Data, Information and Government’s Feedback Loop

It’s no surprise that governments collect data for their own purposes. At MM4P, we see three broad purposes for doing this:

1. Supervising compliance with laws and regulations: Laws or regulations give the regulator the legal mandate to collect market data with the goal of aggregating it to gauge market stability. Supervising regulated institutions involves assessing their reported data to determine safety and soundness of the institutions. Using aggregated data of all institutions, the data paint a snapshot of market stability.
2. Measuring policy impact: Data are used to measure the impact of a specific law, regulation or policy. If the actual impact differs from the intended impact, the assessment can inform an adjustment to the policy or regulation. An impact assessment may require new data to be collected, but in most cases they leverage historical compliance data.
3. Monitoring market trends: Monitoring market trends and disruptive change may require the collection of additional data, particularly where new products or services are operating in the absence of regulation. As the costs of data collection – including the costs incurred by providers required to manage and report the data – can be high, regulators and policymakers will be pressed to justify such costs by identifying what they expect to learn from the new data.

Governments impact market development with data. Public institutions – such as central banks, statistics bureaus, revenue authorities – who gather data from the market do not do so in a vacuum. In fact they are key players in the information ecosystem. They influence what information is collected by regulated entities who incur costs (in time and money) to manage and report the data. Monitoring the market for emerging trends requires an open-minded approach to policymaking that allows the insights from data analysis to guide policy design.

Photo Credit: Nayan Sthankiya, 2012 CGAP Photo Contest

Private actors also require quality market data to justify investment in services or product design. In many cases, the best information a service provider has is from its own data, some of which is reported to regulators. But collection does not imply usage. There is no guarantee that there is a return on the cost incurred to report data to the regulator. The cost of regulatory compliance can be offset if the data and analytics can be made more useful to all participants in the information ecosystem.

Bank of Tanzania is one institution that is trying to generate maximum value from data collection. It recently revamped its approach to data collection by commissioning demand-side surveys to complement its supply-side compliance data reported by providers. The Bank of Tanzania hopes to use this data to measure progress against the national financial inclusion strategy.

Sharing is caring…about innovation. Providing some form of publicly accessible data has the potential to encourage innovation. Governments can sharing data with the same institutions from whom the data are gathered – a feedback loop. Governments have the capacity to gather demand-side data (via surveys and research), potentially providing insights on service usage and adoption. Combined with supply-side data, governments can control access to data in a manner that does not jeopardize competitive advantage or customer privacy, potentially encouraging providers to report high quality data, knowing they will receive market in return.

Kenya sets an interesting example here with an open data initiative tied to their Vision 2030. Under this initiative datasets are available across government institutions managing water, education, health and financial services, providing the market with broad access to data to guide respective initiatives and investments. For particularly competitive industries (such as financial services) the only thing more valuable than one’s own data is the data about their competitors. If aggregated, anonymous market data can be shared publicly at an appropriate frequency and quality to make it useful, then industry stakeholders will have an additional source of market data to drive competition and product design.

Creating a public dissemination platform for financial service data may be an efficient way of completing the “feedback loop”. In other words, providing stakeholders access to market data (aggregated and anonymized) from a single data source, whose function is to assemble, filter, visualize and disseminate data to the market, would democratize access. Particularly for resources that are already public, such as service locations and infrastructure. FSPMaps.com is a great example here. A rich, public data set is an effective way to enable a wider set of institutional use cases and, if incentives align, encourage sharing of data by users.