interwar Germany by analyzing Nazi party entry rates in a cross-section of towns and cities. Before the Nazi Party’s triumphs at the ballot box, it built an extensive organizational structure, becoming a mass movement with nearly a million members by early 1933. We show that dense networks of civic associations such as bowling clubs, animal breeder associations, or choirs facilitated the rise of the Nazi Party. The effects are large: Towns with one standard deviation higher association density saw at least one-third faster growth in the strength of the Nazi Party. IV results based on 19th century measures of social capital reinforce our conclusions. In addition, all types of associations – veteran associations and non-military clubs, “bridging” and “bonding” associations – positively predict NS party entry. These results suggest that social capital in Weimar Germany aided the rise of the Nazi movement that ultimately destroyed Germany’s first democracy.

h/t @m_clem

Update: Tyler took a break from communing with the puffins in Iceland to send along this related paper with Dan Sutter:  “The Costs of Cooperation.”

What could possibly go wrong?

Wow. Bobby Mugabe just opened his latest campaign for president. He’s 89, he’s lost at least the last two elections, but he’s still president, he’s still running hard, and he still is a very snappy dresser:


And, he and his surrealistic party ZANU-PF, have an amazing plan to fix Zimbabwe:

In the 108 pages of Zanu-PF’s election manifesto, the word “indigenisation” appears at least 156 times.

The party is not coy about this, declaring: “Only the indigenisation and people’s empowerment reform programme can meet the goals of the people. There is no other alternative.”

Under its plan, 1138 companies across 12 different sectors would be targeted over the next five years. The party believes the takeovers would realise $7.3billion in assets for the government.

The value of these assets would then be used as security against borrowings, which, Zanu-PF believes, would ultimately create total value of $29.2billion. The money would be used to rebuild the country’s infrastructure, support agriculture, and fund education and health.


People, after a government nationalizes 1138 companies, how many foreign lenders will be knocking on the door offering to loan them money?





An OU student in Bangladesh

One of my former students, Rebecca Stevenson, is interning this summer in the Social Innovation Lab at BRAC. She’s been focusing mostly on slums and urban issues. This internship is her first foray into the world of development, and she is the author of the post below on scaling impact in development projects.

I didn’t realize until recently how big BRAC had become.  According to Wikipedia, it is the largest NGO in the world, with more than 100,000  employees (and 70% of them women).  It was created in 1972 and now serves “all 64 districts of Bangladesh as well as in Afghanistan, Pakistan, Sri Lanka, Uganda, Tanzania, South Sudan, Sierra Leone, Liberia, Haiti and The Philippines.”