Lawry,
Amazing how people can be so definite about wildly different interpretations of something. REH From: [email protected] [mailto:[email protected]] On Behalf Of de Bivort Lawrence Sent: Wednesday, November 03, 2010 3:49 PM To: Keith Hudson Cc: RE-DESIGNING WORK, INCOME DISTRIBUTION, , EDUCATION Subject: Re: [Futurework] Fascinating from India Hi, Keith, Actually, hawala operates on a wide scale. It is a network of financial networks and spans many countries. That is, hawala can process transactions into areas they don't do business with directly through third party hawala. The network can also aggregate large sums that individual hawala stores can't cover. Millions of people use it reliably for large and small transactions and movement of cash. Hawala are used for personal transactions as well as commercial ones, i.e. between individuals who are related, as well as companies that are carrying out normal business transactions. Many hawala 'stores' exist and compete with each other. For example, in a city like Washington, some three or four-dozen hawala operate. I'm not clear why you say it isn't scalable? And then there are the numerous financial transfer organizations -- store-fronts -- that labor immigrants in the US use to remit funds to central and south America, among others. In Washington, I would guess that these number in the many hundreds, though I imagine that there is considerable aggregation behind the store-fronts. It is true hawala exist on trust, and those that fail this disappear pretty quickly. The key here is that a hawala's success depends on repeat business, e.g. bi-weekly or monthly transfers. Any failure to transfer the money will be immediately noticed and the word would go out throughout the community using the hawala very rapidly. Don't all banks operate on a basic level of trust? As did the Templar system. As does, the system described by Friedman. The only difference, as far as I can tell, is the use of mobile phones to register and track the transactions, and the software needed to support the phone transactions. Western Union is another example of this kind of geographically dispersed financial network. The corporate brand that stands for Western Union's reliability is no greater than that of a hawala, and for the same reason: it works, works quickly, easily, and well. Like hawala, any failure of Western Union to deliver the commissioned funds will be immediately noticed by the depositors and this ensures that Western Union maintain its reliability or lose its business. Using mobile phones is a nifty improvement (as is mobile phone banking) but I don't see it as the grand innovation that Friedman posits. The use of mobile phones to process transactions does not diminish the need for trust, nor does it create a larger or more 'scalable' system than that already provided by the hawala . Perhaps Friedman doesn't appreciate the size, flexibility, reach, and reliability of hawala, as he dismisses it as a 'hand-to-hand' operation, when it is, as I hope I've been able to explain here, far from that. Cheers, Lawry On Nov 3, 2010, at 3:13 PM, Keith Hudson wrote: Hi Lawry, The EKO system that Friedman describes is a different beast from hawala. It's scalable, while hawala isn't. Hawala only operates in small networks where the individuals can trust one another completely -- usually between relatives or via a village elder, but they don't spread much wider than that. The money flowing through the EKO system is recordable at every stage and doesn't depend on personal trust so it could spread very widely indeed -- as it is already showing signs of doing. Western governments have been able to lean on the phone companies in order to prevent this development so far. Over here, it could greatly stimulate the grey economy developing more widely. Keith At 11:35 03/11/2010 -0400, you wrote: Friedman entirely misses the point. The system he describes is quite old. It is the hawala system -- which in this article he mischaracterizes as "hand-to-hand" -- pure and simple, with transactions recorded via mobile phones. Hawala was always a "virtual bank." His larger speculation may have merit, but his example doesn't support his speculation. Interestingly, the Knights Templar created for Europe a similar system and, together with what could be considered one of the world's first institutionalized, non-governmental intelligence networks, became extremely powerful. The Templars in creating their "virtual" banking system, copied the Muslim hawala system, which predated it by some centuries. Had I read the Hindustan Times article Friedman cites, I would instead have ruminated on the significance of mobile access at the top of Everest, and what it symbolizes for humankind. Cheers, Lawry On Nov 3, 2010, at 7:26 AM, Keith Hudson wrote: Here is one of the most interesting articles I have read in a long time -- from today's NYT. Keith <<<<< DO BELIEVE IN HYPE Thomas L. Friedman The Hindustan Times carried a small news item the other day that, depending on your perspective, is good news or a sign of the apocalypse. It reported that a Nepali telecommunications firm had just started providing third-generation mobile network service, or 3G, at the summit of Mount Everest, the world's tallest mountain, to allow thousands of climbers and trekkers who throng the region every year access to high-speed Internet and video calls using their mobile phones. I can hear it already: Hi, mom! You'll never guess where Im calling from . . . This is just one small node in what is the single most important trend unfolding in the world today: globalization -- the distribution of cheap tools of communication and innovation that are wiring together the world's citizens, governments, businesses, terrorists and now mountaintops -- is going to a whole new level. In India alone, some 15 million new cellphone users are being added each month. Having traveled to both China and India in the last few weeks, here's a scary thought I have: What if -- for all the hype about China, India and globalization -- they're actually underhyped? What if these sleeping giants are just finishing a 20-year process of getting the basic technological and educational infrastructure in place to become innovation hubs and that we haven't seen anything yet? Heres an example of why I ask these questions. It's a typical Indian start-up I visited in a garage in South Delhi, EKO India Financial Services. Its founders, Abhishek Sinha and his brother Abhinav, began with a small insight -- that low-wage Indian migrant workers flocking to Delhi from poorer states like Bihar had no place to put their savings and no secure way to send money home to their families. India has relatively few bank branches for a country of its size, so many migrants stuff money in their mattresses or send cash home through traditional hawala,or hand-to-hand networks. The brothers had an idea. In every Indian neighborhood or village there's usually a mom-and-pop kiosk that sells drinks, cigarettes, candy and a few groceries. Why not turn each one into a virtual bank? So they created a software program whereby a migrant worker in Delhi using his cellphone, and proof of identity, could open a bank account registered on his cellphone text system. Mom-and-pop shopkeepers would act as the friendly neighborhood local banker and do the same. Then the worker in New Delhi could give a kiosk owner in his slum 1,000 rupees (about $20), the shopkeeper would record it on his phone and text receipt of the deposit to the systems mother bank, the State Bank of India. Then the workers wife back in Bihar could just go to the mom-and-pop kiosk in her village, also tied into the system, and make a withdrawal using her cellphone. The shopkeeper there would give her the 1,000 rupees sent by her husband. Each shopkeeper would earn a small fee from each transaction. Besides money transfers, workers could also use the system to bank their savings. Since opening 18 months ago, their virtual bank now has 180,000 users doing more than 7,000 transactions a day through 500 branches-- mom-and-pop kiosks -- in Delhi and 200 more in Bihar and Jharkhand, the hometowns of many maids and migrants. EKO gets a tiny commission from the Bank of India for each transaction and two months ago started to turn a small profit. Abhishek, who was inspired by a similar program in Brazil, said the kiosk owners are already trusted people in each communityand are already in the habit of extending credit to their poor customers: So we said, "Why not leverage them?" We are the agents of the bank, and these retailers are our subagents.The cheapest cellphone today has enough computing power to become a digital mattress and digital bank for the poor. The whole system is being run out of a little house and garage with a dozen employees, a bunch of laptops, servers and the Internet. The core idea, says Abhishek, is to close the last mile -- the gap where government services end and the consumer begins.There is a huge business in bridging that last mile for millions of poor Indians -- who, without it, can't get proper health care, education or insurance. What is striking about the small EKO team is that it includes graduates from India's most prestigious institutes of technology who were working in America but decided to come home for the action, while the chief operating officer,Matteo Chiampo, is an Italian technologist who left a good job in Boston to work here where the excitement is, he said. India today is this unusual combination of a country with millions of people making $2 and $3 a day, but with a growing economy, an increasing amount of cheap connectivity and a rising number of skilled technologists looking to make their fortune by inventing low-cost solutions to every problem you can imagine. In the next decade, I predict, we will see some really disruptive business models coming out of here -- to a neighborhood near you. If you thought the rate of change was fast thanks to the garage innovators of Silicon Valley, wait until the garages of Delhi, Mumbai and Bangalore get fully up to speed. I sure hope we're ready. >>>> Keith Hudson, Saltford, England _______________________________________________ Futurework mailing list [email protected] https://lists.uwaterloo.ca/mailman/listinfo/futurework Keith Hudson, Saltford, England
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