Archive for the ‘Literature review’ Category

Poverty is Dynamic and Flexible, Just like the Informal Economy: Evidence from India

…the concept of poverty today is fundamentally different from that of poverty three decades ago, and that safety nets need to be tailored to meet the needs of a society in transition.~ The Hindu, 2 Aug 2016

When quantitative data provided by the India Human Development Survey (the first large panel survey in India) provokes the academics involved to question their fundamental assumptions and premise of what poverty is, and what it might mean, its a noteworthy moment.

The survey, conducted by the University of Maryland and the National Council of Applied Economic Research (NCAER) for the same households at two points in time, viz. 2004-05 and 2011-12. Their analysis has led them to say:

Once we recognise that poverty is dynamic in nature, and that as per our conventional definition of poverty, poor households may move out of poverty and the non-poor may become poor over a period of time, we are forced to question the veracity of our fundamental assumptions about poverty. Perhaps poverty occurs not simply due to the accident of birth or as defined in terms of where and in which family people are born, but also due to the accident of life caused by the occurrence of disease, disability and unemployment. Achieving this recognition entails a complete transformation in our mindset.

I will leave them to their explorations from the perspectives of their disciplines, and explore the broader implications of their findings.

A few years ago, as part of my discoveries from more qualitative user research in the field on the informal sector’s financial context and operating environment, I had had my insight on the dynamic nature of poverty as it was conventionally defined.

It was when attempting to clearly distinguish between patterns of cash flow in the formal vs the informal economy, using the concept of the degree of control granted to the end user over the variables of time (duration, frequency, periodicity) and money (amount, cash or kind), that it struck me what kind of difference does control over timing mean for money.

That is, there is a complex value processing underneath each of the decisions on allocating available cash money, particularly in rural areas where cashless transactions can tend to be more common.

When one can control the timing of one’s payments – such as the advance purchase of airtime minutes to use a mobile phone – one’s income could be called dynamic. Within any particular set of calender based time eg a week or a month or a quarter; a vast majority of the lower income bracket cannot predict their total cash income nor feel confident enough to claim it. It can be affected by seasonality prevalent in their region, or it can be purely random volatility, one’s workshop burns down in an accidental fire.

Static income is that which is stuck, such as a fixed salary paid every calender period, regular in frequency, amount and periodicity.

As cash flows tend to be volatile, fluctuating with seasonal influences, chance, and the vagaries of daily life, those whose incomes are not as predictable as a periodic paycheck, are more often than not unable to clearly state (or even know) their monthly or weekly income.

That is, even as data gurus in development banks seek to segment people into neatly defined ranges such as $2 to $4 a day or whatever, it is neither a given that people will remain within this range over the course of the natural year, nor can it be a reliable and consistent indicator of their income level – Below Poverty Line (BPL) is the concept used in The Hindu’s article above.

Therefore, if the survey studied households in an agricultural region during its fallow season the first time, and then went back to study the same households during the post harvest season the second time, that simple little factor of calender time alone can create a difference of as much as 100% to the incomes being claimed during that period. If the study does not follow up the income question to ask if there was seasonality in their cash flows over the course of the natural year and if this question was being asked during the high season or the low season.

When I did the original fieldwork for the prepaid economy project on an IDRC grant, looking at the rural household financial management behaviour in rural India, Philippines, and Malawi, I found that depending on the local region’s primary cash crop harvest patterns over the natural year (say monsoon to monsoon, or Christmas to Christmas) the entire local economy felt the impact of the difference in cash flowing through their ecosystem during the high and the low season. Or, the wet and the dry season.

It was not the naming of the seasons that is important. It is the ability of the people to forecast known fluctuations in their income streams based on patterns recognized from experience and local wisdom. Within the context of an environment of uncertainty and volatility, it offered them some anchors for planning and financial management.

Given that the vast majority of the poor in the developing world, like in India and across Africa, are dependent on irregular, often unpredictable cash flows from a variety of sources, in an environment of higher risk and uncertainty, their incomes can confidently assumed to be dynamic, rather than a static salary.

And the dynamic nature of the informal sector precludes conventional classifications and categorizations of poverty, especially by any stated amount of money mapped against a particular duration of calender time. Time and money are themselves the uncertain elements requiring flexibility built into the systems if they are to work properly in this operating environment.

Thus, I can confidently state that what the Indian data is finally providing the evidence for are the findings from my qualitative research among the same segments of the population, using design ethnography methods. That is, we now have the quantitative data to support the insights derived from the qualitative research.

Full Stop.

Borderland Biashara: Mapping the Cross Border, National and Regional Trade in the East African Informal Economy

efl research team

Rinku Gajera & Michael Kimani, Malaba Border, Kenya, January 2016. Photo: Niti Bhan

And, we’re back! With apologies for the long delay in posting on the blog, we’d been busy wrapping up our groundbreaking design research for development programming project for Trade Mark East Africa this past month or so. As you can imagine, the last few weeks of any project suck all the bandwidth out and leave little for blogging or writing.

Let me be the first to say that this project could not have been executed or completed without a rockstar research team – Rinku Gajera, Research Lead, and Michael Kimani, Research Associate, together put in gruelling hours in the sun, and on Skype, to help increase our understanding of the informal economy in East Africa, particularly the informal trade sector – cross border, national, and regional. Emerging Futures Lab has been immersed in design and development of pioneering methodology for mapping the informal trade ecosystem – henceforward known as biashara, at the borderlands of the East African Community, since November 2015.

tmeaFor this opportunity, I must thank the CEO of Trade Mark East Africa, Frank Matsaert, who saw our passion and our belief in the worth and value of the informal sector, and recognized the need to understand the traders, their business practices, and their aspirations, as the first step necessary for the design of interventions that are not only people-centered, but cost effective and impactful.  We were granted creative license to colour outside the box of the terms of reference with our designer’s empathy and exploratory mindset, and frame this project as an exercise in developing the understanding necessary for the design of human centered methods, tools and frameworks for development programming. You can be sure that there will be more on this topic published soon on this blog, so grab the RSS feed now, or sign up for inboxed posts.

Download the Borderland Biashara Ecosystem Mapping project at the Kenya/Uganda border at Busia and Malaba.

Nov 2015Inception report Informal Economy, Kenya/East Africa/Uganda
Jan 2016Literature Review on Informal Cross Border Trade in the East African Community (EAC), the DRC and South Sudan
May 2016Final Report, General Public – Borderland Biashara, by Emerging Futures Lab

Africa’s world trade: Informal economies and globalization from below by Margaret C. Lee

Margaret-C-Lee-Africas-World-Trade1The entire text of Professor Margeret C. Lee’s work is made available under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) Licence. Clicking on the cover will take you directly to the PDF.

Chapter 3 takes the reader through a journey to different countries of Africa, including Uganda, Tanzania, Ghana, Zambia, South Africa, Namibia, Angola, and Cameroon. The reader is introduced to African traders in the markets in several African countries that trade in Chinese goods. Some of the traders actually go to China to buy goods for their shops, some import them from surrounding countries, and others buy them wholesale directly from the Chinese in their respective countries. What is perhaps most fascinating about many of these traders is the networks they have for the distribution of their goods – these traders serve as suppliers of Chinese goods to traders who come from surrounding countries to buy in bulk to sell in their respective shops.

We learn a great deal in this chapter about Africa’s world trade regimes and how globalization from below operates in this part of the world. Again, African traders, through their stories, humanize these regimes for us

Perspective: Critical Analysis of The African Hype Cycle by Gartner

_fs_Hype_cycleThe very fact that this hype cycle exists is a signal of the increased importance and visibility of the African continent’s place in the global landscape for technology. Released recently by Gartner, the 2015 Hype Cycle for ICT in Africa, is far more interesting for its depiction of the perspective and worldview of Gartner’s analysts than a pragmatic assessment of a diverse and fragmented market.

From Gartner’s website:

The biggest challenge remains the fact that one solution does not suit all countries in Africa. Companies trying to grow their business operations throughout the continent must understand the local market conditions within each country. Small deals stress the business models of many global vendors, to the advantage of local companies.

Yet, intriguingly, this disclaimer did not stop Gartner from assessing the technologies for the entire continent and integrating them all under the broad label “Africa” in one diagram. The other point to note is the use of the word ICT, in general.

If one takes a closer look at many of the technologies listed on the diagram, one will note they are those more closely associated with ICT4D initiatives, rather than corporate for profit or enterprise solutions. ICT4D is defined as

refers to the use of information and communication technologies (ICTs) in the fields of socioeconomic development, international development and human rights. The theory behind this is that more and better information and communication furthers the development of a society.

Further reading of Gartner‘s framing shows that while they position this hype cycle for the benefit of both the public and the private sector, their approach seems to conflate enterprise and business needs with those of social and economic development.

One would question whether this, then, is a helpful framework for either of the two intended audiences. Experience shows that the underlying motivations and philosophies for private enterprise are often very different from those of the public sector and the development aid industry. There is sufficient literature available on how differing agendas influence the evaluation of a particular tool or technology – what might be a viable technology for public sector may not always be appropriate for private enterprise.

A further concern is that there have been numerous instances of “silver bullets” that failed in the development context, often due to the burden of hype. Perhaps Gartner’s hard work and effort in creating this Hype Cycle would have been of greater benefit if they had distinguished between public sector/non profit frame of reference with respect to technology and its surrounding hype, and the consumer market responses and needs of the private sector.

This lack of clarity, imho, will be far more challenging for businesses seeking investment opportunities in this nascent yet rapidly burgeoning market, than for any of the charities deploying their myriads of pilot programs for the sake of development.

Two data points on the hype cycle come to mind as clear examples – Digital commerce, which is advancing far more rapidly outside of the South African context, in such regions as Nigeria, and even, Cote D’Ivoire, and Mobile Retail Payments in East Africa. Gartner’s distinction of Mobile Retail Payment as Apple Pay et al creates further confusion when one realizes that the ever popular game changer M-Pesa has been classified as Mobile Wireless Payment Systems (for NonMature Payment Markets).

End users will require a lot of education in order to comprehend the difference between NFC/contactless payments and Mobile Wireless Payments in markets where the entire context for mobiles and money is very distinctly different from “Mature Payment Markets”. There is no mention of this anywhere in their press release, and one hopes that their education seminar offers more insight.

The path of technological development being taken in Africa is such that one would find greater value in a Hype Cycle firmly grounded in the operating environment’s own context than attempting to use the same labels and subsectors of technology from the overly mature markets of the established world. One feels that a research and analysis office on the ground would have helped with this exercise in a far more practical manner. Insights emerging from the conflation of private sector needs with non profit motives simply perpetuate the existing barriers to the development of relevant and appropriate technologies.

Roadmap for reverse innovation – how to leverage context for disruption

Vijay Govindarajan and Amos Winter have an interesting article in the July/August issue of Harvard Business Review. They identify the barriers to successfully integrating reverse innovation from emerging markets into the product pipeline for mainstream consumer culture. Their key paragraph echoes the issues of people, pesa and place I’d written about earlier:

Our research suggests that the problem stems from a failure to grasp the unique economic, social, and technical contexts of emerging markets. At most Western companies, product developers, who spend a lifetime creating offerings for people similar to themselves, lack a visceral understanding of emerging market consumers, whose spending habits, use of technologies, and perceptions of status are very different.

And they go on to identify the common mental traps that act as barriers to innovation.

As we will show in the following pages, the reverse innovation process succeeds when engineering creatively intersects with strategy. Companies can capture business opportunities only when they design appropriate products or services and understand the business case for them.

I’ve annotated the design principles developed by an engineer and a strategist with a soupçon of human centred design *cough* thinking below:

Trap 1: Trying to match market segments to existing products.

Design Principle 1: Define the problem independent of solutions.

Tech driven innovationCompanies tend naturally to look at opportunities from the perspective of their the product lines, placing their technology front and center of their opportunity assessment. Govindarajan and Winter suggest stepping back to evaluate the landscape of the operating environment for which they wish to innovate.

Trap 2: Trying to reduce the price by eliminating features.

Design Principle 2: Create an optimal solution, not a watered-down one, using the design freedoms available in emerging markets.

torchlight-phonesWhich designer sitting in the comfort of the developed world’s stable and reliable infrastructure would have thought of adding a torch to a mobile phone if Nokia’s exploratory user researchers had not observed people’s behaviour? In developing countries with inadequate infrastructure, power cuts are a frequent occurrence and the bright screen of the device in your pocket was being used by people to find the keyhole in the door.

Trap 3: Forgetting to think through all the technical requirements of emerging markets.

Design Principle 3: Analyze the technical landscape behind the consumer problem.

This is really why a landscape map of the operating environment is critical (and yes, I’ll be following up with a post that explains a landscape map). No-one can remember all the constraints and criteria for product design in environments of scarcity and variance in infrastructure. Whirlpool was one of the first to discover this with their World Washer designed specifically for emerging markets 25 years ago. From Govindarajan and Winter:

When designing offerings for the developing world, engineers assume they’re dealing with the same technical landscape that they are in the developed world. But while the laws of science may be the same everywhere, the technical infrastructure is very different in emerging markets. Engineers must understand the technical factors behind problems there—the physics, the chemistry, the energetics, the ecology, and so on—and conduct rigorous analyses to determine the viability of possible solutions.

It boils down to listing assumptions and questioning them rigorously, something engineers are already accustomed to doing. And, now, my favourite of all these traps and principles.

Trap 4: Neglecting stakeholders.

Many multinationals seem to think that all they need to do to educate product designers about consumers’ needs and desires is to parachute them into an emerging market for a few days; drive them around a couple of cities, villages, and slums; and allow them to observe the locals. Those perceptions will be enough to develop products that people will purchase, they assume. But nothing could be further from the truth.

Design Principle 4: Test products with as many stakeholders as possible.

Companies would do well to map out the entire chain of stakeholders who will determine a product’s success, at the beginning of the design process. In addition to asking who the end user will be and what he or she needs, companies must consider who will make the product, distribute it, sell it, pay for it, repair it, and dispose of it. This will help in developing not just the product but also a scalable business model.


Complex Value Web of Transactions in Cash, Kind and Information. Sketch: Michael Kimani

There are two key assumptions embedded in Trap #4 and its supporting Design Principle. These are:

1. End users are individual actors.
2. That the ecosystem is a conventional value chain

This may be true in the highly individualized mainstream consumer culture of “the West” where the bulk of consumer facing organizations and their designers head quartered. In most of the developing world, users – people – are part of a closely networked community, more true the lower down the income stream you go. Not only must organizations consider the entire ecosystem in which their new product or service will be introduced but they need to consider the individual customer’s social and communal ecosystem as well.

Understanding Users

The Individual as an Ecosystem Sketch: Jeroen Meijer

In fact, as we discovered in the last mile, the value chain is actually a complex value web with overlapping nodes and roles – a community of trust, social capital, information flow and opportunity networks.

Overlooking these characteristics and constraints, that too in the context of the informal and/or rural economy, where transactions are mostly in cash or kind, with few formal financial instruments, has impact on the design of the business model and payment plans as well, not just that of a tangible artefact.

Which leads us to the final and most important point being made by Govindarajan and Winter:

Trap 5: Refusing to believe that products designed for emerging markets could have global appeal.

Design Principle 5: Use emerging market constraints to create global winners.

Though most Western companies know that the business world has changed dramatically in the past 15 years, they still don’t realize that its center of gravity has pretty much shifted to emerging markets. China, India, Brazil, Russia, and Mexico are all likely to be among the world’s 12 largest economies by 2030, and any company that wants to remain a market leader will have to focus on consumers there. Chief executives have no choice but to start investing in the infrastructure, processes, and people needed to develop products in emerging markets.

And, critically, India, China, Brazil and Russia, among others, are all eyeing the opportunities in the emerging economies of the African continent. Understanding these challenging conditions and satisfying the demands of these connected consumers will become all the more crucial going forward.

The ILO’s ‘historic’ informal to formal guidelines and framework: What does it actually mean?

Sustainable Value Chain 1

Illustration: JAM Visueeldenken

The big news this weekend is the International Labour Organization’s (ILO) first ever Recommendations and Guidelines on the informal economy. My first take away from all the documentation is that the informal sector is no more the enemy of good and, now, can finally be addressed with the consideration it needs and deserves. Here’s a key snippet from India’s Economic Times, using one of my favourite words:

“This is important because it is the first international labour instrument that covers the informal economy holistically including wage workers, small businesses, entrepreneurs and self-employed,”

Now, if only they’d also used the word Flexibly, I’d have died happy. But their objective isn’t to integrate the informal sector or bridge the chasm between the formal and informal economies, it’s to assimilate and contain. Anyhow, lets take a further look at what these guidelines are and what might they mean for Mama Biashara.

Section II – Guiding Principles (Page 13)

In designing coherent and integrated strategies to facilitate the transition to the formal economy,

Starts off with a very clear design brief – the choice of the word designing is significant and powerful, as it implies disciplined processes and methods and helps relate it to the holistically mentioned earlier. Next:

Members should take into account the following:
(a) the diversity of characteristics, circumstances and needs of workers and economic units in the informal economy, and the necessity to address such diversity with tailored approaches;

(b) the specific national contexts and priorities for the transition to the formal economy;

(c) the fact that different and multiple strategies can be applied to facilitate the transition to the formal economy;

We need to design for the specific context and conditions, for the to-be-discovered needs of the people, and, one size does not fit all.

Excellent beginning. And as the ILO’s DG is quoted to have said,

“It is not just the adoption of this Recommendation, it’s actually putting it into practice that will matter,”

After a bunch of inclusions and protections from (d) to (i) we have, what I believe, is the most empowering statement of all:

(j) the preservation and expansion, during the transition to the formal economy, of the entrepreneurial potential, creativity, dynamism, skills and innovative capacities of workers and economic units in the informal economy;

Let’s not lose teh hustle in the rush to regulate.

On the other hand, the need for flexibility during these transitions is overlooked and the closest framing we have that may apply to this aspect – as captured by the illustration above – is:

(k) the need for a balanced approach combining incentives with compliance measures;

which leaves it rather open for interpretation. You may call that being flexible, but the fact remains that negotiability of the system is an observed part of what lowers the barriers to adoption of measures for those who manage on irregular and unpredictable income streams and work primarily in the informal sector.

 Section III: Legal and Policy Frameworks (Page 15)

9. Members should undertake a proper assessment and diagnostics of factors, characteristics and circumstances of informality in the national context to inform the design and implementation of laws and regulations, policies and other measures aiming to facilitate the transition to the formal economy;
I don’t think, after this sort of framing and direction giving, that formal economists can overlook the need to dive deeply into understanding people, pesa and place, or the need for a systematic, rigorous, methods based approach to people-centric design of policies and programmes. There’s a huge difference between someone swooping in to do it all for you and someone figuring out a way for you to do it more efficiently yourself.  That’ll be key going forward, imho.

If you’ve read this far and are interested in my prior work in this space, feel free to reach out for some reading materials or for a conversation on how we can collaborate to make a positive difference for those who’ve been overlooked all this time.

An Introduction to Human Centered Design for Policy Makers in International Development

M-PESA and the service innovation framework (review)

A former student of mine just mailed me this article “Extracting Key Lessons in Service Innovation” (pdf) by S.Wooder and S. Baker, recently published in the Journal of Product Innovation Management, January 2012 edition. Here is the abstract of the article:

This paper describes how Sagentia—working with Vodafone, Safaricom, and other organizations—played a significant role in the creation and delivery of a landmark mobile money transfer and payment service for emerging markets, starting in Kenya. In this profile we examine the organization aspects and approach that contributed to the success of the service: the lessons we learned as the technology provider and how the experience has informed and strengthened our service innovation processes.

Reading through, what I found most valuable among the basic principles so simply and clearly articulated, was this insightful description of service innovation, as pertaining to the ways that a human centered design innovation team can work to improve the customer experience for any company, large or small:

What Is Service Innovation? Creating and Delivering Value

We are familiar with service innovation examples such as music download, loyalty programs, franchise chains, ticket/check-in kiosks, and online tax returns.

Service innovation can be described as a combination of technology innovation, business model innovation, social-organizational innovation, and demand innovation, with the objective of improving existing services (incremental innovation), creating new value propositions (offerings), or creating new service systems (radical or transformational innovation) (IfM and IBM, 2008). The key components of service innovation can be distilled down to “participative” value delivery; […]

So if the service is considered to be:

• something that may or may not entail physical product delivery or consumption
• a value delivery mechanism that connects the enterprise to the customer
• the combination of a value proposition, a delivery mechanism, and a customer’s experience

Then service innovation is simply innovation applied to one or more of the following areas:

• new concepts and/or value propositions
• new delivery mechanisms and/or business models
• new experiences

[…] Successful service or product innovation encompasses progress from the creative act (the so-called fuzzy front end) to the commercialization act (execution) and beyond that to sustainability and evolution of the innovation. Our simple framework for service innovation is shown in Figure 3

And they share with us the mapping of MPESA on to this service innovation framework.

The authors conclude their informative article with the following words:

Key lessons that were highlighted by our experience with M-PESA include:

• Learning in a detailed sense the needs of users in new markets and ensuring that it is possible to implement these needs and requirements as part of a pilot process;
• “Keeping it simple”; particularly in the early stages of the service, it is important to focus on a small set of compelling, marketable functions and features;
• Ensure that flexibility and agility, the ability to react and to respond to changes in the business model, are designed into the system; and
• For a service to succeed, it requires a critical mass of users as soon as possible; identifying mechanisms to motivate users to take up the service is an important part of the service innovation process.

The results of the study cannot claim to be generally applicable; however, it has allowed the “usefulness” of the conceptual stages in the service innovation framework to be empirically tested in a real-world example, and the vulnerabilities and strengths are better understood as a result.

This post was published previously in December 2011

Published! Pathways Out of Poverty by iBoPAsia Project

Innovating with the BoP in Southeast Asia.

The iBoP Asia Project has published the complete set of small grants funding innovation projects for those at the Bottom of the Pyramid in the ASEAN region. One of the first projects to win the Small Grants competition in 2008 was The Prepaid Economy Project: Understanding BoP household financial management.

African Traders in Guangzhou, China: Routes, Profits, and Reasons

While digging around for information after my recent flight where I was offered an upclose and personal look at increasing informal trade between Africa and China, I came across this research paper by Yang Yang from the Chinese University of Hong Kong. A snippet from the introduction:

Based on my fieldwork in Guangzhou, this paper attempts to explore the routes, profits, and reasons of the African traders in southern China through individual stories. It discusses the organization of the market as well as individual economic activities reflecting a globalization from below, where traders with relatively small capital become upwardly mobile by standing on the shoulders of the giants, or more directly, by selling their Herculean sandals out from under them, that is, by taking advantage of the infrastructural advancements made possible in the modern age of globalization, such as fast international transportation, convenient communication, mass manufacturing, brand recognition, for short term gains.
The trading activities of the Africans in Guangzhou represent an economic ―underworld, a world that is not only untraceable by customs or survey institutes, but is also rapidly proliferating throughout the developing world.
This paper … focuses on the informal economy in China. China’s position in the world system is ambiguous—while China is the world‘s second largest economy, it is also still a developing country; beyond this, it is relatively closed in terms of immigration policy.