A fine-tuned approach to digital platform design and development in Africa—Part II

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Many thanks to Chris Maclay, Director of Youth Employment at MercyCorps for his time and viewpoints regarding the Jobtech ecosystem in Africa.

An old African proverb proclaims, “It is the young trees that make up the forest.” Africa’s youth will determine its future. The next several years will be decisive in determining how successful we are in caring for the younger trees to help ensure they grow into a vibrant forest. In the previous blog, we outlined some systemic constraints hindering the sustainability and scalability of job matching platforms in Africa. With 70% of the youth population in Africa under 30, stakeholders must seize the opportunity to onboard youth to digital platforms transparently, provide them with consistent and reliable work, and ultimately allow platforms to serve as a roadmap to formalization. Below we have provided recommendations as to how this can be accomplished.

Recommendations

Build the ecosystem from scratch: The digital platform ecosystem in Africa seems to be modelled on digital platforms in developed countries despite the significant differences in the economic models. The “winner takes all” approach, in the absence of adequate labor protections, can actively harm the workers it seeks to benefit, as many platforms aim to run down their prices which negatively impacts workers’ wages, and their trust in the platforms. There is, therefore, a need to develop an ecosystem that can identify and respond to the unique challenges of the African continent regarding youth employment. The Jobtech Alliance, hosted by MercyCorps serves as a place for startup platforms and development practitioners to share best practices and disseminate knowledge in the space. The sharing of information within and among the members will enable stakeholders to address the systemic constraints and facilitate a double bottom line impact – both in terms of running profitable, scalable businesses and providing economic livelihoods to its workers.

Don’t put the cart before the horse: There is little doubt that digital job matching platforms have the potential to positively impact [youth] employment in Africa. However, before such platforms can catalyze this long-anticipated employment boost, they must understand the markets in which they operate. There has been much talk in the development world about the unfair conditions to which platform workers are subject – lack of employment contracts, social protection benefits, labor regulations, etc. In fact, foundations, such as Fairwork, have established fair work principles for gig workers (which include social security benefits, gratuity, minimum wage protection, and working hours), in hopes of raising their working standards globally through transparent evaluation of platforms. There is no doubt that such initiatives are necessary to raise awareness, however, it is important to maintain a balance between the platform’s viability (through the provision of economic opportunities to workers) and its responsibility to ensure fair working conditions. Benefits remain a costly proposition for platforms. Given the negative effects that youth employment has on the African economy, as a whole, and the historical challenges of worker protection, governments should  be involved in sharing the costs of worker protections with the platforms.

Gig workers have expressed more interest in consistent work and the value they ascribe the flexibility, than social protection benefits and workers’ rights. The flexibility and access that platforms provide to low- and middle-income populations initially outweighs the need for such protections, which most certainly are not available in non-platform mediated informal markets.

Build Worker Centric Platforms: A digital job matching platform is only as successful as its workers. Therefore, despite the drive to maximize profit and reduce costs, platforms should be built putting their workers at the forefront – in the long-run this will create brand-value, and thus loyalty of both gig workers and those that hire them. Platforms that offer low-skilled, standardized work, which are the choice of many informal workers in Africa, run the highest risk of designing platforms that give little bargaining power to workers, simply due to the commoditized nature of the work itself. The importance of worker centricity in platform design and execution has been highlighted by organizations like the ILO. The ILO examines how the architecture or business model design of labor platforms directly impacts worker well-being in terms of increasing worker agency on the platform, particularly through greater data transparency that can improve worker bargaining. The role of imbalanced supply and demand incentives or rewards, information asymmetry, inability of workers to coalesce and certain labor management mechanisms put workers at an inherent disadvantage and often results in high attrition rates. Other resources on this topic include a report by the Institute For The Future on Positive Platforms which outline positive design principle that platform designers should consider when designing and operating platforms.

Caribou Digital, as part of its work with the Partnership for Finance in Digital Africa, has done work in this area in regards to advocating for platform payment systems that reduce friction around worker payouts, revisiting withdrawal fees, looking at the timing of payouts and the implications of pay-to-promote policies. Platforms should also consider the role that financial services could play in the lives of its workers and use the platform to facilitate financial inclusion. Several platforms have begun offering financial services to their workers including insurance and credit for the benefit of both their workers (retention, ability to grow quickly etc.) and their core business (diversifying revenue streams). In fact in 2019, MSC, using human centric design principles, collaborated with Britam to design a pay-as-you-go personal accident coverage for Lynk’s workers.

Invest in platform-led upskilling: Platform creators must realize the importance and value of imparting skills and training to small scale vendors and/or individuals who have joined the platform. As the skills gap in Africa is large,  the training that platforms provide, including soft skills, online training and financial literacy, has the potential to result in a stronger and more capable workforce with portable skills. Although it requires an investment, and weighs heavily on the platform itself, governments and donors alike should step in to subsidize or fund such programs. For example, Lynk has experimented with different training mediums to see which resonate most with their workers. Lynk’s application “Lynk Lounge,” contains videos and text training modules on various topics, such as how to create an appealing profile or provide good customer service, as well as vertical-specific tips. MAX, an on-demand motorcycle-hailing and delivery platform in Nigeria, sends in-app messages to drivers to reiterate and reinforce lessons taught during face-to-face onboarding training sessions. A platform’s investment in its workforce is not a sunk cost as it will contribute to higher retention rates and a better market reputation, which is paramount at this time when environmental, social and governance (ESG) companies are increasingly valued and valuable.

Conclusion

With the advent of technology and the ubiquitous use of cell phones and the Internet in Africa, digital job matching platforms are here to stay. We can look at them as a necessary evil in 21st century life, or rather ensure they are filling the role for which they are optimally designed: that is, in many cases, providing job discovery and work opportunities to informal workers while ideally serving as an “onramp to formalization.” There is no one business model fits all approach to platform design and execution. Therefore, by taking market nuances into account, and putting the interests of its workers at the center, platforms in African markets will not only survive, but thrive.

A fine-tuned approach to digital platform design and development in Africa—Part I

Posted on by MSC

MSC thanks Chris Maclay, Director of Youth Employment at Mercy Corps, for his time and viewpoints regarding the Jobtech ecosystem in Africa.

Most young people in Africa currently face an uncertain future. The African Development Bank reports that each year, while 10 million–12 million youth enter the workforce, only 3 million formal jobs are created. As a result, many young Africans seek work in the informal sector without legal and social protections.

The informal sector in urban Africa accounts for 85.8% of jobs. Moreover, it is the primary source of employment and the backbone of economic activity. Although we look forward to a day when formal work opportunities in Africa will be abundant, informal work is not going away any time soon. Accordingly, the emergence of digital job-matching platforms has given development practitioners and economists a reason to be optimistic. Many see these platforms as an essential source of job discovery for African youth and a progressive onramp to formalization.

The ubiquitous use of digital platforms to connect consumers with contractors that provide short-term services is nothing new, particularly in developed countries with a burgeoning middle class. Such services include transportation (Uber or Lyft), home services (TaskRabbit), grocery (Instacart), and food delivery (Postmates and DoorDash). These digital platforms remain viable and scalable in developed markets based on their “winner takes all” business model. It involves thin margins, deep-pocket investors, and enormous user bases monetized at later stages by adding ancillary services. A single company receives most of the available profits, a few others receive a modest share, and the remainder fight over what is left and do not survive long.

However, digital platforms have not performed in African markets despite dramatic growth and monetization in developed economies like the United States. Aside from some digital platforms, notably ride-hailing apps and delivery services, many have failed to scale across the continent or outside of specific African markets. Moreover, when digital platforms scale, they often do so at the expense of the quality of workers’ lives. Unlike more developed markets, Africa is characterized vastly by different educational, economic, and regulatory ecosystems, which influence the digital platforms’ viability, sustainability, scalability, and success.

This blog is the first of a two-blog series examining the Jobtech market in Africa. Here, we explore some of the systemic constraints that hinder the sustainability and scalability of job-matching platforms in Africa.

Oversupply of labor: Africa’s informal sector saw significant growth over the past decades. This growth was driven by technological and macro-economic trends, including the closure of many state-run industries, a shortage of employment and labor law regulations, increasing skill mismatch, and the difficulty of starting and running a business in Africa. These trends resulted in an oversupply of low-skilled workers who recently gained access to mobile phones and the Internet. Many of these low-skilled workers have flooded the job-matching platforms in search of informal work. As a result, supply has surpassed demand for services, resulting in downward pressure on pay and infrequent or inconsistent opportunities, or both, for work.

According to the ILO, most workers on online web-based platforms (86%) and delivery platforms (69%) expressed the desire to do more work. Yet, they cannot obtain extra gigs because of excess labor supply and scarcity of tasks. The platforms cannot provide consistent, predictable, and reliable work, which leads to distrust. As a result, these platforms grapple with demonstrating tangible value to workers. People join these platforms primarily because they need more work quickly. If the platforms cannot deliver on this, workers struggle to buy into the business model, making non-platform mediated work preferable.

Lack of demand: Household economics often hampers the demand for services provided by the digital job-matching platforms in Africa. For instance, local platforms, such as Lynk and Fundis, have shared that their business models were initially targeting countries with a perceived growing middle-class population. The more developed markets in the U.S. and Europe have a sizeable middle class with discretionary income to use such services, which is partly why these platforms have taken off. However, a study conducted by Mercy Corps revealed that countries like Kenya had limited demand from this population group—they lacked the disposable income to purchase the services of gig workers. This situation poses a significant challenge, and the lack of sufficient demand prevents these digital platforms from scaling.

Unit costs: Most successful startups in African markets thrive by drastically reducing costs. Since the startups are compelled to remain competitive and drop prices, many digital platforms in Africa cut the main cost of labor, which impacts the workers. In informal markets like Africa with lax enforcement of minimum wage, platforms that seek to be transparent risk their reputations by paying rock-bottom wages. As a result, digital platforms struggle to sustain demand for their services when consumers realize they can buy the same service for much less on the “informal market”—outside a job-matching platform. The higher unit costs make profitability less attainable. In contrast, most of the labor force in the U.S. and Europe is regulated by labor laws due to the large formal sector. Accordingly, wage arbitrage is not a challenge, and platforms in these developed countries do not face much pressure to run down labor costs.

Further, operational costs drive up unit costs for the platforms. Platforms in Africa, such as Lynk, must incur additional costs to deliver a consistent experience to consumers. Such costs are associated with vetting workers and standardizing work procedures, among other factors. Although these investments facilitate a reliable experience for the customer, they increase costs for the platform, thereby limiting scalability.

All the factors discussed in this blog emphasize the need for business models that are inherently profitable on an individual transaction basis or have built-in monetization measures, or both, early in a company’s lifecycle. In the next part of this blog series, we will suggest ways to design platforms optimally while accounting for the dynamics of African markets.

What will it take for eSanjeevaniOPD to help tackle the third COVID-19 wave and future pandemics?

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India is witnessing another spike in COVID-19 infections, driven mainly by the Omicron variant. The nature of this wave has changed—most symptoms appear less severe than previous waves. The change in symptoms implies the burden of care will likely shift from intensive care units (ICUs) at hospitals to outpatient departments (OPDs). In the previous wave of COVID-19, teleconsultation played a critical role in helping meet India’s growing demand for outpatient and home-based care—and will continue to do so.

This briefing note shares insights and recommendations from our pilot to strengthen the eSanjeevaniOPD—the Government of India’s teleconsultation platform and similar private platforms. We expect these insights will help these institutions withstand the current pandemic and future health concerns.

“Train me like this”: Lessons from a pilot with CDOT and JRGB on CICO agent training

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The inability of BC agents to clear the IIBF BC/BF examination has ramifications both for the individual BC agents and the BCNMs. On the one hand, agents may lose their authority to continue BC operations. On the other hand, BCNM risks losing active agents and spending resources recruiting and training new agents. MSC tested a pilot with CDOT and helped increase the pass percentage of agents, a total of 175 agents appeared for the exam, and 86% of them managed to pass it. Please refer to the deck to learn about our pilot intervention design.

The Ujjwala scheme needs a budget push

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The flagship Pradhan Mantri Ujjwala Yojana (PMUY) might be a big milestone when it comes to women’s empowerment but it urgently needs a budget push to reach every rural household. PMUY was conceptualised and reached scale under the stewardship of the then Minister of Petroleum and Natural Gas, Shri Dharmendra Pradhan” The scheme, launched in 2016 to reduce the dependency of rural households on polluting and low-cost fuel sources, not only changed the indoor air pollution landscape in rural India but also catalysed a larger social movement towards women’s empowerment.

The scheme reached 80 million households in 2019, but five years after its launch, it seems to be flailing. An estimated 20% of the 80 million households no longer use cooking gas despite having a gas stove and canister. Sixteen million households still use a mix of coal, wood, crop waste or cow dung cakes, and are prone to heavy indoor pollution, between two and five times the ambient pollution levels. As a result, in the poverty bowls of Uttar Pradesh and Bihar, many women are estimated to become fully or partially blind by the time they turn 60.

The scheme expanded access to clean cooking gas to rural households by providing subsidised Liquefied Petroleum Gas (LPG) connections for low-income households. It was a runaway success. Adoption in rural areas was fast and good targeting by the government and oil marketing companies ensured that the poor were first in the queue to get the benefits. As against an LPG coverage of 62% in India as on May 1, 2016, Ujjwala enabled a near-universal outreach of 99.8% by April 1, 2021.

However, policymakers need to address three key challenges – cost, convenience and culture – if India wants to keep its Ujjwala promise. In these targeted households, where the average monthly income is around Rs 4,000-5,000, women are unable to muster the Rs 900 ($12) needed for the refill of a gas canister. The annual refills under Ujjwala are hovering around three canisters as against the national average of six canisters. Coupled with financial woes, access issues pose a major barrier for women. Typically, in villages, Ujjwala gas dealers are located at a distance and women are unable to make the journey on their own. Further, fighting cultural barriers is difficult when the family thinks food cooked on traditional chulhas is more nutritious and tastier, though the government has begun to address these attitudes through behaviour change communication campaigns.

A crucial challenge is to ensure access to a lump sum of funds that enable access to canister refills. Ideally, the product should allow smaller ‘byte-sized’ payments over a period of time. Traditional cooking methods allow for byte-sized payments, just enough for a day or two of cooking. On the other hand, a canister is a one-time payment for fuel that will be used over a month or more. Beneficiaries in the most vulnerable income sections find it difficult to accumulate the entire amount of cash. The government, however, tried to reduce the upfront cash outgo by allowing beneficiaries to choose a five kg double bottle connection (DBC) instead of the 14.2 kg canister.

A joint pilot by oil marketing companies (OMCs), State Rural Livelihood Mission (SRLM) and MicroSave Consulting has shown great success, with the key catalyst being local self-help groups (SHGs).

The programme, launched in Madhya Pradesh’s tribal-dominated district of Jhabua had a little over 100,000 customers who had taken either zero or one refill in the previous six months. With the support of the SHG network in these blocks, LPG distributors reached out to these dormant customers between July and November 2021 to provide a three-month-long loan to finance their refill. From a mere 1,200 women beneficiaries, the campaign eventually saw a total of 36,800 women refill their cylinders under this initiative.

While access-related issues were more inhibiting as compared to availability of cash, loans of Rs 900 enabled poorer households to get clean fuel. Policymakers will do well to consider similar solutions. The SHG model to extend credit can be scaled across India. The government can also provide slightly higher subsidies to Ujjwala customers to increase LPG usage.

 

This article first appeared in the print version of the Hindustan Times dated 1st February, 2022.

Weaving a financial security net for Bangladesh’s garment workers

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The readymade garments industry is called the “golden goose” of Bangladesh, given its large contribution to the economy. However, the financial health of workers in this industry is far from golden.

Most garment industry workers do not have a bank account. They dream of buying land or livestock, but neither banks nor lenders today provide suitable options to help them attain these goals. Ideally, these workers should use multiple financial products, such as goal-based savings accounts, nano loans, and micro-insurance. In short, they are a readymade market waiting to be tapped by financial services providers who use an innovative approach.

Financial health of garment workers

The readymade garments industry contributes more than 10% of the gross domestic product of Bangladesh and employs around 4 million people, primarily women. Given the importance of this sector, Bangladesh must empower workers in this industry by providing them decent work and better wages and helping them secure their financial future.

At the moment, the financial health of these workers is precarious. Their median monthly income is between USD 70 and USD 300, while their household income is double the amount. Around 60% of the household earnings are spent to cover day-to-day expenditures, according to data from Microfinance Opportunities (MFO), which studies women workers in the garment industry. An additional 28%–33% of these workers’ earnings go toward unusual expenditures, such as unexpected health issues, weddings, or funerals.

In 2020, around 2 million workers opened the “mobile financial service” (MFS) accounts that provide financial services through a mobile phone. To curb the spread of the coronavirus, Bangladesh Bank had made it mandatory for the garment industry to pay employee wages and allowances through these mobile accounts.

Mobile financial services or MFS accounts can be used as digital wallets to receive money and make payments, such as to buy groceries. However, workers in the garment industry cannot use these accounts to their full potential. Although these accounts can be operated on basic or feature phones, some services are best accessed through smartphones. However, only 40% of women workers in the garment industry use smartphones. Among these women workers, many do not own a smartphone or use smartphones borrowed from their partners or family members. Besides, these workers are not trained to use digital wallet accounts and find them complicated to use.

Meanwhile, as the worst of the pandemic has subsided, many employers have gone back to giving wages in cash. This warrants the need for a different, more innovative approach to bring financial services to garment workers.

Different strands of financial services

In 2020, MicroSave and Apon Wellbeing, a local partner that runs discount supermarkets within garment factory premises, surveyed garment industry workers to understand their lifestyle and needs. The study found that these workers require a bouquet of financial products and services across the dimensions of saving, spending, borrowing, and planning and protection from exigencies.

Figure: Components of financial health

1. Savings: Many garment workers hope to buy land in their villages, build a house, or buy a sewing machine or livestock, which will generate income after retirement. One approach to help them achieve these dreams would be to offer them goal-based savings products.

In more digitally-savvy markets like India, smartphone applications like EasyPlan or Lakshya encourage users to save money in small amounts, provide a return on savings, and give the flexibility to withdraw money anytime. Micro-savings products based on similar principles can be created for garment workers in Bangladesh. Ideally, these products should also be accessible on basic or feature phones.

2. Credit: Our study of garment workers showed that they are keen to borrow money, often to meet household expenses or emergency expenses such as on healthcare. They typically borrow from their family and friends or take a loan ranging between USD 10 and USD 60 from their managers to be repaid with interest. However, they do not understand how the interest is calculated, making them vulnerable to overcharging.

Meanwhile, banks and financial services providers are wary of lending to this segment, partly because they view them as risky. Financial services providers can start by offering savings products to garment workers and give them short-term loans gradually to overcome this perception of risk associated with lending.

3. Insurance: Few workers in the readymade garments industry have either health or life insurance because they lack knowledge about insurance or find the premiums too costly. However, they are a ripe market for nano-insurance products to safeguard them from sudden health expenditures or disruption to their regular income, similar to what happened briefly during COVID-19.

4. Tailored Financial Education: It is essential to educate workers about managing their financial life. Rather than giving generic information, it should be tied to decisions of immediate relevance and presented at a “teachable moment.” For instance, they can be informed about investment options to multiply their money when they receive their salaries. It is best to steer clear of financial education, essentially product marketing for financial services providers.

Opportunity for financial services providers and FinTechs

Companies need an innovative approach toward product design to create suitable financial products for garment workers. An ideal product should be intuitive, simple, and easy for customers to comprehend and use. The product should include all components of financial literacy and cater to “oral” customers, that is, individuals who cannot deal with written text or numbers and are more comfortable with visuals. MSC has suggested a conceptual wireframe called mobile wallet for oral segments (MoWo) in its earlier work for “oral” people. We believe MoWO is the first step toward the financial inclusion of “oral” people. Providers can use these models or build more local models to train their agents and further educate the garment workers.

An ideal financial product for small-income earners, such as garment workers, would include notifications or a “nudge” component that alerts users to make the next deposit or pay the next loan installment. Such notifications are easy in a fully digital model, say through a mobile phone, but most garment workers do not have a smartphone. So, a more suitable solution for garment workers would be an assisted or “phygital” model—combining digital solutions with a human interface.

A network of agents who have access to technology and smartphones and can educate the garment workers about various financial products, ways to use these products, and potential adverse outcomes can be helpful for the garment workers. Workers would benefit from dedicated banking agents like this, through whom they can get information about their savings or loans.

While Bangladesh has a network of bank correspondents and agents for mobile financial services, these agents are not based inside garment factories, making it costly and cumbersome for garment workers to reach these agents. Workers prefer to interact with someone close to their factories to avoid traveling far.

Social enterprises such as Apon Wellbeing, which serve the community of readymade garment workers, can play a role here. Through its supermarkets, Apon is already connected with garment workers. It allows them to buy products on credit and recovers the money through direct deductions from workers’ salaries.

Apon can collect and analyze data about the buying and credit patterns of these workers, which in turn can be used by banks or financial technology firms to provide savings, credit, and insurance products for garment workers. Once providers start lending to these workers and get comfortable about their creditworthiness, they can offer a host of other financial solutions.

The initiatives discussed in this blog, if implemented, can help give workers in the readymade garment industry better control of their household finances and make their future golden too.