Archive for the ‘Base of the Pyramid’ Category

The Resilience of Innovation under Conditions of Scarcity

Kouassi Bafounga works on a storm lantern, Bangui, Central African Republic, January 16, 2018. Thomson Reuters Foundation / Inna Lazareva

Innovating beyond the traditional tin lantern – a simple wick attached to the can – Kouassi Bafounga cuts shapes from tin cans and fixes them together with glass, string and a little petrol to produce storm-proof lanterns.

Last year, Bafounga was one of 11 winners in a “Fab Lab” innovation competition run by the French embassy and Alliance Française, a French cultural centre in Bangui, with financing from the European Union’s Bêkou Trust Fund. The finalists, chosen from more than 100 applicants, received assistance to develop their products into businesses.

Inna Lazareva writes on this “creativity from crisis” sharing stories of inventors and makers who must single-handedly create solutions for daily needs in highly volatile conditions of material scarcity.

Given the challenges faced by the Central African Republic, I see these stories as evidence of the resilience of innovation, something often overlooked when we ooh and ahh over the creations themselves.

How can we learn from this?

 

For more on Innovation under conditions of scarcity and Scarcity as a driver for innovation

Lessons for development from the demand driven investment strategies of the informal sector

This shopkeeper in Laare, Kenya provided me with deep insight on how investments in expensive inventory are managed in a heavily cash based economy. He runs a consumer electronics store stocking everything from solar panels, music systems, spare parts and batteries, through to mobile phones and accessories.

His purchasing decisions are based on visible consumer demand, he said, preferring to stock what he calls “fast moving items” that sell and keep the cash flowing than to risk tying up capital in something that might not sell. For instance, he pointed to a dusty 5W solar panel, this has been sitting here for a year since most customers in the area prefer buying 20W or larger.

In this context, “fast moving items” are not the same as the marketing term “Fast Moving Consumer Goods” or FMCG which refers to over the counter perishables and consumables like tea, shampoo, biscuits or soap. Instead, they refer to the product range that sells in the local market, and as my visits to electronics stores in different parts of Kenya back in 2012 quickly showed, each market had different price points and products which tended to be “fast moving”.

In a more economically challenged region, it was black and white 14″ TV sets, smaller solar panels and no name Chinese mobile phones, while in the wealthier region around Kilgoris as we see in the previous post, its flat screen Sony Bravias and very large solar panels that sell.

Local demand drives decisions, and thus business growth strategies and investments. Can this insight not also inform development strategies?

The Economist has just published this article on how fish farms are experiencing a boom in response to the growing demand for food from the big city:

The task of feeding that huge population has not been accomplished by the government, by charities or by foreign agricultural investors. It is the work of an army of ordinary Bangladeshis with an eye for making money. Mr Belton’s research shows that the number of fish-feed dealers in the main aquaculture areas more than doubled between 2004 and 2014. So did the number of feed mills and fish hatcheries. Mr Belton has found similar trends in Myanmar, where the fish farms are often larger than in Bangladesh, and in India.

As well as transforming landscapes in a large radius around Dhaka, the fish boom has changed many people’s lives. Aquaculture requires about twice as much labour per acre as rice farming, and the demand is year-round. Many labourers who used to be paid by the day are now hired for months at a time. Seasonal hunger, which is a feature of life in some rice-farming regions of Bangladesh, is rarer in the watery districts. People are eating more protein. Mohammad Shafiqul Islam, a feed dealer, points to another advantage. Because food is now so cheap in the cities, migrant workers are able to send more money back to their families in the villages.

I believe this element of assessing local or regionally accessible demand for a product or commodity before investment is often missing even from the private sector influenced “making markets work” philosophy now prevalent in development strategies. Too often, the “market” is framed as an international one, and an e-commerce platform devised as the bridging solution. Local intermediaries are demonized as “brokers out to squeeze profits at the farm gate” without once considering their role as infomediaries of supply and demand. The very information networks that provide the shopkeeper with guidance on what would sell and what to order are often erased and replaced with an app. Little or no attention is paid to existing consumer demand nor any attempt to link to the existing ecosystem. The informal becomes invisible.

How many of these pilots fail to sustain themselves once the project’s funding cycle ends?

Trading economics: a new theoretical system

From the Financial Times, a snippet from a guest post by Wang Zhenying, director-general of the research and statistics department at the PBoC’s Shanghai head office and vice chairman of the Shanghai Financial Studies Association, summarising the arguments in his new Chinese-language textbook on economics.

“Trading economics” is one new theory emerging against this backdrop. Mainstream economics deduces the macro whole by extrapolating from the behavior of individual “representative agents”. Trading economics replaces this with a systematic and comprehensive analysis approach. It stresses that in an interconnected world, the interaction between trading subjects is the fundamental driving force behind the operation, development, and evolution of economic systems.

Trading economics first analyses the actions of trading subjects, then builds a dynamic trading network among trading subjects through trading relations, and finally reveals the operational rules of the economic system. The rules could be examined from two perspectives: short-term and long-term. The business cycle and price changes are examined in the short-term perspective. The long-term perspective would focus on the rules of economic evolution as well as changes in technology, knowledge, system, and network.

Throughout the history of economics, trading economics is the first and foremost theory to incorporate all economic phenomena into an all-encompassing logical system. It changes the long-standing scenario in the economics field, that is, the macro was separated from the micro, and the short-term from the long-term. Trading economics is a revolution of mainstream economic theories and is bound to exert a great and profound impact on all areas, including economic theoretical research and practical application.

 

NB: I thoroughly enjoyed reading this summary and expect to contextualize future research with some of the theoretical frameworks as presented here.

 

 

Leveraging Disability as Competitive Advantage: The Wheelchair Cargo Movers of Uganda

Only in Busia do wheelchair owners from all over Uganda congregate as it is to their economic advantage to do so. Documented, and observed were the handicapped professionals who crossed the border numerous times a day ferrying goods.

In the past 25 years, the Busia tricyclists have created a strong community with initiative and resourcefulness in exploiting economic and political opportunities. Dialogue and negotiations have allowed them to conduct business without having to pay customs duties under the watchful eye of the authorities.

They point out with satisfaction that there are no disabled people begging on the streets of Busia, not even on Fridays when Muslims give out alms to the poor. On the other hand, each new officer must be sensitized.

These children from destitute families earn shillings helping with moving the freight. Neither participant is dependent on handouts.

 

Photographs: Michael Kimani, for Emerging Futures Lab, in Busia, Uganda, December 2015.

A Unique Path to Development Seen for the Informal Economy

Just recently I stumbled over this slim book < 60 pages that analyzed existing data sources in order to frame an answer to the research question they posed:

How did the informal economy―markets and the private sector―develop in the absence of legal and administrative frameworks to support it?

Some of the most intriguing insights extracted here:

And they echo my own statements regarding the East African Community that its the informal sector that’s growing faster and responsible for employing the majority of the population. This makes integration and bridging efforts between the formal and global together with the local and informal even more critical.

The path to integration as described in the book may not apply to the African economies but holds some unusual insights for those in eastern Europe which may struggle with some of the same issues of top down planning and grassroots income generation.

All in all, the step by step approach over the past decade to recognize, and thus integrate the informal sector was much appreciated and if you’re interested, you can download the book here.

Household energy consumption behaviour in East Africa: Lighting & Conclusion (3 of 3 Parts)

 

Jua Kali Kerosene Lamp, Kenya

The following is extracted from a six month study during 2012 on household energy consumption behaviour in rural Kenya and Rwanda among the lower income demographic, that led to an understanding of some of barriers hampering the sales of client’s solar products in this market. This 3rd and final part will focus on fuel usage and consumption behaviours for lighting. Users sampled for this study were selected based on varying fuel consumption patterns, ranging from a single homestead to a rural hotel open from dawn to 1am offering solar powered football on television.

Fuel Choice and Consumption Behaviour is Influenced by Duration and Timing of the Need

Kerosene is the primary source of fuel for lighting for those who live without access to electricity, regardless of whether its on their shamba, or in a building in town. Not only is the reach of grid access limited to a small percentage of rural Kenyans but the cost of the final connection to the dwelling is also a barrier for many. Due to the nature of this project’s focus, the majority of homes visited were without a solar home system.

Hurricane lanterns are the most popular lighting devices among kerosene users, as the glass covering the lamp protects the flame as well as contains the smell and smoke. With prices as low as 250Kes, everyone has at least one, if not more at home and the number maintained depends on size of the family, number of buildings on the homestead and the fluctuating ability to purchase fuel.

Pressure lamps can cost ten times as much and consume far more fuel although they offer a brighter light – they were not seen in Makueni households and the only regular user was the furniture maker who restricted its use to times of high productivity during the Christmas season. In Kisii, they are owned by members of the congregation who use them once a month for religious functions and the fuel is provided by the church. Gregory the schoolteacher called them “gas guzzlers” whose bright light was not worth either the high running cost or price of the device itself.

Everyone owns a few small tin lamps but they were referred to as something discarded during the upwardly mobile climb to a hurricane lantern – “Oh, we must have a few lying about somewhere in a dusty corner” said one wife while Mama Grace only used it in the confines of the kitchen building where the open flame, with its attendant smoke would make no difference. However, due to their small size, they require very small amounts of kerosene and tend to be kept as a backup for times of need when the fuel supply runs low or to be used by the aged, such as Kilonzi’s grandmother who finds the hurricane lantern difficult to maintain.

In addition to kerosene fuelled lamps and lanterns, every home owned at least one flashlight of some sort, whether powered by dry cell batteries, grid rechargeable or disposable for what they referred to as “emergencies or needing to go outside at night”. By emergency, they meant that this form of light was faster and easier to turn for sudden need than the more complicated task of lighting a kerosene lamp, plus it could be used in wind or rain. For many, this item received first priority if resources such as batteries or cash for charging were limited.

What stood out across the board was that everyone knew, almost to the minute in some cases, exactly when they used their light source. This behaviour was evident regardless of the household’s energy source including if it was solar power and thus “free”. Answers would range in specificity from estimates “around 7pm to maybe 10pm, sometimes later” to on the dot timings “from 5.45am to 6.30am in the morning”.

“I only use it for children to study” Mama John who scrimped and saved for solar

This gives rise to the conjecture that the fundamental observation in household financial behaviour of being able to control time (duration, frequency, periodicity) and money(whether prepaid source of fuel like kerosene or postpaid like electricity), is an ingrained habit even after upward mobility has removed the need for such stringent conservation. SHS do not require the same frugality daily use and cost and this can be seen in increased use of entertainment appliances like televisions and radios but lights still follow this pattern. However, it can also be said that rural life is slow to change in response to the introduction of modern conveniences and this may also be a significant factor.

The dry cell battery

Similar patterns of duration and accuracy of timing were also observed in choice and purchase of dry cell batteries, particularly for the radio. People knew which specific programs they wanted to listen to thus the
time and duration of their use of the radio. Everyone wanted to be able to listen to the radio more often but conserved battery life for as long as possible. Many even acknowledged that expensive brands like Eveready which cost 65Kes a pair lasted three times as long as the cheaper Chinese Lion brand costing only 30kes the pair but their irregular cash flows acted as a barrier to purchase dependant as they were on what cash was available on hand (or in pocket) at time of need.

Concluding Remarks

Consumers with limited incomes prioritize household energy and fuel spending according to importance for survival. Food and thus cooking come first followed by light. Everything else depends on the criticality of need against funds available. For example, Muthoka, who was unemployed and living on his small subsistence farm deep in the interior away from a market town, said that if he had to choose between 20Kes worth of kerosene or charging his mobile phone, he would choose kerosene first for lighting was more important to him than his mobile.

Similarly, Gregory the schoolteacher, put batteries for the emergency flashlight as more important than for playing the radio. The question becomes “What can we do without?” and only one of the many respondents of the more general household survey prioritized her mobile phone over light but she was a business woman whose income depended on her being available for calls.

The caveat here is that these answers are not absolutes and while most people will say that the phone is less important, there will be times of need when charging the phone or topping up airtime will be critical.

However, unlike kerosene or dry cell batteries for light, one can always borrow a friend or neighbour’s phone for an emergency phone call. These are the kinds of trade-offs people make when living on the edge on limited and irregular cash flows.

Pricing is rarely the problem

These insights on people’s household energy management and purchasing patterns, based as they are on the limitations and timing of their income sources are what led to the conclusion that the actual price itself was not the barrier to sales but instead it was a combination of factors starting with the choice of packaging and the subsequent pricing and sales strategy.

 

Part One: Introduction to Household Energy Consumption Behaviour Study in East Africa (2012)
Part Two: Cooking

Household energy consumption behavioural study in East Africa: Cooking (Part 2 of 3)

Scrap wood fueled three stone fire in sheltered corner

The following is extracted from a six month study during 2012 on household energy consumption behaviour in rural Kenya and Rwanda among the lower income demographic, that led to an understanding of some of barriers hampering the sales of client’s solar products in this market. This 2nd part will focus on fuel usage and consumption behaviours for cooking. Users sampled for this study were selected based on varying fuel consumption patterns, ranging from a single homestead to a rural hotel catering for more than 12 hours a day.

Fuel Usage Behaviour is Influenced Greatly by Location

Choice of fuel and decisions on quantity kept in stock for cooking is dependent on the location of the primary residence rather than income. Rural homesteads in Kenya have a separate outhouse for cooking and firewood is the preferred choice of fuel even in those regions where shambas are too small to support their own grove of trees.

Kilonzi’s wife dreams of upgrading to an LPG cookstove some day in the future

That is, while Kilonzi’s wife on a large shamba in Makueni might stack enough firewood for just two or three days, collected for free from her own backyard, Mama Grace the tea farmer with land constraints in Kisii will purchase an entire tree to last her for a month. Meanwhile, the more economically challenged on small shambas devote a week foraging far and wide for enough brushwood to last for two or three months before needing to take time away again from more pressing household duties.

Charcoal is also used on the homestead but only for certain tasks like making chapatis or for quickly brewing tea for visitors or in the morning rush before school or work. Even if the charcoal is made right on the shamba from a tree that needed felling, most of it is kept aside for sale and considered a source of cash money rather than consumed as fuel.

Residents who live away from their shambas, taking up rooms in town due to their work where cooking must be done in the same space as living and other activities, cannot use firewood. In fact, if renting, landlords clearly state that the use of firewood is banned, as a safety precaution. Thus, urban residents are forced to choose fuels that can be used in small, portable cooking stoves and charcoal ends up being the most common due to its relative cost as compared to kerosene. Those who do own a kerosene stove are in the minority and again, its use is only for very specific tasks that require speed such as making tea for visitors or in the morning.

Heavy Duty Charcoal Usage by Hotel

For those whose primary fuel for cooking is charcoal, the quantity purchased is dependant on cash in hand if their income is not from a salaried position and this ranges from a ‘deben’ which lasts for about 5 or 6 days and costs around 100 – 130 Kes to an entire sack which ranges from 500 to 750 Kes and can last as long as a month. Pricing for fuel is closely related to its proximity to the source, since transportation can be expensive and convenience is a service that comes with a premium. Kerosene which sells for 83 Kes a litre at the petrol station in town was found to be selling at a rate of 140Kes/litre at a small duka deep in the interior.

Part One: Introduction to Household Energy Consumption Behaviour Study in East Africa (2012)
Part Three: Lighting & Concluding Remarks

TEDTalk video: Recognizing the value creation and economic contribution of the informal economy

My talk given at the TEDGlobal conference in Arusha, this August, went live on Ted.com at some point during the night a couple of days ago. At that very moment, I was on a Finnair flight from SIN to HEL, so with a wee bit of delay, here’s the link to the video of the talk. Also available is a recommended reading list I curated, along with footnotes.

I just want to add that its high time we considered the informal sector as a commercial operating environment in its own right. This change of perspective will transform the way we think about poverty, it’s alleviation, and, importantly, open the doors to innovating products and services that can help boost productivity and revenues for micro, small, and medium sized businesses across the developing world, but particularly in Africa and India.

By doing so, we can recognize the economic contribution and value creation by women who make up the majority of such entrepreneurs, and put dollar values to their investment capacity and growth opportunities. As long as they’re lumped together under the umbrella term “informal sector”, with its unquestioned assumptions of low skill and low productivity, they’ll remain invisible, and solutions meant to support their development will never reach them.

Time to acknowledge the social cost of mobile and apps driven disruption

Abandoned makeshift recharge cards stand (Source: Punch Newspaper, Nigeria)

From Lagos, Nigeria comes this moving human interest story that looks at the downside of modern technology and it’s impact on livelihoods. For those who must hustle to make a living, send the kids to school, or put food on the table, smartphone driven digitization of the services they used to provide are disrupting their incomes.

“On the negative side, it has seriously affected our business with about 40% drop in passenger traffic. There is nobody among us (cab drivers) that would say he’s not feeling the pain.”

Whether its Uber and Taxify grabbing customers from traditional taxis, or the ease of an online purchase of airtime eating into Mama’s recharge card sales, the long awaited and much hyped transformation of African economies by ICT is arriving at a much higher cost than noted anywhere in media, or in research reports on mobiles for “social good.”

Literate youth quick to pick up new skills have no choice but to adapt and adopt. Its the older traders, the taxi drivers, the less literate, the long established service providers in the urban informal economy who are shouldering the brunt of this disruption.

“Even the prices charged by ‘those phone things’ are not realistic. I just pity the people who are rushing to them. A time is coming that they would increase their fares. And by that time, people wouldn’t be able to do anything about it, because they would have killed the competition. They just want to destroy the taxi business, which many of us are using to take care of our families,” Baba Ayo added.

Whose responsibility is this anyway?

Disruption is what every techno bling startup seeks, blaring it in their press releases, as they launch an app for this and that. What falls by the wayside is consideration of the social cost of this disruption – much more expensive in developing countries like Nigeria where there is no social safety net, no welfare department, and certainly no old-age pension for those whose livelihoods are lost to look forward to.

“I have been selling recharge vouchers for about 10 years and I can tell you that the situation has never been this bad. It’s as if someone commanded people to stop buying airtime. I accused some of my customers of patronising other people, and some of them said they usually top-up their phones online whenever they run out of airtime,” she explained.

The entrepreneurial will adapt, or move on to other services that apps have not yet replaced. The article is illustrated with photographs of abandoned recharge seller’s makeshift stalls as the line of business fades away in the big city.

But who will think of all the rest who may not have the energy or youth to start over, and whose responsibility is it to ensure that technological progress is not exclusive?

This post is a reminder to us all of the tradeoff we make when we choose to innovate or disrupt in societies where the margin between hunger and full belly is as slim as this year’s latest smartphone model.

2017 is the Year Mobile Service Operators Became Banks

South African business headlines read MTN takes on Vodacom for title of Africa’s biggest digital bank and usher in a whole new era for banking and finance on the mobile platform. Having watched this space impatiently for more than a decade, seeing this was a landmark worth noting.

The number of mobile-money customers in the region (Africa) is growing rapidly, having surpassed the number of traditional bank accounts in 2015 to reach 277 million by the end of last year, according to GSMA. ~ Moneyweb, 3rd November 2017

Here’s a curated selection of my journey watching the phone become a bank:

Photograph of Nairobi billboard taken January 2016 by Niti Bhan

Blowin’ in the Wind – perspective, May 2007

A User Centered Approach to Banking the Unbanked in Rural India (PDF, entire process) – January 2007

Pondering the Mobile Innovation Divide – perspective, December 2007

African Potential meets Indian Experience – perspective, May 2008

The Telco and the Bottom of the Pyramid – perspective, January 2009

Systems Thinking Applied To Why M-Pesa’s Economic Impact and Wealth Creation Lessons Affects the Entire Ecosystem – Afrinnovator, March 2012

What is The Prepaid Economy anyway? – 14.7.14, in response to Michael Kimani

Banking Opportunities in Africa – The Banker’s Association of South Africa, 2014

A bank meets a telco – how mobile banking is changing the landscape of financial services in Africa – The Prepaid Economy: African Edition, January 2016