Archive for the ‘Indigenous & Traditional’ Category

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.

Voices from the Pacific: Mirroring the Challenges of Informal Market Women Everywhere

ABOUT 80 per cent of all market vendors in the Pacific are women, and these earnings make up a significant portion of incomes of many poor households. In spite of their contribution to the local economy and to markets, women are often excluded from market governance and decision-making. ~ The Fiji Times

Following up from the previous post on cooperative and collaborative financial behaviour in rural and informal economic conditions where I’d stated:

The fact that both simple and sophisticated groups exist within the rural and informal economy imply that the factors that predispose people to turn to cooperative and collaborative solutions for managing their finances in conditions of uncertainty and unpredictability are thus related to factors external to the local culture or society, and have more to do with the similarity of the conditions inherent in the operating environment of the informal and rural economies of the developing world.

These include irregular cash flows from a variety of sources, multiple income streams over the course of the natural year, seasonality inherent in agricultural crop cycles, and lack of a social safety net.

I thought to share the snippet above on an article I came across from The Fiji Times about a Market Vendor Association gathering of women traders from across the island nations in the Pacific Ocean – all the way across our planet from the continent of Africa – and how familiar I found their words describing their obstacles and opportunities. Mama Biashara spans the globe with her trade.

This commonality only underscores our need to capture, document, analyze, and understand the operating environment of the informal economy, thus laying the foundation for its recognition as a very natural and organic response to similar conditions and constraints – a global phenomena, if you will, and thus, not just a local or regional embarrassment to be eradicated.

Savings Groups : Observations on Economic Cooperation and Collaboration in Rural and Informal Conditions

Recently, I was interviewed on communal rural economic behaviour, particularly socially cooperative ones  such as informal savings and lending groups. The questions posed were:

  • How has your opinion of savings group changed over time?
  • Why in your opinion, are people in Africa and Latin America countries (developing countries) predisposed to forming savings groups?
  • What is the importance of appreciating the indigenous financial services of the people of Africa (or anywhere else)?

I enjoyed the conversation reflecting on the lessons learnt over the past decade of primary research on household financial management within context of informal rural economies across continents and countries so much so that I decided to capture my reflections here as an integrated answer to both questions.

On the documentary level, nothing much has changed in the years since I first observed instances of cooperative economic behaviour in rural informal operating environments. Here’s a snippet from the Prepaid Economy Project’s report written in November 2009:

These complex webs of the rural community’s social networks of trust were obvious in the patterns of sharing and cooperation seen in every country. Groups would invest and save together, for example, the extremely sophisticated cooperative ladies lending circle which had expanded over time to include the services of a local bank in India; or the beekeepers cooperative in Malawi where half the annual profits were saved in a common account while the other half was equally shared.

Years later, we’re still documenting the complex webs of social networking and trust in informal economic ecosystems, and the wide variety of organizational structures for financial and economic management.

Its our recognition of the role of such groups, and their contribution to the resilience and the ability of informal economic actors to manage in volatile and uncertain conditions that has evolved, and changed. The layers of knowledge laid down over the years, across the geographies and cultures, now allow me to take a step back from the details of any particular context, and understand the patterns of cooperation, broadly, across continents and cultures.

Furthermore, our own increasing depth and breadth of understanding the highly interdependent networks of commerce and trade within the informal economic ecosystem – from farm gate to cross border trade – have led to us rethinking the concept of the end user, and questioning the assumptions implicit in the way user research is designed for fintech, financial inclusion, and other such related areas.

That is to say, the way my opinion changed regarding savings (etc) groups, over the years, has been to recognize their importance as the basic building block of the rural and/or informal economy in the developing country operating environment, rather than simply observing their behaviour as a means for individual household financial management, as we’d done in the very beginning.

Source Alice’s entire value web can be thought of as an informal economic microsystem

From the human centered design perspective (HCD, or UCD = user centered design), which is the basis for our work here at emerging futures lab, we have begun to consider that the “end user” of our design solutions might as often turn out to be the group, instead of the individual member of that group. This has been the biggest change in my opinion, over time, in answer to the first question

For the remaining two questions, I rapidly sketched this continuum of different types of “informal” groups engaged in financial behaviour as seen in cash intensive, rural, and informal conditions, seen below.

As we have recognized, regardless of continent or community, the group is a basic economic building block. What changes from group to group, depending on its function and its need in the community, is the sophistication of the organizational and money management structure.

On one hand is the simplest form of cooperation – people pool money that one member then receives as a lumpsum to use, only the mechanism of choosing whose turn it is may require some coordination. At the other end are sophisticated economic management structures often with formal registration and recognition.  This includes integration of formal financial institutions and their products – such as leveraging capital in the form of a fixed deposit in a bank for drawing loans, or their services, such as a designated officer from the bank attending chama meetings.

The fact that both simple and sophisticated groups exist within the rural and informal economy imply that the factors that predispose people to turn to cooperative and collaborative solutions for managing their finances in conditions of uncertainty and unpredictability are thus related to factors external to the local culture or society, and have more to do with the similarity of the conditions inherent in the operating environment of the informal and rural economies of the developing world. These include irregular cash flows from a variety of sources, multiple income streams over the course of the natural year, seasonality inherent in agricultural crop cycles, and lack of a social safety net.

Here’s another snippet from the original report of 2009:

Insights derived from the fieldwork lead us to believe that the key factor that makes the ‘prepaid’ transaction model so successful among the BoP is the fact that the decision making is in the hands of the individual. This model gives the end user significant control over time – frequency and periodicity and money – varying amounts, in the hands of the customer and thus fits in with their need to manage their varying cash flow from multiple income sources with a great degree of flexibility.

Furthermore, among rural communities, it was observed that social capital – that is, the community ties and extended networks – plays a significant role in the success of existing informal yet traditional means of borrowing, lending and sharing wealth and expenses.

That is, the negotiability, flexibility, and reciprocity, that trust enables within one’s social ties, is reflected in the prepaid business model that enabled mobile phones to spread rapidly around the world. And it’s this factor that provides the evidence for our assertion that an external business model or payment plan to be introduced into such an informal economic ecosystem succeeds when it resonates with existing forms and structures of financial and economic behaviour.

This is not only why its critical to first observe, document, and understand the existing solutions and behaviours in what may seem to be a financially excluded population, but it provides the keys to the design of sustainable solutions that are successfully adopted and utilized. The bottomline is that the “informal” or the rural isn’t adhoc or chaotic as initial observations might imply, but there are rhythms and structures inherent in the system that may, in fact, be invisible.

A Very Nigerian Opinion on E-Commerce and Online Fashion Startups

Folake Shoga shares her opinion on the recent spate of tech startups and apps mean to serve Nigeria’s fashion and fabric industry.

Two recent articles in Techpoint, the Nigerian online technology magazine, feature initiatives dealing with aspects of the clothing business. One is a startup letting studio space and equipment to makers, 360 Creative Hub; and one is an internet based fabric selling business, Fabricsphere. Reading up on the feasibility of these two initiatives has been an interesting experience, very much encouraged by the richness of Techpoint’s coverage of Nigeria’s tech and business ecosystem.

Having said that, as just a humble, occasional and above all provincial Nigerian, I’ll start by paraphrasing L P Hartley: “Lagos is another country; they do things differently there.” Sometimes, reading official accounts, reports etc of events in Nigeria really jarrs with one’s lived experience of the country (even though being as the standard of written professional journalism is generally excellent, this hardly every happens when reading the actual quality newspapers, Punch and The Guardian and their ilk.) In the aforementioned Techpoint articles some of the prices quoted for goods and services seem steep to me, which surely militates against takeup, but I am, as I said, provincial, and moreover brought up by Ijebu people. No doubt everything costs more in Lagos.

Startup culture is a thing in itself; current, progressive, innovative, aiming to breach new ground or disrupt! received conventions – although strictly speaking away from the comfortable global North there may already be more disruption going on than we are entirely comfortable with. But the term itself, startup, comes surrounded by an effervescence of aspiration, floating on an expectation of the power of a tech-determined state change in human affairs. “First we’ll click here, then we’ll be in tomorrow today already! Yay!!”

As recently as 12 years ago it was impossible to prejudge which casual, frivolous digital activity would end up as an engine of massive social change. Nobody could possibly have foretold, for instance, how a site for rating the comparative attractiveness of your female fellow students could have morphed into a giant data-gatherer, news disseminator and influencer of global public opinion. Or how a site for online shopping could evolve to be at the forefront of research into the logistics of drone technology and other automated delivery systems. So there is a hope and a hype around web-based startup culture, an eye for the next big thing, the next new system that will prove that from small beginnings come big changes. Nigeria, as a vast untapped market, has the potential to be a hive of new technology activity, and Techpoint in it’s many articles provides an interesting and thorough overview of the local scene, though concentrating almost entirely on Lagos.

Read On…

Financial Behaviour Patterns Observed Among Households in Rural Informal Economy in Asia

This is the original working paper of the research conducted on rural household financial management, in developing country conditions, pioneering the use of methods from human centered design for discovery, during Nov 2008 to March 2009, aka the Prepaid Economy Project. It was peer reviewed by Brett Hudson Matthews, and I have incorporated his comments into the PDF.

This research study was carried out with the aid of a grant from the iBoP Asia Project (http://www.ibop-asia.net), a partnership between the Ateneo School of Government and Canada’s International Development Research Centre (www.idrc.ca)

The abstract:


The challenge faced by Bottom of the Pyramid (BoP) ventures has been the lack of knowledge about their intended target audience from the point of view of business development whereas decades of consumer research and insights are available for conventional markets. What little is known about the BoP’s consumer behaviour, purchasing patterns and decision making tends to assume that there are no primary differences between mainstream consumers and the BoP except for the amount of their income – pegged most often between $2 to $5 a day.

In practice, the great majority at the BoP manage on incomes earned from a variety of sources rather than a predictable salary from a regular job and have little or no access to conventional financial tools such as credit cards, bank accounts, loans, mortgages. This is one of the biggest differentiators in the challenge of value creation faced by BoP ventures, particularly among rural populations (over 60% of the global BoP population lives in rural areas).

Exploratory research was conducted in the field among rural Indian and rural Filipino populations in order to understand how those on irregular incomes managed their household expenses. Empirical data collected by observations, interviews and extended immersion led us to identify patterns of behaviour among the rural BoP in their management of income and expenditure, ‘cash flow’ and ‘working capital’ and the significance of social capital and community networks as financial tools. Practices documented include ‘conversion to goods’, ‘stored wealth’, ‘cashless transactions’, and reliance on multiple sources of income that mature over different times.

This paper will share our observations from the field; identify some challenges these behaviours create for business and also explore some opportunities for value creation by seeking to articulate the elements that BoP ventures must address if they are to do business profitably with the rural ‘poor’ based on their own existing patterns of financial habits and norms.


The Conclusion:

In sum, it can be concluded that the challenges for value creation can be quite different for BoP ventures interested in addressing the rural markets. From the observations made in the field, we can highlight three key implications for business development. These are:

  • Seasonality – with the exception of the salaried, everyone else in the sample pool was able to identify times of abundance and scarcity over the course of natural year in their earnings. Identification of a particular region or market’s local pattern of seasonality would benefit the design of payment schedules, timing of entry or new product and service launch, for example.
  • Relative lack of liquidity – The majority of the rural households observed tended to ‘store wealth’ in the form of goods, livestock or natural resources, relying on a variety of cashless transactions within the community for a number of needs. Conventional business development strategies need to be reformulated to take this into account as these patterns of behaviour may reflect the household’s purchasing power or income level inaccurately.
  • Increasing the customer’s span of control over the timing, frequency and amount of cash required – Since the availability and amount of cash cannot be predicted on calendar time, this implication is best reflected by the success of the prepaid mobile phone subscriptions in these same markets. When some cash is available, it can be used to purchase airtime minutes for text or voice calls, when there is no money, the phone can still receive incoming calls. Models which impose an external schedule of periodicity, frequency and amount of cash required may not always be successful in matching the volatile cash flow particular to each household’s sources of income.

Cognitive dissonance and smartphones in East Africa

via twitter, a modern day kanga from East Africa

Its jarring to see high level INGO messaging still talking about “ICT4D” not doing it’s part to bring about technology driven transformation in rural or informal sector Africa when every other sign from the continent points to a mainstreaming of ICT that goes beyond the individual’s capacity to tweet.

The kanga is a traditional item of women’s clothing worn all along the Swahili coast of Eastern and Southern Africa. Probably originating from the monsoon driven textiles trade with the west coast of India long ago in the mists of history, the kanga is rather well known for incorporating Swahili proverbs and aphorisms within its design.

While traditional sayings might refer to love or social relationships, warnings and idiomatic sayings, this photograph of the kanga, now making the rounds on social media, which I’ve shared above, provides clear evidence of the ubiquity of smartphone technology and social media communication in local culture.

Surely your screenshot is waiting in your inbox isn’t a traditional proverb nor an age old Kiswahili aphorism.

Frame Insights: Going back to first principles in the Innovation Planning Process

After conducting research, we need to bring structure to what has been found and learned. We sort, cluster, and organize the data gathered and begin to find important patterns. We analyze contextual data and view patterns that point to untapped market opportunities or niches. Finding insights and patterns that repeatedly emerge from multiple analyses of data is beneficial. ~ Vijay Kumar, 101 Design Methods

“It’s what happens after the research that’s important” is something I found myself saying three times to three different people in three different contexts over the past couple of days. Anyone can go out and interview users and beneficiaries. What’s important is what happens during the Analysis phase.

To ponder this in detail, I wanted to go back to first principles, and drill down into the post research stage where we are expected to frame our insights.

Vijay’s slide pops out 5 key outcomes from this phase, and these are critical for solution development in the subsequent phase. These 5 outcomes from analysis of the data collected during the research phase are:

  1. Looking for patterns
  2. Exploring systems
  3. Identifying opportunities
  4. Developing guiding principles
  5. Constructing overviews

It is this stage that distinguishes the quality of the outcome. Now, in the case of our work in the informal economy operating environment, we have built up an overview of the landscape over the past several years, primarily through immersion and thick data collection using design ethnography methods.

Starting from the purchasing patterns and buyer behaviour of low income consumers, back in early 2008, all the way through to the development of guiding principles such as flexibility, we have explored and mapped the ecosystem from numerous vantage points.

Today, our synthesis of user research does not happen in isolation from the body of work – intellectual property – that has been developed over time, through experiential and practical knowledge.

This, then, is what underlay my conviction when I spoke about the importance of the quality of interpretation of the data, and the transmutation of these interpretations into implemented insights in the form of new product features, service design elements, or nuances of the payment plan in the business model.

Increasingly, the Frame Insights phase of our work has led to the evolution of our understanding of the commercial landscape in rural and informal markets where incomes tend to be irregular and volatile, and infrastructure is inadequate or missing. It is this that I’ve been attempting to capture under the category of Biashara Economics.

It’s not Africa specific. The patterns hold, give or take ~30% margin for historical/cultural/social differences, across continents. That is because these patterns are the natural response to the common characteristics of seasonality, volatility, uncertainty, and unpredictability. And this is why one can see the success of the prepaid business model around the world.

It strikes me here that this in fact validates the methodology and approach to exploration and discovery in unknown contexts, something I had framed as the starting point for the very first such project almost a decade ago. Over time, I discovered how much the methods, as delineated by Vijay in Chicago, had to be adapted for the context but that is a topic for another time.

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“.

It’s way past the time to consider the Informal Economy as a distinct commercial environment

Brand stickers on avocados displayed for sale on a highway, Kenya. April 2013

Regardless of continent, it is now high time we accepted the informal economy (unformal or unrecognised or unorganized sectors) as a commercial operating environment in its own right.

The continued oversight is rapidly coalescing into a gaping void of hiccups and failures, by large companies, non profit institutions, and startups, alike. This issue goes far beyond “understanding the informal” or recognizing the fulltime professional status of the service providers that I’ve written about before.

It’s about the problems created by continuing to assume every individual is poverty stricken and struggling to make a livelihood simply because a significant portion of their commercial activity operates outside what is rarely defined but is assumed to be the formal, structured economy held up as the pinnacle of economic development.

It’s why academics can barely conceal their flabbergasted surprise that a person has a better quality of life, and a reasonably viable revenue stream in [gasp] informal market trading, or even agricultural work.

It’s why @pesa_africa questions the continued transplantation of e-commerce business models directly from Seattle to subSahara given that they’ve tended to wither on the vines.

It’s why market women and traders pay the price of daily harassment and abuse by those given authority over their peace of mind.

And, it’s also why the freshest produce gets to you first thing in the morning in Nairobi or Cotonou or Kinshasa.

This is not meant to be a paean to the hardworking women and men who keep the engines of commerce and trade humming in the harshest of environments with scarce resources and inadequate infrastructure.

It’s the first step in acknowledging yet another holdover from a colonial past that decades later still hampers and hinders the social and economic development that should have happened by now, by all rights.

It’s also the necessary counterpart to the recognition of agency required for design interventions to succeed once donor funding ends.

This theme is consistently covered in this blog in the category Biashara Economics and hashtag #biasharaeconomics