Archive for the ‘Collection’ Category

Livestock as movable assets and financial collateral: Collected insights

Mama Mercy’s farm, Nyeri, Kenya (Photo: Niti Bhan, April 2013)

Following in the footsteps of Zimbabwe, Kenya has just passed a law on the use of movable assets as collateral for loans.

President Uhuru Kenyatta has signed into law a Bill allowing borrowers to use household goods, crops, live animals and even intellectual property to secure commercial loans in a move aimed at boosting access to credit.

This is an important move, because unlike Zimbabwe, the “Kenyan Movable Property Security Rights Act 2017 paves the way for the formation of a centralised electronic registry for mobile assets that financial institutions can use to verify the security offered.”

The implications for the rural economy, entrepreneurial smallscale farmers, and the informal trade sector are enormous, and I will take a deeper look and analyze the implications in subsequent posts. First, I will begin by collating the past decade’s writing on the role of livestock in household financial management, clustered broadly by theme:

 

 

On The Role of Livestock
The multifunctionality of livestock in rural Kenya ~ literature review
“households will treat livestock similarly to a savings account or stock portfolio and typically (and perhaps reluctantly) only sell livestock to cover cash shortfalls when certain necessary expenditures arise”
The Role of Livestock Data in Rural Africa: The Tanzanian Case Study
Only provides evidence of the importance of investing in same
The role of the cow as an investment vehicle in India: Insights on Return on Investment

 

 

Emerging Futures Lab Original Primary Research
The Prepaid Economy project 2009: Original research on rural economic behaviour (IDRC & iBoP Asia) – Part 1
Observations & analysis of rural household financial behaviour – Part 2
Synthesis & Insights on rural economic behaviour – Part 3
Visual documentation from Philippines, India, and Malawi – Part 4
Rural Bottom/Base of the Pyramid and their cash economy

 

 

Application of insights for innovation in Kenya
Component parts of the rural, social economy
Seasonality as a factor in livestock export trade finance
Rural Kenya’s livestock and produce markets are a complex, economic ecosystem
Affordability, pricing strategy, and business models
Livestock’s role in path to upward mobility
From the individual to the community: the rural economic ecosystem (Dec 2013)
Importance and value of the informal food market
Creative ways to financial inclusion, by Michael Kimani

 

 

To Read More: Use this tag “movable assets” for all forthcoming analyses, and you can find a decade’s worth of my original research on informal economy, prepaid business models, literature reviews and ethnography here. The entire subject can be found under the category “Biashara Economics“.

Analysis of the mobile phone’s impact on cash flows and transactions in the informal sector

As we saw, Mrs Chimphamba needs to juggle time and money as part of her household financial management in order to ensure that expenses can be met by income. We also saw that the mobile phone was made viable and feasible by the availability of the prepaid business model that gave her full control over timing and the amount required to maintain it — how much airtime to purchase? when? how often? — all of these decisions were in her hands, within the limits of the operator’s business model. Now, we’ll take a closer look at the impact of the mobile on her domestic economy.

Readily available real time communication has helped Mrs C by speeding up the time taken for a decision on a purchase or a sale. That is, the transaction cycle has been shortened. As the speed of information exchange increases, it increases the speed of transactions — it shortens the duration of time taken to execute them from inception to completion. This, in turn, implies that more transactions can now take place in the same amount of time thereby increasing the frequency and the periodicity. When mobile money is present, one can see that as both quantity and frequency of transactions speed up, so does the cash flow. We’ll come back to this factor.

To explain using a real life example, Mrs Chimphamba does not need to sit at her homestead wondering if today someone will pass by to purchase a bottle of wine. Similarly, Mrs C’s customers do not need to go out of their way to pass by her homestead to see if the wine is distilled and ready for sale, or whether it will still take another day or two for the next batch to be ready. Further, the uncertainty of whether they’ll have cash on hand on that future day, or if they’ll return as promised are all elements that real time communication have minimized.

Now, Mrs C is able to let her regular customers know that she’s making a new batch for sale and do they want to reserve a bottle for purchase? It allows her customers to put aside cash for this purchase. She is even able to accept and execute larger orders for some future date, and even accept some cash advances if her operating environment includes the presence of a mobile money transfer system such as those more prevalent in East Africa. This in turn changes her purchasing patterns and decision making as the pattern of cash flows — timing and amount — changes. She isn’t making do anymore on an unknown and predictable sale based on sitting and waiting for someone to show up to buy her wine.

Real time communication has improved the decision making cycle for both buyer and seller in a transaction as it counteracts uncertainty and information asymmetry even while speeding up the time take for a decision.

As the quantity and frequency of transactions increase— first, in cash conducted face to face, and then later, remotely by mobile money, regardless of the size of each transaction — the change in cash flow patterns begins to smooth out the volatility (the uncertainty factor has changed completely) between incoming and outgoing, as well as the decisionmaking involved. That is, the gap between income and expense starts becoming less in terms of both timing and amount — there is the possibility of a steady stream in the pipeline. Calculus offers hints of how the curve can begin to smoothen out as frequency and periodicity of transactions begins to accelerate.

Size of transactions thus begin to matter less in that the incoming amount now does not need to be so large as to cover expenses for an unknown duration of time before the next incoming payment; nor do expenses have to be tightly controlled constantly due to the uncertainty of the duration of time before the next payment, and the types of expenses incurred during this unknown period of time.

So the boost in decision making — how long it takes to complete a transaction, how often can transactions be completed — enabled by the real time communication facilitated by the mobile phone; plus the attendant immediacy of receiving payment via the same platform is the root of the improvement in the hyperlocal economy and consumption patterns among the informal sector actors. This is why large established traders (with sufficient financial cushion) were heard to observe that both purchasing power and consumption patterns had changed in their market town (Busia, Kenya Jan 2016) in the past 10 years since first the mobile phone, and later, mPesa, were introduced into their operating environment.

Uncertainty and information asymmetry that have long characterized the fragile and volatile nature of the informal sector operating in inadequately provided environments with unreliable systems and scarce data. In the next chapter we’ll step back and take a broader look at communication, connectivity, and commerce in the informal economy starting with the description of the operating environment’s characteristics regardless of continent.

This is part of a newly launched Medium where I will write in detail on economic behaviour and its drivers in the informal economy. Much of it draws upon the original research in the field from 2008-2009 which was shared on the prepaid economy blog. I found that time had passed and increased my understanding and I wanted to explore those discoveries in writing. Much of this is the foundation for recent works on ‘Mama Biashara‘.

Top 5 African Trending Topics in 2015

logo_newsletterEvery day I scan the African business news, and share selected articles on Twitter and Tumblr. Fascinating hobby aside, it gives me a finger on the pulse of stories swirling around the infowebs. On the last day of the calender year, it’s de rigeur to sit oneself down and attempt to cluster these swirling motes into some cohesive pattern. Here’s my 2 shillings worth for 2015.

 

Measuring Africa.

Whether its Nestle and the middle class, Africa Rising or falling, or the quality of data, statistics and analysis, the common thread running through these stories which pop up regularly every week is the establishment’s inability to get a clear picture of the African opportunity. The scramble for Africa seems to be defined by the struggle for data, forever out of reach of grasping excel spreadsheets.

Maybe Africa’s not meant to be measured into exactitude.

 

Solar powering innovation.

The Nigerian solar powered coldhub to help farmers preserve fresh produce and minimize post harvest losses is just one of the many examples of affordable solar driving innovation at the grassroots in Africa. Somaliland’s Hargeisa city boasts streetlamps; grannies are trundling off to India to study solar engineering; Kenyan motorbikes run on the sun; ATMs in Ghana; clinics in Rwanda, and so much more. Its no more the domain of social enterprises swooping in with their well funded and professionally designed solutions.

 

Women are more visible.

Women entrepreneurs, women starting cooperatives, founding companies, writing code, building apps, changing lives. They’ve suddenly become far more visible in the news. Whether it’s a story on how it feels to be a developer writing code in Lagos, or, a young woman helping dairy farmers sell milk, women from all walks of life are coming out of the shadows.

 

Mobile phones and Digital Currency

A measure of a market’s maturity lies in its perception of threats. M-Pesa, the financial inclusion industry’s darling, is fending off Bitcoin, the geek’s dream contender for transborder transactions. The African mobile market is no more defined by low cost candybars from Finland. Its all about apps, games, and services on demand. Welcome to the smart and social web, where you can buy your cow, some sheep, and fresh veg. Delivered to your doorstep.*

 

The digital divide is in the headlines

Africa is not a country. Ghana, Senegal, Zambia and Cameroon are. As social media collapses the commodity chain, linking the county that grew the coffee to the customer who consumed it, the stark difference in the way old fashioned global media still writes headlines for African news stories is glaring. Geographic errors abound, maps are mislabelled, and risk perception shrinks thousands of miles into one singular hotspot. This is one trend that I don’t wish to see make it to 2016.

 

*Those links, and analysis are available for a fee ;p

Emerging Futures: Opportunities in Digital Africa

In January 2011, my friend Dirk Knemeyer, Founder of Involution Studios, an internationally reknowned app design studio, suggested I write a series of articles on the imminent opportunities in technology and design emerging across the African continent.

That first article in the series “Opportunities in Digital Africa” was published on 22nd February 2011. Below, I’ll link to each article in the order it was published along with some key snippets to give us food for thought and reflection. Three years seems like a good time to refresh our view of the emerging future we saw back then and compare against the trends and activities of today.

Africa: The Next Frontier

What kind of opportunities are there? Who are these new customers? Where are they and what do they want? Is it possible to step away long enough from the overriding concerns of chaos, poverty, alleviation and humanitarianism to consider a long term business strategy in a sustainable manner? Certainly, yes. Google, for example, has been investing in a significant African presence with offices in Ghana, Senegal, Nigeria, Kenya, Uganda and South Africa. Needless to say they see the potential of this burgeoning – and no longer dark – continent. Acumen Fund’s East African Manager Biju Mohandas was recently quoted as saying:
“This whole region is growing dramatically. The nature of conversations is changing from that of a continent in shambles, and that requires aid, to a continent that is becoming the next big growth area in terms of economic interest.”

From OLPC to VC: Africa leapfrogs the digital divide

The advent of undersea cables directly linking even small landlocked nations like Botswana to high speed fibre optics means costs are halving as nations come online at top speed. Until now, Botswana had been dependent on expensive and slow satellite internet; now they see opportunities for e-governance policies to be implemented as well as benefits to education and the economy. For African nations, e-governance allows them to deliver services via technology into places where setting up physical offices would be difficult. In fact, building physical administrative infrastructure is so difficult and expensive that e-government has become attractive enough for states such as Kenya to assign high level personnel and resources to the task.

Challenges present opportunities: innovation in Africa

A vacuum exists in areas as diverse as transportation systems, distribution networks, basic raw materials, tools and spare parts. Lack of affordable financial devices, such as loans or overdraft facilities for small- and medium-sized businesses wishing to expand without waiting to accumulate sufficient cash or accessible consumer credit, is a constant hurdle for a population of irregular employment and often no bank account. Risk and uncertainty in this environment are considered endemic leading to high interest rates, closed business networks that operate on trusted referrals, and a healthy skepticism that a system will work as advertised. Yet, for the enterprising, these are the very environmental conditions that offer immense opportunity for creative ingenuity and innovation.

Mobile in Africa: from SMS to Android

A shift away from SMS-based solutions is expected, as user habits change and Internet-based, apps-driven services become more popular. It’s clear that an appetite for mobile content exists and continues to grow but it is not yet the mass market norm. That day, however, is not too far away.

The competition is increasingly about the customers, and what tasks they seek to complete on their devices. Simply building the right apps/content/service to meet that need won’t be enough: it will become a matter of getting the purpose, the platform and the price just right for each demographic. Market creation and customer education will drive each other in tandem.

Software in Africa: more, better, different

Today the integration of the mobile platform and conventional computer systems is a growing business. Text based interaction on the SMS and USSD platform will remain the primary need in the near term as mobile apps, while flexible and convenient, have yet to establish a foothold to the same extent as basic services.

Many software applications which take “always on” connectivity for granted as part of their evolution may not be wholly realistic in Africa for quite some time to come. The software industry reflects the uneven progress seen recently in the previous article on mobiles – pushing the envelope with new ways of transacting everyday activities like paying wages by SMS, even while dealing with challenges of piracy, localization and inadequate computing infrastructure. Still, it is this environment in which some of the most creative and innovative solutions for low cost technology deployment have been tried and tested.

Investing in Africa: challenges and constraints

To successfully enter the African consumer market on a tech platform with content and services means there is a need to reconsider three aspects:

  • Business models, which benefit from cash received upfront rather than implementing a costlier billing process and collection cycle  
  • Customers, who may not have the purchasing power for impulsive downloads (sharing and exchange are far more common) 
  • Services and applications, to leverage the differences in the environment while providing value to both the end user and the company.

Solving the puzzle of African opportunity is eminently achievable, it just requires thinking and acting in ways that are likely new and perhaps uncomfortable. The rewards, however, are well worth the effort.

February 2014, where are we now with what we saw emerging from the African digital landscape three years ago? 

Reflecting on this blog’s genesis after 5 years

I started this blog in late December 2008, in earnest and every day during the first prototype fieldwork for The Prepaid Economy project, one of the iBoP Asia Project’s first batch of Small Grant winners from the ASEAN region. For the first 5 months of 2009, this blog was on the mainpage of my website as I felt my entire enterprise – Emerging Futures Lab – was being entirely supported by this grant.

It was only in April 2009 that I began my next phase in advancing my experiential knowledge of preparing, planning and programming research using design ethnography tools from the field of user centered design (UCD) when I moved to Helsinki, Finland on a project with the then Helsinki School of Economics (HSE) and now a part of Aalto University. This university is the result of an academe-led innovative merger of the independent schools of business, design and engineering (science) which was manifest tangibly in the form of an experimental platform for interdisciplinary innovation research and pedagogy known to all as the Design Factory.

Everything that I came to understand about the patterns at play in the informal rural economies of the developing world was in one way due to conversations and whiteboarding exercises with the wide variety of people accessible to one in the factory. It was only later that it received the formal name of Aalto Design Factory, for most of its first year of existence it was simply “the df” or “df” to all of us early adopters and believers in removal of barriers and silos to effective communication, cooperation and collaboration.

In retrospect, I could have analysed a lot more with the rich deep dive of data I had gathered after my immersion in the field. I had spent 10 days off the www in a rice growing barangay in Iloilo, The Philippines and a similar amount of time but less direct inhome experience in rural Rajasthan, India. On the other hand, in the numerous projects since then, the layers of understanding the balance of flow – the give and take of transactions of value between trusted referrals, juggling the factors of “time” and “money” in order to smoothen the volatility between in the incoming cash and outgoing for daily needs and other expenses – have only deepened in nuance and understanding.

This research path was set upon in late 2008 – just around now, in fact since the deadline for applying for the iBoP/IDRC’s Small Grant was the first week of September. It has been 5 full years on wondering about the inherent conflict between periodic, calender based payment plans, monthly subscriptions and other regular inflows of cash, often paid as a bill of unknown amount due in the near future or as hire purchase payments AND the irregular and sometime unpredictable income streams from a variety of sources relied upon by the vast majority of the world’s households for managing their household finances.

Why the prepaid business model works so well for the informal economy, the base or bottom of the pyramid (BoP) and the seasonal ebbs and flows of the rural economy can all be explained by simply pointing out the fact that this pay as you go system hands over the control over amount to be paid and date it is due to the end user – something that Donald Norman, father of user centered design (UCD) has also pointed out as a factor in user satisfaction with a product and its design.

About 12 months ago I completed fieldwork that took my original primary research on the prepaid economy and its decision making behaviour in order to better inform business models and payment plans and went a few steps further into comparative analysis of experimental results. I was able to compare the sales results of a product line across 4 different variations of payment plans being pilot tested among rural offgrid residents in 2 East Africa Community countries.

This was almost as good as a direct test of the original hypothesis that the greater the span of control over time (duration, frequency, periodicity) and money (amount, cash or kind) a business model offered a member of the informal economy, the better the long term chances of sustaining the enterprise. In fact, I was able to add one more factor to the equational mix which was not considered when I first began this work.

This is what I call “Face time” or combination of social capital, daily proximity and interpersonal relational mix – that which allows you to negotiate on terms of payment such as time and amount with someone to whom you owe this cash or payment and the limits of this negotiation are bounded by the limits of trust between the two of you.

Face time  and Flexibility were the two main attributes of the 4 business models being pilot tested that seemed to capture the range of responses, performance and feedback, yet allow us to distinguish what was different in each model, thus what might have influenced a change.

None of this research was quantitative but completely qualitative groundclearing work to discover insights that would inform more relevant and appropriate business models and other market entry tactics to maximize, within constraints, the adoption rate of innovation (a new venture, a service or business model, an invention) among the population without regular paychecks and easy access to consumer credit. This work has also validated my hypothesis that the tools from user centered design could be used to advantage to grasp and make sense of more complex and wicked problems than could be understood by simple numbers alone.  The methodology being part of product development process also allows for company’s to reach a faster path to market with an innovative product or service or revenue stream in entirety.

The original fieldwork in agriculture dependent rural economies in ASEAN and South Asia and the early work in Africa, all looked at the bulk of such a population, the lower income segments at the BoP. But now with the rapidly emerging global middle classes i.e. those displaying regular patterns of consumption, this knowledge gained can also help assess the worldview and consumer mindset of the emerging consumer markets of sub Saharan Africa.

There is so much yet to be learnt and every single actor is breaking new ground, whether its Econet Wireless and MKopa with their airtime or mobile money pay as you go solar lights and charging or whether its every social enterprise trying to sell a cookstove, a lantern or a water pump to the subsistence farmer. We need to document every instance of success so that patterns of what worked might be of help to better refine and improve our models for market creation at the very end of the global value chain.

Lessons from working with Social Enterprises

Aisle Manager at Nakumatt

By the end of my most recent project, I was convinced that the label “Bottom of the Pyramid” (or Base of the Pyramid) also known as “the BoP” was one of the biggest barriers for organizations seeking to serve these emerging consumer markets in the informal economies of the developing world.

The alternative long and descriptive sentence is not as snappy as the BoP and I struggle with this everyday as I try to capture the characteristics and qualities of this market. But the problem with the label is that it has come to be closely associated with poverty alleviation rather than an emerging market opportunity, and thus gets loaded with the detritus of the aid and development industry. If you are to be a sustainable business, you need to generate revenue if not make a little profit and for that you need to consider your target audience as your customer, not your beneficiary.

The peculiarities of social enterprises seeking to serve the poor include the existential struggle between doing good and good business. But the emphasis on the BoP as the poor, the underserved and overlooked (by myself included) diverts us from taking them seriously as financially shrewd even if economically challenged customers in their own right. We barely know where they shop and why, how they make their decisions to purchase and how they plan to pay for them, in fact there’s little or no serious consumer research on these segments of the population. No wonder if they are not considered serious consumers to be wooed and won over like any other.

“Should we be profiting from the poor?” ask a plethora of well intentioned articles when those who do business with each other in the informal, cash based economies have no such compunction when doubling the price of kerosene as a premium for the convenience of transporting it 10km closer to their customers.

If we took away this well meaning yet now increasingly problematic label (with all the associations of poverty and helplessness), we’d perceive a diverse group of people with varying needs, aspirations, cash flows and consumption habits. We’d be segmenting them with the same rigour of a Unilever or attempting to reach them wherever they shop like Coca Cola. We would not be sitting around measuring impact of the soda or wondering how to scale. I’m going to wrestle with this wicked problem further but in the meantime, here are some collected thoughts from my observations in field recently:

Questioning the value of the term Base or Bottom of the Pyramid aka the BoP
But why aren’t they buying my fantastic life saving product?
Assessing social impact vs financial sustainability for Base of Pyramid business models
Why so much “BoP” marketing fails in the developing world

 

Social enterprises and the target audience for their value propositions
What does it mean when Chinese manufacturers enter the social enterprise space?
Systems thinking and the mobile for economic impact and wealth creation
Raising some concerns about urban user research insights being applied to design for rural markets

 
Navigating the African market opportunity
Caution: The emerging African market PDF stampede
Cracking the informal markets in Sub Saharan Africa: the need for strategic improvisation
Insights from the South African low income market (BoP) opportunity
The ingenuity economy: grassroots social enterprises abound

 

Women Together: Incentivising Savings

Prema Salgaonkar has been working with Mahila Milan for over 20 years and now heads a group of local facilitators of a daily savings scheme for Dharavi residents. Mahila Milan means “women together” and provides a decentralised vehicle for the empowerment of women via leadership roles and advocacy alongside its pivotal daily savings collection. Prema visits around 450 households each day, of which a third will deposit anything between Rs 5 to 200, with almost all households banking something each week. Such a savings mechanism is ideally suited to the irregular nature of earnings at the base of the pyramid which we have been widely discussing here.

The deposits from a number of collectives are formally banked but rather than paying interest Mahila Milan provides community and emergency support in a transparent manner. For many, without this daily visit which both incentivises and protects savings, surplus cash would not even be conceived of – let alone put aside. Savings are readily accessible and members of the scheme can apply for credit if required. If loans are requested the local Mahila Milan leaders will assess the need and ability to repay, possibly consulting with neighbours as to the borrower’s situation. Repayment terms are negotiated on a case-by-case basis around the borrower’s earning patterns, with consideration given to the maintenance of some savings alongside repayments. Loans – usually for up to Rs 500 at 2% interest – have helped with school fees, medical bills and entrepreneurial start-ups from tailoring services to coconut vending.

Beginning in Mumbai in the eighties, initially Mahila Milan had many more illiterate members and developed a system whereby coloured squares of paper would be exchanged for deposits and kept by the saving member in a plastic bag: red for one rupee, yellow for two, green for three and so on. This way members could always check how much money they had access to and plan accordingly. Now this system has been largely disbanded and replaced with passbooks which members were proud to show us and explain the context of various peaks in savings and withdrawal. Currently Mahila Milan constitutes a networked federation of nationwide woman’s collectives encompassing 60,000 women

The system is not just about collecting money but also about daily contact which deepens the understanding of various issues facing Dharavi residents. Contributing to a consensus of community priorities, this information is often passed on to other support groups in the area such as the local community council (panchayat) plus used to inform a number of Mahila Milan initiatives. One of our informants (above) who used the scheme conveyed that even on the days when she has nothing to deposit that its was reassuring to be visited by a trusted outsider with sound financial knowledge and that she sometimes used the opportunity to discuss issues such as how rising food prices were affecting those beyond her own neighbourhood. She notes that watching her savings grow has allowed her to start imagining and planning a better future for her family – with her mother and sister also active members in the scheme.

We were told of numerous success stories like the woman who saved towards buying a second-hand sewing machine which allowed her daughter to leave a gruelling job at a local garment factory to start her own now-flourishing dressmaking business. Another woman with six children and an alcoholic husband saved Rs 5-10 a day till she had Rs 5000 with which she bought a machine to process heavy duty plastic for recycling and now boasts a much higher standard of living for herself and her family. Others access their savings on a more short term basis to counter income fluctuations – still signalling a heightened life standard. And significantly most continue with their savings schemes while servicing their loans.

Micro-credit has been commanding a fair amount of attention surrounding poverty alleviation of late – including voices of caution as have featured on blog posts below. Mahila Milan seeks to strengthen financial assets primarily through savings-led services with micro-loans being offered as a secondary and complimentary service. Last year’s brief article Putting the Microsavings in Microfinance from the New York Times makes the highly relevant point that “only some poor people will benefit from the chance to borrow, but almost all will benefit from the chance to save.”

[Check out more photos from fieldwork at Dharavi.]

iBoP Asia’s Frontiers: Charting the future of S&T innovation for the poor in Southeast Asia

A bicycle-powered paper shredder that can be used to make
environment-friendly charcoal. A new way of processing waste cooking
oil that turns it into cheap fuel for vehicles. A web-based system that
allows small-scale fishers to access marine data using mobile phones.

These are just some of the promising devices that will be showcased,
along with other “base of the pyramid” (BoP) innovations, in a forum
co-organized by iBoP Asia (www.ibop-asia.net) and the Dewan Riset
Nasional (www.drn.go.id). The forum will be held on March 3, 2010 at
the Grand Sahid Jaya Hotel in Jakarta, Indonesia.

The BoP refers to the 2.9 billion people in Asia (4 billion worldwide)
living on less than 4 US Dollars a day. iBoP Asia, a collaboration
between the School of Government of the Ateneo de Manila University in
the Philippines and Canada’s International Development Research Centre
that was launched in 2008, is a pioneering effort in the region that
promotes and supports S&T-based approaches and solutions to
poverty.

Aptly called
Frontiers, the forum will gather experts and
innovators in the sectors of water & sanitation, energy,
agriculture, climate change, ICT and microfinance to tackle the
pressing needs of the BoP in these areas and how S&T can provide
viable and affordable solutions to these needs. Dr. Allen Hammond,
Ashoka senior entrepreneur and lead co-author of ‘The Next 4 Billion’
is the forum’s keynote speaker.
Putting the BoP at the heart of S&T
development and innovation in the region is the underlying message, and
what is called for is to harness the potential of Southeast Asia to
become a knowledge-base and leader in S&T innovation for the BoP.

The innovation projects of eleven (11) organizations from the
Philippines, Singapore, Indonesia and Vietnam supported by the iBoP
Asia Small Grants Program will be the highlight of the forum. Apart
from the innovations that were previously mentioned, also to be
presented are studies on the spending patterns of the BoP and payment
strategies for those with irregular incomes
; the development of BoP
enterprises; the improvement of farming practices and agricultural
products; and innovative models for water service delivery in
communities.

Last year, another set of grants were awarded by iBoP Asia to fifteen
(15) organizations, including orgs based in Thailand and Cambodia. The
results and outputs of these projects will be presented to the public
in October 2010.

iBoP Asia is building partnerships not only with researchers and
innovators but also with key agencies in government, the private sector
and civil society. The Project has been recently cited as a “positive
and inspiring” example of a pro-poor S&T research program by the
Dewan Riset Nasional. DRN, under its Secretary, Dr. Ir. Tusy A.
Adibroto, has taken on a key role in furthering iBoP Asia’s efforts in
Southeast Asia by becoming the home of

iBoP Indonesia,
the official network of iBoP Asia in Indonesia. Ms. TikTik Dewi
Sartika, DRN’s junior communication staff, serves as iBoP Asia’s
Network Fellow and overall coordinator for iBoP Indonesia.

Visit www.ibop-asia.net to know more about iBoP Asia and its partners in the region.

(Dean Tony La Vina on the iBoP Asia Facebook page)

Using Ethnographic Research To Learn About Life at the BoP

The expected deliverable of the iBoP Asia grant project is that we create a new payment strategy or business model for purchasing a shared resource within a Bottom of the Pyramid (BoP) community. Recognizing that no member of our research team has grown up in a community considered to be at the BoP, we can’t assume that we have all the answers concerning what payment strategies are appropriate for the economic and social pressures that these individuals face on a daily basis. So, we have to start at the beginning, collecting insights about what it’s like to live on small, irregular and unpredictable incomes.

To collect this information, we’re leveraging the methodology of Ethnographic Research. In its purest form, Ethnographic Research is about entering the natural habitats of your users, seeking to understand through participation, listening and observation the behaviors, values and motivations of a culture. We plan to use the behavioral and values-based data that’s been collected during fieldwork–in the Philippines and in India–as the foundation for our ideation efforts concerning new payment strategies for the BoP.

Using Ethnographic Research in grant work is unique
We’re learning that the use of Ethnographic Research in grant-funded work is a bit unconventional, as the exploratory nature of the methodology is non-directed and unscripted. This challenges all norms associated with how grant money is traditionally awarded, as we don’t have the answer before we’ve begun. We aren’t studying some of the poorest neighborhoods in the Philippines and in India to validate a hypothesis, but rather, using Ethnography to gain a comprehensive understanding of the individuals intended to benefit from the outcomes of our work.

Additionally, we’ve intentionally scoped our research to be more “broad” in focus versus “narrow,” which seems to be a point of contention among some as our results will be more “abstract” versus “concrete.” Yet, from our perspective, “abstract” is good…in this case.

An exploratory, “broad” research approach offers context for development

When it comes to doing research for purposes of product development or strategy, one of the first questions you must ask yourself is, “What does this research need to inform?” Once you’ve answered this question you now know what your project’s “level of focus” needs to be.

You determine “level of focus” by considering both the scope and the expected outcomes of an initiative. For instance, if you hope to understand the socio-historical context of which a product or service will be part, you scope your project to be “broad” in focus, as we have. This “broad focus” will give insight into the values of the sub-culture in which you hope to introduce your new offering. Additionally, you’ll gain knowledge regarding some of the likely barriers to acceptance in the marketplace that your offering may have once introduced. On the other hand, if you need to see and understand the detailed interactions that a user has with a product or its interface, a “narrow focused” study is more appropriate. A “narrow focused” study will result in “concrete” recommendations about how to improve the customer experience associated with a product or service.

The “broader” that a project’s focus is, the more “abstract” the outcomes of that research will be. “Abstract,” in this case, means that you’ll be able to create high-level conceptual descriptions of a new product, service or business model, but shouldn’t plan for an immediate market launch of your new offering. You’ll likely need to take the concept through more “narrow focused” studies to iron out the details.

You might question, “So, what’s the value in starting with a ‘broad focused’ research initiative? Why not just jump in at the ‘narrow focused’ level?” The reason is, the more “narrow focused” you are in your research, the more likely it is that you’ll miss some fundamental truths about your user group that could dramatically impact the acceptance of your offering in the marketplace.

Most people have heard a story or two about focus groups gone wrong. Usually the story goes something like this: “We did the study. All our participants loved the product, told us they’d buy it. The price point seemed to be right on target. And then nothing…we have two customers.”

Sure, there are lots of things that could be questioned about the design of that focus group. Yet, more than likely what went wrong was that the product didn’t offer enough value to these people’s lives to warrant their hard earned money. It’s not as if participants in the focus group intentionally lied. They gave their truthful opinions about the product as was asked. It’s what wasn’t asked and explored that became the downfall of the product. The product had no place in its intended users’ lives. It didn’t fit with their behavior patterns and values. Behavior patterns and values are the things that “broad” focused, exploratory research uncovers.

It’s these behavioral patterns and values that we think are critical to understand before we can confidently propose a new payment strategy or business model for purchasing a shared resource, such as water harvesting equipment, in a BoP community. Past experience has shown us that an upfront investment in customer understanding goes a long way for saving time, costs and resources in solution development and implementation. I suspect that we’ll find the same to be true here as well.

Our next steps
To date, the fieldwork for the iBoP Asia grant has been done in both the Philippines and in India. We’ve pulled together a multi-disciplinary team comprised of ethnographers, design strategists, BoP specialists, and economists. We’ll meet in Helsinki in April at the Helsinki School of Economics. Methods of Design Ethnography will be leveraged in a 10-day workshop, as we seek to translate this behavioral and values-based data collected about our user group into tangible constraints and criteria for the payment strategy that we deliver as an outcome of this grant. These constraints and criteria will offer the fodder required to support our team’s ideation efforts and ensure that payment strategies proposed are all grounded in the reality of what it’s like to live in the BoP.

The payment strategies for purchasing a shared resource that emerge from our workshop in April will be conceptual in nature. I don’t expect any of these ideas to be ready for implementation. Instead, we’ll work next on developing one or more prototypes of these payment strategies. We’ll then seek additional grant money to do the next step of “narrow focused” research.

Collection: Pay as you go or prepaid economy?

The basic concept for this project emerged from a series of observations covering the themes of managing on irregular and unpredictable incomes,
informal economies at the BoP as well as the popularity of the
"prepaid" model which enable micro purchases on demand.

These weak signals of change were seen globally and here are all the previous posts written since May 2008 from the Perspective 2.0 blog collected together:

Banking on airtime, transaction models, informal economies
How does a bank account help the unemployed?
Fish and the price of an iPhone
Business models for emerging customer markets
Value transactions in Africa: documenting grassroots practices and innovations


The increasing global influence of pay as you go OR do you need a 'top up'?
Early signals of a 'pay as you go' economy?
Singapore launches prepaid electricity meters
Prepaid electricity increasingly popular around the world
A "Pay as you go" consumer culture?


Benefits of prepaying – thoughts from Malawi
Value is contextual