Archive for the ‘rural’ Category

A matter of timing: seasonal opportunities

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Temporary stall for festive goods (Photo: Niti Bhan, March 2017)

These stalls full of water pistols and balloons sprouted overnight a couple of days before the spring festival of Holi (March 13th 2017) – these vendors are neither local nor regulars in the market complex. They’re here to offer seasonal products and might even have been invited by the local shopkeepers to provide attractive temporary displays not unlike festival shopping at the mall.

IMG_7356Seasonal opportunities for special offers and custom products are not to be missed chances for a boost in sales. India’s FMCG majors can’t afford to ignore the seasons that guide the cash flow for the majority in the informal and rural economies over the course of the natural year.

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

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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.

 

 

Lowering the barriers to effective communication is the key to sustainable development

KnowledgeOne of the challenges that we discovered during our multistakeholder workshop in The Hague a few years ago was that people tended to fall back on their expertise when faced with the discomfort of empathizing with farmer’s needs. Particularly so when the farmers in question were from Africa, and not from their own regions.

Our design visualization team – Jam visualdenken – captured one element of how this barrier manifested. Experts talked a lot about “Knowledge” being the key to effective agriculture value chain development, and how it was critical to transfer as much of it as possible. It became this big thing shoved at the ‘global South’, with little thought given to how it would be transferred, much less how relevant and appropriate the “knowledge” would be. A silver bullet, or a panacea.

Today I came across this article from Zimbabwe – “Limitations of using documents & reports to share knowledge in Africa” and I could immediately perceive the author’s deep understanding and empathy of their own local context and needs. Here’s a snippet:

While African communities have learnt from each other for generations, the conventional way of trying to spread knowledge through case studies is not yielding sustainable results.

There is an assumption that technical people can get into a community, work with local people, document their successes and share success stories with other communities, leading to adoption of best practices.

This notion misses a thorough understanding of how communities learn from each other. Almost all rural African communities rely on collective sense-making through very patient conversations, observations and learning by doing.

This led me down the rabbit hole of the authoring organization‘s website, where I came across a blog worth following for their deep understanding of the African agricultural landscape and the information needs of the farmers. Here are two selected blogposts from their site:

From farmers and traders to knowledge artisans

[… ]motor mechanics and metal fabrication are now part of the informal sector.  Previously locked in formal systems, these skills are now being unpacked and applied in informal markets.  This is leading to the integration of indigenous knowledge systems into formal knowledge sharing pathways. 

Since indigenous knowledge is more customer-oriented, it results in the production of needs-based products, tailor-made to meet the needs of diverse customers.  For example, ploughs and hoes are made as per customer requirements unlike the previous mass production ethos in the formal sector which had little consideration for existing draught power dynamics in different farming communities.
[…]
Technology and digital tools do not know empathy and why it is important.

Why some approaches and technologies are not moving beyond early adopters

A lot can be learnt from remarkable ways through which African socio-cultural systems generated and shared knowledge. There were reliable conduits for sharing knowledge from one age group to another, one gender to another and one society to another.  Besides respected knowledge brokers, each community had sense making tools linking different communities of practice. Some of these methods and tools included rituals, idioms, metaphors, stories and various forms of apprenticeship.
[…]
This is exactly what our modern knowledge systems lack. We have not cultivated proper ways of sharing the rich information/knowledge from schools, colleges and university curricular into diverse African communities.  There is an expectation that this knowledge can be shared by students after graduating. However, a lot of what can be useful in communities is either forgotten or misapplied.  More than 70% of ordinary Africans who function through their own languages, values and norms have no way of meshing what they know with the formal education system.  In most cases, their cultural values are still considered barriers to academic knowledge which is being confused with modernization.

Unless we develop verifiable ways through which knowledge is questioned, shared, rejected and value-added, it remains stuck within various communities of practice.  Such knowledge will have less developmental impact than anticipated. Academics continue to be locked in their systems, speaking to each other while farmers and rural communities continue holding onto what they know works. As if that is not enough, the language used for crafting policies in most African countries is not suitable for use by the majority but for lawyers and judiciary systems who can interpret it.

Reframing the informal sector in the African consumer market: The real African middle class

malishopThis is Ruth’s shop, on the side of the highway, approximately 5km on the road to Kisumu, from Busia in western Kenya. Not quite directly part of the borderland’s economy, that trades incessantly with each other, these businesses still manage to feed off the energy of the hustle and bustle of biashara, as it flows through the complex webs, as seen by Walther in W/Africa.

Her home, abutting her husband’s wholesale business in soft drinks (they’re registered with Coca Cola) is next door to her shop, hidden in this photograph. She buys a minimum of 10,000 shillings of goods each Thursday, just from Bungoma, and that’s only one of her many source markets. The malimali shop is the village general store or variety store. The 5 and 10 mashed with a mini department store. We bought two of her sandals. I would have paid $7 in Singapore for them and it only cost $1.80. They were made in Kenya, I think.

This is the sign of the emerging middle class that the bean counters can’t find in their datasets. This class of business abounds in the small market towns dotting the countryside and the economically stronger parts in the interior. They are wholesalers and retailers, sometimes both, as nobody wants to turn away a customer, no matter how small their wallet might be. Its an inclusive market and one that we might learn something from. It sometimes has a feeling of a socially responsible capimercantilist society.

Bright Simons was the first to point this fact out, in HBR a few years ago. He was right, as I’ve just validated through a recently completed study on the rural/urban economic linkage in western Kenya.

Infrastructure has a direct relationship to how much your rural business can scale

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Busia market, Kenya Feb 2016 (Photo: Niti Bhan)

This is a micro-wholesaler and retailer in a staple commodity. Infrastructural constraints limit the stock she can manage at one go – seen as the sack with her name on it. This indicates that it was sourced from some distance away, as this is the matatu’s informal package tracking service. It could have come from rural Uganda – some of the most productive agricultural land is in Eastern Uganda within 60km of the Kenyan border. Food is ridiculously cheap in Uganda and the fish in Busia was swimming a few hours before it landed on your plate with dhania sprinkled over it.

Similarly, that poor fish can only go so far, though the traders have built their own jua kali cold chain and can assure you of 24 hours freshness. Its the tomatos and the cabbages that wilt miserably in the searing sunshine and thus limit Mama’s daily income to the purchasing power in her neighbourhood market. She can’t wait for two days to sell her produce.

Its a natural cap on her ability to scale. Both volumes traded and distance supplied are a function of the quality of the cold chain at the very last mile of the farm to fork sustainable agricultural value chain. They need good logistics and reliable infrastructure. We can’t have the fish spoil during a power outage.

Therefore, you can see the economic importance of good infrastructure and also how such minor easy to implement tweaks can boost and trigger all sorts of emerging opportunities for entrepreneurs.

The hidden cost of doing business #informaleconomy

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Kenya, 2nd Feb 2016. Photo Credit: Emerging Futures Lab

This looks like its a low cost business operation with low barriers to entry. All you need to do is find a decent tree under which to display your wares.

The reality is that these entrepreneurs have numerous fees and costs that they must pay in order to do business, regardless of how informal it all looks. They pay rent for that space on market day, they pay the council in order to transport their wares, they need to pay for transportation, and any assistance they might need for loading and unloading, they even need to pay the various formal and informal “tax” collectors on the road to this market town.

There is a cost to doing business, and there’s uncertainty of income and cash flow. Some of these fees might be fixed or known, but some, like the amounts asked for, along the way, might be dependent on the mood of the officer, or even, the weather.

On the other hand, these fees and taxes and payments ensure that the retailer has a decent location in the market, that they won’t be harassed or chased away during working hours, and that the “system” – chaotic though it might seem to our eyes – will serve their needs.

If you were ask them what they think of this, they would shrug their shoulders and tell you its just the cost of doing business.

Changing flows of trade

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Secondhand clothes from India in rural Kenya. 1st Feb 2016 Photo Credit: Niti Bhan

This unassuming pile of clothes caught my attention on market day in Busia, Kenya. They are mitumba (secondhand clothes) from India. This is a recent development, apparently, as traditionally mitumba tends to come from the ‘west’ (as can be noted by the name on the bag shown below). Clothes sourced from India have begun showing up in the market only in the past year or so.

whodis

Where did it come from? Secondhand bag in rural Kenya. 1st Feb 2016

Is Uganda’s rural, informal economy helping people climb over the poverty line?

uganda poverty worldbank opendataI stumbled across this dataset on the World Bank’s open data website yesterday, and couldn’t resist making a table to convey the message. Uganda’s poverty headcount halved in the decade between 2002 and 2012. Their statistics are rated well enough that this doesn’t seem to be too far off the mark. In the three years since, one can imagine it has only dropped a wee bit further. For context, the poverty headcount in the United States is officially 14.5% – not too far away from 19.5%.

datasetThis intrigued me enough to go through the data for the greater East African region. The first table is sorted in order of GNI per capita, with Kenya leading the pack, while the second table is sorted by the least proportion of the population below the poverty line.

Here are some visual outcomes of my playing around.

regional analysis efl wbregional indicators efl wbThough Kenya is the “richest” country, its poverty headcount is more than double Uganda’s. What’s interesting is that Uganda’s per capita GNI (Income) is around half of Kenya’s. Uganda is heavily dependent on agriculture, and not as urbanized. In fact, the urban poverty headcount is a wee bit higher than the rural.

Given that rural economies, especially in East Africa, are technically part of the “informal economy”, I wonder if looking closer into that might offer some insights on how a “Low Income” country can slash its poverty level so dramatically? It might help explain why the per capita GNI is so much lower (Kenya is far more industrialized) yet far less people are living hand to mouth.

Lessons for toilet builders from the history of India’s cookstove development efforts

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Learning from the maker, herself. Rawal village, Rajasthan, India in January 2009.

Vaishnavi Chandrashekhar has written a superb critical analysis looking back at the history of India’s development efforts to provide viable, feasible, and desirable solutions to the myriad unmet needs of the common man. Using cookstoves as her narrative theme, she explores the challenges of base of the pyramid product development and marketing, and draws lessons for “the toilet builders of today.” A must read for social enterprises, entrepreneurs and design for impact.

Years after its big launch, India’s stove mission is going nowhere. A new government is in power, and another object meant to save the rural poor is now galvanising excitement. Companies such as Indian Oil, L&T, Tata Consultancy Services and Vedanta, among others, have pledged to build toilets to stop people from defecating in the open. Meanwhile, the cookstove programme has practically vanished from view, quietly renamed the Unnat Chulha Abhiyan and downsized.

This was not the first time a big push for clean cookstoves started only to falter. The history of India’s cookstove programmes parallels the evolution of the global development agenda, shaped by the geopolitics of each era—saving forests in the 1970s, improving women’s lot in the 1990s, preventing global warming in the 2000s. Since the 1970s, development agencies and governments around the world have spent millions of dollars promoting clean stoves as the solution for a succession of big problems. These programmes reflect a yearning, among nation-builders and international donors alike, for silver bullets—objects that are quantifiable technological solutions, but also symbolic, such as vaccines, mosquito nets and toilets.

A timely find, as the World Bank et al renew their PR push to promote toilets over mobile phones. The rise and fall of the “next big thing” for the poor is as much a trendy hip thing of the moment as any 15 minute internet celebrity. As silver bullets emerge and disappear according to donor whims and fancies, its the poor who suffer from half baked solutions and incomplete projects left behind like abandoned children’s toy in the sandbox.

Badly trained, reluctant stove-makers meant bad stoves. In one Haryana village, 67 percent of users said the new chulhas were too high, and over half said the cooking holes were too small for their pots. In Punjab, many families found their fuel consumption increased. In Orissa, chimneys were removed because villagers feared their thatched roofs would catch fire. In one village, a row of houses did burn down. “We couldn’t talk about chulhas in that area for years,” said Sarin.

There was also a more fundamental issue: the programme’s goals were out of sync with what women wanted. While the focus was on making stoves that consumed less wood, women wanted ones that emitted less smoke, or cooked faster.

As always.

As for clean cookstoves, she came to the conclusion that structural problems couldn’t be solved with single-point interventions. “Designing a smokeless biomass chulha,” she said, “is in some ways more complex than designing a nuclear power plant.”

And in India, we note the same issues that plague the  sales of “objects to replace dirty stinky kerosene” and other things that are good for you, like oatmeal.

Over the years, Karve found that even better-off rural communities were not persuaded by arguments about health, the environment, or even time saved in cooking. Women’s time and health were not valued; any family with Rs 1,000 to spare would first buy a mobile phone. She came to believe that the “aspirational value” of the stove had to be engaged. Like any successful consumer product, “the price has to be right, the benefits outstanding, and it has to look good,” she said. “It has to be cool.” That kind of hard-sell made Karve, with her “NGO mindset,” uncomfortable.

Is that women’s health is not valued, or that the rupee invested in the mobile phone brings back a greater return than the rupee sunk into a stove or toilet? What are the assumptions we are making on why people choose  to make these trade-offs, and how does that bias us so that our own assumptions end up being consistent barriers to new product introductions to this target segment? We have enough years of experience with the stoves and toilets and water purifiers to want to pause and reflect by now.

“Why must the global alliance for a developing-country problem be headquartered in Washington?” he said in an interview in his IIT office, in 2013. Besides, he wasn’t sure that the GACC’s market-driven approach was the correct one. “I’m always worried when people say there’s only one way to solve a complex problem,” he said.

Which brings us full circle to the problems of toilets and the bank.