5 Public participation
So far we have focused on governmental procedures and institutions. In the mid to late twentieth century these have been the main mechanisms for decision making on national issues like technology policy. But in the last decades there have been changes as the public have organized around their concerns, for example about nuclear power, pollution and risky chemicals plants, and more recently about mad cow disease and genetically modified crops. One of the constraints of formal technology policy approaches has been the lack of formalization of public voices. The degree of formal participation by ‘outsiders’ in complex decisions on technology policy is limited in the UK. The main route for most ‘outsiders’ to gain involvement is via consultation. Individuals or groups with an interest in or expertise on an issue may be invited (or sometimes be legally required) to submit evidence for example to Select Committees or Royal Commissions.
Public concerns and conflicts over some types of technological development have, in recent decades, led to noisy lobbying, major demonstrations, and even direct action against projects. Strong views on environmental protection are now influential across society. While some objections may relate to specific projects, there may also be wider objections to policies or even governments. In addition, there may be significant numbers of people who do not view the formal processes for decision making as legitimate or fair.
More open forms of government are sometimes prescribed as a remedy for at least some of these problems: certainly, as technology becomes more complex and remote from the influence of most ordinary citizens, there would appear to be a need for new ways to resolve major disagreements over the way it is developed and to set widely acceptable paths for the future.
Read Braun’s classic paper ‘Promote or regulate’. While reading it keep the following two basic questions in mind:
- What does Braun suggest are main reasons why Governments develop and apply technology policies?
- To what extent can the development of technology be steered or directed effectively by Government intervention?
The second question of course begs the sub-question – ‘effectively’ in what terms? That raises essentially political issues e.g. to what social economic or environmental ends might such steering be directed, and who decides? You might also ask, should governments seek to intervene in shaping technological development at all? As you will see Braun has his own views on this issue, as no doubt you will have.
In his paper Ernest Braun explores roughly the same ground as has been covered in this text so far, but provides more detailed insights on why and how governments attempt to promote and/or regulate innovation. The following exercises are designed to bring out some of the key points.
Write a brief list of the key reasons why, according to Braun, governments engage in the attempt to influence technological innovation. Then compare your list with the one below.
Reasons for Government Involvement
Braun outlines some of the basic possible reasons in section 2.1 of his paper:
- 1 In order to strengthen the economy by stimulating economically successful technological developments. This is the promotion role.
- 2 In order to regulate technology, so as to avoid socially and environmentally undesirable developments. This is the regulation role.
- In section 3 of his paper he adds some more, perhaps subsidiary, reasons:
- 3 In order to reduce the risks faced by the private sector, though this could be seen as in support of 1 above.
- 4 In order to meet strategic national objectives, which may include ‘social’ objectives e.g. meeting specific social needs, providing employment, or environmental objectives, or defence related objectives.
Write a brief list of how you think governments might seek to influence innovation and the development of technology, i.e. what policy measures are available to them. Then compare your list with Braun’s Table 1 in section 4.1 of his paper, and read the discussion below.
Mechanisms for influencing technological innovation
How governments seek to influence innovation may be classified in many ways. Your study of this Block so far should have helped you come up with a general list e.g. in terms of R & D support, support for technology transfer and demonstration projects, the provision of subsidies and so on.
Braun’s taxonomy in his Table 1 goes further. It is quite complex, but it highlights some useful distinctions. He provides a categorisation by ‘policy domains’ (left hand column). He distinguishes (in succeeding columns) between direct and indirect mechanisms, between general and specific targets, and between the various stages in the innovation process at which support might be given. Whether or not you find Braun’s table useful, it does highlight the fact that the various mechanisms can have differences in focus.
Braun provides some brief examples, within this matrix of classifications, in the table. More flesh could be put on each entry as follows: for example at one extreme we might have direct R & D support for specific technologies targeted at specific companies; a less focused approach would be indirect financial incentives like taxation, presumably affecting a wide range of companies and products; and at the most general we might have the background provision of support for innovation via information, education and training schemes.
In subsequent sections of the paper, Braun then goes on to describe each of these mechanisms in more detail.
In addition to reviewing the various mechanisms available to governments for influencing technological innovation, Braun goes beyond the purely descriptive to ask to what extent should government be involved.
Clearly he feels there is a need for more than purely commercial considerations to enter the equation: he asks whether ‘social needs’ can be fed into the technology assessment and prioritisation process, and more radically, whether this might even result in the conclusion that innovation as such was not the answer.
Braun argues that the rate of innovation may be too fast, with new ‘planned obsolescent’ products being introduced ever more rapidly just in order to increase profits, without significant gains in use-value or utility. Indeed he suggests that not only have environmental problems worsened, but also that some aspects of rapid technological development may not have been beneficial in social terms.
This challenges the basic belief that technological progress and social progress are fundamentally linked. Certainly there are now clear signs that rapid technological ‘advance’ has had an increasingly negative impact on the environment, and may not be sustainable, in its current form.
The issue is perhaps whether technology can be managed and improved to avoid these problems, and if so, by what political/social means, although Braun seems to despair of this being possible.
SNAPSHOT:Mobile Money Speeds Commerce
Mary Mwangi has a small general store in Meru, Kenya. She has just received a call from a family friend and occasional supplier of stock to her shop who lives in Nyeri, nearly 100 miles away. She is told that for Ksh 7,000 (about $100 US) she could secure a supply of kitchenware for less than half the usual price, as long as she can pay for it today. This is a good opportunity for Mary as she knows that she can sell these goods in Meru at a profit.
How does Mary secure this deal quickly? Time and distance are not on her side. She doesn't hold a bank account and neither does the supplier. She does have the cash but it is in her Meru store. She could send her money with a friend on a bus to Nyeri but it will take most of the day and cost a significant part of her profit. Traveling with money is also a risk as highway robbery is not uncommon.
The answer lies in M-PESA (pesa is the Swahili word for cash). Mary recently registered with Safaricom to open an M-PESA account. This was a simple process that gave her access to an e-money account managed entirely through some simple menu instructions on her prepaid cellphone. Ten minutes after the call from her friend, Mary has been to a local Safaricom Airtime Dealer (of which there are several in Meru) and has deposited Ksh7,000 into her M-PESA account.
This is very similar to topping up he prepaid cellphone airtime, except she is loading cash into her M-PESA virtual account. A few minutes later Mary has returned to her shop where she sends an SMS text message instructing M-PESA to transfer half the cost of the goods to her friend's M-PESA account, effectively securing the purchase with a real time funds transfer. The goods are dispatched to Meru on the next bus, and when they arrive Mary settles the remaining money by sending another text message instruction to the M-PESA service. Making this payment quickly and securely by cellphone cost Mary Ksh60 (less than a dollar).
The M-PESA service is fast, secure, and very cost-effective. It is opening up new opportunities for businesses like Mary's all over Kenya as well as supporting person-to-person money transfers, or remittances, which are common in many economies where the bread winner supports an extended family, often many miles away. (Hughes and Lonie, 2007, p.63)
How did it happen?
M-PESA was the result of a good idea and fortuitous circumstances. Against a backdrop of donors looking for new ways to deliver funds to those in need and a growing focus on alleviating poverty by encouraging enterprise, “a hand-up rather than a hand out” (Hughes and Lonie, 2007), the UK’s Department for International Development (DfID) were looking for opportunities to use their capital to encourage business through joint investments with the private sector. Vodafone top executives had an idea that they were looking for sponsorship for. They pitched for DfID funds and were successful in winning £1million, funds which the company matched. Thus, DfID helped subsidize the investment risk. Vodafone had part ownership of a local telecoms company, Safaricom, who would launch the M-PESA project with the help of a project manager from Vodafone.
M-PESA as a project faced formidable financial, social, political, technological and regulatory hurdles. In-order to implement, Vodafone, as the parent company, had to marry the incredibly divergent cultures of global telecommunication companies, banks and microfinance institutions and at the same time negotiate the large and often contradictory regulatory requirements.
(Adapted from: Hughes and Lonie, 2007)
If you want to find out more about M-PESA the following URLs have been provided:
Both Vodafone and DfID were critical in realising this project. The Department for International Development made available a public sector challenge loan to Vodafone. These are loans made available to the private sector for initiatives that address challenges to providing a public good. This loan defrayed some of the risk to Vodafone, who matched the DfID funding, and made the project viable. Vodafone provided a project manager to Safaricom to provide the necessary expertise to expedite the project and to negotiate the legal regulatory framework in Kenya as well as bridging the different cultures of companies involved in delivering the innovative technology. As Mas and Radcliffe (2010) have written:
M-PESA’s market success can be interpreted as the interplay of three sets of factors: (i) pre‐existing country conditions that made Kenya a conducive environment for a successful mobile money deployment; (ii) a clever service design that facilitated rapid adoption and early capturing of network effects; and (iii) a business execution strategy that helped M‐PESA rapidly reach a critical mass of customers, thereby avoiding the adverse chicken‐and‐egg (two‐sided market) problems that afflict new payment systems.”
The next case study clearly built on the M-PESA technology reinforces many of the learning points from the M-PESA case study. Thus, the success of a technology is a blend of social and technological developments. Thus, the responsiveness of Kenyan society to a range of simple, secure and cheap financial products offered through developments in mobile telephony produced a successful synergy.
Read the M-KESHO case study and answer the following question.
Recalling Taylor’s discussion of incremental innovation in unit 1, discuss how the M-KESHO case study illustrates this concept. Taylor defined incremental innovation as ‘technological modifications or improvements to an existing product, process or system.’ (1996, p.16)
M-KESHO in Kenya: A new step for M-PESA and mobile banking.
M-KESHO is a savings account that is the result of a partnership between M-PESA’s Safaricom and Equity Bank in Kenya. M-KESHO customers, as with M-PESA, do not get charged huge fees (only a small withdrawal fee but no opening or monthly account fees) and the accounts do not require minimum balances. However, this account does pay interest. They are also linked to an emergency credit and insurance facility. The flexibility of the M-KESHO account sets it apart from a regular bank based savings account. Instead of only being able to conduct transactions against the account at one of the 140 Equity Bank branches in Kenya, M-KESHO customers can use any of the 17,000 M-PESA retail outlets. This is because the account works in a similar way to any other mobile banking application through a user interface on the mobile phone. It is also available through Equity Bank’s own mobile banking service. Customers can deposit or credit money to their account using their M-PESA account and which they turn into cash at the M-PESA outlet.
Safaricom is now discussing with other banks to see if they want to use M-PESA to make their banking options for customers more flexible. There is currently however, a short-term exclusively term in the contract between Safaricom and Equity Bank relating to co-branding, use of M-PESA agents and user-interface integration.
Some of the key features of M-KESHO and the operation;
|Product suite||M-KESHO is a package of financial products issued by Equity Bank that runs on the M-PESA transactional lines. The core product is a savings account, but account holders can also tap into loan and insurance facilities.|
|Branding||It is jointly branded by Safaricom and Equity Bank – they own the brand and logo jointly. The first part of the logo takes after the M-PESA logo, while the second part has the brown colour of Equity (to me it looks more M-PESA-like than Equity-like). ‘Kesho’ means ‘future’ in Kiswahili. So they are positioning this as a more aspirational service than M-PESA, which is more functional.|
|Marketing:||Equity Bank and Safaricom have developed a joint marketing plan with joint funding to market M-KESHO.|
|Account terms||Like existing Equity and M-PESA accounts, the savings account has no account opening fees, minimum balances or monthly charges. Like M-PESA accounts, there are no monthly statements or passbooks. Unlike M-PESA accounts, it pays interest (though not very much: 0.5%-3% depending on saved balance) and does not have a limit on account balances.|
|Account linkages||M-KESHO customers must have an M-PESA account (and hence be a Safaricom customer). In addition, they may have a normal Equity Bank account and this can be linked to their M-KESHO bank account, but that is not required.|
|Account opening||Under the new agent banking regulations in Kenya, account opening cannot be delegated to agents. So account opening will take place either at branches or at a subset of some 5,000 M-PESA agents at which Equity Bank will place a bank representative. (These are students paid on commission) Customers must bring the original plus a photocopy of their ID and two photographs (at agent locations their picture will be taken on the spot with a digital camera). Customers complete a relatively short and simple application form, but accounts won’t be active until 48 hours later.|
|Account management||M-KESHO accounts are held in a server that is owned, hosted and operated by Equity Bank. Equity Bank has the right to up-sell M-KESHO customers to full Equity Bank accounts when their account balance reaches KSH 10,000 = USD 133.|
|Deposit/withdrawal options:||M-KESHO only takes electronic transactions, offering no direct cash in/out possibilities. Money can flow into and out of the M-KESHO account either from a customer’s M-PESA account or (optionally) from a normal Equity Bank account. M-KESHO customers can’t do cash transactions at an Equity Bank branch teller, but of course Equity branches are M-PESA agents so they can first cash into either their M-PESA or Equity Bank account and then transfer the amount into M-KESHO. M-PESA’s minimum transaction size of KSH 100 = USD 1.30 and maximum transaction size of KSH 35,000 = USD 467 also apply to M-KESHO.|
|Accessing M-KESHO through Safaricom’s M-PESA phone menu||M-KESHO customers will have one more item on their M-PESA menu that says ‘M-KESHO’ (their M-PESA menu will get refreshed automatically over the air upon registration). A submenu then allows customers to fully manage their M-KESHO account: transfer money to/from their M-PESA account, request a balance inquiry or mini-statement (last five transactions only), and apply for the loan or insurance facilities.|
|Accessing M-KESHO through Equity’s Easy 24x7 phone menu||Equity has its own mobile phone user interface for its customers, available through a number of channels: JAVA, WAP and USSD. Customers will have the option of managing their M-KESHO account (including transferring money in either direction between their M-PESA and M-KESHO accounts) from either their M-PESA phone menu or through the Easy 24x7 service.|
|Credit facility features||Loans must be requested from the mobile phone, and are for amounts between KSH 100-5,000 = USD 1.30-67. Equity intends to use a credit scoring system based on the balance and transactional history of the customer on their M-PESA, M-KESHO and normal Equity accounts (if any) for the previous six months. There is an application fee that depends on the amount, ranging from KSH 20-500 = USD 0.27-6.67. Overdue interest is charged at 3% of outstanding balance.|
|Insurance facility features||This is limited to personal accident insurance for the first year, then it is upgradeable to full life insurance cover. It is optional, and customers apply through their mobile phone. Annual premium is KSH 530 = USD 7 if paid annually in advance (the premiums are higher if customers choose to pay on a monthly or weekly basis reflecting the time value of money.|
If you want to find out more about M-KESHO the following URLs have been provided:
- M-KESHO in Kenya: A new step for M-PESA and mobile banking; article by Ignacio Mas, Bill & Melinda Gates Foundation
- Kenya: M-Kesho Heralds a New Dawn for E-Commerce
- M-PESA meets microsavings with Equity Bank deal in Kenya, Jim Rosenberg: Tuesday, 18 May 2010
M-KESHO built on the success of M-PESA. It developed the M-KESHO product to offer a further range of services to customers that acknowledged the demand for a more sophisticated and varied offering of financial products through mobile telephony. Taylor defined incremental innovation as ‘technological modifications or improvements to an existing product, process or system.’ (1996, p.16). While the case study does not tell us much about the technological developments, it is likely that the extension of services required the development of new functionality for the M-PESA user interface on customers’ mobile phone and compatibility with Equity Bank’s own mobile banking service.