A JOURNAL OF INTERNATIONAL DEVELOPMENT
The new ‘wave’ of social enterprise WAVE IS A new app that enables users to send money cheaply and instantly to Africa. It’s target users are the continent’s diaspora as it enables people to send money from their smartphone to the recipient’s mobile money account in East Africa or Ethiopia. This sort of tech innovation is characteristic of the tidal wave of social enterprise coming from the Global North to aid life in the Global South. But what role does it play in existing development frameworks? Whether one celebrates or condemns ‘Wave’ depends on how development is conceptualised, and whether the development of the individual or the economy is prioritised. The app improves financial access for individuals in the most direct way possible, and removes a smaller proportion of these funds in the process of doing so. This enables a range of social changes to take place. A 2016 paper in Science (Suri & Jack) found that the mobile money system M-PESA lifted 2% of Kenyan households out of poverty since its introduction in the country. They found that this effect was particularly strong in female-headed households, and argued that this was because M-PESA made financial transactions easier, enabling women to go from agricultural occupations into business. Given that women’s control over financial resources is a key concern for many not-for-profit development interventions, it is promising that social enterprise is also tackling this important issue. On the other hand, Wave relies on one-way money flows from the Global North to South. Whilst mobile money empowers people
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LENT 2018
NINA JEFFS
to undertake entrepreneurial enterprises, Wave is about one-way transactions from emigrés to their family at home – and this is an important difference. It could be argued that Wave continues a cycle in which successful young people are encouraged to go overseas, rather than invest their skills in the domestic economy and hence remove important human capital from where it is most needed. Dependency theorists might also see it as characteristic of the cycle of dependency between the Global North and South. If this money is used for survival by people in developing countries, evidence from IMF researchers Maelan Le Goff and Kangni R Kpodar suggests that this may increase dependency on international aid – a concerning dynamic given the increases in remittances in recent years. However, Le Goff and Kpodar also found that “remittances lead to lower aid dependency when they are invested in human and physical capital rather than consumed”. This is because remittances in this case feed into the economy as a whole in addition to benefitting the lives of individuals. Wave enables a larger injection of financial capital into developing economies – the key issue is really about the opportunities available to the recipients to use this in productive ways, something government agencies are potentially better placed to deal with. Although Wave is a for-profit enterprise, it has been lauded by some ‘Effective Altruists’ for its practices. Wave charges 3 per cent on each transaction, which undercuts Western Union and MoneyGram, the only other existing
companies for sending remittances, which both charge rates of 10 per cent. Of course, for Wave this is a strategy to get ahead in the market, but it also has huge positive impacts based on the relative purchasing power of money in different countries. According to the analysis of the Effective Altruism organisation 80,000 Hours, for each dollar of revenue Wave makes, they save $2.33 for someone in the world’s poorest countries. Given that last year’s remittance flows to developing countries totalled $429 billion (several times larger than global Official Development Assistance), Wave’s reduction of the cost of sending remittances by 70% could result billions of dollars being accumulated by people in developing countries if it were to be expanded globally. Indirectly, Wave could have a more significant financial input than many key donor countries – and this is a reason for optimism about social enterprise. Profit motives are justifiable when it comes to social enterprises like Wave because it ensures the sustainability and expansion of the projects. Profits can be reinvested into improving mobile money technology, which is highly likely to drive prices down, and of course into expanding its market. With the rapid growth of M-PESA and other mobile phone based payment systems in East Africa, these is certainly room for expansion on the African continent – and it seems increasingly likely, worldwide. Non-state development interventions are often criticised as being illegitimate, or crowding the public sphere of developing countries, where people should be able to use their own agency to pursue their personal goals. Wave enables people to pursue their own goals by streamlining an existing process.If development ultimately means improving the welfare of individuals, then we should hope that the ‘Wave’ continues to wash over our shores.