(Republished from old Perspective 2.0 blog March 10th 2009)
The biggest shock for me in the Phillippines was learning that airtime minutes purchased on a prepaid plan came with an expiry date. The smaller the amount the faster the expiration. For example, the lowest amounts of “load” that can be purchased are 10 or 20 pesos (about 25 USD cents) and they are valid for either text or voice or a combination of both for just 24 hours.
As usual, nobody in the rural area had heard about GCash or used it, much less transferred airtime to pay for anything, although anecdotal reports seem to imply that this was the case. While my observations are naturally based on the interactions in one barangay in one province on one of over 7000 islands, it does make me wonder if by creating a perishable product, the local telco’s might inadvertently be hampering the uptick of a host of grassroots workarounds and innovative uses? It also makes me wonder if the observed and documented phenomena of Filipinos having the highest usage of SMS might have something to do with the fact that you have to consume the 20 peso worth (100) sms in 24 hours or lose your money?
“But people are in the habit of only buying what they consume daily” said someone in the city when I brought up this fact out of curiosity. True, to a degree. On the other side of the coin was a small business owner who is forced to load 30 peso worth every three days simply to keep his phone operational since it is a critical part of his business operations and allows him to stay in touch with customers. Do high volumes/small margins at the BoP necessarily imply forced consumption?
Another eye opener was hearing the story about a microfinance loan for enabling local women to start their own small businesses. The woman in question runs a sari sari store as seen in the photograph above in a small cluster of houses. She participated in the program about 4 years ago and took out a loan of 5000 pesos to start the shop. It was based on the Bangladesh model according to her memory of the introductory seminar by the loan officers and they would be required to pay it back over a period of 25 weeks (6 months). The experience made her so unhappy that she will never take out such a loan again, poor woman entreprenuer or no.
The first payment was due exactly one week after the loan was disbursed – she’d barely set up her shop, bought inventory of stocks, figured out pricing and what to do, already she was under pressure to start repaying. She used the capital to pay the interest and wished that there had been a grace period to get the business up and running. After all, it was not a cow or a mobile phone, something that could conceivably start earning money in the first week after purchase. A shop needed time to start generating cash flow as people in the neighbourhood discovered the location and spread her prices (the lowest in the walkable distance) by word of mouth. The pressure was intense and created tremendous ongoing tension every week. It just wasn’t worth it and she was glad to have gotten out from under the cloud.
Others, she says, are still trapped in the ongoing cycle of taking out constant loans for working capital and repaying back, never quite earning enough to buy a decent amount of inventory and thus earn enough to get their heads above water. Was this bridge between “poverty and progress” meant to drown the BoP in consumer debt? The whole experience sounded like a vicious downward spiral for the new business owner/entreprenuers.
There’s much much more to this story of course and after spending a significant amount of time in the shop, doing inventory shopping, checking the prices at the outlet store in the nearest town 5 km away, the affordable markup on the products back in the village and the subsequent analysis, it makes me wonder if it were possible for business models meant to the serve the BoP could be designed to be as flexible and adaptable as the informal economy itself?
For example, the most popular ‘sausage’ seller in the area is a woman who sells them door to door. Her prices are naturally a tad higher than what you’d get at the markets in town but her USP or unique selling proposition for the majority of her customers – she has about 50 households on her regular weekly walking route – is that she extends them a week’s credit to pay her for the ‘frozen foods’ as they are called locally. Hotdogs, chorizos, longganisa and other preserved meats. Naturally, given the choice between needing to have cash upfront when shopping for the same or being able to account for it over the period of a week, they prefer buying from her. Besides, she’s a cousin and they don’t have any remittence coming in at home.
All of this makes me wonder what is it about the set up that workarounds are inevitably required by those who live on irregular and unpredictable incomes in order to navigate their way through these systems and processes? In some cases, ironically, even those meant to improve their lives.
Whether its the chap who would rather sell his much loved motorcycle to start his own business than to risk taking out a microfinance loan meant just for people like him (because his income flow is so different from the payment schedules) or the woman who sends her about to expire airtime to her son and he sends it back to her again ( passaload costing just 2 pesos) so that the clock ticking on expiry turns back to zero, these are all jugaad ways or workarounds to cope with the inability of the systems to meet the unmet needs of the customers for whom they are meant.
How and where do we begin to meet the basic needs, if we are indeed to do business sustainably with the poor, not just profitably?