Household Finances in Rural & Informal Markets

What insights can we derive from observing and understanding how those at the BoP currently manage their household budgets to inspire new transaction models or pricing strategies for businesses wishing to serve the poor more effectively, yet profitably?

Selected in 2008 Small Grants competition conducted by iBoP Asia Project to conduct exploratory research in rural India, The Phillipines and Malawi. Final report is available on request.

This drawing was made by Jeroen Meijer of JAM visual design, Amsterdam November 26th, 2012.

Its a visualization of the chart used to show how participants were sampled for this. The axis represent the individual's ability to accurately predict either timing or amount of their cash flow status, and thus, their ability to plan.

Its also a way to segment the undifferentiated masses in the informal economy, where traditional means to segment a population demographic such as income level or education may not be relevant or skew results leading to misinterpretation.

What if one could cluster by patterns of cash flow, and thus, consumer behaviour?

Irregular income streams from a variety of sources pose their own challenges to both buyers and sellers but offer an opportunity through the flexibility designed into business models for the informal economies where this pattern of cash flow tends to be much more prevalent.

Flexibility is key, as well as the ability to negotiate on “time” – frequency, periodicity, duration and “money” – amount. This works in the highly personalized transactions negotiated in most of the “developing” world but the challenge arises when those dependent on volatile cash flows meet “the system”, which cannot be negotiated with.

Between time and money in the equation of the underlying principle of flexibility is the “trusted network” or human beings. Facetime and financial flexibility have proportionate relationship to the success of a business model in such an environment.