Posts Tagged ‘design research for development’

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.

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