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By Maria Flores Letelier, Senior Consultant and Fellow, Cheskin
In the last ten years, I have been asked by several companies in the U.S., Mexico, and South America to help them learn about a consumers living in poor, disenfranchised communities. Indeed, there has been much interest in capturing the billions of consumers in emerging markets in recent years. A commonly cited statistic is that there are four billion people making less than US$1,500 per year worldwide. Given the prevalence of informal economy, with almost no formal financial sector, there is very little data available. Adding to the complexity of collecting data is understanding what data counts as meaningful data. Meaningful data sheds light on how people in poor communities in different cultures view progress, including barriers to progress. Barriers to progress often seem irrational. Personal loyalties to one's network may override maximizing one's own economic well being. Meaningful data should also yield actionable insights, that is, insights for designing products and services that will allow people to become more productive and aid development.
Construction Industry: CEMEX's Patrimonio Hoy
In 1998, CEMEX, one of the top three Cement producers in the world, estimated that somewhere between 20% to 40% of its sales in Mexico were purchased by households in poor, marginalized communities. Targeting mainly distributors, CEMEX knew very little about its end users, and less about those in poor communities on the outskirts of cities. CEMEX determined to immerse itself and learn about this market to develop a program that would create long term differentiation. As a result, CEMEX discovered that this segment builds their homes one room at a time. Each room can take anywhere from four to ten years to build, as the cost of the construction materials presents a barrier to constructing rapidly. CEMEX also learned that when people save, the main goal of their savings is to add on to their houses, but that the savings is often spent on "emergencies".
The learning process resulted in the creation of Patrimonio Hoy, a service that allows people to join a group and pay for construction materials in weekly installments as they build their homes. As we constructed a learning process, the team included two elements that turned out to be the at the heart of the success of the project.
"Gardening" For Data
Once we learned that an informal group savings practice, tandas, in which a group of ten people contribute a fixed amount for ten weeks, was the most common savings and loan mechanism in Mexico, the team established construction material tandas with fifty families simply to collect preliminary data regarding how much people could potentially save, who the different segments were, how long it took each to save, and so forth. We called this first phase a "garden" as the idea was to plant a seed and watch it grow.
Measuring Aspiration Increase
Second, we noticed that as people built one room, they wanted to build more. This led us to eventually measure the increases in aspiration that would become important for rolling out Patrimonio Hoy on a larger scale. We learned that once people joined the program, they wanted to build up to three more rooms than they originally aspired to. We designed a simple, ten minute survey called "Tell Me About Your Dream Home" that was administered routinely with the same panel of four hundred or so respondents that asked about different attributes of the dream home, allowing the team to measure aspiration creep, and eventually offer more aggressive microloan services as part of the program.
The Financial Services Industry: Obtaining Data for Consumers with No Credit History
Several clients in the financial services, including Bancomer in Mexico, Banco Santander Central Hispano in Peru, and one of the largest financial institutions in the U.S., have asked me to determine how people without bank accounts or formal credit finance their needs, as well as why the formal sector has not been able to penetrate with this group. Any survey or research aimed at answering this question will need to understand how people view the future. No matter what the research methodology employed, what is important is measuring the time horizon and purchase amounts for which people can commit. For instance, in various projects I have identified the types of tangible goods that folks view as assets and which ones are viewed as wastes. In addition, with my clients, we have been able to identify the exact amounts that people are able to gather for different types of events. Finally, determining the family dynamics and roles in financial matters is integral to designing a program. In several communities, I learned that the women in the household, whether working or not, will often play the role of setting money aside for emergencies or large ticket items, yet important decision making conversations occur with the man of the house before making a purchase.
The Food Industry: How Family Spending Budgets Are Managed and the Role of the Corner Store
The food industry has been an early entrant in distributing consumer food products in disenfranchised communities. Understanding how people manage budgets, including the amounts they allocate, the time horizons for spending a certain amount (a week being a common time horizon), the way in which they pay (with cash, with an "I owe you" note, and so forth) are all relevant to companies wishing to distribute any products in poor communities. In my work with the Alfa Group's Sigma Alimentos, we have found that local corner stores are often the best sources for learning about household budgeting practices that will be relevant for designing microfinance services. Therefore, surveying these is just as important.
Implications For Microfinance Surveys
- Categorize Type of Labor and Resource Access
Even if people make the same amount of money, their ability to get a loan is very different if someone is salaried or not. Salaried workers will be eligible for loans from work while an entrepreneur may not have such access. Still, some entrepreneurs may be able to show receipts and qualify for certain types of local loans. Others may be able to access network capital. For instance, in a networked community where loyalties count as capital, a person with a larger network will be more likely to have "co-signers' or people vouch for them when they seek a loan. Hence, the "social exposure" of the type of labor is relevant. A taxi driver or operator of a corner store will be exposed to more people in a community than a domestic employee.
- Review Housing Data and Availability of Infrastructure Services In a Region
Those that have been capable of building rooms to construct a home reveal a discipline for saving substantial amounts. Determine the number of rooms people can aspire to as well as the time it takes people to build a home. In addition, determine which infrastructure services are available and how people go about paying for these. An ability to diligently pay for a utility bill, for instance, indicates a potential ability to pay off a microloan.
- Identify Formal and Informal Financial Services Available
Conduct 8-10 informal one-to-one interviews and elicit how people go about getting loans. Ask how prevalent loans from family or friends are, as well as about community pooling of money to obtain high ticket items.
- Choose Regions with Large Cultural Differences
The number of regions studied in a country is determined by how large the cultural differences are. I have found that large, overarching cultural styles are prevalent across a nation. Still, practices may differ depending on the history and geographic location of a region. In Mexico, the northern region, with its proximity to the U.S. will have different financial practices than the Yucatan, where Mayan influences are still strong. Five to seven regions will usually yield rich insights.
- Identify Community Leaders in the Region
Community leaders are helpful in gaining access to a community and dispelling the fear or distrust of outsiders asking questions. People in poor communities around the world have often been the victims of the type of fraud that occurs in the absence of a formal economy. The support of community leaders will facilitate the data collection process. In addition, a researcher should determine the role of local, informal leaders in financial intermediation.
- Conduct 10-15 "Focal Groups" per Region for Identifying Analysis "Themes" and Driving Variables
"Focal" is a term derived from the anthropologists Pierre Bourdieu referring to practices that build trust and focus all those around them. I use the term "focal" groups to refer to in depth interview discussions with small groups of friends or acquaintances connected by one group member aimed at reflecting about the background values that drive how people view getting ahead and the barriers to getting ahead. A researcher must probe and allow people to reflect about these issues as most people have a difficult time articulating these. Still, the types of values that are revealed, such as the importance of saving face or avoiding conflict with other community members, are crucial for designing appropriate microfinance products and testing ideas in a survey. In addition, identify the basic language that is used, or the "live" distinctions that people have for describing how they go about getting ahead.
- Include in Survey Design Key "Progress" or "Productivity" Themes
A survey that sets out to collect all types of data will yield lots of information about what people do today, but may be limited in developing ideas for aiding development through microfinance. Use the research obtained in the qualitative phases regarding how people view the future and getting ahead to develop concept descriptions or themes that can be tested in a survey, even if these are not fully developed concepts. Minimally, test deeper value themes such as practices for loyalty and entering contracts with friends vs. family members vs. a stranger from an institution that can later be used to develop appropriate microfinance products.
- Mechanics: Train Field Team, Test Survey, and Leave Room for Open Ended Questions
In any survey, the field team should be trained in the local language and culture so as to avoid misunderstandings. When surveying disenfranchised communities, assume that respondents will be extremely polite and attempt to give the "right" answer. Furthermore, train the field team to assume that they don't understand much of what a respondent is saying and to probe for clarification. In the case of Patrimonio Hoy, local social workers were recruited and trained in all the distinctions obtained in the qualitative phase before proceeding to field. As with all survey research, it is best to test a survey before rolling it out. However, in communities where much distrust exists, it is important to take this step even more seriously, altering the survey to correct for time and misunderstandings. Finally, while open ended questions take more time to analyze later, the responses given may yield some of the most interesting data for developing culturally appropriate microfinance services. Informal mechanisms that had not been previously encountered may be revealed.
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