Financial education via cellphone text message

Project PoupeMais will be tested on 10,000 account holders who are beneficiaries of the Brazilian government’s social programs.

By Suzel Tunes  |  FAPESP Research for Innovation – Offering simple, low-cost technology to implement innovative social transformation projects sounds like a utopian mission but has been a successful recipe for MGov Brasil, a São Paulo-based startup. Founded in 2012, the firm has developed management tools for government agencies, institutes and foundations using cellphone text messaging (SMS) to collect and send information. It now wants to take a step forward by developing its messaging service with the support of FAPESP’s Innovative Research in Small Business Program (PIPE).

The project, called PoupeMais (“SaveMore”), was enrolled directly in Stage 2 of PIPE. Experience acquired in previous ventures by principal investigator Guilherme Lichand, a founding partner of MGov Brasil, enabled the firm to apply for funding to develop the SMS system that will handle financial education messages and collect results.

By early 2018, MGov Brasil’s researchers will also have evaluated the impact of these messages on consumption, credit and savings decisions by the addressees, who will mainly be beneficiaries of the government’s social programs. On completion of the project, Lichand and his partners Rafael Vivolo and Marcos Lopes plan to have developed a financial education product that can be marketed to government agencies and the private sector with the purpose of encouraging healthy financial habits and reducing indebtedness among low-income households.

The use of cellphones to send and collect data is strategic. “Face-to-face data collection is extremely costly,” Lichand says. “It can cost between three and ten times the cost of an interview by cellphone.” Cellphones offer the advantage of being present in some 93% of Brazilian homes, according to the 2016 Survey on the Use of Information & Communication Technology in Brazilian Households (TIC Domicílios).

The drawback of cellphone use is that 46% of Brazilian homes still do not have internet access, according to the same survey. In rural areas, that proportion can reach 74%. Moreover, 65.5% of active subscriptions are prepaid, according to ANATEL, the national telecommunications regulator (data for August 2017). The researchers therefore opted for SMS and collect (reverse-charge) calls. “Any cellphone has this functionality, which doesn’t require the user to have top-up credit to receive content or interact with the system,” Lichand explains.

Reaching the target audience is also a challenge. Contacting cellphone numbers without prior consent is not just banned by ANATEL but also has low response rates. In previous projects, the solution was to establish partnerships with government bodies through which users were invited to take part in a survey.

To develop PoupeMais, MGov Brasil is sending financial education messages to 10,000 people who have an account with Caixa Econômica Federal, the federal savings bank, and are also beneficiaries of the conditional cash transfer program Bolsa Família (“Family Allowance”), one of Brazil’s largest social programs. In April 2017, the startup was included in the bank’s Social Impact Business Challenge, a partnership with the NGO Artemísia. MGov Brasil was one of five finalists, selected from 460 firms that participated in the program by creating solutions in financial education and services for low-income individuals. As a result, it was able to use a real-world situation to test its pilot project developed with FAPESP’s support.

“Account holders were divided into two groups: half began receiving messages in mid-October, and half will start receiving them after six months,” Lichand says. “We’ll be able to compare the impact of the messages on their bank balances and indebtedness.”

In previous projects, MGov Brasil used a messaging system acquired from outside. This time, thanks to PIPE, it has its own system. “The tools available in the marketplace are costly and don’t do half of what we’re able to do now,” Lichand says. The system developed by the firm is smart in the sense that it can perform repeated message delivery attempts. “Operators typically stop trying to send text messages if a cellphone user has no signal. The system we’ve developed tries again later on the same day, and the message is held in the outbox until there’s a signal.”

It took longer than the researchers envisaged to develop their own system. “There was a lot of interaction with suppliers before we reached the present solution. In the future, I’d love to have in-house developers,” Lichand says.

With the system ready to go live, the project completes Stage 2 of PIPE in January 2018, and the researchers hope a Stage 3 award will provide sufficient funding for them to structure a commercialization strategy and sales force, as well as travel and operational support.

Prize for innovation

Previous initiatives by the firm suggest the tool can have a real impact on public policy implementation and the quality of life for ordinary people. Lichand’s first project, developed in 2013 for the Rio Grande do Norte State Department of Planning & Finance, produced significant results. 

“Rio Grande do Norte then had the oldest milk distribution program in Brazil, benefiting 150,000 families every day,” he recalls. “However, there was a suspicion that the milk didn’t reach the people who most needed it and that many beneficiaries resold it to bolster their income. The state government needed to know whether to continue investing in the program or reallocate budget funds to another policy with a real impact.”

For three weeks, with government support, the researchers interviewed 1,000 beneficiaries in 40 municipalities. Interviewees were invited to participate in the survey via the milk program, which offered a prepaid cellphone top-up if they accepted. “We managed to get 70% to take part for a cost of less than R$0.50 per beneficiary,” Lichand says.

Data collection used an automated voice system. The outbound voice message was recorded in a local accent to create empathy, and the addressee replied to the questions simply by entering numbers: 1 or 2 for gender and a score of between zero and ten to rate service, etc.

“At the end of the survey, for the first time in 20 years, the state had a diagnosis of the program,” Lichand says. It was not very positive. According to Lichand, the program was very poor on average, failing to benefit the people who genuinely needed milk. However, the assessment was better in municipalities where the program was locally managed. The results enabled MGov Brasil to suggest decentralization of the program. The Rio Grande do Norte State Government accepted the recommendation, making the program more effective.

The success of this project made Guilherme Lichand internationally recognized. In 2014, he was selected by MIT’s Technology Review as one of the ten most innovative Brazilians under 35. He now plans to offer this technological solution to other governments and public-sector bodies, while at the same time continuing to do research. He has a PhD in political economy and government from Harvard University. Lichand believes that entrepreneurship and research complement each other. The entrepreneur-researcher’s horizons include the construction of a fair society.

Company: MGov Brasil
Site: mgovbrasil.com.br
Address: Avenida Paulista, 171, 4º andar, Bela Vista, São Paulo (SP), 01311-000, Brazil 
Contact: mgovbrasil.com.br/pt/contato