Observations: Rural BoP and the cash economy

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Investment or Independence?          Photo Credit: Goverdhan Meena

Across the board, the particular characteristic that most stood out during my conversations with the rural populace in India and The Philippines, as well as prior experiences elsewhere, was their undeniable pride in their degree of self reliance, and thus, their level of independence from the formal or cash based economy.

Over and over, people would proudly point to assets like firewood, livestock, kitchen gardens etc and emphasize that these resources were “free” and didn’t need to be purchased for cash, often in the same breath pointing out how everything needed to be bought if you lived in the city. Whether it was a nanny goat kept just for milk for morning tea or an extra sack of rice held back from the harvest sales, there was a distinct sense of achievement for every penny that didn’t have to be spent.

This trait of minimizing the need for actual cash money also cropped up in other patterns of behaviour including the storage of wealth in the form of ‘kind’ or ‘goods’ (that could be liquidated if required); cashless transactions, from the simple to the sophisticated; and the rapid conversion of cash received into goods or “kind” (livestock for example).

All of these behaviours imply a challenge for businesses seeking to serve rural populations effectively since their relative lack of liquidity places them in a challenging position as future customers. While some initiatives are being put into place in order to deal with just this situation, few, if any, are currently applicable to more mainstream purveyors of consumer products and services. While one could conceivably begin to address the challenges of designing payment plans for those with irregular incomes, what happens when you add a tendency to shun liquidity to the mix?

 

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