Therefore with an eye to the public good, I shall speak that which, when understood, will lead to an understanding of things in their proper perspective ~ Sri Chanakya Niti Shastra

Musing on the past few days as I sit here this evening after a full day out at Thika, the future industrial town an hour or so outside of Nairobi, makes me ponder some early thoughts and patterns that I’ve seen. Keep in mind this is all still being digested and very early stage, very rough thought directions.

mPesa has not only penetrated the daily life of the average Kenyan, its influence can be felt even by the midsized SME manufacturing plant we visited today.  Run by a Kenyan of Italian heritage, he makes drip irrigation equipment and shade nets among other things. While his larger customers buy large orders of equipment and thus in turn, receive 90 day credit or even, in some cases, upto a year to pay their bills, his small time farmer buyers work on a cash basis and mPesa’s advent has changed the purchasing pattern. They’ll send over a boda boda guy (who tend to act as informal courier services for local businesses) and call him with their order saying that money will be transferred by the time the guy arrives to pick up the order. Is this the informal “real time economy” that they’ve been trying to get organized up in the EU?

Regardless of size – whether of business premises, revenue or production capacity – the maker/manufacturers we’ve met tend towards making every single part, component and in many cases, the very tools that they need for their actual end product. For example, the man who makes inverters will also make his own PCB, steel casing and the machine tools he needs to shape the casing or cut the vents in the casing. Similarly, the drip irrigation manufacturer makes or sources every single component of the equipment right down to weaving the shade nets from the filament that he extrudes starting from raw PE media. I found this unusual as manufacturing or assembly, regardless of size, tends towards specialization or at least sourcing parts or components from vendors if the material or methodology is outside one’s core competency. That is, if you focus on making electronics, would you necessarily do plastic extrusion or metalwork yourself? Or if you made beehives, would you necessarily expand into harvesting honey and bottling and branding it as well selling to the end user (unless you were a huge agribusiness conglomerate, I mean)

Yet this was what I was seeing here in Kenya and I asked why was it so?

There are many reasons but the key insight I took away was particularly fascinating to me in that the basic rationale could be boiled down to two key things – the need to control cost and the need to control “time” (quality, reliability, quantity etc)

Time and money are the two things that I’d found were the points of uncertainty that influenced the “prepaid economy” or those who managed on irregular income streams – that is, the greater the span of control over the timing and the amount of payment that the end user had (such as that offered by prepaid airtime purchase over receiving a subscriber’s monthly bill with an unknown amount due a fixed date) the greater the ability to minimize the variance between income and expenses; manage the fluctuations of cash flow and thus, increase the success rates of any long term payment plan the customer may undertake.

To hear this from the more formal yet SME drip irrigation manufacturer as well as the beehive maker or the invertor maker – NONE of whom were using loans of any kind, micro or banking, to run their businesses – was unexpected but on reflection, not really surprising when you think about it.

They’re still operating in a challenging environment of uncertainty, and that too, under the irregular income stream, simply on a larger scale than the single entrepreneur shining shoes or selling sausages door to door.