The Perfect Storm: A Continent, A Phone, A Business Model

In the mid 1990s, in a small city in northern Finland, engineers and designers began work on the product development of a mobile phone that would eventually become one of the best selling Nokia models ever – the 3310, released in Europe and the Far East in the year 2000. The continent of Africa was not yet on their radar as a target market. Its iconic success for its legendary durability was still some years in the future, as was its impact on sub Saharan Africa.

Around the same time, in 1994-5, Portugal Telecom’s mobile telephony division TMN, invented the prepaid business model whilst researching ways to lower barriers to credit, and thus reach a wider audience for their services. They, too, weren’t thinking about the farmers, traders, or vegetable vendors on the African continent, for whom the prepaid plan was to be a godsend, matching their needs for flexibility and control over timing and amounts expended on cellular services. This, too, was still a handful of years in the future.

Meanwhile, across the African continent, the 1990s were a bleak time of rising prices, dropping employment rates, and meagre economic growth. African nations were still adjusting to the impact of the Structural Adjustment Programmes (SAPs) imposed by the IMF and the World Bank in their attempts to boost the lacklustre developmental progress. Hundreds of thousands of civil servants had been laid off as Africa strove to meet the demands of liberalization and globalization [aka Washington Consensus] and young graduates left universities with few opportunities and fewer jobs. Uncertainty was rife, as Cameroonian scholar Walter Gam Nkwi observed1, and this was to prove to be a fertile field for the perfect storm that was on its way.

Liberalization of state owned monopolies such as in telecommunications in the mid 1990s opened the doors to private sector operators in cellular telephony, and thus, to competition. In the early days, circa the late 1990s, telcos used a forecasting model for sales and revenue projections to inform service pricing and payment plans that was reliant on number crunching annual growth in adoption rates from a hundred different markets where mobile telephony had already been introduced 2, and then compared against a selected basket of countries with similar economic and demographic attributes to their target country. This approach provided metrics that were to prove to be laughable within the decade. For instance, in 1999, Kenya’s Safaricom forecasted reaching 3 million subscribers by the year 2020 (Kenya crossed 41 million subscriptions in 2018), and Botswana’s Mascom3 to consider themselves comparable to Germany if they met the target of 6000 subscribers per year in the first three years.

These modest forecasts led to telcos assuming a High Margin; Low Volume business model targeting the wealthy who would be eligible for credit required for a monthly subscription. In addition, they expected businesses, government departments, and non govenmental organizations of all stripes to sign up for reliable communication services given the inadequate fixed line infrastructure and the moodiness of its service quality. After all, Africa’s declining growth in the 1980s and 1990s, together with the SAPs, had made a hash of the economy and poverty was endemic. Nobody really expected much from these markets, and investments in cellular infrastructure was limited to capital cities, major trunk roads, and a handful of other urban clusters.

It took two African visionaries, independently, to consider the prepaid business model as the key to Africa in 1998. For Strive Masiyiwa, it had been a long hard fight for 5 long years to crack the telecommunications monopoly tightly held by Mugabe’s government before he was able to launch Econet Wireless with its Buddie prepaid plan, transforming the Zimbabwean market. In London, a Sudanese telcom engineering consultant, Mo Ibrahim, saw the fortune at the bottom of the pyramid that an African mobile services operator could reap, if only he could make it happen. For him too, prepaid was the wedge that would drive demand among the African populace navigating economic uncertainty on irregular incomes. Celtel would go on to pioneer per second billing in LDCs like Malawi in 1999, and capture the lion’s share of the market as price and service became affordable in the bite size pieces that began to match local cash flows. Both men would later be quoted as saying it was prepaid that made their fortunes.

Mobile telephony adoption in sub Saharan Africa (Source: IFC)

Rapid improvements in the prepaid billing model made by advances in software and switching technology, as well as GSM standards for telecommunications, again led by the Finns in their northern stronghold, over the next few years made all the difference as they permitted greater fractionalization of purchasing power thus lowering the barriers to adoption for the vast majority of the population. By 2003, airtime vouchers for voice and text messaging on mobile phones could be purchased for as little as 50 cents, if not less. This ability to purchase bite size pieces of communication triggered the hockey stick curve of adoption of mobile telephony seen in the chart above.

End of life 1998 model Nokia in use in 2008, South Africa

By this time, the robust well engineered Nokia models of the late 1990s were entering the secondhand markets, both locally in Africa, as well shipped in bulk from the wealthier markets of Europe, as people upgraded their devices to keep up with the times. Available for as little as $10 or $20, end of life Nokia phones were suddenly made affordable for the masses, who did not hesitate to put down their hard earned shillings or kwacha or rands for the chance to become connected, at last. Hand me downs by wealthier relatives and devices sent home by migrant workers also played their part in this heady period of adoption and growth. It would take the visible impact of the hockey stick curve of growth for Nokia to turn their focus on the African consumer and her needs, before phones were being designed and built for this market.

Photo Credit: Ken Banks, kiwanja.net

This was the perfect storm of design, engineering, and business that came together on a fertile field to create exponential growth in mobile handset sales and mobile service subscribers in Africa (among the informal economy) that would lead to the next 15 years of annual growth rates of more than 30%, only beginning to show signs of slowing down in 2018.

There was a flurry of research on understanding the impact of mobile telephony in the informal economy and among the low income demographic also known as the bottom of the pyramid in the early years of mass market penetration circa 2007 to 2010, but there has been little or no study taking the long view of the changes that the sudden intervention of modern telecommunications and ICT have made on society, particularly among small businesses, traders, and manufacturers in the informal sector. Commerce and finance have been disrupted by the mobile in the past ten years, and daily life including rural/urban linkages and relationships impacted for the past fifteen years.

What can we learn about this digital society emerging without the trappings of legacy infrastructure and institutions? Early signals of a decentralized digital economy are emerging, and in today’s context, what can these emergent and novel models of supply chains, distribution, marketing, and commerce show us for the future ways of organization for inclusion and impact in our increasingly smaller and more connected world?

Now, what I will study is the longer term transformations that have taken place in the past 15 years in Africa, using the case of Kenya – the world’s leading mobile money market and the testbed of innovative products and services on the mobile platform for startups and companies from around the world.

Posted in Africa, African Consumer Market, Afrique francophone, Airtime, Analysis, Articles on Design and Innovation, Base of the Pyramid, Biashara Economics, Business Models, Cashless transactions, Commerce en ligne (e-commerce), Consommateurs, Consumer Behaviour, Design, Economy, Ecosystem, Emerging Futures, Emerging Markets, Flexibility, global, Informal & Flexible, Innovation Planning, Kenya, Mobile platform, perfect storm, Perspective, Platforms, Prepaid Economy & Informal Sector, Research, Rural Economy, South Africa, Sub Saharan Africa, Systems, Technology, User research | Tagged , , , , | Leave a comment

The African Continental Free Trade Agreement and the Age of Interoperability

I have been writing on cross border mobile financial flows across the African continent since early 2015, when the partnerships and agreements made between African telcos to provide interoperability between their mobile money services first began to hit the headlines. In my last post back in August 2016, I asked if Cross Border Mobile Money Would Boost intra African Trade and Regional Integration?

Today, however, recent moves have made this question moot, and inspired me to dive into the topic again. Transformation is taking place across the African continent, than simply innovation on the mobile platform alone, one directly leading to greater regional integration and intra African trade.

The African Continental Free Trade Agreement (AfCFTA)

Fifty-four African nations met last weekend in Niamey, capital of Niger, to launch the pan-African free trade zone, the world’s largest. The AfCFTA aims to, among several other objectives, create a single market for goods and services and facilitate the free movement of people, capital, goods and services. If the massive deal works as hoped, it will connect 1.3 billion people, creating a $3.4 trillion single continental market, not unlike the European Union. Such trading is expected to begin on July 1st, 2020.

What caught my attention was a little snippet from the essay written by the former Indian High Commissioner to Nigeria, Mahesh Sachdev.  He not only points out that informal cross border trade is rife across the continent, but that with the launch of the AfCFTA, Africa was finally dismantling one of the last major legacies of colonialism – the artificially drawn borders breaking up and fragmenting the ancient overland routes criss-crossing the continent since prehistory. Sachdev concludes:

Subsequent colonialism and mercantilism destroyed internal trade routes, replacing them with an ecosystem in which Africans had better links with their foreign “mentors” than among themselves. By the AfCFTA, the Africans are only trying to correct this historic distortion.

https://www.tralac.org/resources/infographic/13795-status-of-afcfta-ratification.html as of 8th July 2019

The Challenge of Intra African Financial Flows

Financial flows across the continent will be critical for the success of the AfCFTA. Stone Atwine wrote a couple of months ago:

…we can’t facilitate trade without smooth payment systems. It is particularly difficult to move money between African countries. The current regional payment systems are of poor quality or completely non-existent. Cross-border payments are expensive and sometimes slow, which is not ideal for regional trade.

In fact, cross border flows, particularly between currency regions such as those prevalent in Francophone West Africa and her neighbouring Anglophone countries of Ghana or Nigeria, are expensive and difficult because they must be settled outside the continent. The most recent SWIFT report illustrates the situation clearly:Transactions take time and money in fees and currency exchange losses through the formal financial and banking system. Nigeria’s regional traders often prefer to use the parallel market, through the regional Hausa currency bureaux networks, for direct naira to CFA franc conversions, and research quotes wholesale commodity traders on their need to carry sacks of paper money across the border to complete their transactions.

More recently, Mouhamed Kebe points to the need for the liberation of financial services as the key to unlocking the full economic potential of the continental market. And, at Niamey last week, the Afreximbank launched the first continent-wide digital payment system to facilitate payments for goods and services in local currencies – the Pan-African Payment and Settlement System (PAPSS).

However, what is being overlooked by both Atwine and Kebe is the informal trade ecosystem prevalent across the continent, the majority of whom may not consider their bank as the first choice for transactions. As the former Indian diplomat in Africa, Mahesh Sachdev writes:

Indeed, the logistical and financial networks across the continent are poor and customs formalities are foreboding, but these can be eventually overcome with stronger political will. Moreover, vigorous “informal” trade across porous national borders is already a fact of African life.

Africa’s informal cross border trade networks

It is this vigorous informal cross border trade and its reach, scale, and impact, that is currently being overlooked in all the assessments of the future of intra Africa trade in goods and services, financial or otherwise. Only rough estimates are available for the value of the informal flows across borders in Africa, some of which are given with caveats that the margin of error could be as high as 40%. What is known, however, that 4 times as many cross border traders are likely to be operating outside the ‘formal’ economy, than are within it.

The most common reason given is the bureaucratic nightmare clouding every aspect of international commercial activity, sometimes more so when its a neighbouring country. Benin’s Port of Cotonou, for instance, has grown into a major revenue base and employer by serving the much larger Nigerian market’s import needs. The changes to be instituted for the AfCFTA to be active will take time and effort to implement. Trade will not pause in the meantime, and it remains to be seen how the informal trade ecosystem will be affected, if at all.

Women play a significant part in informal cross border trade, although their role and market visibility tends to depend on their region’s culture and norms. In West Africa, women who trade have garnered respect, reputation, and influential power, the most successful coming to be known as ‘Nana Benz’.

Cross border trade networks, Olivier J. Walther et al (2015)

Finally, intra African informal cross border trade is neither ‘informal’ in the sense of casual or ad hoc, nor is it simply the purview of the marginalized and vulnerable as INGO reports would have it. The extensive research conducted by scholars like Olivier J. Walther, and others at the OECD’s SWAC, inform us that traders and their intermediaries form extensive social networks spread across their region of activity, able to coordinate and complete complex transactions with a brief phone call.

Informal Package Tracking at Kenya-Uganda Borderland. Photo by Michael Kimani, December 2015

The Role of the Mobile Phone

Its that brief phone call – the one that informs a far flung currency bureau outlet of a Hausa or Somali trader’s cash needs and validates the recipient. The phone number that acts an “informal” package tracking mechanism. The call that brings an order from a regular customer “across the border” and provides the means to receive his payment via mobile money.

Its the mobile phone that connects the far flung networks, whether directly through a phone call, or indirectly through various social digital platforms. And, its the phone that boosts the trading capacity and reach of the businesswomen who now don’t need to cross the border with their goods on their head. As their network of customers and vendors stabilize, this powerful handheld device becomes their primary tool for commerce and communication. Many traders leave their bank accounts dormant, and turn to the convenience of mobile money – agents tend to be part of their daily transactional network and facilitate services such as cashing in and out at times convenient to the businesswoman rather than to the bank.

MPesa merchant paybill numbers distinguished by destination – mobile wallet and bank account, photo by Niti Bhan, February 2019

Mobile money has only increased their efficiency and productivity, whether its receiving small amounts directly into their wallet, or whether its large payments facilitated by such services as MPesa directly into their bank accounts. Though workarounds have already been established for cross border digital payments such as visible at the borderlands of Uganda and Kenya – wholesalers’ agents in Kampala keep a Kenyan SIM active for MPesa payments – African telcom providers have already recognized the importance of interoperability for boosting transactions and revenues.

Slow to pick up pace, as telco negotiated with telco, what 2019 brings us is the ‘age of interoperability‘, now seen as a key facilitator for economic growth. And, it is this that is driving the dream of regional integration while lowering costs and increasing efficiencies of intra-African, all the while remaining under the radar of institutions and their observers. And, it takes the concept of seamless digital payments on the mobile platform beyond the scope of simply mobile money or p2p transactions, as we will see.

The Age of Interoperability

While Tanzania is considered first to have established interoperability of mobile money services, it is Ghana who has surpassed the entire continent in adoption of mobile money and in the implementation of interoperability between various financial payments platforms.

…seamless cross mobile money network transactions became possible in May 2018, following a challenge thrown to the Ghana Interbank Payment and Settlement System (GhIPSS), the telcos and financial institutions […] described the Mobile Money Interoperability (MMI) initiative as successful. He said it has provided a very efficient way of funds transfer for many people, opening up the mobile money payment platform and enabling people and businesses to use it in different ways. Beginning with just 96,907 transactions in its first month, public usage of the cross-network platform grew phenomenally to 502,873 transactions in May 2019.

Interoperability has boosted the use of mobile money payments, and even telcos deem it to be a profitable undertaking. Two major telcom providers across the African continent joined hands to launch a pan-African mobile money platform – Orange and MTN’s Mowali. The GSMA – the telco industry’s global body – is very excited by this move, and help us understand the power of interoperability on a continental scale:

Interoperability solutions make it possible to send money between any two financial accounts, transforming the financial landscape for everyday consumers. Greater interoperability of financial services, including across mobile money accounts, stands to accelerate growth in Africa.

The objective of Mowali is to encourage the everyday usage of mobile money by unlocking access to a diverse payments ecosystem beyond the individual user’s own provider. The introduction of a common payments acceptance brand through Mowali will accelerate online and physical merchant payments. International remittances, payroll services, and a wide range of other financial services will also be made easier by the convenience and reach that Mowali will bring to consumers across the African continent.

In addition to industry led initiatives, mega donors are cashing in the game from the perspective of the financially excluded. Francophone West Africa’s BCEAO bank has just received a grant from the African Development Bank (supported by the Gates Foundation) to develop an interoperability platform for its member countries – the West African Economic and Monetary Union (WAEMU).

The grant will create an interoperable digital payment system that will allow consumers to send and receive money between mobile wallets, and from these wallets to other digital and bank accounts. That is, the WAEMU countries that surround Ghana will now also be working towards the same degree of interoperability for digital payments, in parallel with the Orange and MTN platform’s launch. To assess the combined impact, here are the countries where Orange (Left, 2018) and MTN (Right, 2017) are active on the African continent.

 

 

 

A Pan African Digital Economic Ecosystem?

Given what we’ve already seen happen in Kenya, and East Africa, as the outcome of the rapid adoption of mobile telephony and mobile money among the informal sectors of the economy, the foundation is being laid for the hybrid digital economic ecosystem to connect up with each other and scale across the entire continent. It is the value flows that will accelerate beyond the borders, and link the regional value creators up not only with each other, seamlessly, but also provide the accelerant to flow outwards beyond the continent’s borders to the rest of world.

It is highly likely that Africa’s “informal” trade ecosystem might be first out the starting gate by the time the implementation of the AfCFTA begins to lift barriers to the freer movement of goods, services and people. And, given the evidence that mobile money prevalence is linked to a decrease in the informal sector, the actual outcome in 5 to 10 years time might turn out to be far more transformational than ever imagined.

Posted in Africa, Afrique francophone, Airtime, Alternative currency, Analysis, Assumption filter, Banking, Base of the Pyramid, Biashara Economics, Business Models, Cashless transactions, Commerce en ligne (e-commerce), Economy, Ecosystem, Emerging Futures, Ghana, Income, Informal & Flexible, Kenya, Mobile platform, Perspective, Platforms, Prepaid Economy & Informal Sector, Research, Strategy, Sub Saharan Africa, Systems, Technology, UEMOA | Tagged , , , , , , , | 1 Response

New Market Opportunity: The Digitalisation of African Agriculture

Just over two weeks ago, I analyzed a report on the Digitalization of African Agriculture on twitter. Bandwidth heavy PDFs aren’t user friendly for mobile first or mobile only browsing environments, such as prevalent across much of the African continent, and ‘granulating’ reports is something I’ve gotten into the habit of doing quite regularly for a few years now. This is the first such analysis that I’m bridging over to the blog, and this and subsequent ones will be available under the category “Report Review”.

The full report is available for download on the CTA website.

My Review

In their summary, the report acknowledges the need for human actors – intermediaries, brokers, extension workers – as a critical component of the agricultural value web’s last mile. From the technology perspective, they make the case (again) for the need for “a highly connected, intelligent, real-time agricultural ecosystem that is vastly more productive, efficient, and transparent.”

Illustration by Jam Visueldenken of Amsterdam, 2013

This was the essence of my team’s recommendations to the Dutch government back in 2013, also published at Wageningen, by the University’s Economic Research Institute. However, what the CTA report has comprehensively evaluated is the economic impact and the investment opportunity for agritech – which they dub ‘D4Ag’ in yet another neologism – in the African context, while we focused on the end users at the last mile in our early phase analysis.

They estimate the total addressable market for digital solutions to address the African agricultural space at around 2.3 Billion euros and growing. The four key areas where technology can offer impactful value to the smallholders are:

1.  Advisory Services

2.  Market Linkages

3.  Financial Services

4.  Supply Chain Management

Yes, there are a plethora of macro and micro information services – the bulk of the current and past crop of farmer information systems – but they have been found to be less directly useful, and difficult to monetize in a sustainable manner once donor funding ends. Therefore, I choose leave that sector out of the opportunity spaces for innovative digital services delivered on the mobile platform for agriculture in Africa.
Here are my bulletpoints – drawn from analysing the report – outlining the market opportunity in this emerging space.

  • Competitive Landscape: The report notes 390 active players across the entire African continent as of the first half of 2019. More than half were launched in the past 3 years, and ~ 20% in 2018. The bulk of the players are concentrated in East Africa, and Kenya stands out for its disproportionately high number of both D4Ag solutions as well as farmers onboarded. Pareto’s Law is in action in this space, as largest 20 solutions account for ~80% of farmer registrations.
  • This implies that the Francophone Africa market is either wide open or not comprehensively covered by the Anglophone report. Regionally, Central Africa is the least saturated at this point in time, while opportunities seem open in both Western and Southern Africa. I would hesitate before recommending entering East Africa at the market entry or pilot testing stage, unless the agritech solution is bundled together with more broadly targeted use cases.
  • Profitability: Only 26% of the solution providers surveyed for this report were breaking even. However, optimism is high in this D4Ag space, as it estimates profit margins and revenue per farmer to be higher than the evidence around business model viability and solution desirability documented.

…possible to generate up to €90/farmer annually, though average revenue much lower (e.g., ~€5 for advisory services, ~€25 for market linkages, and €4 for digital financial service intermediaries & supply chain management solutions…

  • Business Models: The viability, feasibility, and desirability of business models and sustainable revenue generation strategies seems to be a bigger challenge than the usability or design as currently faced by the 390 or so solutions surveyed by the CTA/Dahlberg report. Through the rosy optimistic pictures painted for each section, the barriers to adoption (regular usage rather than simply registration) and monetization come through as we read between the lines. From the innovation planning perspective, the vast majority of the solutions are taking the more expensive ‘spaghetti on the wall’ approach to discovering ‘fit for purpose’, and as we discovered back in 2013’s analysis of 100+ mAgri pilots, generous donor funding usually runs out by the time some glimmer of insights on what might work in this rural, informal, economic context emerge for the solution providers to use.
  • The vast majority, at this point of time, also seem to focus on pushing ‘knowledge’ or ‘information’ at the farmer – a top down expert driven approach – rather than uncovering farmer needs that can be boosted via technological intervention, as would be the design planning approach for concept design.
  • Target Audience: The end user is being considered as an individual, as tends to be the case in the first world’s highly individualized urban techno saturated context, rather than understood to be a node in the highly interdependent rural economic ecosystem and a member of a community, and in many locations, a member of various groups addressing different facets of her lifestyle. Little segmentation of the lumpen mass of “farmers” seems to be evidenced by the solutions covered in this CTA/Dahlberg report beyond drawing attention to gender – women make up almost half of the smallholder farmers in Africa – and the youth bulge.

The emergent opportunity seems to lie on well designed platforms supporting diverse use cases and viable revenue models.

Posted in Africa, Airtime, Alternative currency, Analysis, Base of the Pyramid, Biashara Economics, Cattle, Design, Ecosystem, Indigenous & Traditional, Informal & Flexible, Innovation Planning, Livestock, Mobile platform, Platforms, Report Review, Research, rural, Rural Economy, Sub Saharan Africa, Systems, Technology | Tagged , , , , , , , , | Leave a comment

Mobile Money and the Informal Economy: A Paradigm Change

One of the most powerful pieces of data analysis I have come across recently has been the Banque de France’s working paper on the role of financial innovation in the informal economy. In my opinion, the importance of their conclusions are no less than the famous “price of fish” paper of a decade ago – both provide evidence that transforms the way we perceive the role and the impact of mobile telephony in the developing world context.

The essence of the paper by Luc Jacolin, Joseph Keneck Massil, and Alphonse Noah give us robust evidence that the presence of financial services on the mobile platform – basic mobile money transfers, as well as attendant value adds like loans and savings – have a proven relationship to the decrease in economic contribution of the informal sector (the relative size of the informal economy), in that particular country. In their own words:

This paper investigates the impact of mobile financial services – MFS (mobile money, and mobile credit and savings) on the informal sector. Using both parametric and non-parametric methods on panel data from 101 emerging and developing countries over the period 2000-15, we find that MFS negatively affect the size of the informal sector.

According to estimates derived from propensity score matching, MFS adoption decreases the informal sector size in a range of 2.4 – 4.3 percentage points of GDP. These formalization effects may stem from different possible transmission channels: improvement in credit access, increase in the productivity/profitability of informal firms attenuating subsistence constraints typical of entrepreneurship in the informal sector, as well as possible induced growth of firms already in the formal sector. The robustness of these results is supported by the use of an alternative estimation approach (instrumental variables).

These conclusions frame the discourse around MFS in an wholly new way. Conventional research tends to focus on the poverty alleviation impact of mobile money in developing countries such as Kenya, with mixed results. Jacolin et al focus on MFS impact* on the size of the informal economy. Thus, you get the kind of take downs of the poverty alleviation studies as recently published by Bateman, Duvendack, and Loubere, followed by debate  and discussion, even more so on Twitter. The subject matter is far too complex for simple answers and/or simplistic solutions. In my opinion, its a systemic one.

Informality != Poverty

What is left unpacked in these analyses and conversations is the unspoken assumption being made by researchers from the Global North regarding the relative wealth or lack thereof among the economic actors in the informal economy. Informality is not equivalent to poverty, although it may seem that way to academics and economists more accustomed to dealing with numbers rather than people themselves, in situ.

My go to example is Teresia, whom we met selling new clothes under a tree in the market at the border of Kenya and Uganda in spring 2016. At first impression, she seems marginalized, literally in fact operating by the side of the road. But after spending a few days with her to understand her commercial investment decisions and business management practices, one discovers that her annual investment in trade goods (her inventory) and services (transportation; mobile money, etc) ranges around 20,000 US dollars, on average.

Location specific segmentation attributes (by Niti Bhan, March 2016)

She is the perfect example of an informal business that is on the path to future formalization – not yet a proto SME, as we discovered, when segmenting the informal trade ecosystem at the border by their investment capacity, but showing all the signs of being on her way.

Digital economic ecosystem spurred by Mobile Financial Services

More recently, we undertook fieldwork to understand the rapid adoption and utilization of digital platforms among the informal trade ecosystem, this time in the regional hub markets of Nairobi. Here, what I am seeing, is the emergence of a hybrid economy, one that is neither wholly informal, but not yet wholly formalized.

This liminal space can be called the primordial soup from which the formal micro-enterprises are emerging, faster than before, given the exponential growth in usage between 2017 and 2019 that we documented.

Time to change the paradigm of digital development discourse

Thus, we can see why this Banque de France paper has the potential to shape the development discourse around poverty and mobile money services. By shifting our attention away from poverty alleviation – a magic bullet if I ever saw one – to that of transformational change – a decrease in informal sector! a long awaited magic bullet in its own right – we can open up a whole new paradigm in the way we approach the theme of economic development, at the policy design level as well as at the earliest research stages to inform programming and planning.

The evidence provides novel pathways for promoting progressively beneficial transformation of the complex adaptive system we have observed and mapped within the informal economy. And, the rapid adoption of mobile telephony and subsequent digitization imply that fresh lenses are now required for puncturing long held assumptions on poverty and informality that have been holding us back. Separating the impact of mobile money services on the informal sector from the impact on poverty offers a clarity of focus hitherto unknown in the literature, and a far more pragmatic path to follow. As Jacolin, Massil, and Noah conclude,

These findings lay the groundwork for the scarce literature on the macroeconomic impact of mobile financial services, a major dimension of the growing drive towards economic digitalization.

 

 

* Agreed, Mobile Financial Services cover a broader scope than mobile money alone, however few of these MFS could work without the foundation layer of a ubiquitious mobile money platform already prevalent in the region or location of study.

Posted in Africa, Airtime, Alternative currency, Analysis, Assumption filter, Banking, Base of the Pyramid, Biashara Economics, Cashless transactions, Economy, Emerging Markets, Flexibility, Income, India, Informal & Flexible, Kenya, Literature review, Loans, Mobile platform, Prepaid Economy & Informal Sector, Research, Savings, South Asia, Sub Saharan Africa, Technology | Tagged , , , , , , , , | Leave a comment

The results, two years on, from Kenya’s Movable Property Security Rights Act 2017

Photo Credit: Cowsoko

Movable property such as household goods, livestock and office equipment has helped add 183,487 loan accounts into the banking sector, a Kenya Bankers Association (KBA) report shows. […]

“The loans that flow out of the banking system on the basis of assets in the register has been growing. This shows that the alternative collateral has started picking up,” he said.

Two years after the movable assets bill was announced in Kenya some results have come our way. I covered the announcement and outlined some future areas of potential impact in a blogpost written in May 2017.

Household items are the most popular type of collateral with 198,873 items having being deposited with various banks since May 2017. KCB, KWFT, Equity and Co-operative Bank are the top banks in lending against these items.

This is followed by motor vehicle where borrowers have used 86,010 cars to get loans from banks and nonbank institutions.

Other popular accounts registered as movable assets collateral include furniture (84,626), equipment (71,396), livestock (27,785), stocks (25,000) and inventory with 19,010 entries in the Business Registration Service.

The Act also accommodates individuals working in the creative industry who can value their assets and obtain facilities against them. For instance, a musician can demonstrate to a bank that they have performance contracts lined up and is thus assured of cash flow to enable them to service the facility they seek.

At the moment, the results are numerical in nature, and the impact of this innovative loan facility has yet to be documented. But if this article is anything to go by, this has definitely had impact on the way banks perceive and serve their addressable target market. It should be noted that the article mentions a delay in the creation of the assets registry by a year, so the outcomes are actually quite healthy for such a short period of time for something wholly new to the banking sector.

Regular reports would be welcome, particularly from the rural areas, accompanied by narratives from the bank’s customers themselves. Still, its thrilling to hear about financial innovation in Kenya that doesn’t come attached to a mobile phone.

Posted in Africa, African Consumer Market, Alternative currency, Banking, Biashara Economics, Business Models, Cattle, Consumer Behaviour, Economy, Flexibility, Livestock, Loans, Perspective, Prepaid Economy & Informal Sector, Rural Economy | Tagged , , , , , , , | Leave a comment

Book Review: Stuffed and Starved by Raj Patel

Although the book I’ll be reviewing today was first published in the year 2007, I only came upon it this year in a used bookstore. Raj Patel’s Stuffed and Starved lays bare the innards of the world’s food distribution systems and the market dominance of the megacorps in the business.

The Guardian’s original review captures the essence of the book succinctly:

His thesis is that the simultaneous existence of nearly 1 billion who are malnourished and nearly 1 billion who are overweight is in fact the inevitable corollary of a system in which a handful of corporations have been allowed to capture the value of the food chain. Moreover, government policies through history have been designed to control our food. Their aim has been to provide cheap food for the urban masses and so prevent dissent at home. The instruments of colonial command may have been replaced with newer mechanisms that give a greater role to the private sector, but control our food they still do with disastrous social consequences, despite all the neo-liberal rhetoric of free trade and choice.

I, on the other hand, could not help but think of the vast informal trade ecosystem that underlies the food production and distribution system in the developing world’s context. Somehow, and this still tends to be overlooked by those who design policies and programmes, fresh produce grown in peri-urban and rural farmlands manages to land in the city’s teeming informal markets.

Photo Credit: Yepeka Yeebo

The last mile of the farm to fork agricultural value chain is still outside of the formal economy’s command and control. Textbook definitions of value chains tend to frame them as linear as those in the more structured ecosystems of the formal economies of the very highly industrialized world, where food can very often be that which is manufactured in a factory, out of chemical components, rather than which is grown, by hand, on a farm that you can visit. And convenience is often a service provided by the market women selling the fresh produce rather than a frozen packet industrially produced and available at the supermarket.

Freshly shredded cabbage (Photo Credit: Niti Bhan)

Patel depresses us with details of the bottlenecks of the global food system but manages to shed light on the cooperative movements around the globe which empower farmers and peasants and enables them to bring their agency back under their control.

Fighting back against this is the movement to regain “food sovereignty” or the people’s right to define their own agriculture and food policies. The idea originated with the global network of peasant farmer organisations, Via Campesina, and has been honed through the early 2000s. Patel sees it as the hope for the future and ends with an impassioned call to action. The “honey trap” of ethical consumerism will not do it, he says; we must organise and reclaim our control of the food system, just as the landless in Brazil and cooperatives in America and Europe have done.

It is the existence (and the near invisibility) of the last mile value webs that give me hope that we have ways and means available to us that we may not yet be wholly aware of that can help us effect positive beneficial transformation of the industrial ‘food’ value chains. One that is sustainable, both ecologically as well as economically, and one that is far more equitable than the system Patel lays bare in his book. Technology might well play its part – as the nascent but burgeoning ‘agritech’ movement in sub Saharan Africa shows – but it will be the resilience and robustness of the so called ‘informal’ economic ecosystem that will ultimately provide the sustainability and endurance necessary for the current system to come through the impacts of the climate emergency that faces us all. The food industrial complex may possess riches and reach, but its dependency on industrial production systems that are rapidly obsoleting themselves, both in the consumer’s eyes, as well as the logistics of fuel and transportation, makes it far more fragile today in 2019 than when Patel wrote his book over a decade ago.

Twelve years after publication, Stuffed and Starved is still a valuable study of the global food ecosystem, and a worthwhile read whether you’re simply an interested layperson, like myself, or pondering the agricultural sustainability for our collective and emerging future.  I recommend it as a must read for anyone contemplating an agritech solution or startup in the developing world context, for a holistic understanding of the larger forces at play surrounding the production and processing of food stuffs, than simply looking at post harvest losses or farm gate prices alone.

Posted in Africa, ASEAN, Base of the Pyramid, Biashara Economics, Book Reviews, Economy, Ecosystem, Emerging Futures, Indigenous & Traditional, Informal & Flexible, Migrant worker, Perspective, Produits de grande consommation (FMCG), Retail in Africa, rural, Rural Economy, South Asia, Sub Saharan Africa | Tagged , , , | Leave a comment

My thoughts on the internet closures by various African governments

There have been a lot of internet shutdowns of late in many countries in Africa. These range from as little as simply blocking access to popular social media apps like WhatsApp and Facebook, all the way to shutting down the entire internet.

What concerns me is the conflation of access to the internet with access to private companies such as the Facebook group or Twitter when voices are raised in support of people’s rights to connect, communicate, and in the majority of the cases, to conduct commerce (be it formal or informal).

There’s an economic cost to these shutdowns, with the greatest impact being felt by the most economically vulnerable. In today’s digital world, connectivity is critical for commerce and communication.

But, is it access to Facebook that is critical or WhatsApp rather than access to the internet and the world wide web?

Facebook’s recent past demonstrates vividly, in places such as Myanmar, what the real cost of unchecked access to a means to rouse violence and subsequent genocide has turned out to be. In India, WhatsApp has been directly blamed for riots and lynch mobs. Owned by the same company, their track record in managing hate speech and its inevitable consequences is shameful at best, and deeply dangerous and disturbing at worst.

As civil society groups and others raise their voices in support for peoples disconnected the global digital economy and society today, I believe we need to be cautious about what we’re speaking up for. I would not speak up for Facebook’s rights – there’s ample evidence they’ve trampled on mine even though I’m not a registered user of their platform – nor would I support other private sector tech giants headquartered far away.

The perception that people cannot communicate with each other, nor organize rightful protests, without the use of this one company or that one is a dangerous one in a world where these companies neither care for our rights nor our privacy.

Instead, there’s an opportunity for the emergence of a plethora of independent African “anti-block” social and commercial solutions -whether SMS based or USSD based or whatever the technology specialists deem fit – that can then be supported if shut down, instead of us raising our voices in support of the Facebook Group of Companies.

Posted in Africa, Mobile platform, Perspective, Platforms, Technology | Tagged , , | 2 Responses

Resurrecting the Perspective blog

A long time ago, sometime in the first couple of months of 2005, I was on the phone with Stu Constantine, the founder of Core77, wondering out loud about future prospects as I contemplated resigning from my position as Director, Graduate Admissions at the Institute of Design, IIT, Chicago. He advised me to start a blog, so as to build a brand for myself, if I was going to venture out alone as an independent professional.

By the end of April 2005, I had gone public with my first blog, Perspective. Over the next couple of years, I was to write extensively on business and design – from my first column in BusinessWeek in December 2005, to my first article in print for New Design magazine in 2006 which was commissioned for a fee.

Yet, I did not consider myself a professional writer, nor a journalist or even, author, although going by my prolific output, I could have claimed any of these roles. Writing was my medium for sketching out early stage design concepts, as the 700+ blogposts in the first version of Perspective show. It was there, during the years 2005 to 2007, that I worked on the then newly popular concept of design thinking – working out, in writing, my thinking on business and design, plus a soupcon of strategy.

The outcome of my thought exercises, in written form, on design thinking, bore their own fruit. But that is a topic for another blogpost. For now, I’ll just say, that, as I re-orient myself towards thinking and writing and research again, for my doctoral studies, the time feels ripe to resurrect the Perspective blog.

Its always had a very personal voice, rather than the soulless professional writing I’ve been doing for the past decade or so, on one site or another, and it was willing to be wrong, to experiment with ways of seeing and thinking and doing, so much so that I have taken my entire website apart just to be able to return to a learner’s mindset again.

It circumlocuted, and it pondered out loud. Alliteratively and frequently. It was a playground for my passionate love for design and business and engineering, and perhaps, it can be so again. Given all the academic work I will have to do over the next four years, having a sandbox, to again experiment with thoughts and concepts, will be a welcome break I look forward to.

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Building the Bridge: Design methods for success in the informal economy

The above is a screen cap of my research plan submitted at the end of March 2019 as part of the doctoral admissions process. Everyone understands its only a working title for a yet to be defined problem statement, which is the purpose of doctoral studies as I see it from the user’s perspective. Both the title and the content are expected to evolve and change as one proceeds with research.

Right now, as I work on my application for a personal working grant so that I can focus on studies fulltime, I am playing around with the title you see as the title of this post: Building the Bridge: Design methods for success in the informal economy

Its self descriptive, provides a hint of the primary discipline, implies the merger of design methods in the business context, and provides all kinds of clues on what the academic verbiage of the doctoral research plan might mean in terms of scope and focus.

However, it too is a work in progress…

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