Posts Tagged ‘kenya’

Implications of Mobile Money Interoperability in Kenya?

Mobile money pioneer Kenya, has finally gone live this month with account to account interoperability between mobile money services. Neighbouring Tanzania pioneered interoperability between the mobile money services offered by local telcos with a soft launch back in 2014. Fears of cannibalization and zero sum scenarios were unfounded, as documented in an early evaluation report by the GSMA. On the other hand, perhaps that assessment of impact was far too early as little else is mentioned in the rather thin report. Fellow East African Community member Rwanda too has had interoperability for a couple of years now. Now, its Kenya’s turn.

In a market where mPesa services posted a market share of 80.8%, what, if any, will be the impact of this newfound ability to send money directly from wallet to wallet without cashing out?

Talking points in news media articles and various interested non profit bodies point to “increase in financial inclusion” and “increase in competitiveness” with lower transaction costs as the benefits to end users, but these seem to be just that, talking points.

Safaricom, the telco behind mPesa, has long maintained a stranglehold on the market, and even now continues raising barriers to frictionless payments. In the decade since mPesa’s launch and unchallenged dominance, the vast majority of Kenyans have had no choice but to set up their own account even if it means using a separate SIM*.

In a different market, such a move would be cause for a celebration- the potential benefits clearly outweighing any drawbacks to individual service operators, and the future potential for digital commerce and trade enabled by a frictionless payments platform to be realized in time. In fact, mobile money usage is only growing in both Tanzania and Rwanda, though in each the numbers of subscribers is less unevenly distributed across the telcos.

But in Kenya, beyond providing ~20% of mobile subscribers with the ability to send money to mPesa (more or less) seamlessly, the overall impact on platform and service innovation within the local economy is likely to remain limited. Providing the service takes the edge off Safaricom’s issues with monopolization of the market but will in no way change much of the daily transactional reality on the ground. Habits are hard to break. And mPesa has become a Kenyan habit.

 

*  mPesa has a penetration rate of ~81% as compared to Safaricom subscriber penetration of ~72%, as of January 2018

 

Why is the Kenyan mobile loan industry facing just a digital version of India’s MFI problems?

When you make fast, easy, short term loans available on the phone to anyone with a need for quick money, why is it a surprise when high levels of consumer debt are the result?

A recent survey by financial inclusion giants like FSD and CGAP discovers that low income Kenyans have not been helped by the plethora of easy access mobile loans introduced in the market in the name of financial inclusion and ‘access to finance’.

“The rise of the digital credit market has raised concerns about the risk of excessive borrowing and over-indebtedness among lower-income households. Digital loans are easy to obtain, short-term, carry a high interest rate and are available from numerous bank and non-banking institutions,” states the report

The same pattern of behaviour is emerging as did in India during the peak of the MFI small loan boom almost a decade or so ago. People are borrowing from one loan to pay off the other, and livelihoods are hurting while some face challenges putting food on the table. The year 2017 might have been economically challenging for Kenya, but the design of repayment plans are also a factor.

“Digital credit is not reaching everyone and remains ill-suited for most of the population, such as farmers and casual workers, whose livelihoods are characterized by irregular cash flows,” says the phone survey.

The attractiveness of the market opportunity however is such that new loans served through the mobile phone are still being launched every other month in Kenya. Whose responsibility is it to ensure that programmes meant to benefit the lower income population don’t end simply perpetuating the same problems seen before, albeit as profitably?

Why the African Consumer Market is NOT the same as the African Middle Class

Consumer goods store, Kilgoris, Kenya (March 2012)

The biggest challenge faced by consumer facing companies looking at the African Consumer Market is the age old positioning of the “middle class” as the ideal target audience. This middle class is segmented by the same attributes as the original middle classes who formed the consumer markets of the developed world.

This is the outside of the same store. Its located in a town called Kilgoris, situated at the edge of densely populated Kisii in western Kenya, and the sparse land of the nomadic Maasai pastoralists.

When you consider the range, the variety, and the price of the products displayed for sale, and compare it to the small dusty town with just one modern building, you wouldn’t imagine that solar panels worth USD 200 or Sony Bravia flatscreen TVs would be selling like hotcakes. But they do.

No dealer in a heavily cash based consumer market such as upcountry Kenya would tie up his working capital in expensive consumer electronics if there wasn’t a demand for it that meant the products sold quickly enough to keep the cash flowing in. My assumptions were completely upturned by this shopkeeper’s insights – it was the Maasai making purchases after attending the weekly livestock market.

A maasai manyatta Source: https://bushsnobinafrica.wordpress.com/tag/maasai-mara-game-reserve/

They’d pack 6 foot long solar panels, flat screen TVs, and satellite dishes onto the tops of hired trucks and take them off to their thornbush and mud manyattas. Yet neither you nor I would classify them by any of the traditional marketing department’s attributes as being part of the “middle class” consumer segment.

On the other hand, they were undeniably part of the African consumer market, and as the shopkeeper informed us, they were not only willing to spend on their homes, regardless of what they looked like from the outside, they could afford the best that he had to offer. He showed us his entire stock of kitchen appliances, water filters, jugs, mugs, and even children’s toys and fake flowers from Dubai! It is dealers like this who know best what their customers want and they range as far away as Nairobi to obtain the products in demand.

But I wonder if the marketers and the analysts still seeking the middle class have a clue about this huge market invisible to their eyes? And, whether, they’re looking in the right places?

Household energy consumption behaviour in East Africa: Lighting & Conclusion (3 of 3 Parts)

 

Jua Kali Kerosene Lamp, Kenya

The following is extracted from a six month study during 2012 on household energy consumption behaviour in rural Kenya and Rwanda among the lower income demographic, that led to an understanding of some of barriers hampering the sales of client’s solar products in this market. This 3rd and final part will focus on fuel usage and consumption behaviours for lighting. Users sampled for this study were selected based on varying fuel consumption patterns, ranging from a single homestead to a rural hotel open from dawn to 1am offering solar powered football on television.

Fuel Choice and Consumption Behaviour is Influenced by Duration and Timing of the Need

Kerosene is the primary source of fuel for lighting for those who live without access to electricity, regardless of whether its on their shamba, or in a building in town. Not only is the reach of grid access limited to a small percentage of rural Kenyans but the cost of the final connection to the dwelling is also a barrier for many. Due to the nature of this project’s focus, the majority of homes visited were without a solar home system.

Hurricane lanterns are the most popular lighting devices among kerosene users, as the glass covering the lamp protects the flame as well as contains the smell and smoke. With prices as low as 250Kes, everyone has at least one, if not more at home and the number maintained depends on size of the family, number of buildings on the homestead and the fluctuating ability to purchase fuel.

Pressure lamps can cost ten times as much and consume far more fuel although they offer a brighter light – they were not seen in Makueni households and the only regular user was the furniture maker who restricted its use to times of high productivity during the Christmas season. In Kisii, they are owned by members of the congregation who use them once a month for religious functions and the fuel is provided by the church. Gregory the schoolteacher called them “gas guzzlers” whose bright light was not worth either the high running cost or price of the device itself.

Everyone owns a few small tin lamps but they were referred to as something discarded during the upwardly mobile climb to a hurricane lantern – “Oh, we must have a few lying about somewhere in a dusty corner” said one wife while Mama Grace only used it in the confines of the kitchen building where the open flame, with its attendant smoke would make no difference. However, due to their small size, they require very small amounts of kerosene and tend to be kept as a backup for times of need when the fuel supply runs low or to be used by the aged, such as Kilonzi’s grandmother who finds the hurricane lantern difficult to maintain.

In addition to kerosene fuelled lamps and lanterns, every home owned at least one flashlight of some sort, whether powered by dry cell batteries, grid rechargeable or disposable for what they referred to as “emergencies or needing to go outside at night”. By emergency, they meant that this form of light was faster and easier to turn for sudden need than the more complicated task of lighting a kerosene lamp, plus it could be used in wind or rain. For many, this item received first priority if resources such as batteries or cash for charging were limited.

What stood out across the board was that everyone knew, almost to the minute in some cases, exactly when they used their light source. This behaviour was evident regardless of the household’s energy source including if it was solar power and thus “free”. Answers would range in specificity from estimates “around 7pm to maybe 10pm, sometimes later” to on the dot timings “from 5.45am to 6.30am in the morning”.

“I only use it for children to study” Mama John who scrimped and saved for solar

This gives rise to the conjecture that the fundamental observation in household financial behaviour of being able to control time (duration, frequency, periodicity) and money(whether prepaid source of fuel like kerosene or postpaid like electricity), is an ingrained habit even after upward mobility has removed the need for such stringent conservation. SHS do not require the same frugality daily use and cost and this can be seen in increased use of entertainment appliances like televisions and radios but lights still follow this pattern. However, it can also be said that rural life is slow to change in response to the introduction of modern conveniences and this may also be a significant factor.

The dry cell battery

Similar patterns of duration and accuracy of timing were also observed in choice and purchase of dry cell batteries, particularly for the radio. People knew which specific programs they wanted to listen to thus the
time and duration of their use of the radio. Everyone wanted to be able to listen to the radio more often but conserved battery life for as long as possible. Many even acknowledged that expensive brands like Eveready which cost 65Kes a pair lasted three times as long as the cheaper Chinese Lion brand costing only 30kes the pair but their irregular cash flows acted as a barrier to purchase dependant as they were on what cash was available on hand (or in pocket) at time of need.

Concluding Remarks

Consumers with limited incomes prioritize household energy and fuel spending according to importance for survival. Food and thus cooking come first followed by light. Everything else depends on the criticality of need against funds available. For example, Muthoka, who was unemployed and living on his small subsistence farm deep in the interior away from a market town, said that if he had to choose between 20Kes worth of kerosene or charging his mobile phone, he would choose kerosene first for lighting was more important to him than his mobile.

Similarly, Gregory the schoolteacher, put batteries for the emergency flashlight as more important than for playing the radio. The question becomes “What can we do without?” and only one of the many respondents of the more general household survey prioritized her mobile phone over light but she was a business woman whose income depended on her being available for calls.

The caveat here is that these answers are not absolutes and while most people will say that the phone is less important, there will be times of need when charging the phone or topping up airtime will be critical.

However, unlike kerosene or dry cell batteries for light, one can always borrow a friend or neighbour’s phone for an emergency phone call. These are the kinds of trade-offs people make when living on the edge on limited and irregular cash flows.

Pricing is rarely the problem

These insights on people’s household energy management and purchasing patterns, based as they are on the limitations and timing of their income sources are what led to the conclusion that the actual price itself was not the barrier to sales but instead it was a combination of factors starting with the choice of packaging and the subsequent pricing and sales strategy.

 

Part One: Introduction to Household Energy Consumption Behaviour Study in East Africa (2012)
Part Two: Cooking

Introduction to rural household energy consumption behaviour in East Africa (1 of 3 parts)

The following is extracted from a six month study during 2012 on household energy consumption behaviour in rural Kenya and Rwanda among the lower income demographic, that led to an understanding of some of barriers hampering the sales of client’s solar products in this market. This first part is an overview of household financial management in conditions irregular and unpredictable income streams from a variety of sources. The 2nd and 3rd part will focus on fuel usage and consumption behaviours for cooking and for lighting separately. Users sampled for this study were selected based on varying fuel consumption patterns, ranging from a single homestead to a rural hotel catering for more than 12 hours a day.

Aspirational ownership and tangible evidence of savings in prepaid purchase model of solar panel, as seen in Chuka, Kenya (Photo: Niti Bhan, February 2012)

Rural Kenyans are not very different from rural Filipinos or Malawians or Indians when it comes to the way they manage their daily household expenses. Similarities in decision making, in purchasing patterns and in observed consumer behaviour, all stem from the same underlying need to plan and manage on irregular incomes from a variety of multiple sources in harsh environments of scarcity and uncertainty. The underlying driver is always to stretch the limited shilling, rupee or peso to the maximum while keeping one’s head above water.

With the exception of the salaried schoolteacher, who managed on fixed amounts of cash paid predictably on a calender schedule, the rest juggled an irregular cash flow against required expenses, attempting to minimize the differences over calender time and as a planning mechanism across the natural year’s seasons of abundance and scarcity. Even cash croppers like Mama Grace, who received end month payments from the tea factory, coped with the significant difference in the quality and quantity of tea harvested during the wet and the dry seasons with a variance of as much as 300% between high and low payments.

Rural homesteads manage their household finances rather like a “portfolio of investments” that mature over varying times such as cow’s milk which can be sold daily for cash, while a chicken takes less time than a field of maize to be ready for harvest and sale. Thus decisions are made based on timing of the expense and the choice of ‘investment’ to liquidate on what was ‘ready’ as well as the amount of cash required. For example, in Kilala livestock market it is a known fact that livestock prices always drop in January as its time for first term school fees and everybody needs to sell to raise the necessary cash. Similarly, major purchases or cash outlays are planned for known times of abundance such as right after the seasonal harvest.

Unlike those on a fixed salary who are able to plan ahead, those on irregular incomes need greater control and flexibility over the timing – that is the frequency and the periodicity; and well the amount – in cash or kind; of their cash flow, as a planning mechanism for financial management. In fact, the greater the span of control the customer has over their time and money, as articulated above, the greater the success of a business model or payment plan. This is why prepaid airtime is the preferred model for 96% of the African continent’s 700 million mobile phone users and also why kerosene has been so hard to dislodge. It can be purchased by cash amount (say 40 Kes worth) or quantity (half a litre or 5 litres) on demand or in bulk, and then frugally used for as long as possible, allowing consumers control over their “time” and “money” with great flexibility.

Observations on household fuel and energy use reflect these purchasing patterns and consumer behaviour. Cooking and then lighting are the most important needs, and the two elements of time and money as discussed above, show up in the form of duration and location. While duration of use has a direct relationship to the amount of time and money required, location has a critical bearing on behaviour in rural Kenya as will be seen in forthcoming posts.

 

Part One: Introduction to Household Energy Consumption Behaviour Study in East Africa (2012)
Part Two: Cooking
Part Three: Lighting & Concluding Remarks

How the African movable assets bill can unleash innovation opportunities for the rural economy

Somewhere in Kenya, 4th June 2012 (Photo: Niti Bhan)

As Kenya joins Zambia and Zimbabwe in ratifying a Movable Property Security Rights Act, there’s a sense that the floodgates to innovation in access to finance might be taking place in rural Africa, south of the Sahara and north of South Africa.

Kenya’s law also goes beyond the cows and goats and allows a borrower to collateralise future receivables arising from contractual relationships.

How it ends up being implemented will set the stage for the next big disruption in financial inclusion. In the meantime, let’s take a closer look at the opportunity space for innovation in the informal and rural economy that dominates these operating environments.

 

1. A whole new bank, designed to meet the needs of rural Africa

Last night, a tweet by Charles Onyango-Obbo struck me forcibly, and reminded me of our Banking the Unbanked proposal crafted for ICICI back in January of 2007.

The very fact that contemporary thoughtleaders in the Kenyan banking industry are unable to take the concept of livestock as collateral for loans seriously, taken together with the deeply embedded assumptions of the formal economy’s financial structure leaves the door wide open to disruption.

It would not be too difficult to conceptualize a rural, co-operative bank custom designed for the local operating environment. In Kenya, where the mobile platform provides clear evidence of the viability, feasibility, and desirability of innovative financial tools and services that work for irregular income streams and provide the flexibility, reciprocity, and negotiability inherent in the cooperative local economies, such a bank could change the social and economic development landscape overnight.

In fact, one could conceivably foresee this “bank for rural Africa” scaling far beyond Kenya’s borders.

 

2. Insurance sector must respond to banking disruption

The domino effect of disruption in the banking sector should kickstart the stagnant insurance industry that has been ineffectually attempting to scale outside of the formal economy’s neatly defined boundaries. Bankers willing to take livestock as collateral for loans will therefore require insurance on their movable asset as a surety against the risk of disease, or drought.

Current products tend to emerge from the international aid industry, seeking to insure smallholder farmers against the shock of losing their livestock to climate related disasters such as prolonged drought, or an epidemic of illness. There is a dearth of relevant and appropriately designed insurance products from the private sector targeting the needs of the rural economy. For all the talk of African urbanization, even the most optimistic projections show that East Africa’s rural population will continue to dominate.

Thus, this an opportunity ripe for the plucking, given the right mix of product, pricing, and promotional messaging.

 

3. Disrupting assumptions of Poverty and Purchasing Power

Whether it is Kenya’s significant non profit sector or the nascent consumer oriented markets, the redrawn lines defining assets, collateral, and the floodgates of access to finance will require a complete overhaul in the way the population is segmented and measured.

Once these hundreds of movable assets have been valued, insured, and registered officially, even the most reluctant banker must now count the pastoralist among his wealthiest local clientele, able to draw a line of credit against his true wealth to the tune of thousands of dollars without feeling the pinch.

 

4. Triggering a rural investment and consumption boom

From mabati for a new roof and simti for the backyard wall, to the latest model smartphone or pickup truck, the concurrent boom in investments and consumption provides an ample playing ground for new products and services tailored for the contextual needs upcountry. Finally, Farmer Joe can install that solar powered irrigation pump for his orange groves in time to reap the next big harvest. And Mama Mercy can think of building up a nest egg of investments faster from the income provided by her farmyard animals.

Kagio Produce Market, Kenya, April 2013 (photo: Niti Bhan)

This might turn out to mean upgrading to a breed of high yield milch cows or being able to provide them with better quality feeds and medicines, but the financial bridge that a well designed strategy leveraging this movable assets bill and it’s timely implementation could mean the difference between the brass ring or treading water.

 

5. Trade and Commerce will open new markets

Given that the Kenyan Movable Property Security Rights Act 2017 goes beyond livestock to include other stores of wealth and value creation, there will be an undeniable impact on regional and cross border trade. No trader will give up the opportunity to leverage their existing inventory if it qualifies for additional credit that can be plowed back into the business.

On the road to Bungoma, Western Kenya, February 2016 (Photo: Niti Bhan)

Trader’s mindset and the documented biashara growth strategies already in evidence point clearly to the productive economic use of this access to finance rather than passive consumption alone. As their business grows, they will require a whole slew of tools and services tailored to their needs. This could be as simple as a basic book keeping app or as complex as customized commodity (assets, livestock, non perishable foodstuffs, grains and cereals) exchange platforms that integrate the disruptive new services percolating through the entire ecosystem.

 

In conclusion

These few steps outlined above are only the beginning of laying the foundation for disrupting the current social and economic development trajectory of small town and rural Kenya. I see immense potential for both direct to consumer as well as business to business segments for forward looking organizations seeking a foothold in the burgeoning East African markets.

We, at Emerging Futures Lab, would be pleased to offer you customized white papers on the opportunities for new products, services, and even business models, based on this emerging financial environment recently signed into law by President Kenyatta. Contact us for an exploratory conversation on the scope and scale of your particular industry’s needs. Our experienced team can help you maximize these opportunities from concept design and prototyping all the way through to path to market strategies.

Livestock as movable assets and financial collateral: Collected insights

Mama Mercy’s farm, Nyeri, Kenya (Photo: Niti Bhan, April 2013)

Following in the footsteps of Zimbabwe, Kenya has just passed a law on the use of movable assets as collateral for loans.

President Uhuru Kenyatta has signed into law a Bill allowing borrowers to use household goods, crops, live animals and even intellectual property to secure commercial loans in a move aimed at boosting access to credit.

This is an important move, because unlike Zimbabwe, the “Kenyan Movable Property Security Rights Act 2017 paves the way for the formation of a centralised electronic registry for mobile assets that financial institutions can use to verify the security offered.”

The implications for the rural economy, entrepreneurial smallscale farmers, and the informal trade sector are enormous, and I will take a deeper look and analyze the implications in subsequent posts. First, I will begin by collating the past decade’s writing on the role of livestock in household financial management, clustered broadly by theme:

 

 

On The Role of Livestock
The multifunctionality of livestock in rural Kenya ~ literature review
“households will treat livestock similarly to a savings account or stock portfolio and typically (and perhaps reluctantly) only sell livestock to cover cash shortfalls when certain necessary expenditures arise”
The Role of Livestock Data in Rural Africa: The Tanzanian Case Study
Only provides evidence of the importance of investing in same
The role of the cow as an investment vehicle in India: Insights on Return on Investment

 

 

Emerging Futures Lab Original Primary Research
The Prepaid Economy project 2009: Original research on rural economic behaviour (IDRC & iBoP Asia) – Part 1
Observations & analysis of rural household financial behaviour – Part 2
Synthesis & Insights on rural economic behaviour – Part 3
Visual documentation from Philippines, India, and Malawi – Part 4
Rural Bottom/Base of the Pyramid and their cash economy

 

 

Application of insights for innovation in Kenya
Component parts of the rural, social economy
Seasonality as a factor in livestock export trade finance
Rural Kenya’s livestock and produce markets are a complex, economic ecosystem
Affordability, pricing strategy, and business models
Livestock’s role in path to upward mobility
From the individual to the community: the rural economic ecosystem (Dec 2013)
Importance and value of the informal food market
Creative ways to financial inclusion, by Michael Kimani

 

 

To Read More: Use this tag “movable assets” for all forthcoming analyses, and you can find a decade’s worth of my original research on informal economy, prepaid business models, literature reviews and ethnography here. The entire subject can be found under the category “Biashara Economics“.

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.

Innovation, Ingenuity and Opportunity under Conditions of Scarcity (Download PDF)

coverIn July 2009, I was inspired by working in the Research wing of the Aalto University’s Design Factory in Espoo, Finland, to launch a group blog called REculture: Exploring the post-consumption economy of repair, reuse, repurpose and recycle by informal businesses at the Base of the Pyramid*.

Within a year, this research interest evolved into a multidisciplinary look at the culture of innovation and invention under conditions of scarcity and it’s lessons for sustainable manufacturing and industry for us in the context of more industrialized nations.

reculture research bed

Emerging Futures Lab, July 2010 (Aalto Design Factory)

As a preliminary exploration, my research associate Mikko Koskinen and I timed our visit to Kenya to coincide with the Maker Faire Africa to be held on the grounds of the University of Nairobi in August 2010.

This photographic record of our discoveries (PDF 6MB) among the jua kali artisans and workshops of Nairobi, Nakuru, Thika, and Kithengela, guided by biogas inventor and innovator Dominic Wanjihia captures the essence of the creativity and ingenuity it takes to create without ample resources and adequate infrastructure.

A synopsis of our analysis is available here.

 

* The publishing platform, Posterous, died a short while later and we lost years of work. I’m looking into reincarnating REculture on Tumblr soon.

 

Signs of Interdependency between the Formal and the Informal Economy

bridging economiesThere is a lot to be unpacked here – I made a mindmap of the urban African entrepreneur who is the backbone of the visible emergence of a consumer class. I’m drawing from my experience of the Kenyan context. I started this in response to Michael Kimani’s Storify recently on the mythical “middle class” and the African consumer market.

We know that this demographic, regardless of the efforts to label it “middle class”, is quite unlike the traditional bourgeoisie that built the developed world a century ago. We can call them the informal bourgeoisie – solid members of society who nonetheless break stereotypes of the white collar, university educated, salaryman.

More often than not, they are entrepreneurs and businesswomen, traders and makers, and workshop owners, who bootstrap their lines of business through the traditional means available amongst what is still called the informal economy. If they’re lucky they might have finished high school, or even graduated from university, but a degree is not a prerequisite as it might be in a private sector job.

In this post, I’m only going to write about something that struck me last night when I was staring at the mindmap. The line that links business to entrepreneur can also be considered a bridge between the informal economy and it’s business practices, and the upcoming formal markets of urban population centers.

The successful workshop owner or regional trader rapidly acquires the signals of his or her business success in the form of consumer goods and increased expenditure on staples and necessities, including upgrades to choice of schools and church. I believe that formal financial services and products such as bank accounts, credit cards, and various apps on a smartphone are part and parcel of this.

In effect, the entrepreneur is the link between the informal economy which provides employment and income to the vast majority, and the burgeoning formal sector in consumer facing services and products.

The formal economy is more likely to be dependent upon the health of the informal sectors than the reverse.

This interdependency, and relationship, is important. I will be coming back to this diagram again to unpack more of what I’m seeing here. For now, it’s enough to have figured out that initiatives meant to eradicate the “pesky” informal trade might have greater implications than initially assumed.