 So hi everyone, I think it's time to get started. Tonight's seminar is titled from microcredit evangelism to digital utopianism. The unstoppable rise of the global microcredit industry. Before we start, I'd like to make two quick announcements. So first, the first one is about the ongoing use-use strike, with which we have full solidarity. So it sadly didn't make the ballot due to the Tori anti-union laws, but we will re-ballot and hopefully join others soon. And the first round of strike action lasts till the 4th of December. So if you go to a university that's taking an industrial action, please do not cross the picket line. The second announcement is about the general election, taking place on the 12th of December. So please go out and vote. And there is no development study seminar next week. However, I would like to invite you to a general election special panel event called A Labour Government and Beyond, which features UCU General Secretary Joe Grady, the author and activist Richard Seymour, and the SOAS academic and author Maya Goodvello. So it takes place at the same time and same place at development seminars. So Tuesday, the 10th of December, 5pm, right here in the DLT. Everyone is welcome. So to the talk, to introduce Milford Bateman. He is a freelance consultant on local economic development policy, visiting professor of economics at Jurai de Brilla University of Pula Croatia, adjunct professor of development studies at St. Mary's University in Halifax, Canada, an affiliated researcher at the Future Forum in Norm Penn, Cambodia. Dr. Bateman obtained his PhD from the University of Bradford in 1993. As a freelance consultant since 2006, he has worked on local economic development projects from almost all of the major international development agencies. Dr. Bateman has published widely on the key issues affecting local economic development, including the influential why doesn't microfinance work, the destructive rise of local neoliberalism, published by Zed Books in 2010, and which is now being prepared for a second updated edition, Out Do in 2020. His latest book, published in January 2019, by Routledge, in cooperation with UNCTAD, and co-edited with Stephanie Blankenburg, and Richard Kozl Wright, is entitled The Rise and Fall of Global Microcredit, Development, Debt and Disillusion. Finally, his most recent work with Maren Duendak and Nicolas Loubert seeks to provide a more accurate assessment of the development impact of the global fintech movement, epitomized by such as Kenya's iconic M-Pesa. And we also have Penelope Hawkins, who is a published economist with a PhD in economics from Stirling University Scotland. She has an MA in economics from the University of South Africa and a BA in economics, a higher diploma in education and a BSc, all from the University of the Witwatersrand. She has been an economist, policy researcher and advisor for nearly 20 years. Her expertise in the financial sector stems from her published work, including her PhD thesis, which examined the financial constraints of small open economies and extended the analysis of financial fragility, vulnerability and exclusion to small businesses. Her body of knowledge includes financial inclusion and education, consumer protection, consumer credit policy, industry pricing and behaviour, competition policy and market conduct regulation, among others. So, if you want to tweet during this seminar, please use the hashtags SOASDEVSTUDIES and ESRC. So, to start with, Method. Okay, thank you. Thank you very much. This is the second time I've taken part in these development studies seminars and the last time I was here, it was really good fun. Great Q&A, I really enjoyed it, so I'm very happy when they invited me back for a second time. I'm talking sort of on the same topic, but I've extended it slightly into the issue of the whole digital utopian issue, which we'll come on to. But it's also because we have a book out earlier this year which was basically published by Rutledge, but in conjunction with UNTAD and with my co-editor Stephanie Blankenberg and Richard Kozlerite. So, I was based there in Geneva working on this and afterwards. So, really, that's the reason that we're here. Hang on. So, yeah, so what I want to talk about quickly is I'll talk a little bit about the microcredit movement and then move on to this whole idea of digital financial inclusion, which is really taking over the world at the moment and there's all sorts of euphoria building as a result. So, we'll try to just dissect some of those issues. If you want the PowerPoint, I can send it to Faizi and she'll have it, or it'll be on the research gate or something. So, you don't need to try and copy anything from that, you can get it a bit later. So, starting out, I mean, this is what I talked about a couple of years ago, so if you're here for that, then I apologise, but things have moved on a little bit. So, just very briefly, this whole idea of microcredit, which I'm sure you all know, are small loans used for informal micro-enterprise sector establishment and expansion. So, where did it come from? Well, originally, it was something that emerged in Latin America and it was part of the political economy of the US government, because in the 1960s and even today, there was a lot of resistance to the US model of corporate capitalism and there were a lot of movements bubbling up and there was an issue about how do we deal with those movements that might end up having the worst case scenario, some sort of Cuban-style revolution. And they head upon the idea of, look, if we can try to individualise getting out of poverty, make it the responsibility of an individual, then maybe certain parts of the population will say, well, we're not going to support these wider popular movements, we'll focus on ourselves and our family to get out of poverty and we'll abandon all those wider movements. So, that was the US strategic policy aim in the 1960s, why USAID went into financing microcredit, starting in Brazil and to other countries as well. It was designed to, in a sense, frustrate more wider social movements and change transformational change. If you could embed the idea that there was hope for individuals, individually, rather than in the wider society, you could basically hold back social change that might be disadvantageous to the American government and to the American version of corporate capitalism. But then in the 1980s, things switched to Bangladesh, and I'm sure you've all heard of Dr. Mohamed Yunus, who won the Nobel Prize Prize, and Yunus really gained fame because he was able to bring capitalism down to the poor. So he sold microcredit on the idea that, really, this would be an extension of capitalism down to the poorest community. So before that, capitalism was also always something in the corporate sphere, it was about elites. But if you could say, well, everybody's involved in it and you do well or you don't, depending on your own particular initiative or skills or hard work, then basically everybody becomes part of the system. So there's nothing really to argue against. If we're all members of the club, there isn't another club that you could argue we should join instead of the one that we're in. So microcredit basically linked in brilliantly with the neoliberal project that began in the 1980s because of Ronald Reagan being elected a Margaret Thatcher. So it was all about individual capitalism, individual self-help, individual responsibility, and no idea of working together with anybody else in the community or nationally or voting in a, a progressive pro-poor government. Everything was drilled down to the individual to try and do something or not, as the case may be. So the idea that we, in many countries, the way out of endemic poverty was the deployment of what we call collective capabilities. One of the collective capabilities that has improved life is, for example, rather appropriately, the trade union. Governments that you elect can do things as well through social welfare programs, unemployment insurance, pensions, those sorts of things. But if you can encourage the poor to think only individually and not to really get involved in trying to build the more collective ways of reducing poverty, then you can make sure that they go along with what you are trying to do. So as I say, in future microcredit, it's an individual way out of poverty. Now, it became clear, though, by the sort of 2000s that the original idea of microcredit wasn't really working. Nowhere could we find poverty was being reduced in a clearly identifiable manner. So what happened then was that they had to somehow come up with some explanation or some idea that, well, this is why it's not working. And the first idea was that the original microcredit experiment was then widened into something called microfinance, although the two were basically interchangeable. But the microcredit idea is credit, and microfinance is a whole suite of products that the poor are expected to use in order to manage their way out of poverty. So the argument became, well, microcredit didn't really work as much as we wanted it to work. Now we must extend the sorts of financial products the poor have, and that will be the key to their liberation. So let's not abandon microcredit, let's just extend the service offer, and this is what is going to get the poor out of poverty. In reality, the move was simply designed to make sure that microcredit had more of a shelf life, as we'll see on slide number seven. And then in 2010s, the concept of microfinance then began to disappear from the discussion, and this new term called financial inclusion started to emerge. And this was an even wider suite of services. So the idea was that microcredit movement and the microfinance movements didn't actually include everybody into the financial system, but what we need to do now is to make sure that everybody has access to all financial services and is a fully-fledged financial citizen. And so even though microcredit was really 90-95% of what financial inclusion was all about, it was advertised as some sort of broad movement, a broad suite of products and technologies and institutions that the poor could use in order to manage their way out of poverty. So the goal was including everybody in the financial system. However, even that argument then started to fall on rough ground because there was really no solid evidence that this concept, wherever it was defined, was not actually doing what it said on the tin. So we couldn't actually find any real evidence that this whole movement or any real evidence as to exactly what was the mechanism this was going to work, how including people in the financial system, giving them a bank account and a mobile phone and all the other instruments that we have like credit cards and stuff, how this was going to get them out of poverty. So there's good paper there from Marin Duvenac and Filmeda which basically looks at the evidence and says, well, there's not really that much evidence to look at. So very briefly, microcredit basically failed and I'll just very quickly go through that. Mohamed Yunus made a fundamental error in when he was looking at... He believed in something called Say's Law. Now Say's Law is that supply creates its own demand and so Yunus had the idea that if you gave everybody in the community a small microcredit, they would buy a table, they could sell vegetables, they could create... build baskets or they could buy a tuk-tuk and use that and then everybody would get out of poverty. But of course, increasing the supply of something doesn't necessarily mean you increase the demand for those products and so it didn't actually work as he assumed it would because if you have, let's say, 20... If a village can support three or four hairdressers, if you make 30 hairdressers, that doesn't mean to say the demand is going to arise from somewhere to keep all those hairdressers profitably employed. What tends to happen is that the 30 are weeded out very quickly to become, say, 20 and all of those 20 have much reduced incomes. We end up getting something called job churn which is where you have high rates of entry but equally high rates of exit, okay? And even when new jobs are created, the extra competition tends to depress the income of those working in the informal sector. A very good example is South Africa where after the post-apart idea with the entry of microcredit, a lot more new informal microenterprises entered and the competition, I mean got rid of some of them but those that remained basically demand was divided up amongst them and the income levels went down to a third of what they were after apartheid fell. So very, very difficult to do anything there. We have mass over indebtedness in so many countries now. Wherever microcredit has passed a particular threshold and become something that's really part of the financial system, inevitably we get an over indebtedness crisis and then we have a repayment crisis and then the loss of collateral which includes housing and land in particular. Commercialization took place in the 1990s under the Western government's pressure, turning microfinance, what was originally a more NGO-led model into a more for-profit model and that introduced all sorts of destabilizing dynamics into the model and we ended up with a lot of booms to bust and all sorts of damaging forms of competition. It's also a very inefficient way of intermediating scarce capital in developing countries in the global south because what microcredit actually does is it takes the scares savings of the population and then intermediates that cash into the most unproductive enterprises possible, informal microenterprises and self-employment ventures and it essentially takes that money away from more productive, more technology-based, more innovative, more export-oriented companies. So everywhere you look, Latin America is a good example where the microcredit sector came aboard. There was a massive expansion of the informal microenterprise sector. The SME sector started to contract and that's one of the reasons... Well, the central reason, productivity fell in Latin America over the 80s, 90s and 2000s and that was one of the reasons why poverty started to rise again in Latin America. So it's a very unproductive, a very inefficient form of financial intermediation. And then finally, we have what's called accumulation by dispossession that basically the whole point of microcredit is not so much helping the poor but it's hoovering up or siphoning out of the community enormous amounts of value which really isn't what is good about development. Development is about a recycling process whereby wealth is created and the bulk of it should be reinvested back in the community. Historically, that's how communities prosper. But in fact, with microcredit, the money is made and then it's siphoned out usually to or increasingly to the financial centres in Taiwan, China, Germany, all over Wall Street, all over the place. And again, South Africa is another good example of this accumulation by dispossession, a very narrow elite in the financial sector. I've made stupendous fortunes whereas South Africa now is the most over indebted country in terms of the household debt in the world according to the OECD. So don't just believe me, even people who were very much promoting microcredit in the early 2000s are now saying yes, it's a busted flush basically. David Rudman, Daniel Altman, that's a famous reference to Bono's comment about don't give somebody a fishing rod, give them a microcredit, they'll buy a fishing rod, learn to fish, support themselves. So that was a reference to that. And most interestingly, Jonathan Morduk, who was the co-edit author of the standard textbook on the economics of microfinance, basically came out and said, well, yeah, at the end of the day it hasn't worked. There are other benefits and those benefits are maybe mainly corporate benefits but in terms of poverty reduction hasn't really worked, which is huge. So if it's not working then somebody obviously would say, well, why is it still supported? And there are really two reasons. And as I said, people like Douglas North have a conservative economic history, got the Nobel Prize, I think, in 1999 or something, but his idea was institutions, even when they fail, they are useful and are promoted because they benefit elites. I mean, that was, in a sense, one of the conclusions of his work. And we can see that here. So there are two reasons. I mean, the first reason is ideology because the neoliberal revolution ushered in a period when the individual mattered. And so everything was about the individual. Do you remember Margaret Thatcher's famous phrase about there's no such thing as society? That means joining together, working together, actually isn't something we want to promote. We want to promote everybody as individuals, law of the jungle, everybody's on their own. And so microcredit supports that idea of everybody seeking their own fortune and regardless of the impact on society or inequality or whatever. And so how can you be against microcredit because it supports your ideology? So that's a key reason why they keep it going. And the second is more prosaic. It is because there's so much money to be made in microcredit. Once they realized from several high-profile IPOs, initial public offerings of microcredit banks, how much money could be made, the investing community piled in to microcredit. And we have things called MIVS, microfinance investment vehicles. Everybody was moving in, making tons of money. So that's the story of microcredit, a microcredit to microfinance, to financial inclusion. Now we're on to the fourth iteration of this idea of trying to get the poor to look after themselves and not try to make links in society to individualize everyone. And it's to do with digital utopianism. And this is about something called fintech, financial technology, or if you like, microfinance on steroids. So this is... I mean, somebody defined this as computer programs, another technology used to support or enable banking, financial services. The movement to digitalize everything to do with small-scale finance basically started in Kenya, then Silicon Valley got involved, then China got involved to develop these technologies and the methods and the mechanisms to get everybody involved in a financial system, usually through their laptop, their mobile, their laptop, or whatever. So electronically involved in the financial system. Now, enormous publicity was given by M. Pessa in Kenya. If you haven't heard of that, that's Kenya's famous mobile money platform set up by the British government or pioneered by the British government who financed some projects which involved Vodafone, which is one of the world's biggest multinational, and they realized this could be turned to work so that people through their mobile phones could impact or could interact with others in the financial system and not coincidentally, as we'll come on, to make a shed load of money for Vodafone. So people like David Portius, who was a former World Bank official, then moved into an organization set up by DFID, the British government, to promote the idea of financial inclusion through digital means, said that this is going to be fantastic for the poor, everything's going to work, and it might impact upon society as much as the Industrial Revolution. So what he said was full financial inclusion will be realized in our lifetimes. So this was a big gamble. But as I said, the experiment essentially began with M. Pessa in Kenya, as I say, set up with the British government, Vodafone working together, and everybody now has a mobile phone and an account. They can access funds from their network of friends and family. So anybody who's on the M. Pessa link, I have a problem, I send a message to my cousin in Frankfurt and they send me $200 and it gets me out of a bit of a problem. And that makes it so easy to do. You don't have to go through Western Union, you know, phone them up or whatever. It's much easier to save because you can go to your M. Pessa agent and just put some money in and it's credited to your M. Pessa account on your mobile phone, okay? And then the more dangerous thing is that it's much easier to get credit. I mean, M. Pessa and other fintechs advertise on the basis of five clicks and you get a credit. Okay, how dangerous do you think that is? Including you can get credit from what are called peer-to-peer lenders. So investors or financiers based in Silicon Valley, in Beijing, in wherever, you can get on to that and they can lend you some money through your M. Pessa account. But as I said, it also made a hell of a lot of money, starting with Vodafone, but once Vodafone was showing some enormous profits, then of course the attraction was there and then lots of others moved into it. So it's being hyped up as the future of money. Basically, we won't have cash anymore. Everything will be done with our mobile phone and our credit cards, whether it will be good for us or not. One of the most influential articles or pieces of work done on this financed by the Gates Foundation, by US-based economists Tavneet Suri and William Jack and they basically, their important contribution was to turn what was an inclusion model into a development model. So they categorically said this is going to reduce poverty. So this electrified the industry with their claim, 2% of households were going to exit poverty as a result of using this mobile money platform, which was a huge thing to say and it electrified the international development community and the NGO industry and it validated all the moves into fintech. It wasn't being done because you could make profits, it was being done because we're going to help the poor out of their poverty. So Vodafone, if you like, had a cover for its money making. It could say, well, we're really doing it to make poverty, but to disappear poverty. So that was very important in doing that. So now we have the fintech, what's called the fintech revolution. So we have a conglomerate of what Gabor and Brooks have described as the fintech philanthropy development complex, a whole conglomerate of various institutions that all believe in the idea that fintech is going to be the sort of poverty reduction and development mechanism that the research of Suri and Jack claim it's going to be. So that upped the stakes, money started to pile in because they could justify this investment on the basis of poverty reduction. We had a gold rush, okay? Fintech confirmed as brilliant. Investors coming in, even just the other week, I saw investors pour 400 million into African fintech in a week. Okay, that's huge. Visa and MasterCard are moving in big time now and they are massively expanding their activities and also trying to control, as I'll mention in a minute, trying to control the local financial situation, local financial institutions. Silicon Valley investors will, of course, they're bumping in, hoping to make the next unicorn a billion dollar valuation. The banks are moving in partly for the attraction of profits but partly as a defensive move because they're worried that the fintechs are going to take most of their market share from them. To push the idea forward, they needed NGOs and lobby groups and that's where these so-called astroturf organisations emerged, funded quietly by the likes of Visa and Citigroup and other organisations like that, but pretending to be about independent and about poverty reduction. The best one, I think, I love their stuff, it's so bad. Better than Cash Alliance. Okay, so if you look at their website, it's all about, you know, we're going to eradicate Cash because that's what the poor want, that's how it will help them. Quietly, they're being funded by Citigroup and Visa and MasterCard because that's their long-term strategy of getting rid of Cash and then everybody has to go through them. So that's what's happening. So the final, the problems then begin. Because fintech, as you can imagine, are credit at five touches of a button. Crazy, so we're now starting to see the first links between fintech arrival and growing over indebtedness, okay? Many countries in Africa and Asia are starting to experience this, okay? No surprise that the first case is Kenya with M-Pesa, okay? Brilliant article by Donovan and Park in the Boston Review called, you're looking at the extent of over indebtedness now. Okay, that's a real problem. You've got Visa and MasterCard getting rid of Cash so that everybody has to go through credit cards and mobile money which they control. So imagine lots of little cuts from whenever you're moving money around, the flow of money going to Visa and MasterCard, you lose control of your financial system. And when you look at the amount of profit through IPOs and these unicorns and the euphoria of the amount of money being made, then that whole thing clashes with the idea of this being pro-poor. A little, indulge me a little bit here. But Suri and Jack's work was then called into question. When you look at it, it is surprisingly weak. And with a couple of friends, we had a look at that, their signature article in the very prestigious science magazine, and it's basically riddled with omissions and logical dead ends that we had some real problems. The main problem is that they simply have a methodology of evaluation which is all about you can avoid all the downsides. So you look, you bring into your samples, you bring all the good things, and then the bad things, you simply don't discuss, you don't try to evaluate, you try to evaluate the good things, whether as good as they could be or perhaps not so much, but all the bad things you rather suspiciously leave out. So, for example, the fact that women with M. Pessow are said to be making more businesses. Well, that seems good, but then when you look at the exit figures, people are leaving almost as many as who are joining and leaving with debts and losing money and losing collateral. So that's not a good thing, it wasn't discussed. The effect of competition, stimulating competition in very small local markets, price effects, not discussed. Rising debt. You didn't even see the word over-indettingness in their work. Not even a mention of gambling. The strain of these links that you have with your brother in Frankfurt or your cousin in New York, of constantly now with Ben Pessow, I'll ask for another $200, I'll ask for another, commodifying what are supposed to be friendly links and social links into basically, you know, I'm demanding money all the time, no discussion of how dangerous that is, how destructive that is of the social links that you have. No discussion of the defaults that are now taking place in Kenya. Huge default rate. Or discussion of the fact that what we called it is a new form of digital mining. You can go into the poorest communities, get everybody together, link together and then start to take out the wealth. Just as happened 100 years ago with colonial movements, that was physical mining of gold, silver, diamonds, platinum or whatever, and you take the wealth out and send it abroad and develop your country. Now it's called digital mining and you take the wealth out, the wealth that was there, made in the community, but taken out. No response so far from Suri and Jack, which we found rather strange. There was even a plea by Martin Revalion of the World Bank on his Twitter site who said, I use their work all the time and cite it, I think they should respond to this serious critique because this is quite damaging if it turns out that their claims for benefit don't actually work. And now many in Kenya are now coming on and saying, something needs to be done here. The Gates Foundation did a minor replication of their work, but again, it stuck to the original parameters and didn't actually discuss all those downside factors because Suri and Jack didn't discuss them, so no need to have a look at those really bad things because Suri and Jack stuck to the very good things. So that was very weak when I read it just the other day, somebody sent it to me. So finally, is fintech an unstoppable force? The problem is governments in Africa, they know that there's some short run positive impacts, and it's very difficult to think in the next 10 or 20 years what would happen when this thing gathers steam and becomes something that's structurally embedded in your economy, when at the moment somebody's saying, I'm going to give you $100 million of investment to set up a fintech and you'll maybe get some of that through taxes and fees and stuff, so it's very difficult. Governments also take a cut of the tax that some of these fintechs generate, okay, some of the profits, as well as some powerful individuals take a stake informally or whatever. In M-Pesa, for example, a stake was built up or given 3% of unnamed individuals, and they made massive amounts of money when they unwound their position later on, so they basically pushed it through. Then it was revealed that USAID was behind the demonetization drive in Africa, that they're trying to get rid of cash in there, everybody goes through credit cards and mobile phones, and then it was revealed that it was USAID who was pushing this forward on behalf of US-based financial and digital corporations. In other words, it wasn't about helping India's poor in order to improve their lifestyles, this was something that was being driven from the United States. And then the latest one is with the help of IFC, which is the World Bank's investment arm, MasterCard has just signed a deal, yeah, perfect, for fintechs in Africa to use their services, so don't have local networks, which are just based in Kenya or Tanzania or whatever, link them to ours, and then everything goes through our cloud server or whatever, and we'll take care of everything. That is extremely dangerous, because you lose control of everything there. So finally, but are the chickens coming out into roofs? Because finally we've seen these problems, the Kenya government reacted to the bad news, including our article which got a lot of media coverage and said, right, that's it, we're going to ban gambling on the M-PESA platform. Huge outcry, one of the companies was Sport PESA, which is a big supporter of Premier League football clubs here, they've now closed down. So that was huge, that was huge. And M-PESA is losing a major part of its revenue stream. Major indebtedness problems, even advocates are now saying, we've got to do something about this. This is going overboard. South Africa, net one, a social grant program. So individuals were given their social grant on their mobile phone, but net one was selling them all sorts of credit and all sorts of crazy things, resulting in mass over indebtedness of their clients. In other words, they weren't really treating them with respect. And then the final one was something, I mean China has been advertised as one of the leaders of the FinTech movement, and one of them was the peer-to-peer movement. So people in different parts of the wealthiest parts of China and abroad would be financing entrepreneurs in villages or whatever, called peer-to-peer lending. It was crazy ideas that people in Silicon Valley or Beijing would know what somebody in some village was hoping to do, and it all went wrong and massive defaults and all sorts of problems. And just a week, well, not even a week ago, China's lending industry peer-to-peer must close down in two years. It's about a trillion dollar industry built up in about 10 years, and it's the major part of their FinTech, and they said, it's got to close, it's not helping and it's making things worse. So finally, what's being done, minor changes to regulations, investor rules, major changes are coming in China, as I mentioned, but otherwise the euphoria is there and it's going to, I think, carry on for a little bit more, but we'll have to see what the end results will be and maybe in two years' time, if I come back, we'll see exactly how this all played itself out. Thanks very much. Thank you, Milford, and we'd definitely love to have you back in two years. It would be a nice tradition. So we'll hear from Penelope now. Thank you very much. It's lovely to be here. I'm in a way standing in for Richard Koeselwright, who was originally part of the programme, and Stephanie Blankenberg, who used to be at ZOAS. I am a senior economic affairs officer at Ongtired, and I work for the development, sorry, Debt and Development Finance branch, in a division called Globalisation and Development Strategies, and we are, in many ways, I suppose, the finance hub of Ongtired. Those of you who don't know, Ongtired stands for the United Nations Conference in Trade and Development. It was established in 1968 by developing countries for developing countries, basically a backlash against the Bretton Woods institutions. By 1964, it was becoming obvious to developing countries that the IMF and the World Bank really didn't care about what was happening in the developing world. And so Ongtired stands to do research for developing countries, so that's the reason we exist, and the work that we do, although we don't have finance in our name, it was always understood that you cannot have trade and development without understanding finance, and so that's really where we come from and the work that we're doing. Most of the times I stand up in a podium such as this and represent my branch, I'm talking about global indebtedness. And global indebtedness, as you may be aware, if you've been reading the newspapers recently, has massively increased since 2008 as a consequence of the quantitative easing programs, effectively releasing massive liquidity and effectively pushing it into developing countries. And so both high and middle income countries are more indebted than they have ever been, and they are indebted to private corporations, and it is the private corporations that are indebted. And in a way, this story about microcredit is very much a microcosm of the same forces. When we talk about microcredit or microfinance, we're talking about the powers of the financial industry promoting themselves, pushing liquidity to create profit. And that's effectively what it's all about. And the side... I mean, very much I think Milford and my presentations are complementary in that he has spoken a lot about some of the supply side story. I'm going to talk a little bit more about understanding the regulatory and demand side story, because this is, after all, an interactive process. I'm going to talk to you specifically about the rise and fall of African Bank, which is often described as a microlending bank. And in South Africa, when we talk about microloans, we really are talking about loans to individuals and almost always to employed individuals. So we are not talking about little scrubs of loans to people who are doing survivalist businesses, a la Grameen Bank. No, these are the teachers, the policemen, the nurses. They are on somebody's payroll and actually they're going to get credit. And how best can we ring every last cent of profit out of them? And then I'm going to talk very briefly about how some of the characteristics of microlending in South Africa can be seen to have leapfrogged into the fintech story. I'm using a theoretical device called the Evolutionary Theory of Banking. It was originally set out by Victoria Chick, herself now a retired professor at UCL and has been here many years, and she set out the stages of banking in 1992 and 1993. And basically what she does with that, it shows us very clearly that when we're talking about money, we have to forget this notion of the need for prior savings. If you look at the evolution of banks, the private savings notion is not necessary. We are talking about creation out of make-believe credit, and that's what we're into. I think this is a useful point of entry because it does give us some understanding of the rise of financial inclusion and the unsustainable over indebtedness that has resulted. It's essentially a relational theory here. We're talking about the interplay of innovation and regulation. So as something's regulated, the banks or the financial sector innovate around it and eventually the regulators play catch up. But in the interim, there have been some exploited consumers. Very briefly, there are six stages to this story and I'm just going to go through them very quickly. First of all, there's free banking. This is the notion we sometimes hear about that dates back to the 1600s. This idea of promises to pay, the idea that there's gold left and a merchant gives somebody a promise to pay on a slip, and that becomes the start of banking. There's no regulation. It's effectively a 100% gold-backed system. We are no longer there. We've moved very quickly to the notion of branches and the multiplier, the money multiplier. The thing you did in Economics 101 and that somehow often where we stop talking about money as economists, but that's a mistake. So branches and multiplier, the minute you start having branches, you get this notion of the money multiplier. I deposit money with you, but I then write a check and that is deposited into another bank and so we get this money multiplier and you start entering into the world of regulation. Suddenly there needs to be somebody who's monitoring that and enter the central bank. Gradually we move to a clearing and settlement system where you have the enter bank rate, overnight settlement of loans between banks and you start to get a much more sophisticated system. People are starting to believe in the system, can it work for them? And it's in this phase in particular that we start to see the building of trust in the notion of moniness. We don't have to have it 100% backed by gold. We know that this thing called money is worth waiting for. We work an entire month before we get paid and we believe that it will have value because of the system and the confidence built around by regulation. We then end up with lender of last resort phase, liability management and originating distribute is the world in which we live now and it's the world in which has created the bubble that led to the global financial crisis and in fact we have not re-regulated it and we continue to live in that world. Going to very briefly, just step through this. Each of these are stages. The important thing I'd like you to look at are the last two columns, central banks and inclusion of consumers. Sorry, I don't have a pointer. But the important thing here is that in the first stage this is really banking only for the wealthy class. Gradually by the second stage we start to get more and more people who are salaried, who are wealthy, being able to use checks. It's becoming convenient. By stage three, public confidence is growing. You're not having current accounts developing in the system. It's starting to become aspirational because actually if you're credit worthy you can get a current account. You can get a checkbook. You can start to be able to get a mortgage. Then by stage four, we start seeing how banks are moving beyond their reserve capacity. We're no longer worrying so much about just the multiplier. We're saying banks will offer loans if there's a marginal profitability to be gained. We're remembering that they are always able to loan from the central bank. If the profit exceeds that, they will offer you the loan. Suddenly you start to see this expanding into the salaried middle class in society. By stage five, we now have what we call liability management. When a bank engages in this, they are not only worried about their deposits, they're actually seeing how they can leverage loans and enter the world of securitisation. So you push it off book and effectively you don't have to have assets to actually back that. And immediately you start spreading more and more unbacked credit into the system. Unsolicited offers of credit belong in this phase where in order to push loans because that's after all the money is, you now have to understand about your consumer and that's why something like Fintech is so exciting for people involved in this game right here because I know everything about you in the Fintech world and I know precisely how much money I can pump into your account and reasonably expect that it will be repaid. Of course, stage six again is very much even a further push of the securitisation debate and part of it is a systemic overestimation of the creditworthiness of consumers which leads to the inability for them to sustain their debt. In the South African context, let me just very briefly put it into context for you. After the 1994 democratic elections there was a very strong push to say how do we deal with the faults of apartheid? Quite clearly there was what you might regard as a puddle of provision, an enclave of financial provision surrounded by a huge pool of exclusion and there was a very strong political push by all of the new political elite in South Africa to say we have to do something about it. The first thing they thought was we'll let do the micro-credit story. We've got this thing called unsecured lending. We've got an exemption to the credit act and what we're going to do is say if you want a loan to start your small business you can have it at 100% per annum and we're going to push small credit. What in fact happened was that there were no businesses that evolved out of it. It was just simply the huge aspirational push from people who now suddenly had recognition and perhaps a public sector job and they wanted to expand their horizons as quickly as possible. Very soon it became apparent that there was a need for a new regime called the National Credit Act. At the time that it was being drafted it was seen as a world class. I was part of the advisers of that act. We were invited to the US post the crash of 2008 because suddenly the regulators there realised they hadn't protect consumers at all. One of the key things about this push was that the National Credit Act allowed for various clauses including something called reckless lending. Reckless lending was an amazing provision. It said that if you hadn't as a provider assessed the financial conditions of your consumer then that loan was unenforceable. That meant if the consumer stopped paying that you would never be able to enforce it in court. It was massive. The problem with so many things in South Africa is that we have really very good regulation but we just don't enforce it. Of course that was the biggest problem. That was a real matter of trust. Because there was this idea of trying to really bring people into the inclusion net there was a massive push for access standards. These were matters that were discussed by unions, by consumers, by the banking sector, by the public sector. The whole idea was that you couldn't claim to have produced a good product for low income people unless you met certain standards. It was all really higher ground stuff. The only problem was that it didn't work out as it was intended. The political push for financial inclusion was so strong that by 2011-2012 the then Minister of Finance, Pravin Gordon, said South Africa will now be financially included. In the very next year, Watto, we now had 70% of the adults included which meant that they had a bank account and a microloan. The bank account was supposed to be allowing them opportunity to save but there was no saving. It was all about the microloan. This is data from 2008. South African population here is divided into four groups. This group one is the poorest of South Africans and represents something like 28% of the population. They have no access to financial services. 44% of the population, though, do. And guess what the key thing is? This is that red line is all about personal loans or microloans. 22% of the population earn as much as 1,609... 16,000 rand per month in this particular category which at that time would have been about two and a half thousand dollars. Again, the most important thing that they have is a microloan and the blue bar is credit cards. So you can see how the push for financial inclusion was all always about credit. Just one final thing about regulation. The way it worked in South Africa was that if you gave somebody consumer credit, you were immediately regulated by the National Credit Act. But if they were also a registered bank, of course they were also regulated by the central bank. So there should have been double coverage. So the tale of African bank is in fact a really desilutri tale. It started in 1998 on that very same usury act exemption that I mentioned. The only thing they ever did was doing microloans and credit cards. They took no deposits. Their method of raising money was through wholesale deposits which they onlend. Most of their clients had been previously unbanked but they were all in formal employment, working for mostly the state sector. And they kept saying they were on a mission to lend money to those shut out by the apartheid state. It sounds quite a lot like the UNIS story of bringing capitalism to the poor. Very similar kind of speak. The tale of African bank, they were lauded in the international price in 2012. They were the bank of the year. They achieved ROE of 45% for that year. And that was the same year they issued their first swiss bond. Of course what was happening was that at the time that they went bust, which was in 2015, they were the sixth biggest bank in South Africa. They served over 3 million clients. Effectively, because they were lying about their position, which they had to do, because they were not collecting on a third of the book, their precarious position had been hidden for a long time, ultimately they were put into receivership and their book was shut down into good and bad. They have subsequently regained, but had massive loss both to the wholesale depositors and of course there's been continued pursuance of the consumers who owed them loans. I remember once going to visit them on behalf of a regulator and being really stunned by the fact that when I went into the ladies loo in the African bank headquarters, there was a sign behind the door that said, have you got a big enough microloan? We can help you. This is what they were pushing for their own employees. There was complete failure of regulation. There was none of this building of trust, maintaining of trust, both the national credit regulator and of course the reserve bank protected them to the last. Financial inclusion was really a failed social project, primarily I believe, due to regulatory failure. The consumers that are involved know when they get value. All of the consumers involved had, for example, the mobile phones, which they see as valuable, but they resisted many of the financial inclusion products because they didn't see them as really that useful. Just to prove comments just before I close about understanding consumers, one of the things that we sometimes forget when we talk about microloans is the position of the consumer. Consumers are offered unsolicited loans in their workplace. A lot is known about them at the time of the call. It's very difficult for a consumer to speak clearly and in some cases this might be perceived to be a salvation. The consumer clearly does not ask about the terms and what will happen if they default. Will there be penalty interest and so on? And in most cases they feel that their education has failed. We undertook many surveys in South Africa and one of the things we found out from those people who were already over-indicted and in debt distress was that they all said, if only I'd just had a small failure when I was young, then I would know what to do. But many of them went straight into the big time. Just very briefly about the fintech and why I think they have leapfrogged. The whole story about money-ness and money-banking is about confidence in money. And the regulator makes you believe that you can believe in money because of this confidence. What the fintechs have done is that they have actually mimicked. It's kind of like a mimicry that you would see in the animal kingdom from butterflies. They have mimicked the trust by doing various things including, for example, alibaba when you buy the way in which they've encouraged trust, is that they, for example, suggested that orphans go into an escrow account only when you're happy with your sale do you actually pay the provider. They do not charge for any of these transactions. How nice is that? They don't charge. Why? Because they are milking the data sources. They have set up in 2010 the Alley Loan Microfinance, which was based, in fact, on the Alley Pay system which was set in 2004. They have mimicked the Vista's and MasterCards. In South Africa, the story was you could never really do microloans big time unless you were a bank. Why? Because the central bank would never allow you to do it. And we believe the central bank would protect the consumer. That was false. Alibaba is everything. You don't need a credit card. You just need your mobile. And it's linked to Alibaba. They provide the services, the mobile services, they provide the payment services, they provide the microloan. And they're so clever that they've got the 310 model. Three minutes to apply, one second to approve, zero human intervention. How good is that? Moreover, what they have now started to do is securitize the microloan book. These are data from the BIS just to show securitization of loans in China. You see that huge bar, you can't really take all of this information in right now. But securitization really came to a head in 2017 until the Chinese authorities stamped down on it. They've continued now, but even now in 2019, microloans represent 5% of all securitization. Economic theory, since way before all of us in this room were born, through people like Keynes, said banks have liquidity preference and they will supply to the fringe of unsatisfied borrowers and beat the bushes when they have additional liquidity. What we have seen is the rise of the corporates, they can also play that role. They can also provide the needs of the unsatisfied borrowers. The problem is that, of course, this origination and distribution model that we see that has developed, whether it's through banks or whether it's through non-banks, tells us a story about how financial regulation has failed us. The reason I wanted to talk about this today is because I believe that has to be the way forward. Because everything we know about consumers, if we were to clamp down on all of the African banks, if we were to clamp down on all of the Alibaba's, there would still be something else that would rise to meet this apparently insatiable need for more credit. But it can only work if somebody is regulating it and ensuring it that consumers are not exploited to the nth degree. Thank you very much. Thank you so much, Penelope. So we will now open the floor to questions. I hope it's okay if we take a few at a time and then you can come back to it. All right, so please raise your hand if you have a question. Yeah, could we get the one on the corner there? Hello. Hi. My name is Trisa. My question is for Milford. You showed the Suri and Jack paper and you also wrote kind of an answer paper to this. And I have a question which is the way that they measured it, I think you also put it on these slides is that people who went out of poverty, this 2%, were people that consumption increased, right? So this is how they measured income increase as well. And I was wondering if they explain this because I also find it a bit problematic that they count this as in form of consumption because they could have just got the loans increased, their consumption, it doesn't really mean that they are better off than before. And I was wondering if they say anything about this on the paper as well, if you remember it. Thanks. Yeah, just go there. Thank you. My question is to Penelope because it's not every day you get the chance to interact with someone who has interacted a lot with regulators. So I hope you don't mind me asking a rather blunt question about your experience with regulators. A brief background. It is hard for me to understand why people believe that having financial services causes being less poor and causing being wealthy. To me, it's just obvious that I have access to good financial services because I am not poor. It's not the other way around. So I'm just wondering if you have any... Can give us any inkling of why it is that regulators are so willing to believe that financial services cause growth, development, reductions in inequality and reductions of poverty. Of course, for every bad bank, there's a bad regulator and of course there are conflicts of interest. But there does seem to be some sort of deep-seated ideology that I'm really curious about why this has reached the highest echelons of government. Thank you. Any other questions? Just over there. Oh, in the front here. Good evening. I want to ask a question for Penelope. You concluded your speech saying that... I forgot what he said. But my point is that what is related to my colleague here... I'm from Bangladesh and I know the case about Grameen Fawn very well. Not much about the South African system. So the thing is poor countries need micro-credit and in only poor countries, this necessity exists. In Britain, there is no need for micro-credit. Not much huge need for micro-credit. So there is a lack of regulatory system because the government is not strong enough to develop their own countries. So they let those micro-credit private banks to flourish because they understand they are failing in their governing. So there is kind of refrogging in this because the government is not strong enough to do so. So they let the financial, private financial sector to overtake their duties. Right. We can take one more this round. Yeah, just from the corner there, from Jay. Hi. I wondered if you could comment one or both of you a little bit on the gender dimensions of the sector because one of the things that's really striking is the micro-finance industry just seems obsessed with women. If you go onto any of the websites, they talk about 95% of the lending is by women and this is an amazing thing. And I wonder if you could talk about why that is and also why they seem so obsessed with focusing on it and exacerbating it. All right. Thank you. Would you like to come up? Yeah. I'll start. The Surrey and Jack paper was very interesting as to why they said that consumption went up. A lot of it was to do with the receipt of loans through M-Pesa which allowed them to set up new small-scale trading businesses. So they said that basically they were getting the money from cousins or wherever abroad and they were able to use that to set up a small buy a table and start selling something or something like that. So, but they didn't go into the downside to that. So the assumption seems to have been that everybody who did that succeeded so they never differentiated between or maybe it wasn't possible because of the data or whatever but they never differentiated between if you have 100 people who set up and do that you might have 90 within the first two years fail and then they might lose their collateral, they'll lose their loan, they lose their sort of standing in the community so there are serious negative effects on setting up a business particularly in countries where the local economy is already pretty saturated with the types of simple things you could produce with a $300 loan, you could do. So they never went into that. So the assumption seems to be that whoever consumption raised because these micro enterprises were set up and no going into the downside. What we think happened though is that the reason they found slightly higher consumption was a case of reverse causation. So, M-PESA is run through agents. So an individual becomes an agent from M-PESA and they subcontract and they run a small store and then you go to them and so for them the more throughput the more people you have coming to them obviously the more profit you make. So what we think happened was that a lot of these agents were actually gravitating away from the poorer communities because there wasn't enough clients or they were defaulting or they weren't particularly good and moving to the richer areas. So the reason that the clients of M-PESA looked as though they were wealthier was not because of what they did with the loan but because M-PESA was actually moving out of the poorer regions and their clients were wealthier which is why their M-PESA moved there. So it wasn't anything M-PESA did to create the wealth. They simply were attracted to the wealthier areas because they could sell more credit. So they got a case that it was sort of reverse causation. It was the fact that the agents were moving to the wealthier areas which created the impression that in consumption was going up. It wasn't because of what people did with these loans. So that was the key with that. The other question somebody asked was the issue of gender. And yeah, you've seen this in all the micro-credit sector that once they, I mean, originally Grameen, for example, started out as anybody, you know, but then they quickly realized that women were better repayers for whatever reason. I mean, more trust, more, I don't know. But for whatever reason they were better at repaying and so there was a shift from then on and Grameen became very much based on women repaying, on women as clients. But so it was more to do with the fact that they were better at repaying than the fact that it was creating lots of benefits for women in poverty. And even today, most people who advocated for that, that women should have as much micro-loans as possible. I mean, I think that idea has been pretty comprehensively abandoned now. The UN Commission for Women, I mean, I'd have to shout that out, the UN Agency has basically said they no longer recommend micro-loans for women because of instances, too many instances of over indebtedness and excessive profiteering. I mean, paraphrasing what I think it was. So even the UN Agency set up to empower women now says that we do not recommend micro-loans because the evidence is overwhelmingly that they don't actually empower them. My own experiences of a program set up in Bosnia, which was exclusively for women, called Women for Women. And it was about giving tiny loans at a time in Bosnia's history when there was a lot of military personnel there and NGO workers. And it was to set up small businesses serving these with little souvenirs or whatever, handicrafts, which is a crazy business idea as we said I was working as a consultant there. But the people doing it wouldn't have it. They said, no, this is going to empower. And five years later, they had to shut down because something like 90% of the women, the businesses clearly failed because there's no demand for souvenirs and handicrafts, tiny little bit of demand in a country like Bosnia. But the worst thing was that in Bosnia they had a particular regulation to try to prevent fraud, which was that when you're given a loan from a bank or a micro-credit agency, if you default on it, you have to go to court to sign a document to say that the person who gave you that loan was not a family or friend. In other words, if you think, wow, if I do mess this up and I'll have to go back and say, my father gave me that loan and that'll put him in trouble. So it was designed to minimize corruption. But then you had thousands of women having to drag to court to actually sign a statement to say that I got this loan and it wasn't a family of somebody I knew and then they were allowed to go bankrupt. So that's the most humiliating and disempowering outcome for thousands of women. And then they closed it, very quietly merged it with some other microfinance institution. But that same women for women, which is run, it's an American NGO and it still operates in other countries doing the similar things. So it's a poison challenge, yeah. Thank you very much. Such very nice questions. It's very good to think about regulators as understanding that in fact they have a raison d'etre which is designed about their job. If you're a central banker, then you are there for empowering and extending that sector. And I think that there is a very strong narrative that has been around for a long time which says that imagine the inconvenience of not being able to make a payment or to transact. And people often associate making a payment with collecting water. How hard would it be if you didn't have a tap on hand? How hard is it if you don't have a card or a mobile or something that says this is who I am, I can transact? So there's this kind of self-fulfilling kind of narrative that goes on. And I think it's very easy to criticise regulators and I've spent a lot of my time doing that. But I think this idea of understanding that cash has its disadvantages. In a country like South Africa where we have an incredibly violent and dangerous place to live for many people, especially if you're poor, carrying cash with you is a problem. So yes, is there a mechanism that can release that? You know, there's some sense to what there is there. But this notion that somehow we should replace cash which is after all the cheapest payment system anybody can ever have. And in fact is the most flexible, the most anonymous and for most people, highly functional. Is something that needs to have pushback. That's not to say we should say nobody should be able to make payments on a mobile. But there needs to be an understanding of what it means once somebody has captured your data and when they actually start pushing unsolicited loans your way. And I think this also relates very strongly to your point about thinking about microloans. And is it only a developing country phenomenon? In some ways perhaps, although you living in the UK know very well about paid air loans and paid air lending and how in fact very badly your own administrations have dealt with it, not particularly well, still highly exploitative system. And in many ways that mimics the microloans we see elsewhere in other countries. But this notion that unless you actually manage the financial sector, you know, we, sorry, I'm just to interrupt myself very briefly, this year we have a flagship report as our division called the Trade and Development Report. And our 2019 report has a chapter that looks at debt and trying to understand how debt can be made to work for development. And if you think about that even at the micro level the idea is that people should at times need to undertake debt. There is no way that Germany would have rebuilt itself after the Second World War if it was not allowed debt, if it was not able to manage that debt, if the London Agreement did not exist that said you will repay the debt once you have export earnings and only out of a certain share of that export earnings and the interest rate on the debt that the loans we give you will never be greater than 2%. Germany would never have survived. It does appear to have forgotten that in dealing with Greece, however. But this idea of using debt is not something that one should say this is naturally bad. And one of the things we push for in our division is to say why cannot not be the developing countries finish a development cycle? What happens is they become over indebted according to some threshold defined by the World Bank. Then they are forced immediately to repay all their creditors in total including whatever predatory interest rates were charged and then they're back to the two starters. And that's exactly the same kind of microlending story that we see. People become over indebted. They don't understand the full value of it. It has become a generational issue. I'm sure all of you have grandparents who when they bought their houses they bought it very, very slowly and very, very carefully. A mortgage was considered a privilege. It was paid back very slowly. We are not of that generation. We want instantaneous gratification and we need protective regulation, I believe. This point about foreign banks and the indebtedness of nations. Absolutely. We increasingly try to say to developing countries you need to to the extent that governments need to undertake debt. They need to find a way to undertake domestic debt so that in fact they do not have the problems of foreign exchange, a risk as well as repayment of the debt and moreover that allows for the building up of their own indigenous financial sector. Regarding the gender, I think that Milford answered that very successfully. Thanks, Milford. I think the one thing is that of course it also is part of justification of microlending and that's a very strong World Bank push. I mean, we find it in our environment all the time. We're living in a world in which multilateralism is completely out of vogue and in fact if you can be the person who disrupts multilateral accord then all the better for you. And whenever we produce a report that talks about debt they'll say, well, we can't accept this report because we can't see the gender aspects. Okay, so I mean it is a sub-narrative that can push otherwise clear thinking out of the way. All right, we'll take some more questions now. Please raise your hand if you have a question. Yeah, there's one in the back. Hi, thank you so much for both of your presentations. They were really interesting and informative. My question is for Penelope, just about that point about protective regulation you just mentioned. Obviously we've got things like the Basel II framework, the Basel III framework, CGAP, Guidelines on Microfinance. And then we have domestic banking law and things like that. But I was just wondering, do we need more regulation? Do we need better regulation? And therefore who is the owner's on to develop those kinds of things? Do we need better international regulation? Do we need better domestic regulation or a combination of the two? Do we need more power for the people that can, in fact, enact regulation right now? I'm just wondering what your suggestion is for the future. Thank you, yeah, just go up here in the second row. Thank you. Milford, thank you again. It's always great to have you and it's very nice to have you as well. Penelope and it's nice as you both together in the arena critiquing microfinance and doing a really effective smackdown of the rubbish that we hear. I have questions for both of you. And Penelope, I'll start with you first because it leads on the regulation question. No doubt it's important, the question of regulating finance, development and so on. But I'm also wondering if you can distance that from the same question of financial capacity to the extent that such an imbalance today between public and private financial ownership and control and capacity, whether or not it's even possible to regulate global finance without some sort of counter-power, counter-financial capacity. And in a way related, Milford, I read your paper and I can't remember exactly the levels or the ownership, but you're talking about Kenya and M-Pesa and maybe it's the related company tied to it, I don't recall. But you mentioned that the Kenyan government owned 35% of the company. It's not a company. Yeah, engaged in this. How is this possible? And I'm just wondering if you have any insights on that or commentary in the ways in which the government is in a sense enabling this accumulation by dispossession. Tying those together for both of you, the question I have then is can you see a role for democratization in finance and development, both at the level of regulation in terms of democratizing central banks, for example, and at the level of ownership of banks and so on? Thank you. Yep, just up there. Thank you. Milford, I had a question about what you were talking about during your talk, which was the euphoria towards all the money that can be made from financial inclusion. And I was wondering what would be necessary to make this discussion more realistic about the gains that financial inclusion might have, but definitely also about the drawbacks. Is it research, advocacy, better models? And I'd like to ask one more question, perhaps aimed at Penelope, which links back to the regulation stuff we've been talking about. And that is, do you think that there is a future for financial inclusion once it is regulated better? And do you think that there are particular areas that are lacking in regulation now? For example, the way the loans are pushed in the amount of information that is given. I thought it specifically interesting what Milford mentioned about loans being pushed with already a clear idea behind them of what the loans were supposed to do, namely these women for women, where they had clearly no idea of what the amount was there. Okay, that's all. Thanks. We can take one more in this round. Anyone? Yeah, just the front here. Thank you for both of your presentations. I'm just wondering, there is clearly a lack of data. All I see is all the institutions reporting default rates close to zero What would be, for both of you, a reliable body of the bad data that would show us all the negative facts about microfinance? Thank you. Thanks. Would you like to come back? We'll have you go first. Bye. Go first. Okay. So the issue, yeah, Kenya, the MPSR is very interesting because MPSR is actually owned by a company called SafariCon, which is majority owned by Vodafone, Vodafone or whatever, including through a South African subsidiary. So the 35% owned by the Kenyan government, I think was the way to be permitted to do what they were doing. So initially, they had a 3% share owned by individuals who Vodafone have always refused to mention or to cite in commercial confidentiality. It's recognized that they are senior members of Kenyan society who pushed the legislation, the favorable legislation through and said, we know you're going to make tons of money. We want a part of that. So they were given their 3%. They unwound it, I think, in 2005 and 2007, 20, 30 million dollars they made. Something like that, I think it is. So the 35% was that if you're going to be allowed to do this, we want to get something out of it. I mean, you can make your money on the other part, but we want to make our money out of it. And I think, from what I understand, it was just simply a way of being allowed to do what they were doing. So sometimes you have to give a share to the government, however they use it and do what they want with it. Sometimes governments do good things with it. I mean, the comparison has been made, which we also initiated a discussion of if it's the biggest company by far now in Kenya, 40% of the value of the Kenyan stock exchange is Safari Con. So it's huge. And the comparison is with Chile and Codelco, which is the copper producer, which is a state-owned company, which even after the coup in 73, they said it's so important to the chances of Chile that we need the revenue from it to fund our investment. And so what we said, well, look, I mean, if Kenya really wants to develop, then they should simply, you know, basically use the revenue, well, the 35%, but maybe the other revenue that if they were to take over this as a way of funding Kenya's development. I mean, it makes so much sense. And there are ways of buying out Vodafone by turning what the equity into debt and getting rid of them over time. And they're making so much money that it would be quite possible to get rid of them. So I think it's, as in many countries, you know, if a multinational wants to do something, they sometimes have to make a hard bargain with the government and, you know, and give them a share, but then build it up. But they, I mean, the money, as Safari comes profits in 2018 was $612 million, U.S. dollars, which is three times the entire health spending of Kenya. And a lot of it, of course, went to South Africa, the Vodacom, the subsidiary, to Vodacom International based in the U.K. And then the other shareholdings were funnily enough based in the Caribbean in tax, you know, the Panama Papers, you know, a lot of the other owners are there. So apart from the 35%, the rest of the money basically goes abroad. Huge flows abroad. So the single biggest economic asset in Kenya really doesn't do that much for the Kenyan economy. So we just raised that issue of that. But as I say, sometimes you have to, if you want to get in, you've got to give, you've got to, you know, every mafia organization knows you've got to pay a little bit to the little guys. The gains from FinTech question, I mean, that's something we've looked at because FinTech, by definition, isn't necessarily bad. I've worked a lot on arguments for financial cooperatives and credit unions. And one of the big things they've always had is that they, with paper systems or computers, they've always had problems of reaching scale in order to become financially self-sustaining. FinTech can help them tremendously. So I don't find a problem with that at all. If it's run by a financial cooperative with 10,000 members, they can radically transform their operations and provide really good service to the members. Without the, as in FinTech, the idea that you've got to expand your membership because that's how you maximize profits, whereby in a financial cooperative you're basically at the service of members and your incentive structure is not to just massively expand. It's to provide a service. With FinTech, you can provide a better service. So I'm not against FinTech, it's just which ones it goes to. Finally, in terms of the data, yeah, it's very difficult to get data because, yeah, the data issue because obviously financial institutions are very adept at being able to massage. The example of African Bank is a good one that Penelope gave because I was following that for quite a few years and many people in South Africa were saying these figures are hiding lots of bad things, but yet the actual figures look good. There's another example now that when African Bank went bust, the other big microcredit bank called Capitec Bank was given a lifeline because a lot of the customers went to them and with African Bank out of the equation, at least for a year, they were able to build. But then when you started to look into their financial situation, you realized that a lot of what they were doing was what they call a Wall Street, extend and pretend. So you lengthen the loan period in order to keep people on the debt treadmill, but you give them a new loan to repay their old loan and then it looks like they've got a new loan. The old payment, the old loan was repaid, hence the 98% repayment rate and then you've given them a new loan over say five years rather than two and the monthly repayment or weekly repayment is lowered and you keep them like that. And there's been a lot of discussion about whether Capitec is in that class. I mean, we know they're extending and pretending, but to the extent that they're going to blow themselves up like African Bank did, I don't know. I've heard some really strange things just this last week about the way things are going, so we'll have to see. But you're right, getting data out of financial institutions is very difficult. Also, the regulators and the central bank refuse to do this in many cases because if, say, for example, another country I'm working in, Cambodia, the central government, the banking system, is very protective of the micro-credit industry even though they're massively over-endetting the poor because if any one of them fail, there'll be a real knock-on effect on the credit rating and then loans for the government will then be much more expensive and FDI foreign direct investment might dry up. So they have an inbuilt incentive to say, no, everything's fine, everything's going well, don't do anything. So it's very difficult to even get honest brokers to actually come up with the data to do this. It's a difficult problem. Thank you. Thank you. I think starting from the data question and thinking also about the Basel regulations that you mentioned, I think they're very often linked. One of the things that we do know, and certainly there's been a huge theoretical debate about whether, in fact, the change in Basel regulations have been in fact pinpointing the right things. Should they be looking at liquidity? Should they be looking at the way they do look at it? And it seems to me that central bankers approach the world with a particular paradigm and when they start regulating banks, they apply that and they don't always understand precisely what's going on in the world around them. And so there is this huge problem where often the wrong things attract your own Charles Goodheart, as always said, the problem is the minute you target something, it changes. And so there is this link between what are you measuring, are you measuring the right thing and is that going to enable you to do better regulation? Certainly what we know absolutely from the changes in the Basel regulation is that, of course, it's created huge unintended consequences. So the minute you actually regulate something that leads to this innovation, this arbitrage by banks and clearly what has not happened since the global economic crisis is adequate regulation to really change behavior. If you just look at the indebtedness data of the world, now the global indebtedness is more than three times global GDP. It's grown steadily since 2008. There is no change. There is no sense that we can believe Mark Carney when he says the world is safer, better, whatever else. Farrah, I think he also added Farrah. And I think that relates very much to the notion of you've asked what do we do? You've all asked what are we going to do going forward? And I think one of the things that underpins the work that we do in Ongotayades is trying to understand what is happening with the super profits that are going particularly to the financial sector and now FinTech, big data. The ability of those sectors to capture super profits at the disadvantage of general development, job creation, and the empowerment of ordinary people. And the issue really is somehow trying to find a mechanism to make credit and banking boring again. You know, it was boring probably up until the 1970s, maybe some parts of the 80s. And then it became the big hot thing that could create super profits for everybody. And this has created this kind of self-fulfilling mechanism where increasingly there is no sense or reason in terms of the way in which credit is extended. It is so profitable. You know, again, this question of data. You can hide so much because your model allows you to exist when 25% of your book is not paying because you're charging such incredible rates, incredible fees. It feeds on itself. It's got this massive pyramid capacity of just keep sucking in from the bottom. And this is part of the problem with trying to understand get a grip on it. And it really does need, certainly, regulation at the very highest level and it needs something far more dramatic than what the Financial Stability Board is doing, what the BIS is doing. And then it really needs a rethink at the global and regional levels. One of the important things, I think, that one needs to think about is that simply saying, well, you know, this has been a failed experiment, well, we should just shut it down, does not work. But if you can actually find mechanisms that do work for people, like, for example, cooperative banking, simple dedicated banking that really does address the needs of people who want to have those facilities in some ways but who should not be the exploitation fodder for these industries, I think is essential. I think your point about financial capacity and democratization is exactly to point. Exactly how does one achieve that, though, particularly in a world where, for example, a very recently, an omission in Indonesia. Indonesia is a very large country. It has 17,000, 5,000 islands, five of which we can actually see on the map and the rest are very tiny. They have an average GDP of about 4,000 US dollars per capita and they already want to see themselves as developed. And last week, I was listening to a regulator saying, the best thing that we can do is shut down bank branches and small banks and just go with fintech because what it's going to do is capture the data, push the loans and get everybody up to speed. And this is the kind of speak that has been pushed by the World Bank for many decades and you have countries like that who think that if they can show that everybody has some kind of mobile or transaction capacity and a microloan, then that must be part of the success story of their country. And I think this notion of the future of inclusion is that we have to, somehow, it almost sounds like a kind of a luddite response. You know, we have to forget some of what we've done and go back. But unless we actually really work back to your point, which is, in the past, people were pulled into the system as and when they met reasonable credit worthy requirements and that meant that they had jobs and that they were able to repay. And what has happened is that in many countries, the minute you have a job, it's assumed that you're now credit worthy and will be able to repay and unsolicited loans come your way. Perhaps I'll stop there. Thanks. All right, thank you very much. Sadly, I won't have any time to take any more questions, but you're all welcome to join us for a drinks reception in the senior common room where we can continue these debates. I have two very quick announcements before we all go. Firstly, there is an event by SOAS Justice for Workers starting at 7 p.m. just here in the same room, so quite soon, in around 15 minutes, which includes a film showing of the Limpiadores and a campaign talk back. And secondly, we have created this lovely flyer for our second term of events. Hopefully you all got one. If you didn't, maybe we can find you one. All right, thank you so much for coming and please join me in thanking the speakers.