How informal financial services can lower the barriers to formal financial inclusion

Around 2 and a half years ago, I was on a short visit to Abidjan, the capital of Cote D’Ivoire as a guest of the African Development Bank. They were holding an innovation weekend for young women and men in the Francophone West African region who were interested in becoming entrepreneurs.

David O. Capo Chichi, who used to work back then for MTN, a major telco very kindly took me around the informal markets on his day off and we got to talking to market women about their financial management habits. One interesting behaviour linking the informal with the formal came to light.

An established spice seller told us she had a savings account at the bank, but accessing the bank’s services were a huge barrier – the opening times ate into her business hours and the long wait times meant loss of income from potential customers. At the same time, because she was dependent on cash income from daily sales, it was more convenient for her to put a portion of money aside on a daily basis. So what she was doing was paying a tontine collector for the service of showing up at her shop everyday and collecting her small amount of cash set aside for savings. He would hold it safely for her for a month and then she would take the total saved up amount back from him, take the day off work and go deposit it in her bank account. That was the only way she could have the flexibility and negotiability that budgeting on her irregular cash flow required and still access the benefits of a secure safe interest earning savings account at the bank.

Now today I came across this article describing a pilot program in Benin where the private susu (small small) or tontinier, such as that used by the lady in Cote D’Ivoire, have been formalized into a more secure and insured service for the same demographic of informal market women and traders. There’s even a digital component that updates the accounts via the mobile phone.

“The reality is that we can’t be everywhere, and the Susu collectors are near the population. We have to work with them and find the best business model to get them into the formal system.”

Now, this exact same model being piloted by the MFI in Benin may not apply in exactly the same way elsewhere, depending on the conditions prevalent in the operating environment, but its clear that the structures and systems in place at the formal institution can be made more flexible and negotiable – given a “human face” – by working together with the pre-existing informal financial services already in operation.

This behaviour also resembles that seen among the informal cross border traders at the Uganda/Kenya borderland. Teresia who sells clothes under a tree has established a trusted relationship with her mobile money agent. He shows up at closing time to help her transfer her cash into mPesa, thus securing it for her and saving her both time and effort through this personalized service. Though she said she had an account at the bank, it lies dormant, for the same reasons given by the spice seller in Abidjan – “Who can afford to close shop during the day to spend hours at the bank?”

Innovations aimed at increasing inclusion for financial services need not always contain a digital component for them to make a difference for the customer, and lower the barriers to adoption and usage. All it takes is a deeper understanding of the challenges and constraints of the end user in the context of their day to day life.

Zambia’s inclusive approach to various sectors in the informal economy is worth noting

The Zambian government most recently announced that they would provide certificates to illegal (artisanal) miners in order to recognize and formalize their activities. In addition, they were being encouraged to form cooperatives – a legally recognized organizational structure – that would permit further benefits to this informal sector.

Compared to the challenges Ghana is facing with galamsey – the local word for illegal or rather, artisanal mining – one must sit up and take note of Zambia’s decision to lower the barriers to inclusion rather than build the walls higher to protect large scale formal extractive industries.

And mining isn’t the only sector to be so considered by the Zambian government. There was an announcement last year of their intent to legalize street vending – the bane of all developing country cities – and bring vendors – mostly women with families to support – within the formal employment and revenue net.

I looked for updates on this legislation and have yet to find something, though there’s lots of news on managing the street vending and hawking rather than the usual method of chasing them off the streets or confiscating their goods. That in itself gives me hope that we’ll see some pioneering advances from Lusaka.

In fact, there’s an article in the Zambia Daily Mail from a week ago that says “Its the perfect time for vendor training“:

Most of the traders on the streets are women who carry their children along due to lack of caregivers at home. For many women, this vending is considered an extension of their reproductive and domestic role. And so they are willing to risk it all and toil all day so that they could earn enough to cater for the following day’s orders and meals for the family.

However, many of these have dreams, big dreams to grow, provide and educate their children to a level where their offspring will never have to earn from the streets. And with the right training, many, with aspirations to grow their businesses and create a brand for their products, could benefit from financial and business knowledge that they could otherwise not be able to afford.

Some vendors have decided to change from trading in goods that are high-risk (these include foodstuffs such as vegetables and fruits) to those that have less risk such as clothing and other products. However, without any improvement in the level of knowledge of the new trade they are about to engage in, many are likely to fail, and they may return to what they know best, no matter how risky it is. It would therefore be prudent for organisations with the perfect know-how to take this opportunity to offer knowledge that will enable them to make the swap with better planning and more confidence.

Street vending is viewed by many as an economic activity for those with a low level of education. But what the cholera outbreak has taught us is that, if it is left without interventions, the negative effects will spread out and affect the whole nation.

The training I am suggesting could include assistance with regard to business registration, opening companies, tax remittances and branding of businesses, among other things.

I can’t help but underline all that is being said, and express my hope that other cities – Lagos, Nairobi, I’m looking at you – will take a leaf from Lusaka’s book.

Women’s Entrepreneurship Driving Emerging Future in Africa

We’ve been silent of late on this blog due to work deadlines and end of the year paperwork, however this will change. I’ve promised to write one blog post every day – even if its a few lines – for the next 30 days. I realized it was habit and discipline that was missing, not content related to this blog.

Meanwhile, here are some data points to ponder:

African entrepreneurs are missing out on the untapped potential market – said to be worth around $ 800 million – for women’s hygiene products such as sanitary napkins. The opportunity exists at every price level, from branded consumer oriented premium goods distributed through local supermarket chains, to rural handmade and re-used napkins that enable girls to go to school. What are you waiting for, if you’re looking for new ideas to invest in?

African women are also driving the small home solar revolution. I’m planning on sharing key extracts from the household energy consumption behavioural study I’d conducted in rural Kenya and Rwanda soon on this blog. In the meantime, the article linked above offers some food for thought on this trend.

Elsewhere, women whose herds of goat were ravaged by drought are picking up the pieces with cash grants which they are ploughing back into their businesses.

Ahatho Turuga arranges goods in her shop set up with support from The BOMA Project in Loglogo village, near Marsabit town, Kenya, on November 29, 2017. Thomson Reuters Foundation/Benson Rioba

This theme is best wrapped up by an article showcasing Maggy Lawson of Lomé, Togo, a woman whose trading ability has made her famous throughout the African continent and abroad.

Maggy Lawson is a Mama Benz. That’s what people in West Africa call women who have become rich in the textile trade – so rich that they can afford a Mercedes-Benz. Maggy Lawson owns homes in Dallas, Washington, Paris, and Monaco, as well as a villa on the outskirts of Lomé with marble floors and teak paneling. She is both wealthy and influential, representing the coastal regions in the Togolese Parliament and advising the Minister of Labor on important economic questions.

Here is our report on Nigeria‘s informal and formal textile trade, tracing the value web from end user customer through brokers to wholesalers and retailers of appliques.

Emerging African women entrepreneurs #informaleconomy

Ruth, the retailer who dreams of wholesale. Western Kenya Feb 2016 Photo: Niti Bhan

At the other end of the high tech geeky startup spectrum increasingly providing a platform for African women is the informal retail and wholesale trade sector. Like their West African sisters, the women traders I met in the border market of Busia, Kenya (next door to Busia, Uganda) and its nearby environs (~ 5km radius), and at Malaba, Kenya (also next door to Malaba, Uganda) are professional businesswomen, some with ties as far away as Egypt and Kampala.

They break the stereotype of the poor African woman who sells tomatoes as a livelihood activity to feed her 4 kids and send them to school. One company has a B2C outlet in Mombasa, while they sit in between Kampala and Nairobi, trading in women’s accessories and various accoutrements that are fun to own. Another imports clothes from Egypt, while also wholesaling eggs from Uganda. And ladies who are in the wholesale of staple agricultural commodities, documented evidence of which only began in the 2000s.

UNWomen would have it that the majority fall into the conventional description that doesn’t question its implicit assumption that operating in the informal sector automagically means you’re in the lower income category. Besides, the concept of “informality” in the English language causes more misconceptions around the sector as it exists in East Africa.

I’ll be honest, I cannot actually say without a proper market research study, at scale, whether the exceptions are the majority or minority. To be honest, as I noted in the previous post, it costs almost as much money to run an informal business as it would a formal. This whole topic of what is formal and informal is an entirely different, far more academic post. Income level does not really enter into the picture as a defining characteristic.

These are businesswomen with bank accounts and book keeping. They are invisible because their business can be conducted from indoors, by phone and mobile money transfer.

Economic ecosystems tie the fortunes of informal sector to health of formal business

Juapong, Ghana Photo Credit: Nicole Pelusio

The story of Ghana’s “pillow city”, Juapong – a small town in the North Tongu District in the Volta region, offers us insight on the inter-relationship between formal industries and the ecosystem of informal businesses that spring up around them.

Juapong is said to be losing its identity as the pillow capital of Ghana.

A few years ago, a common feature on the main road leading to Juapong from the Adomi Bridge was the display of beautiful assorted pillows. Local women depended on waste cotton or materials from the textile factories to produce pillows and mattresses. Today, cheap imports from China have affected Ghana’s textile production.

The Chief Executive of Margico Enterprise, Auntie Margaret Okyere, who sells pillows on wholesale, lamented that the pillow business has collapsed. Madam Okyere took over the trade from her mother in 1991 and had trained several women to make pillows.

She revealed that the business was one of the lucrative ventures in Ghana and recounted how in the glory days of the business, traders from Tema, Accra, Kumasi, Koforidua, Tamale and Togo travelled to Juapong to buy pillows in large quantities. That, she said, enabled them to make a lot of income to support their families.

Madam Okyere, who was making a few pillows to feed her shelf with the help of one of her workers, said fortunes in the trade had dropped because the raw materials were no longer available.

“Previously, if you came to this town, you would find pillows arranged beautifully all over and it created a lot of jobs for the youth. We even supplied some hospitals as well. I did not make less than GH¢300 profit a day,” she said.

And its not just the women who make and trade in pillows feeling the effects, the young men who helped load and distribute the pillows are leaving town in droves to look for work. An entire ecosystem has felt the impact of that butterfly’s wing out flapping on the other side of the world. Industries benefit far more people than just those employed at the factory directly.

Uber’s problems with women’s safety in India – my 2 rupees worth

In its mindless rush for scale, Uber leapt into the Indian market with their “hassle-free” service of hailing a car with a push of a button on your smartphone. I call this mindless because “will it scale” is an unquestioned imperative for a startup, not something that is thought through. Nobody asks should it scale, or, is this the right place to scale? Neither does anyone look at the compromises made, to the brand and to the customer experience, in this drive to scale. Thus, its no different from the mindless growth of an amoeba, responding to the instincts imprinted on its DNA.

I’m due to arrive in New Delhi next week. Would I use Uber? No. I’d rather walk across teh street to the Sardarji sitting in his tent at the local taxi rank and ask him for a car and a reliable driver. It could be for the day or for the week but I’ll insist on the same guy showing up, without extra company in the front seat, and register my home address and phone number with the taxi rank. For additional peace of mind, I’ll walk back across the road to the guardhouse at the entrance to our apartment complex and point out the taxi fellow responsible for driving me around.

In the neighbourhood where our apartment is located, we are recognized as original owners, not newbies, and the local taxi standwallah isn’t going to risk his future business and his reputation if there’s even a peep of complaint from me. The eyes of the community should be sufficient to keep the animal instincts of the average Delhi eve teaser under control. A little further down is the auto rickshaw stand, under the shade of a large tree where the chaiwallah makes his brew. More strangers come and wait here unlike the taxi stand, but one can still spot a regular or two. At least, that’s how it used to work back when I was taking a scooty to work every morning.

In neither case would I think of wandering around after dark, if I was alone in the vehicle.

Uber arrives.

Why do we hear of women taking these cars at night all by themselves?

Things might have changed in the last couple of years since the horrific news of the bus rape in New Delhi, what do I know? So I did a little digging to see if my premise on why Uber was enabling women to lower their barriers to conventional common sense in India.

“To the extent that the Uber brand name induces a sense of security and this is used as a business strategy, a proper legal regime should allow the Indian woman’s strategy to succeed,” source

Because it needs a smartphone, knowledge of English, and an internet connection, is there an implied raising of standards of who’ll show up at your doorstep? Implicit here is that education and data plans imply greater security?

On the other hand, this knowledge hasn’t helped this lady in Chennai whose Uber driver kept trying to ‘cancel trip’ in the middle of a secluded location.

The internet’s explosive growth in India, coupled with smartphones, mobile wallets and e-commerce, seems to have lowered the barriers to services such as these, which probably leads to a greater acceptance of an app driven service along with the perception that it’s somehow “safer” than hailing a regular taxi on the roadside.

Yet, the very same internet has always provided trolls with the anonymity and impunity with which to harass and abuse women without consequence. This element of the web seems also to have now transferred itself onto the app driven sharing economy.

SOS buttons in a context where the police aren’t likely to jump in their vehicles and race over to save you, nor can they be trusted not to molest you, is a technological solution meant for the VCs back home.

Taking a taxi ride is not the same thing as purchasing a book or making a restaurant reservation. Can you scale trust and local context as instantly as you do an app?

Introducing Mama Biashara

The Global Entrepreneurship Monitor (GEM) released a women’s report with some eye opening figures.

Simply put, African women lead the world in being their own boss.

Mama Biashara’s business activities may perhaps be more driven by livelihood need and few alternatives but she’s not sitting around looking for a handout either. Pillar of the informal markets that supply fresh food and the solid rock that keeps homesteads running, children fed and schooled, Mama Biashara is an archetype of the informal economy that contributes so much to the national GDPs yet goes unremarked.

Under a new category “Mama Biashara“, we would like to celebrate the endurance, the survival and the commitment that these Mamas, Nanas and Mummies demonstrate every single day, across the continent. Add it to your RSS feed or bookmark it, as we’ll be filling the pipe with more stories about her as we go on.

Book Review: An Uncertain Glory: India and its Contradictions by Jean Dreze & Amartya Sen

Photo Credit: India Habitat Centre, New Delhi

Just over a month ago, in Kinokuniya bookstore located in Singapore’s Orchard Road, I picked up the hardcover release of Amartya Sen’s latest book – An Uncertain Glory: India and its Contradictions – coauthored with Jean Dreze.

Today, I’ve reached the point in my daily few pages of reading where I can write something approaching a review, or at the very least, my thoughts.

The book is a vast tome yet written in an extremely accessible chatty tone – something very rare in Indian academia which tends to be addicted to the turn of the previous century’s writing and style guides – in fact, and I’ll just get it out the way and say it upfront, Mr Sen really should get his own blog in the way Paul Krugman has or simply join a syndicate like Joseph Stiglitz. But I recognize the transitional era of the hardcover book and the need for such things in the rest of the world. Print is booming, iirc, in India, ever the reader’s market. English books taught you vocabulary and idiomatic language, along with the pre-internet peek at lifestyles and mores from a different culture or geography.

I do not regret having purchased this book although I am not happy to be reading what Dreze and Sen are saying. They have really done their homework and swept out some really cobwebby corners of India’s social and economic responsibilities to her people. Oh voiceless masses, cries one more global Bengali intellectual, who will hear thy cry upon thy mother’s breast to be fed the milk at your first indrawn breath?

India is an embarrassing mess for a country of its size and unnatural resources, its jugaad and babudom, resisting the clearly written look in the mirror that shows the continued atyachaar upon it’s girl children and the harijans in general. Unsaid in so many words but underlined with charts, graphs and lucidly explained data driven disparities, Dreze and Sen show us the social and economic apartheid that the country’s caste system perpetuates and the quarter of the population who are so destitute that the very lack of public goods and services, much less a civic consciousness of social responsiblity, should draw international wrath upon our heads for allowing this daily humanitarian crisis to continue.

It is only the recent opening of the markets in the past 20 years of liberalization of the economy with their attendant promotional cacophony that drown out the ever beating drums of the poor of India and their downtrodden voiceless plight. Somewhere around 2006, I recall reading an article in The Guardian going on about the “third india” here “A Tale of Two Indias“published April 2006, says:

Gandhi’s India, or at least his influence on economics, has all but disappeared in the past decade. From 1947 until 1991, the economy grew at 3.5% a year, the so-called Hindu rate of growth which championed equality and social stability over wealth. After 1991, that all changed. Notions of speed and efficiency were stamped on to a civilisation that traditionally took a slower, more relaxed view of life. Economic growth rose to 6% a year. In the past three years, it has zoomed to 8% a year – meaning that the economy will double in size in a decade. The message now is similar to that of China during the 90s, in the phrase attributed to Deng Xiaoping: “To get rich is glorious.”

Not that the wealth has reached all of the country. India is one land, but the rich and poor exist on apparently different planets. Virtually unreported are some awful daily realities: the rate of malnutrition in children under five is a shamefully high 45%. Less than a third of India’s homes have a toilet and most women have to wait until the dark of evening to venture out to answer the call of nature. The talk of making poverty history sounds hollow in India, a land which is home to a third of the world’s poor and where some 300 million people live on less than $1 a day.

Yet another world is growing up, fuelled by the immense wealth that is being amassed by India’s new monied classes, who shop for brand-name luxury goods, ski in the Alps and send their kids to Harvard. Very soon the country will have 3.8m households with an annual income of 10m rupees (£130,000).

Below them in any rich list is the middle class, estimated to number about 150 million. Their hunger for goods has seen a new money culture – how to make it and how to spend it. India’s masses were, under the more equal state-run economy, denied shopping choices. The country is today undergoing a consumer boom. For some, this is proof enough that, in opening up, India has gained from globalisation – allowing Dior, Bulgari and Rolls-Royce into the country. Consumption in this India is nothing if not conspicuous.

And so on and so forth about the increasing divide between the rich and the poor. I would hazard a guess that what is really the issue is a) how visible the disparity has gotten i.e. the rich are no more shy about flaunting their wealth, a la Gandhi’s coterie of Calcutta industrialists like GD Birla himself et al, and b) how much more visible the global ICT connectivity via PC, broadband and mobile smartphone is making this disparity internationally.

Sen’s global experience in the UK and USA shows in his clearly argued case against private public partnerships or other enterprise led BoP solutions. At one point in the reading one got the distinct feeling that he was debating with the late CK Prahalad on the way the BoP concept was been narrowly interpreted to mean micro user fees. He mentions the very words and points out how it immediately becomes a huge barrier to access for India’s poorer segments of society, a micro fee for preventive healthcare might end up excluding anywhere upto 90% of those it is most meant to serve.

Who will serve them, ask Dreze and Sen, if they are not profitable even in the most basic sense? The state and the public goods that are currently mismanaged, corrupt and inefficient yet can demonstrate their efficacy in spots such as Tamil Nadu or Kerala (all in Southern India). They point out that even Bangladesh next door has better social indicators and gender parity metrics than India.

One has not heard a peep about this book on Twitter, does it mean I’m following the wrong crowd or that the book has not been noticed? This is a message that every able Indian really should take to heart. Why are we such a fucking backward nation in the August of the year 2013?

Vignettes from Singapore’s past: Independent Women

Look up more on Samsui women , pioneering globe trotting. independent employment for women.

The Samsui women were a proud and independent lot. Prostitution, opium peddling and various vices were common with other women mired in poverty. However, Samsui women chose to be engaged in hard labour with little pay instead of being lured into vices even if they paid more. They found employment in tin mines, rubber estates, on construction sites and as amahs or “domestic servants”. They were hired extensively at construction sites in the 1950s. They carried rocks, dug holes and conducted menial work that defied their small physical stature.

They wore a red head dress which became their trademark feature. The red head dress was a square piece of blood-red cloth folded in a way that it sat like a fairly large rectangular roof on their heads. Their hair was combed into a bun or “pigtail” or towchang and tucked under the red cap. The towchang was a mark of their spinsterhood. They dressed in a stiffly starched black samfoo (sometimes spelt samfu), a tunic-and-trouser suit, protected by an apron. The sandals they wore were pieces of rubber cut out from used tyres and fashioned on their own with a strap.

The ingenuity economy: grassroots social enterprises abound

Since I’d recently completed my review of Robert Neuwirth’s book, Stealth of Nations – The rise of the global informal economy, it struck me that what best characterizes this economic activity is captured by him here:

The French have a word that they often use to describe particularly effective and motivated people. They call them débrouillards. To say a man is a débrouillard is to tell people how resourceful and ingenious he is. The former French colonies have sculpted this word to their own social and economic reality. They say that inventive, self-starting, entrepreneurial merchants who are doing business on their own, without registering or being regulated by the bureaucracy and, for the most part, without paying taxes, are part of “l’economie de la débrouillardise.” Or, sweetened for street use, “Systeme D.” This essentially translates as the ingenuity economy, the economy of improvisation and self-reliance, the do-it-yourself, or DIY, economy.

Do those words not capture the spirit of innovation we so often discuss here? The ingenuity economy seems to capture that essence somehow, though I doubt it would ever make it into general parlance. In any case, here are such two stories from Kenya – one regarding household solar power and one on potable drinking water – traditionally the purview of design students and social entrepreneurs everywhere.

Charles Otieno Ogwel is a school dropout who makes custom inverters for household consumption drawing energy from solar power. From yesterday’s Daily Nation article:

Mr Otieno is now lighting up rural homes where Kenya Power has not yet reached to provide electricity. At a cost of Sh12,000, a homestead will get electricity as his inverter converts solar energy into high voltage alternating current. One needs a solar panel, an accumulator, and the specifications of the domestic appliances to be used. Mr Otieno then determines, through calculations, the type of inverter, in terms of capacity, suitable for that home. He then makes an inverter that suits his clients’ need.
[…]
The father-of-three says he has spent more than Sh250,000 on research to come up with the modified gadgets and has sold close to 10,000 customised inverters.

Why aren’t all the solar power enterprises snapping up fundis like Mr Otieno? And from a slightly older article from the Business Daily comes the story of these enterprising women from Kirinyaga who brought an organic, affordable and natural solution for water purification back from the Sudan. Here’s a snippet:

Victoria Kamwenja is one of the women now working to spread the word on the water purification in training sessions.

“When added to water, the crushed seeds attract particles of dirt that are floating in the water, including certain disease organisms. The dirt attaches to the seeds and they fall together to the bottom of the jar. Then you pour off the good water to drink,” said Victoria.

“The dirtier the water the more seeds you will need”.

Together the women are now selling the seeds to other households in other areas after offering training at a fee. Susan Kinya and Anastacia Nyawira are selling the seeds in four districts surrounding Kirinyaga where the Moringa tree doesn’t grow. They package the seeds in quantities sold for Sh10, Sh20, Sh50 and Sh100. In a single day in one district, the two women manage to sell seeds worth Sh5,000 on top of the Sh2,000 that they charge for the training. They hold their demonstrations at rivers, such as the River Chania in Thika District.

“It’s a good enterprise that has been keeping me busy since I retired as a school teacher. I am now planning to be the sole trainer of cheaper ways of purifying water in the whole province,” said Susan Kinya.

And there doesn’t seem to be any external agency involved, this is a homegrown women’s enterprise. One wonders whether they and the many others like them, particularly the makers and inventors, will ever come to the notice of investors wishing to make an impact among the communities?