Archive for the ‘Mama Biashara’ Category

Exploring the Scope of Biashara Economics

biashara2There’s a dearth of research on the economics of biashara – the everyday commerce that keeps daily life running. And this hampers the efficacy of the design of programmes and policies meant for operating environments where the informal economy may be providing employment for more than half the working age population, and often, as high as 80 to 90% – India is at 92%, just for context.

This is not yet a literature review, although that is next on my list. It’s an attempt to capture the realization, while reading a couple of fascinating articles on the South African township economy, that the underpinnings of the informal retail and trade economy were not themselves the subject of research.

We stand firmly on the shoulders of giants, I realized, when reading these papers, though they maybe few in number. Without John Keith Hart’s body of work, none of us would be here, not even the “informal economy” –  the label itself attributed to his work in Ghana in the early 1970s. And without Martha Alter Chen’s rethinking of the informal economy, I wouldn’t have taken the path that I have this past decade.

…as long as you lump together the activities of the people like selling hotdogs door to door (although buying it from a wholesaler informally), distilling wine for the village, keeping small shops within walking distance when towns are far away or even urban services ranging from garbage disposal to dishwashing to repairing shoes – with the “firms that are hiding from formal regulations and don’t want to pay taxes etc” any formal programs or activities, whether from the social and economic development angle or the corporate profitability angle are going to act at cross purposes.

Martha Alter Chen writes in “Rethinking the Informal Economy” that India stands out as an example where the informal economy has been accepted, acknowledged and now slowly being addressed by government policy. Not in order to dissolve it or remove it but to work with it simply because the incomes of far too many people are dependent on it and no formal systems can be put into place to take care of each and every corner of the country nor her billion citizens.

One can then take what seems to be working, called “creative, resilient and efficient” by Hart, quoted by Chen, and enable systems that support it further, fostering development and increasing success rates at the touchpoints where the informal and formal meet.

So, it is with their distant blessing I will also put forth all that we’ve uncovered about the economics of informal trade and commerce, in the context of the various existing studies which overlap and provide us with insights or confirmation on our own findings. Including the tag “biashara economics”; I’ve now created it’s own category.

Snapshot of the Dynamics of the Urban Informal Retail Trade in Nairobi, Kenya

Informal Economy Dynamics - Updated

Made by Latiff Cherono – click for larger image

Latiff Cherono quickly made up this diagram during a brainstorming session with Francis Hook and myself on the ways and means to further disaggregate the general category of “Informal wholesale and retail trade” that the Kenya National Statistics Board uses to lump together the second largest sector providing employment in Kenya after agriculture.

jobs2 In urban conditions, vending and hawking of this sort is the largest source of income for the formally unemployed.

As you can see in the map visualizing Latiff’s analysis of a well known location for street vendors and hawkers to operate breaks down traffic flows not only by speed but also takes in account both static and dynamic forms of informal trade.

It may look chaotic but there are principles underlying the decisions made by both pavement vendors and mobile vendors (streethawkers in traffic) for their location of choice. These relate to the speed of passersby and potential customers – both wheeled and heeled, as Francis is wont to say – and closer analysis will most likely provide evidence of attempt to drive more footfalls to the shopfront, so to speak.

An example is the way pavement vendors locate themselves on either side of the busy bus stops, while mobile vendors who vend their way through traffic focus on the bottlenecks created by the roundabout and the traffic police.

We’re still in early days yet but time and money seem to be two of the factors that describe the attributes to segment and categorize the informal retail sector in urban Africa.

Implicit Assumptions commonly held about Informal Markets

Mozambique

Woman owned and managed informal retail in Mozambique via Twitter

  1. “Informal Economy” always means illegal, shadowy, gray.
  2. High volume of low value cash transactions imply poverty, ignorance, lack of sophisticated money management.
  3. Operating with a lack of infrastructure and institutions implies ignorance, lack of ambitions and aspirations, and motivation.
  4. Lack of cash implies lack of purchasing power – particularly in rural settings.
  5. Lack of formal retail markets and packaged consumer goods implies lack of knowledge, information, and choices.
  6. Lack of competition, due to all of the above.
  7. Entering markets where informal retail dominates will be a cakewalk.

Bridging East Africa’ formal – informal financial services divide

Kenya’s formal inclusion looks pretty, the financial inclusion industry has been has been great at talking up its achievements over the past 10 years. Here, 75.3% of Kenyans are now formally included, a 50.3% increase from 19 years ago. Official statistics on mobile phone penetration is up to 80.5% of the population and there is general consensus, the mobile phone has been central to expanding formal financial services to the – unbanked and under banked. The numbers are pretty awesome.

In February, FSD Kenya’s chart of the week featured an interesting pattern.

 

source: http://fsdkenya.org/data-visualization/chart-of-the-week-credit-in-kenya-how-big-are-loans-on-average/

source: http://fsdkenya.org/data-visualization/chart-of-the-week-credit-in-kenya-how-big-are-loans-on-average/

 

The red line marks the axis between the formal (prudential) and informal financial services alternatives. The largest source of credit for the bottom 40% populate the informal segment – SACCOs ,MFIs, Peer to peer, community groups. Dotting the top in blue are the banks and mobile banking lending products Mshwari.

So, there is more going on besides what the numbers say about formal financial inclusion.

 

Appreciating the informal sector’s financing alternatives

I got a sense of this gap between what the reports say and what was on the ground in 2015/2016 as part of 2 immersive fieldwork projects – Nyeri Mama’s Financial Diaries and later same year as part of Borderland Biashara: Mapping the cross border, national and regional trade in the East African informal economy project. I got to meet and spend time with biashara people, mama biashara, informal traders at the borderlands, boda boda guys, brokers and 65 year old Wangari – all in their natural setting – the mostly rural and cash intensive informal economies at the borderlands.

I found out that 90% of them had a basket of alternative credit, investment, insurance and savings informal financial products at their disposal – up to 8 different volatility management groups. The flavor of these alternatives ranged from extreme formal prudential to extreme informal.

Wangari, from Nyeri, for example, did not have a bank account but, was part of

  • 1 Micro-finance bank,
  • 2 Cooperatives
  • 1 ROSCA (Rotating Savings and Credit Association
  • 1 Chama (savings group)
  • a Catholic church group and
  • a modest Nokia mobile phone with Mobile wallet (Mpesa) and mobile wallet bank (Mshwari)

At the borderlands of Busia and Malaba between Kenya and Uganda, close to 96% of 100 biashara interviewees were part of at least 3 savings groups, besides their mobile phone. There was almost always one savings group that was part of their trade or craft networks.

 

Bridging the Gap

system-monster

When we look at the under banked strictly through the lenses of a bank, we miss out on the rich diversity of community bank-like products at their disposal. When their options are labelled informal, the tone becomes one of expanding the larger banking formal system, at the expense of our dear Chamas.

My suggestion for the present day efforts to push towards financial formalization, is to instead transform into a pull towards formality. Is there a middle ground? Where we can have the rich of the Chamas and savings group together with the formal financial system? Or where we can have a blend of the rich of the savings groups with technology?

Yes, we can, and there are examples from East Africa’s Kenya and West Africa’s Chad

  • Equity bank directly engages registered savings groups at the Busia Malaba border, a trader’s Chama.  A credit officer from a local branch attends weekly meetings with the group, and liaises between Equity Bank and the Chama. The bank facilitates loans guaranteed by the group as a unit. 

“Muranga county seeks to ease unemployment with cow loans”Daily Nation

  • Ng’ombe loan, by Muramati and Unaitas SACCO, was an unconventional loan product much closer to the realities of a rural Muranga. Youth in this county received high-yielding, pregnant dairy cows on credit, and were to repay the loan through milk deliveries to processors. An expectant cow as the loan principal, with repayments priced in daily milk deliveries. How cool!

“TigoPaare – People’s Banks for Communities across Africa”Balancing Act Africa

  • In Chad, Paare are the equivalent of Chama group savings plans in East Africa. TigoPaare is a group wallet that adds a ‘group layer’ on top of standard mobile money, to deal with common funds, trust and other group initiatives. The wallet helps informal cattle trades look after their income from cattle sales, with the functionality to make loans to members. The pilot attracted 19,000 users, including community mutual funds, cotton producers cooperatives, churches, market sellers and women’s groups.

 

 

Seasonality as an element of contextual planning for emerging consumer markets

livestock flows eac fewsnetGrowing up as a Hindu expat in multicultural ‘West Malaysia’ of the 1970s and 80s, it was a matter of course that every festival would be a big occasion. We had Christmas in December, and Chinese New Year soon after, to be followed by Hari Raya (Eid) and Deepawali – each of them deserving of TV specials and decorations on the streets.

Seasonality of cash flows and income streams in the informal and rural economy translated in the urban areas as festivals triggered a boom in consumer sales. India’s formal economy still keeps watch on the onset of the annual monsoons, as those rains will have documented impact on their 3rd quarter sales in the peak festival season of October and November, leading into the wedding season.

In Eastern Africa, this seasonality is seen, among other things, in the lives of pastoralists and livestock farmers. As Eid Al Adhar approaches in a few days, livestock sales for the annual sacrifice are reaching their peak. Trade in meat is one of the staple income sources in the arid lands and the Port of Mombasa is one of the keys to the distribution networks.

The livestock trade to the Middle East accounts for 60 percent of Somaliland’s gross domestic product and 70 percent of its jobs.

This, however, is changing, as the Port of Berbera will soon receive millions of dollars of investment in improved infrastructure. The element of seasonal cycles over the course of the natural year, however, will not change. And this is worth noting for those considering the emerging consumer markets in the developing world.

Beyond word of mouth, however, it is hard to get a proper idea about the economic impact of Ramadan. Perhaps because of sensitivities around dealing with a religious institution, international organisations such as the World Bank, International Monetary Fund and United Nations Development Programme have not conducted research on the precise economic impact of the custom.

FMCG majors already feeling the pinch of shrinking domestic markets are finally taking note of this entire opportunity space. In Indonesia, Unilever, Beiersdorf and L’Oreal are making halal face creams and shampoos to court Muslims as sales in Western markets taper off.

There are patterns of trade around major holidays in each region, be it Chinese New Year or Dussehra, and the informal sector prepares for, and relies upon, these expected bumper ‘harvests’ in their cash flow. It will be interesting to watch what happens in the context of the African consumer market as the Asian giants begin to eye it seriously as the last frontier for significant growth.

African Youth find Opportunities in Informal Sector Biashara

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Biashara in Africa’s emerging economies – Nigeria, Kenya, Zimbabwe- are at loggerheads with the state.  An ever bulging young demographic  and a failure to absorb them into the formal economy has resulted in increased biashara.  The informal sector’s low barrier to entry, appeals to the young Africans’ aspirations, like Simon Danda from Zimbabwe. Rather than to idle, he is one of many tapping into biashara opportunities, mostly in trade and services. A common theme is sweeping across the the continent. Yacine Bio- Tchane observes from Benin, West Africa

“ECOWAS countries’ economies are driven by more than 50% by the informal economy. In Benin, where the informal sector represents more than 90% of the economy, graduates are found becoming drivers of taxi-motos to make ends meet. They were not able to find work within their sector so they became taxi-motos.”

But, the peculiar nature of the informal economy is a challenge for state agencies.

On July 13 2016, for the umpteenth time, City Hall officials from Kenya’s capital, Nairobi, vowed to crack down on informal sector biashara people: Hawkers, Matatus, Boda bodas, car washes, roadside eateries, and street families.

“The Nairobi County Government has formed a sub-committee tasked with restoring order and sanity in the central business district (CBD) following complaints from businesses over hawkers’ invasion of key streets. All car washes, kiosks and hawkers will be arrested with immediate effect”  – Business Daily

2 weeks earlier, the Nigerian state of Lagos had clamped down on street trading in a bid to sanitize its streets.

“Lagos State Governor Akinwunmi Ambode, said the renewed enforcement was in line with Section One of the Lagos State Street Trading and Illegal Market Prohibition Law of 2003, prohibiting street trading.” – Lagos Goes Tough on Street Trading, Hawking

2 months prior to Nairobi’s crackdown, Zimbabwe’s efforts to contain protests were met by strong resistance from informal biashara people. Traders opposed an ultimatum to either vacate streets by end of June or face arrest.

“We are not going anywhere until the government give us jobs, it’s better they kill us. I have an accounts degree and was forced into street vending because there are no jobs. They destroyed the economy and now they ban us from selling on the streets.”Ventures Africa

In Africa, the line between an entrepreneur and a lawbreaker is a thin one.

Biashara contributes to the economy

informal sector jobs

When I walk through Nairobi’s Tom Mboya and Moi Avenue, I see entrepreneurs. Young men, women, breastfeeding mothers and the disabled committed to biashara. They will sell you anything you want! From foodstuffs, to electronics, or the popular mitumba (second hand clothes) to a quick boda ride out of the city.

Arguably, no one understands the needs of consumers better than biashara people. They naturally seek out demand and will go where they can find it. The massive evening foot traffic of the continent’s buzzing capital’s (Nairobi Lagos,Harare) makes for a great concentration of demand.

More people are now turning to the informal sector. GDP and labour force statistics highlights the vital role of this segment in Africa’s economies

“In Kenya, it is estimated that the informal sector in excess of 35 per cent to the GDP and employs close to 80% of the workforce.” – Taxing the informal sector requires better strategy

“In Nigeria, informal trading of which hawking is a part thus accounts for 10% of total Nigeria’s GDP, bigger than crude production” Yemi Kale, Director General of Nigerian Bureau of Statistics

The trouble is the conflict between the state agencies’ perception and the value creating biashara. How we view this sector is important and matters for both public and the private sector in

  • Crafting public policy

Biashara people are taxpayers, and economic contributors just like formal institutions, a fact often forgotten. Just like we craft targeted policy for the formal economy, after considering stakeholders interests, so we should for biashara.

  • Product and service design for Sub Saharan Africa consumer markets

Biashara people are the consumers of the formal economy’s products and services like mobile money transfer services, mobile banking services, sports betting, airtime, and FMCGs.

We need to understand biashara’s operating environment (business or people), if we are going to sell goods and services to this sector.

  • Innovation for Sub Saharan Africa’s economies

Once we appreciate biashara people as a market segment with its own merits, we can free ourselves of our one eyed biases and innovate for their  biashara needs.

For example, we can start by not referring to them as Bottom of the Pyramid people.

 

 

*The original version of this article appeared on my blog

Will Cross Border Mobile Money Boost intra African Trade and Regional Integration?

cross border MMTOver the past 18 months, since I started tracking the spread of cross border mobile money payments across the African continent, there has been visible progress in leaps and bounds, as documented by the GSMA. In fact, back then, I’d written:

Top down reportage on banking and interoperability seems to focus only on the customer’s individual needs, and overlooks their agency as entrepreneurs, traders and business people.

The map above has been taken from the GSMA’s Mobile Economy 2015 report, and the 2016 report reproduces it as well. Now, the role of mobile money transfers in facilitating cross border and intra African trade is finally being recognized for its potential and cost savings. Author Ashly Hope lays out clearly the high cost of remitting money in the SADC region:

cost of remittance sadcSouth Africa and Tanzania are the largest sources of remittance, yet their transaction costs are significantly higher than the Sub Saharan average of 9.7% (which in turn is the most expensive region in the world where the average cost is now ~7.4%). And this is only one regional grouping.

It is when we look at the penetration of mobile money, that we see something that hints at the digital economy emerging in East Africa (birthplace of Mpesa in case you weren’t aware).

Given teh pace of change, we can safely assume that the figures given above have only increased since 2014. Tanzania’s mobile money market has been frequently cited for its growth and opportunity – it is also outstanding for the level of interoperability within the telco ecosystem.

In the previous article, we noted that Tanzania had just flagged off a Chinese funded regional logistics and trade hub which would include a local footprint for the distribution and sales of China made goods in the form of a warehouse.

“The trade hub will also help Tanzanians especially women to buy products here instead of travelling all the way to China, hence cutting costs down,” said Ms Janet Mbene, Deputy Minister of Industries & Trade.

Savings on travel and shipping is bound to translate into increased inventory purchases, and thus value and/or volume of goods traded. Taking the context of the entire East African Community’s “informal” cross border trade, and the visualization of the interconnections now provided by various mobile money transfer systems in the map above, one can safely start to forecast the potential gains to both traders, and the telcos, as the landscape of the local operating environment begins to change in response to infrastructure investments.

Whether this potential opportunity is exploited by the region’s traders, or overlooked and missed due to the existing digital divide, is the question that remains to be answered. The EAC’s mobile economy (~96% prepaid) needs to start thinking of itself as more than just telco led and impact hub driven, and get down to the ground at the fringes for the future.

Digital literacy plus “sharing economy” platforms can offer formal employment for African youth

Back in February of this year, I made a note on the inherent potential of Uber (and related apps) to deliver the data necessary for the informal taxi sector in Kenya to clamber onto the path to formalization. Today, I came across an article reflecting on the potential for formalization in India that quotes Nandan Nilekani:

“…once a taxi driver becomes part of Ola, then in fact he becomes part of the formal economy. He is able to use data, get a loan, buy a car and start paying taxes.”

Tracing the original cover story by Nilekani led to his observation that simply  providing these platforms were not enough. Literacy and numeracy were the deal breakers, and a necessary ingredient for the magic of employment, income, and more regulated economy. From his op-ed on India’s domestic future:

Among the government’s first priorities should be the improvement of literacy and numeracy for everybody. Because for one to participate in this [platform based aggregation of microSME services] economy, you require basic literacy and numeracy. For example, if you have a taxi driver on Ola, he should be able to read a message from you or his map and reach where you are. All the other countries that grew rapidly, whether Korea, China or Japan had already achieved universal literacy before their rise.

There are many countries on the African continent which have a headstart on English literacy and numeracy among their youth, due to history and cultural development, especially the Church. Kenya’s literacy and English language facility is easily ahead of India’s by double digit percentage points among her youthful population. Yet there are few locally beneficial platforms that have successfully managed to aggregate – Nilekani’s insight on job creation offers a glimmer of light, and thus opportunity. Look:

The era of large companies as we knew them is also over. It will be a world of platforms that aggregate small companies. Amazon and Flipkart will aggregate goods made by lakhs of vendors and provide a platform to sell them. Similarly, Ola or Uber will aggregate millions of drivers who will work on the platform, Practo will aggregate doctors and patients and so on. Aggregation by platforms is the way that jobs creation will happen. This platform aggregation will also lead to formalisation of the economy.

Ironically, the technologists aiming at the African continent seem to have grasped only the basic element of this opportunity – Digital literacy needs to come first before financial inclusion – as megadonors and funders throw their weight behind their pet projects skewing the emphasis of development directions. But financial inclusion cannot arrive without viable, feasible, and desirable pathways to formalization i.e. economic inclusion. And, logic dictates that its inclusion that empowers.

What if we take a leaf from India’s book for transforming Africa ? Nilekani is not only one of the cofounders of India’s transformational technogurus – Infosys of Bangalore – but also the man who led the Aadhar project – the world’s largest biometric ID system. As the first article observes:

All this is possible because of the enabling circumstances: a young population—65% of India is less than 35 years of age—of which a greater proportion are more literate than the older age-groups; growth; adoption of mobile-based apps; and a push towards a cashless economy.

[…]

What all of this is doing is creating an information technology highway seeking to connect over 1 billion people. This is the key to the vision Nilekani espouses. As a result, a generation of small businesses and micro entrepreneurs can now be part of the platforms that are springing up on this national IT highway. Surely, this integration of the informal into the formal economy can only augur well for India and its denizens.

A country like Kenya should be on this pathway too, in fact, even faster than India due to the presence of the very same enabling circumstances, and then some. What has been missing is the vision that Nilekani so generously provided us – that of considering platforms as aggregators, and as aggregators, stronger than scale of any one singular organization.

Harambee, they call it, can be digitized. Harambee, as an app and/or a digital platform aggregating micro entrepreneurs, service providers, wholesale and retail traders et al, can provide that same facility for the integration of the formal and the informal. It can transform the nation, and change the entire East African economic landscape, auguring just as well as for India and her denizens.

The Kenyan informal sector’s well-trodden paths of upward mobility

IMG_4417Studying the dynamics of the informal economy of a particular region in Western Kenya has been an eye opening exercise in questioning one’s own assumptions and frameworks. Other times, I noticed answers to questions I’d never even thought of asking (an outcome of holding implicit assumptions).

One of these was career paths and ambitions.

The most obvious paths are the ones with tangible indicators of upward mobility. You begin with the bicycle, adding a cushioned seat at the back, and dream of purchasing a motorcycle, which can also double as a micro distributor at the last mile of delivery. Then, you dream of a car and taxi.

I was wrong. The decision to select one’s choice of vehicle is a professional one, and each of these transportation mechanisms is a distinctly separate cluster of owner/entrepreneurs. There isn’t much cross vehicle mobility as you’d imagine. There are older gentlemen who preferred the simplicity and the low running costs of a bicycle, saying that anything one earned after a big solid breakfast in the morning was pure profit.

However, this is not to say that the fundamental paths to expansion and growth of opportunities were as closed. They are just different from what we imagine, looking on from the outside, and the drivers for decision making are fundamentally characterized by the patterns of flow of time and money in the informal/rural economy.

For instance, in Malaba and Busia on the western Kenya/eastern Uganda border, one does not begin in Malaba. For the penniless youth emerging from his father’s shamba deep interior where no tarmac goes, its Busia that provides the facility to earn seed capital. They call this kibarua, and there’s a yard near the truck loading docks where they can join the available pool of labour. Its the first step to earning an income in the economy the world calls informal. Women prefer to grow something to sell – be it chickens, eggs or a wide variety of fruits and veg. One lady sells partially treated roots and branches that’s the seed for locally brewed beer.

Once one has amassed some cash, one can buy stock to sell, or invest in a growth vehicle for cash flow. A dairy cow is a growth vehicle, with almost daily cash flow. The challenge for growth on the farm is lack of cash money. Women dominate the informal wholesale and retail trade, just as they’ve been documented to do in West Africa. They are newcomers to trade, having been noticed in this region only in the past 10 or 15 years. They’re smarter, shrewder, and know how to leverage their extensive social networks. They are a growing demographic, particularly in Kenya, Uganda, eastern DRC, South Sudan, and Rwanda. Burundians, it seems, are happy to live on their farms and let their Rwandan friends do the hard work of buying and selling them stuff.

Then, one can move from tabletop sales into retail and wholesale. Its an interesting example of leapfrogging the middle income trap – by the time the market woman with a cloth covered with merchandise can grow her stock to rent a permanent store, she has also become a micro-wholesaler who will break bulk down to the smallest denominations for her micro retail customers to sell on their tables and mats.

Their next ambition is to become that micro-region (a radii of 50km) re-distributor. That is, by the business practices of the global FMCG majors, they want to be registered and counted. The local Coca Cola distributor has probably a hundred such wholesalers scattered around a 100km radius. The scale of operations is limited by the cost of fuel and transport.

Now, many who don’t wish for the extensive groundwork that the former ambition requires, move on to trade from Malaba. Its where the larger regional trade flows take place, not just the multiple micro-crossings of Busia (which by the way annually cross 33 million US dollars). In just one border market, there’s annual biashara worth $5 to 10 million. There will be one or two outliers to this due to natural and geographic advantages.

The energy of biashara is obvious in the market. And every market day along the better roads, the scale of trade was far more than anywhere upcountry, even the roads to Nyeri and Nanyuki. These trading ties go back centuries to before the white man came and the kings of the Buganda loved teh stuff the Indian Ocean traders brought to the Swahili Coast.

The best paid profession is that of a long distance trucker. Yet, intriguingly, young men aspire to reach this position only to acquire the networks of a broker and to retire from the dangerous business of driving heavy inflammable loads for a living.

There many such paths to live a good enough life, educate the kids in town, take care of mums back home on the homestead. The informal economy does indeed offer the lowest barriers to entry into business.