Quick summary of workshop findings

Our workshop officially ended today although there's still a lot of 'mopping up' to be done not to mention the final documentation. We had the opportunity to analyze groups of users observed and interviewed by me in rural Rajasthan (India) and a barangay in Iloilo (Philippines) as well as some basic personal financial management information on users sent in by John Lumbe from Malawi. Here is the quick and dirty, summary of our findings:

Broadly speaking, we saw far more sophisticated cash flow management than has either been expected or assumed by those who live on "irregular and unpredictable" incomes. In fact, one future task is to parse out whether the terms "irregular and unpredictable" can even be applied – at this moment, it seems as though it would be far more accurate to say that they do not manage on a 'fixed amount arriving on a predicted day/date' i.e. a salary. The second element to be reconsidered is whether those at the "BoP" especially in rural  communities can even be accurately called the "poor" – living on $2 a day is one thing, but quite another when much of the hyperlocal economy may not even be based on actual cash.

Cash flow and working capital is managed by manipulting a combination of elements such as experience – a farmer can look at his fields and guesstimate the next harvest's yield and approximate timing; social capital in the community – whom to lend, borrow from or do 'business with'; spreading risk across multiple sources of income and finally, the control over two key elements – time: as in periodicity and frequency and money: as in amount and also "form" (is it cash or a good?).

The aim of all of this complex maneuvring is essentially to:

Increase the ability to plan

AND

Decrease the variance between Income and outgoings

That is, we observed a pattern of behaviours across the various geographies and range of "bop" income levels (the Indian community being the 'wealthiest' while the Malawians living closest to the edge) such as:

1. Maintaining multiple sources of income simultaneously
2. Allocating multiple resources (for the same function) according to cost
3. Managing a "portfolio of investments" that act as deposits maturing over different durations of time (the shorter turnaround of a chicken ready for sale or consumption versus the longer term investment in a harvest of wheat)

All of these behaviours also serve to provide a cushion against the impact of shocks, both predictable and random.

In essence, it was pointed out to us that this demographic we were studying displayed patterns of fiscal management closer to that of diversified corporations than individual customers.

4 Comments

  • Interesting post. I am not sure how you can draw a conclusion that the fiscal management of the poor is similar to diversified corporations. The poor are perhaps just dealing with a high degree of uncertainty. And I think they simply handle it by trial and error and experience rather than planning ( which is what a large corporation will do).
    Check : http://strategycore.blogspot.com/2009/02/strategy-is-not-planning.html
    Bhalchander

  • I think we might partly be disagreeing over semantics here, but I’ll throw my two cents in anyway. My primary question about the poor’s use of trial & error in managing multiple income streams regards their well-known risk adversity. That is, I’d guess most people are “planning” their income sources based on the information they currently have about successful activities in their own communities, rather than trying many new things which might fail. It’s not the same as strategy, certainly, but it’s also not blind guesswork.
    That said, I think Niti’s point (to extrapolate a bit) was more that there seems to be a U-curve of the complexity of economic activities, correlated with the rising income level of a person/organization. Poor people have a lot to lose if they don’t diversify, and large corporations have a lot to gain if they do diversify, so there’s a strong incentive for creating diverse income streams at both those levels. Among middle-income individuals (and perhaps small corporations), however, the existence of a single sufficient income stream appears to reduce the need to seek out other sources.

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  • Niti, I’m a grad student at the IIT Institute of Design and have had a deep interest in the BOP for a long time now. It’s been a while since I’ve commented on your blog, but I wanted to corroborate your workshop findings with an ethnography I conducted for a large energy client across multiple provinces in China.
    I should first say that the metaphor that you would invoke, fiscal management as in a diversified corporation fits precisely. In the case of the Chinese periurban, and rural consumers that we studied, this is definitely the case.
    I vividly remember a family in rural Anhui: for whatever reason, the man of the household had left. Only the woman, and her two kids remained. While she sought some support from her brother, I was impressed by how cognizant she was of her personal financial situation. The family generated income through selling bottled water, distributing honeycomb coal to be used in kangs, and had supplemental income from farming.
    Other families that we studied, particularly in the rural areas whose incomes were heavily dependent on farming, had a very strong sense of the cash outlay they incurred when trading off between different fuel sources. Sometimes, this would happen on a daily basis. Imagine, if we had to change our source of energy constantly from the utility company, to the solar heater on top of our roof, or go and collect the biogas from a pit of pig excrement in the backyard. And yet, these are common household decisions that happen without the blink of an eye.
    Also, it was most often the case that the “financial manager” ( to continue your corporate metaphor) was the woman of the household, not the man. Most often, it was the woman who “kept the books” and relayed this information back to the rest of the family.
    When I was on the study, I had considered these behaviors particularly important, and in many cases, diverged from our own Western worldview. While I can’t share the outcome of the synthesis phase of the project, I think they are very interesting business models that are new to the world that emerge from the findings of your workshop.
    Do you have early thoughts on how your patterns can result in design criteria for multinational companies looking to serve BoP customers?
    ash

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