We met over juice in Maputo through a common friend and, less than five minutes after first saying “hello”, had launched into an animated discussion about local livelihoods, entrepreneurship, cash flow management, credit and savings and growth in household incomes. Kirstine Kjær Pedersen is studying anthropology, and has spent time living with Mozambican families, researching issues around food and materialism, specifically related to household energy purchases as part of a Masters Degree with Copenhagen University.
We had so many questions, like: Is there active market research on what the emerging middle and lower income populations in countries like Mozambique actually want to buy? What are the cash flow trends within and between households and among entrepreneurs, especially women in peri-urban slums, in places like Mozambique? Could these cash flows be better utilized to help people in the informal economy (especially women) become more financially secure? Linked to this, we talked about the rise of microfinance and mobile money in Kenya, and the relative lack of such initiatives in Mozambique. We also debated if there are opportunities for lower-income individuals, in particular women in the “informal sector” to better manage their cash and get access to services like credit and savings opportunities.
All of this led up to a point where Kirstine said: “Maybe we could do a small case study about what it means to work in the informal sector, and then start from there?” Due to her previous work, Kirstine had developed a close relationship with a group of women working at a local market in her neighborhood, and based on that, she imagined that a case study might be possible. Here its important to note that this is a case study as we never set out to do any inference but rather ask questions and collect information to get a better idea of the situation.
In this post, Kirstine provides a summary of the case study (below), which we later discuss. Based on this, we suggest that:
1) It’s difficult, but not impossible, to measure informal incomes.
2) Informal incomes of self-employed people are probably higher than recognized and appreciated, both by the capital market as well as by the individuals.
3) There could be opportunities in further studying this informal market, as it seems there may be ways to profitably harness this market, for the benefit of women entrepreneurs in similar situations.
I quickly realized that the case study would not be easy. There were limited time and resources (it was done on a voluntary basis), and the women market sellers’ interest was unclear. Tanja and I first developed a questionnaire, which the market sellers (the women) agreed to complete, to estimate daily their incomes. The data was collected over a short study period (ca. one week). Only two women, Jane and Sara, fully participated and completed the questionnaire properly, but other women market sellers that I know were also interviewed.
Making sense of the information
From the data received, I estimated what the women earn in a month. This was challenging, not least because a lot of expense-related data was missing. While revenues tend to be earned in small amounts, over the course of the day, expenses are usually incurred in slightly larger amounts, when needed, and when the money is available. Prices also vary from day to day and from season to season depending on weather, transport, and supply and demand.
After receiving the results, I interviewed the women to get more information, especially on their purchasing activities, such as how often goods for sale are bought, volumes and costs. When calculating the numbers, I found that some of the women earned a lot more than we all expected!
The information collected from Jane, showed that her monthly income amounts to ca. 15-20,000 MZN (Mozambican Metical) – equal to 500-700 USD. This is obviously not much money; but it’s a lot more than expected, and much more than Jane herself estimated. After asking her about her earnings, and showing her the numbers, Jane just looked at me with smiling eyes and shook her head. Sara had approximately the same earnings as Jane (actually on average she had a bit more even though she had a rather “low day” on salad). Sara’s response on hearing the result was: “But Kris, I don’t have that money in my hand!”
The reactions of the women understandably made me doubt my calculations. Sara’s “low day” on salad also demonstrated how insecure sales (and incomes) are on a daily basis. It also made Tanja and I curious as to the women’s own perception of, and insight about, their businesses, expenses, income and spending.
So I tried to test the numbers, by rounding up expenses and rounding down revenues. I compared the results to some of the known market prices: There are two particular products, for which profits are quite easy to estimate: bread and peanuts. A loaf of bread is usually bought for X and sold for X+1 MZN, e.g. acquired for 4 MZN and sold for 5 MZN. This means if a woman sells between 100-200 breads a day she earns 100-200 MZN in a day and about 3-6,000 MZN in one month. While 3,000 MZN (100 USD) a month, although low, is a common salary of an employed low-income person in Maputo, 6,000 MZN is a respectable income for a maid or guard. If a mother can earn 3,000 MZN selling bread in front of her house, from where she can also look out for her family, financially, she’s doing relatively well.
While bread is more often the single product available in a market stall, additional products like peanuts are sold beside coconuts and other groceries. Peanuts are purchased by market traders in bags of 50 Kilograms (Kg), and divided into plastic cups for the retail market: circa 250 plastic cups with 200 grams each. The earning potential on a single bag of peanuts is between 500-800 MZN, which is usually sold in 2-4 weeks. Jane usually sells more than this; her average sale is around 6 bags of peanuts a month. According to our crude estimates, Jane would earn a profit of ca. 5,100 MZN on peanuts alone in the month of the study, however, most of her income comes from selling coconuts, and a variety of edible leaves. Based on looking at Jane’s sales over this short period, and discussing the numbers with her, the estimate of her monthly income does actually seem realistic.
Before collecting the information, I had spoken with another friend, Susan, who is a market trader. Susan told me that she already knows how much she earns on average, as she only sells bread and peanuts. Susan sells 125 loaves of bread a day and 1-2 bags of peanuts a month, making a monthly income around 4,000-4,500 MZN.
When first sitting with Jane to discuss this small case study, I asked her to guess how much she earns in an average month. Jane didn’t dare to guess, but based on my discussions with Susan, I guessed ca. 5,000 MZN a month. Jane laughed: “I don’t earn that Kris!” I told Jane about Susan, and together we calculated Jane’s earnings. After finishing the calculations together, we got to the same conclusion: Jane probably earns more than 4,000 MZN a month on peanut sales alone. At this point Jane conceded that: “I already did this [calculation]” but added that “[Peanuts] don’t always get sold in two weeks, some times it takes longer.” To which I could only remind Jane, that she doesn’t only sell peanuts, she also sells coconut, edible leaves and more.
This very small study indicates that women market traders in Maputo can earn more than they, and others, expect. Being very conservative with the numbers, and factoring in uncertainties, they probably have an actual average income of ca. 7,000-10,000 MZN a month. This is comparable to a low, though respectable, salary of a full-time employee. These sums are not enough to make a person rich, but it is certainly a respectable income compared with formal salaries in Maputo. And, the number was a surprise both to people in the local development sector and other Mozambicans, who did not expect that the market traders would have this sort of cash flow.
We discussed the results, their meaning and implications. Many self-employed Mozambicans don’t really view themselves as having a “proper job”. Our information suggests that the women’s entrepreneurial market activities could, in income terms, actually be comparable with a “proper job”. Now the questions are, if and how could these women move away from viewing their business as a short-term struggle, and how could they grow it, to bring them security in the long-term? Could the group band together to access insurance, savings facilities and loans, or form a supply cooperative? Many of the women market traders look out for each other, minding each other’s stall when someone is sick or has a family emergency. Can this be formalized into a savings and credit cooperative? How could this be initiated? Many of the women use informal moneylenders and participate in an informal saving scheme, but there may be benefits to formalizing the groups further (e.g. enabling them to access lower interest rates and approach banks). However, in doing so, there would clearly also be drawbacks for example they may suddenly have a tax liability.
What about financial literacy? The ladies are obviously interested in learning new business management skills, if they see a benefit. However, long-term opportunities aren’t that visible to them. We thought it could be interesting for the ladies to learn more about how similar groups in other locations have worked together to improve their lot, and to maybe help them access some basic business management tools. However it’s been quite difficult to find good examples and resources suitable for these busy women with limited literacy skills.
Many of these women have an interest in building their business, but don’t really believe its possible, and don’t know where to start. We think this informal sector, particularly women market sellers, is interesting and rather under explored. One thing is clear though, the potential is there, but there are many outstanding questions. However, we would very much like to continue to help these women, in one way or another. Ideas / thoughts / suggestions for support are very welcome!
Post-script 1: We have changed the names of the women involved. Also, none of the pictures show the participating women.
Post-script 2: For more on the informal economy, we recommend Robert Neuwirth’s 2012 TED talk: “The power of the informal economy”. Also, we are interested in this topic, as the informal economy has an impact on resource use.
 The reason I’ve summed the figures up to a monthly incomes is that the women don’t buy groceries everyday, this makes it difficult to calculate one days earning. Also a monthly income make it more comparable with other salaries like that of a maid, guard, driver etc., or in comparison to Mozambique’s GDP which is 570 (ca. 16,900 MZN) according to UNCTAD (2012).