Wi-Fi voucher: A top-selling product for rural corner shops in Indonesia

Wi-Fi voucher: A top-selling product for rural corner shops in Indonesia

Corner shop owner Yuyun finds it difficult to connect to the internet on her phone from her village of Gunungpayung in the hilly terrain of Temanggung regency. The village in Central Java lies 458 kilometers east of the capital of Jakarta. Yuyun sells daily necessities from a corner shop in her home. She also runs a coffee roasting business in the village. She is one of our diarists from MSC and L-IFT’s Corner Shop Diaries project. Gunungpayung is not the only rural area in Indonesia that has no or limited internet access.

Reports indicate that access to 4G networks evades 12,548 villages in the country. While 90% of 4G signals are available in urban areas, the number falls to only 76% in rural areas. In Java, the most developed and populous island in the archipelago, the internet penetration rate is only 56.4%. In less populous islands, such as Sulawesi and Papua, the rate of internet penetration falls to below 10%. This inequality results from various factors, including geographical conditions, a notion among providers that rural and sparsely populated areas are not profitable, and a lack of regulation in infrastructure and frequency-sharing.
Wifi vouchers

However, even though she faced difficulties accessing the internet, Yuyun used several methods to sell her products to her clients, who live as far away as Jakarta. These included the use of WhatsApp to advertise her small business, promotional posters that she created on a design app, and Shopee—an e-commerce platform—to sell her products. What is her secret of being technologically savvy and well connected in a place without internet access? 

Yuyun showed us a box stenciled “Voucher – Wi-Fi” where she kept a pile of paper coupons (the vouchers). The coupons allow buyers to access the internet. She sells two kinds of coupons, one worth IDR 2,000 (~USD 0.14) for two-hour unlimited use and another worth IDR 5,000 (~USD 0.35) for all-day unlimited use. Such coupons are reasonably cheap and cost the same as a small box of milk that children usually buy. The package details are printed on the coupon. Customers only need to turn on the Wi-Fi feature on their mobile phone, enter the username and password, and connect to the internet.

Yuyun’s wifi voucher box
Yuyun showed us how to use the voucher

The chart below shows the share of Wi-Fi voucher sales in Yuyun’s weekly revenue compared to other products, for example, snacks and daily necessities. The revenue from Wi-Fi voucher sales varied from time to time, from IDR 8,000 (~USD 0.56) to IDR 185,000 (~USD 12.96) per week. It shows that despite not being the main selling product, the Wi-Fi voucher remained a constant part of Yuyun’s total revenue.

Yuyun is not the only one who sells Wi-Fi vouchers in her area. The Wi-Fi voucher business is mushrooming, especially in densely populated areas with many blank spots in Temanggung and Wonosobo. The business model of Wi-Fi vouchers is through agencies. Small sellers like Yuyun are agents who receive routers and coupon papers from larger entrepreneurs. These entrepreneurs usually understand networks and other technical issues better and also determine the market price of Wi-Fi vouchers. Agents like Yuyun earn around IDR 500 – IDR 1,000 (~USD 0.035 – USD 0.070) from sales per coupon.

The signal of the Wi-Fi network, which Yuyun sells vouchers for comes from an access point device installed in her house. The access point functions as a “repeater” and extends the range of the internet signals that the users could not reach earlier. Yuyun spent IDR 70,000 (~USD 4.89) to install the access point. Meanwhile, the fee charged for personal use is IDR 350,000 (~USD 24.45) for access point installation and IDR 30,000 (~USD 2.10) for internet usage per user per month.

The Wi-Fi signal is sourced from the fiber optic cables owned by big internet providers, such as PT Telekomunikasi Indonesia (IndiHome). The Wi-Fi voucher entrepreneurs usually live close to the location of the fiber optic cables. They subscribe to internet data from an established provider and then they connect their modem to the router using a LAN cable. This router serves as a bandwidth distributor. Some routers also have an implanted access point to transmit the signal to the user, although others have to buy an access point device separately. The router has hotspot software embedded. The device is then connected to the PC using a cable to operate the software. The Wi-Fi voucher entrepreneur then sells the Wi-Fi signal through agents like Yuyun. They install access point devices in the agent’s house or corner shop so the signal can be distributed there. Ideally, Wi-Fi users should be maximum of five meters from the access point device to get optimum signal strength.

The router, access point devices, and other tools needed for this business are not hard to procure. These tools can be purchased easily at local computer stores or through e-commerce platforms. The prices also vary and are dynamic following the fluctuation of the USD exchange rate.

The quality of the Wi-Fi signal is more stable than the ordinary mobile network signal because it comes from an optical cable and is relayed by several extenders constantly. Errors or outages are rare. When they occur, it is usually for three reasons. First, the big providers may experience system disruption, for example, due to extreme weather. Second, the Wi-Fi entrepreneur may not have paid the internet subscription bill to the primary provider. Third, the access point device may be damaged, for example, due to unstable electricity or lightning strikes. Disruptions are rare because the big providers carry out system maintenance routinely and the electricity supply is usually good. However, if services are disrupted, an agent like Yuyun cannot do anything because they depend heavily on the performance of the Wi-Fi entrepreneur and the primary provider.

The Wi-Fi voucher model is not something new. Big mobile providers like Telkomsel have previously sold internet voucher products at affordable prices. The demand for internet packages has increased since 2013, along with the widespread use of Android-based mobile phones. However, the bigger mobile providers’ signal usually comes from a base transceiver station (BTS) tower, which is not as stable as the signal from optical cables. Compared to optical cables, the BTS tower has a broader coverage area. The signal from the BTS tower faces more obstacles or blockaders, such as hills, large trees, and buildings, resulting in blanks spots. The Wi-Fi voucher business carried out by local entrepreneurs who use optical cables covers these gaps.

The Wi-Fi voucher customers are diverse. However, Yuyun observed that the low-priced packages are usually in demand by children and teenagers, while adults usually consume the more expensive packages. The Wi-Fi voucher is used mainly for online gaming, streaming via YouTube and Facebook, and downloading big-sized data. These vouchers have also helped support school-from-home activities, which corresponds with MSC’s study that household internet needs have spiked during the pandemic.  

Coming back to Yuyun, we see that despite limited access to resources, Wi-Fi vouchers proved to be an opportunity. The entrepreneur used the internet to develop her business despite limited access to resources. However, information obtained from the internet was not the only inspiration for Yuyun to become technologically savvy. For example, migrant neighbors or relatives visiting from the city also gave Yuyun insights into current events and opportunities for those like her who lived in rural Indonesia.

Even though Yuyun is internet literate, she is yet to explore other technological tools and services. For example, she has never tried using digital payments. Her store on the e-commerce platform Shopee is dormant, and she is yet to reactivate it. Yuyun is young and relatively more tech-savvy compared to other micro-entrepreneurs in her village. However, concerted efforts from both public and private sectors are needed to enable digital infrastructure and provide digital skills to micro-enterprises in remote rural areas. These efforts can then speed up the trickle of benefits from Indonesia’s booming digital economy down to the villages like Gunungpayung.
Countries such as India and China now harness the benefits of public investments from building an inclusive digital infrastructure. Yet digital infrastructure alone is not adequate to ensure inclusive digital ecosystems: awareness, skills, and the application of digital tools are required.  

                                                                                                                                                             Source: ENRD

Indonesia has set ambitious goals through the BAKTI program, UKM Naik Kelas, and Payments Vision 2025 to ensure that country is well prepared to build an inclusive digital economy. While such programs encourage the private sector to provide digital services to the last mile, they must also use rural community networks to ensure effective delivery and enhanced adoption of their program and initiatives. Involving and empowering rural entrepreneurs like Yuyun is crucial.

WRITTEN BY

Rahmatika Febrianti

assistant manager

Yani Parasti Siregar

associate

Raunak Kapoor

SENIOR MANAGER

Life on credit: Why and how do corner shop owners take loans?

Yuyun sells food items and products of daily use from a small shop from her home in Central Java, Indonesia. By late February, 2021, Yuyun had four outstanding loans. While four concurrent loans seem excessive, Rahmat Kabir from Hrishipara in central Bangladesh goes a step further. By the middle of 2021, Rahmat had 13 outstanding loans—seven from multiple microfinance institutions (MFIs), five from friends, and one from a neighbor. 

However, juggling multiple loans is not common to all micro-enterprise owners. Only two of our diarists from India had more than two outstanding loans—most had either one loan or no loan at all. One such diarist, Manish Chouhan, runs a grocery shop in Madhya Pradesh, India. Manish was trapped in a vicious cycle—reduced stocks due to a drop in income led to lower sales and a consequent decrease in revenue. To break this cycle, Manish had to borrow INR 10,000 (~USD 134.79) from his friends to purchase supplies for his shop. 

These examples illustrate the difference in borrowing patterns in the three Asian countries of our Corner Shop Diaries research—India, Indonesia, and Bangladesh. By analyzing the loan transaction data of our diarists, we identified the key insights discussed below.

1. Taking loans is more common in Bangladesh, followed by India and Indonesia

Only eight out of 25 diarists had outstanding loans in India. These diarists had a total of 10 outstanding loans. In Indonesia, 10 diarists had a total of 17 outstanding loans, while in Bangladesh, four out of five diarists had as many as 27 running loans in total. Bangladesh also tops the list in terms of total loan value disbursed, as depicted in Graph 1. The reason behind the significant difference in the number and value of loans is the phenomenal growth of MFIs in Bangladesh since the 1990s. These MFIs facilitate access to credit for the low- and moderate-income (LMI) segment in rural and urban areas.
Graph 1

Other possible reasons for the difference in number and value of loans across countries:  

The diarists did not divulge the details of loans taken willingly. We had to gain their trust and make them comfortable enough to reveal this information. Taking loans is not a desirable practice in the cultures of some of our countries of research. This may be a significant factor responsible for this reluctance in sharing information, and the levels of reluctance also vary across countries. Another factor is the difference in skills of data collectors who acquired the sensitive information related to credit. However, we can safely assume that these are not the only factors that contribute to the significant difference in the number of loans. Borrowing behaviors may also vary based on historical and market-level aspects of the country, as mentioned before.

2. Banks and MFIs are significant sources of loans

In general, borrowers in India prefer to take loans from formal institutions- mainly banks and some NBFCs. In Indonesia, informal institutions like Rotating Savings and Credit Associations (ROSCAs) and formal institutions like banks, cooperatives, and MFIs are familiar sources of loans. With the historical evolution of its microfinance industry to curb rural poverty, MFIs are the major source of credit in Bangladesh . The country has been expanding its banking industry to push economic growth—most recently through agent banking. Besides these sources, borrowers in Bangladesh also take loans from informal sources like friends and family.

These practices reflect the experiences of our diarists in these countries. Diarists in India prefer to secure loans from banks, with seven out of 10 loans taken from banks. In Indonesia, diarists took almost half of the loans (eight out of 17 or 47%) from MFIs, five from banks, and the remaining four from other sources like cooperatives and friends or relatives. Since we conducted our research in the primary working area of CU Lestari, our partner in Indonesia, several diarists have outstanding loans with the MFI. 

Due to the overwhelming presence of MFIs in Bangladesh, diarists took 70% i.e. 19 out of 27 loans from MFIs. The remaining eight loans were taken from informal sources like friends and relatives. The abundance of access is a major factor that influences the choice of borrowers regarding the source of the loan. Prominent MFIs like Grameen Bank and BRAC, mid-sized MFIs like DSK, and smaller local MFIs like Sahaj Sanchay operate in Hrishipara, the area that our project covered. This made it easier for diarists to take multiple loans, either under their names or through accounts owned by people they know. Moreover, most MFIs in Bangladesh have also relaxed their terms of repayment after the pandemic.

The interest rates also vary significantly depending on the source of the loan. In India, banks charge interest rates of 7% to 13%, whereas money lenders charge interest as high as 18%. In Indonesia, the interest rates range from 2% to 24%, and in Bangladesh, they can go as high as 36% per year.

Informal loans from friends or relatives are usually interest-free and have flexible terms of repayment. Hence, these loans are the first choice for many. Informal loans are also the choice of instrument to repay other outstanding loans with stricter terms of repayment.

3. Diarists take loans primarily for business purposes

Diarists in India took more than half of the loans (six out of 10) for personal reasons and the other four to support their businesses. However, loans for business or livelihood were more predominant in Indonesia and Bangladesh—11 out of 17 (65%) loans in Indonesia and 22 out of 27 (81%) loans in Bangladesh were business loans. In Bangladesh, borrowers take business loans but often use the amount for various purposes. Borrowers generally use informal loans for a single purpose, such as to on-lend to others or repay debts, or smoothen their income. They consume such loan amounts swiftly. In contrast, borrowers use MFI loans mainly for business purposes and spend this amount slowly. They also use some parts of such loans to repay other loans or smoothen their income, among others.

Case 1: Rajesh Sharma runs a small restaurant in a town in north India. While Rajesh was cautious about taking a loan, he needed credit to purchase a small refrigerator for his shop to store perishable items. Rajesh found it challenging to access credit from a bank due to a lack of collateral. Even from other sources, Rajesh could not find medium to large loans at less than 12-14% annual interest rates. Even providers of small loans usually charge around 18-24% per year. Rajesh finally managed to secure a loan worth INR 18,000 (USD 250) from a local NBFC that he had to repay in 15 monthly installments of INR 1,420 (USD 20). Rajesh found the process convenient as a representative from the company visited his shop to get all the documents filled. Convenience and moderate interest rates were the two key factors for Rajesh.

Case 2: Yuyun is a serial entrepreneur from rural Temanggung, Indonesia. She once rented a shop outside her village to sell airtime and perfume. To open the shop, she took a four-year MFI loan worth IDR 14,500,000 (USD 1,008.74) from CU Lestari. However, since the location was not strategic, the shop failed within three months. To ensure the smooth monthly repayment of her MFI loan and to meet ends, she needed to start another business. For that, she took a one-year loan from neighborhood ASCA, worth IDR 15,000,000 (USD 1,043.53). She used the ASCA loan to open a corner shop from her home selling food and daily needs items and daily necessities and to open a coffee roasting business with her husband. She also once borrowed IDR 1,000,000 (USD 70) from her neighbor to buy coffee beans, which she has repaid within a month. Her corner shop and coffee business run well, helping Yuyun repay her MFI loan. The ASCA loan has also been repaid now, using the money loaned from her sister. She still struggles to repay her sister; fortunately, the repayment term is flexible and with no interest because they are family.

Conclusion

The samples[1]  from India, Indonesia, and Bangladesh highlight the difference in behavior regarding loans in South and Southeast Asia. Financial service providers can extract essential lessons from the complete picture of how and why borrowers take loans, their pain points, and the catalysts of loan adoption.

Loans are not always a burden but a stepping stone for growth, as evident in Case 1. Micro and small enterprises need access to finance to scale up and grow their business. Even small loans can have a significant impact on these enterprises. Loans help in consumptions smoothing, to build a cash reserve or to repay another loan, as highlighted in Case 2. However, mostly informal micro-enterprises still struggle with the lack of loan products tailored to their needs.

Easy access to credit and reasonable interest rates can help convert a cautious borrower like Rajesh (Case 1). Simultaneously, while too many options can make it easier to access credit, they can also lead to a string of loans and trap borrowers in a cycle of debt, as seen in the case of Rahmat from Bangladesh.

Stakeholders can learn from the example of CU Lestari—the MFI has attracted numerous LMI customers through its direct approach, such as providing a cash pick-up service for loan repayments. As businesses bounce back after the pandemic and the demand for credit rises, early movers will reap the benefit.

[1] We have not extracted the diaries data from a representative sample. Hence, the insights cannot be generalized.  

WRITTEN BY

Rahul Chatterjee

manager

Yani Parasti Siregar

associate

Rahmatika Febrianti

assistant manager

Manoshij Banerjee

assistant manager

Volatility and resilience: Lessons from the corner shop diaries research in Nigeria

Volatility and resilience: Lessons from the corner shop diaries research in Nigeria

Adaeze Degreat[1], a middle-aged mother of two, works in a local teaching hospital  in Southern Nigeria and runs a supermarket that sells groceries and daily provisions. A steady income from her salary and a variable income from her shop keeps Adaeze’s household finances mostly manageable. That is, until COVID-19 hit Nigeria. The disease was first reported in the country on 27th February, 2020. By April, several states in the country were under a complete lockdown, barring essential service providers, such as medical facilities and grocery shops.

The virus struck communities and upended people’s lives in an unprecedented way, affecting their economy in particular. Different states implemented lockdowns during March-June, 2020. The baseline data of the National Longitudinal Phone Survey, which was collected in April-May, 2020, indicates that 35-59% of the households that needed staple food could not purchase it, 26% of the households could not access medical treatment, and the income of 79% households decreased.

As highlighted in this report by FATE Foundation, the pandemic had a severe impact on MSMEs. 94% of MSMEs reported being negatively impacted by the pandemic—particularly in the areas of cash flow (72%), sales (68%), and revenue (59%). However, corner shops, which are small neighborhood shops that sell daily need items were allowed to operate during the lockdowns and they served as the sole lifeline for local people.

L-IFT had been running a Financial Diaries research exercise in Nigeria since 2019. In that sample, we identified five corner shops and later included a sixth shop in April, 2020 for the global Corner Shop Diaries research. All these corner shops are located in the Edo State in Southern Nigeria. By the end of March, Edo State had started lockdown measures by limiting public gatherings to 20 people. By mid-April, a full lockdown was in effect, backed by containment strategies, such as closures of all interstate borders.

Using the daily financial transaction data from the diaries, our blog provides key insights about the financial life of corner shops and the impact of COVID-19 on them.

1. The COVID-19 pandemic had a severe impact on the income of corner shops, which was already volatile

The five corner shops in our pre-COVID sample vary in terms of the businesses they operate but all display similar volatility in income. Three corner shops sell groceries and daily provisions, one is a crayfish business, and one is a digital services shop. Examining the trends in the income of these shops in 2020 (Graph 1) highlights the volatility.

For five out of the 10 months, the combined monthly income for the five corner shops was more than 25% below their overall average monthly income—we can call these dips. The monthly income for three months was 25% more than the average monthly income—we can call these spikes.

We also see how external factors, as well as business-specific nuances, can affect income. The crayfish business, which started in January, 2020 has been very profitable and has seen big cash flows in regular intervals. The spike in July is mostly due to one such big cash flow. The second spike in October a result of panic buying by people as they feared a shortage of items caused by the END SARS[2] people’s protest.

Graph 1

If we zoom in on the data from March to June in the early months of the pandemic, the impact of the lockdowns[3] is prominent. As we can see in Graph 1, during the lockdowns, that is, April-June 2020, the income of the corner shops was at its lowest point. The crayfish business, which performed well during some stages of the lockdown, created the combined income spike in July 2020. Graph 2 highlights that the other businesses did not reach their pre-COVID level yet and even the panic buying during the END SARS protests in October did little to help them.

Graph 2

2. Depending on additional income sources, rationalizing expenses, and withdrawing savings were key survival strategies for corner shops during the pandemic

The COVID-19 pandemic emphasized the importance of multiple sources of income for a household. We saw that our respondents either picked up additional sources of income or started to depend more on their secondary sources of income. One of the respondents, who holds a salaried job, happened to have started the lucrative crayfish business just before the pandemic in January, 2020. She is the highest earner in terms of overall income among the corner shop diarists.

The respondent started this business after realizing her fixed employment was no longer enough to survive. This proved lucky for her. During the lockdown, which limited operating times at her workplace, shifts were implemented. Meanwhile, her salary began to diminish. She also offered crayfish deliveries during the lockdown, since she owns a car. Through this venture, she could reach more customers quickly and provide a convenient solution for them, who stayed at home to avoid COVID-19. The income from this crayfish business helped her to manage her finances at the peak of the pandemic.

Graph 3

The expenses of the corner shop owners (Graph 3) helps us understand some of the coping strategies they adopted and how their expenses changed during the pandemic. We can see an increase in expenses on food in March, which can be attributed to pre-lockdown panic buying of essentials. We then see a drop in April, when the lockdown was in full swing, and then a rise in May as lockdowns eased up. This gradually came back to the pre-COVID levels by September-October.

Understandably, we see a drop in religious expenses in April – May. This was the time during or just after the lockdowns and mosques and churches were closed. Although the lockdown eased slightly from May, the post-lockdown era came with its own new set of regulations with bans on religious and social gatherings still in place. However, around October, religious expenses seemed to have exceeded pre-COVID-19 levels.

Owing to the lockdowns, when nobody was permitted to travel, transport costs dipped during March. The month of May saw the gradual easing of lockdown restrictions, which allowed people to move and work again. Hence, we see a sharp increase in transport costs followed by a gradual stabilization and then further increases with further easing of the lockdown.

The cost of toiletries rose just after the lockdown (see the spike in May) as personal hygiene measures were a priority for most. Since toiletries, such as soaps and sanitizer were important for COVID-19 prevention and care, some shops bought and hoarded them in anticipation of their demand. However, during the June to August period, we see toiletry expenses dropping as a result of lower demand and an expectation for them to return to pre-COVID-19 levels.

The pandemic also forced the diarists to withdraw significantly from their savings. Data from the five corner shops—excluding the one that joined in April, 2020— indicates that the total savings withdrawn by respondents increased significantly between April-October, 2020 compared to August 2019-February 2020. The respondents reported that they withdrew NGN 354,000 or USD 928 in April-October, which is 66% more than their withdrawals in August 2019-February 2020. The crayfish business and a supermarket contributed the most in this owing to the increase in demand and the subsequent need to restock.

3. The savings patterns of corner shop owners correlate with their income

Graph 4

We observed that income and savings are correlated (correlation coefficient=0.5). Graph 4, makes it evident that the pattern of people making savings deposits mostly mirrors their income patterns. The only exception is in March, 2020, the month when lockdown started. This dip in March is likely due to the limited amounts that could be saved during the start of the lockdowns as businesses and their individual households needed more funds to stock up adequately for the COVID-19 period. During this time of uncertainty, people may have also preferred to keep their money in cash, ready for use, instead of saving the money.

Closing remarks

The findings highlight the reality of income volatility and celebrate the resilience of micro-businesses and LMI segments. Many observers expect the business of corner shops to remain unharmed as they were allowed to operate during lockdowns. Yet this is clearly not the case. They faced significant drops in income and have only gradually started to recover. We also see how multiple sources of income are extremely helpful during times like the pandemic. Adaze, who we met at the beginning of this blog, received substantially less income from her salaried job and her business also suffered due to reduced customer footfall. However, she and her business, along with many others like her in Nigeria survived in the long run and have been gradually recovering from the shock. And we can credit a nuanced research approach like the Diaries method to have uncovered a better understanding of the path toward recovery.

[1] A pseudonym has been used to protect the privacy of the participant.

[2] SARS stands for Special Anti-Robbery Squad, a former police unit in Nigeria feared for brutality. END SARS was a movement that protested against this police brutality and demanded the unit to be disbanded.

[3] In Edo state, the initial lockdown measures were announced by the Governor in 24th March and by April, 2020, a full lockdown was in place. The lockdown was eased in phases from May to June.

WRITTEN BY

Rahul Chatterjee

manager

Mhlalisi Ncube

PROGRAMME MANAGER

Anne Marie Van Swinderen

FOUNDER AND MANAGING DIRECTOR

‘Surviving a pandemic’: Five key insights from the Corner Shop Diaries research in India and Indonesia

‘Surviving a pandemic’: Five key insights from the Corner Shop Diaries research in India and Indonesia

Ishwar Sharma, the only bread earner in his family, runs a small café in a town in northern India. Meanwhile, Alus, a mother of two, runs a small grocery store in Central Java, Indonesia.

The COVID-19 pandemic and the “economic pandemic” that followed have brought Ishwar and Alus to the same point. These misfortunes had hit the businesses of both micro-entrepreneurs badly.

In Ishwar’s case, people become reluctant to buy his food and beverage due to health concerns, as he prepares the items he sells onsite. His troubles were compounded by the prolonged closure of businesses during lockdowns, which translated to fewer customers, alongside new competition from the reverse-migration by people returning from the cities who set up small cafes in his neighborhood.

As for Alus, her customers—mostly local farmers—became cash-strapped due to the significant drop in crop prices. Furthermore, the prices for basic groceries have surged during the pandemic (for instance, the price for cooking oil jumped 33% higher), and Alus’ customers had to either limit their purchase or pay for their groceries later.

Both micro-entrepreneurs are, however, striving to keep their businesses afloat.

MSC’s research on the impact of COVID-19 on MSMEs in India indicates that 73% of the businesses surveyed had reported a decrease in customer footfall. Meanwhile, three-fourths of the enterprises reported a decline in income. Meanwhile in Indonesia, 79% of MSMEs surveyed reported a drop in sales volume by a median of 50%; and 51% reported that they kept operating as usual but the overall number of customers per day had decreased by a median of 50%.

From October, 2020, MSC started to track the daily financial life of 25 corner shops each from India and Indonesia using the Financial Diaries methodology. We have collaborated with the social enterprise Low-Income Financial Transformation (L-IFT), to track the daily financial transaction of corner shops. These corner shops are small retail businesses located in neighborhoods that sell daily needs products and provide essential services.

The daily financial data of these shops generate intriguing insights into how these corner shops are in the process of recovering from the COVID-19 pandemic and the challenges they face.

In this blog, we discuss five insights from the early data of this research.

1. In India, owners of the small daily provisions store have become risk-averse and restricted their ambition.[1]

Varun Singh, father of two teenagers, runs a small daily necessities store in the north-west part of India. He mentioned during the interviews that his monthly gross income was INR 15,000 (USD 206) per month before the pandemic, which dropped to INR 8,000 (USD 110) per month during the pandemic.

The data that we collected in the past two months of 2020 indicates that he is yet to attain his pre-COVID level of business (see Graph 1).

Graph 1

Varun has been running his small shop from home although he wanted to buy or rent a shop in the market area. Despite difficulties, he wanted to grow his business. Yet the financial and health-related risks related to the pandemic have convinced him to postpone his planned expansion and continue operating from the current location.

Many corner shop owners in our sample also think along similar lines. Even though customer footfall has returned to normal, they are buying less compared to pre-COVID-19 times. Hence even if the income of the shops has picked up gradually, is still not what it used to be.

The financial stress and the experience of losing near and dear ones have made the corner shop owners risk-averse.

2. In Indonesia, many corner shops managed to maintain their regular income during the pandemic. For some, the pandemic helped to increase revenue.[2]

Hening, a young mother of two, runs a corner shop in Central Java. She sells staple foods, cooking oil, snacks, sweets, tobacco and cigarette, medicine, gas, and toys. She could maintain her usual sales revenue even during the pandemic (an average of IDR 30 million or USD 2,146 per month). 

The data from the Diaries (Graph 2) indicates that Hening’s average monthly gross income is IDR 29 million (USD 2,074). It shows a drop in November, 2020 (Week 7) but only because Hening had to close her shop for around two weeks to help with some wedding events.

The revenue of Hening’s shop was soon back to normal—and even increasing—once she returned to the business (see Graph 2).

Hening has maintained her sales revenue during the pandemic by using some simple strategies. For instance, she stopped selling airtime as many of her customers often pretend they didn’t receive the top-up so they can refuse to pay –forcing Hening to cover the cost herself. As Indonesia did not restrict shop operational hours, Hening also kept her usual opening hours, that is, 6 am to 9 pm daily during the lockdowns. She also implemented hygiene protocols when the pandemic was at its peak by providing hand sanitizer outside the shop for customers’ use to make them feel safe.

Moreover, Hening has started to prepare better budgeting for her business and personal finance. She also uses her business data to map her income and expenses better and also allocated some money for saving.

Graph 2

Many corner shops in our sample adopted several simple strategies. These included following health protocols to make customers feel safe, prolonging operational hours to increase customer footfall, and reducing the number of staff members. The corner shops also adjusted their product or service mix to sell items in high demand or commanding a higher market price and stopped the sale of unprofitable or less-profitable items.

The strategies have helped corner shops to maintain their income or even make more profit than in earlier years.

3. Corner shop owners are beginning to think digital.[3]

In India, multiple corner shop owners, such as medicine shops, barbers, and cafés, among others, told us during interviews that they have started to accept digital payments, most commonly from PhonePe or Google Pay from clients during the pandemic. This phenomenon is mostly observed among younger diarists. We have also seen the use of messenger apps and social media to market products and services. Some diarists have also started to accept orders from regular customers through WhatsApp.

In Indonesia, we found multiple diarists using their WhatsApp and Facebook accounts to promote their business; mostly to generate awareness among customers about any new product or service they have started to sell. We also found that the micro-entrepreneurs use WhatsApp to communicate with suppliers. Some diarists use e-commerce sites, such as Shopee, Tokopedia, or Bukalapak to buy stocks at cheaper rates and sell specific products, such as plastic furniture. Only two of our diarists use digital payments to settle bills through ShopeePay, and pay suppliers and accept payments from customers through OVO and LinkAja. However, this had been their practice for a couple of years before the pandemic.

Many diarists were interested in using e-commerce in the future. Yet juggling between the brick-and-mortar shop and the online store requires time and energy. They also have concerns about the cost of internet data; hence they have become reluctant.

4. CICO agents in India saw increasing footfall but declining income during the lockdowns.

Our sample from India has three dedicated CICO agents and all of them mentioned that the pandemic has hit their businesses. These three CICO agents reported the total monthly net income of INR 38,000 (USD 521) before the pandemic, which fell by 24% to INR 29,000 (USD 398) during the pandemic.

The four major reasons for the decline in income are:

1. Reverse migration, which has decreased remittance;
2. Most withdrawals were small in value, which increased footfall but not income;
3. Worrying about cash crunch during lockdowns, many people withdrew their savings through the BC agents, thus creating liquidity issues for the agents;
4. Owing to mobility restrictions, agents could not travel to rebalance their liquidity, which also hampered the business.

Graph 3

However, the business has picked up now. Graph 3 shows the average monthly income of INR 40,108 (USD 550), which is similar to pre-COVID-19 times.

5. Women who own corner shops have faced unique challenges during the pandemic.

Social norms and caregiver responsibilities created an extra set of challenges for women who own corner shops. As traditional gender roles are still prevalent, we observed our women diarists struggle to manage their unpaid work at home and responsibilities at the shop.

One respondent from Indonesia mentioned that as schools are closed and children are at home, she struggled to manage her shop and the children. For another respondent, the extra pressure of earning for the household, since her husband lost his job, and fulfilling her duties as the caregiver made her life very stressful.

In India, a few women-owned enterprises reported that their husbands used to help them for tasks where mobility is required, such as withdrawing cash, repairing business assets, and buying supplies, among others. Yet the COVID-19 pandemic posed a challenge as their husbands had to work harder to earn money and could not help at their wife’s business.

To conclude, we highlight that financial conditions and the adoption of digital means are dynamic processes that change rapidly. One-off surveys can capture the situation at one point in time but fail to capture the transition and the volatility. Fortunately, the Corner Shop research can bridge this knowledge gap.

This blog is an introduction to the Corner Shop Diaries project, the first of a series that will be published regularly this year. We will also publish regular data-based insights on our website, and combine these insights with actionable recommendations for policymakers and practitioners.

This series will touch upon different themes, including the adoption of digital payments and e-commerce by micro-businesses, savings and loan products that they need, and their behavioral changes over time. Be sure to stay updated for more insights from us.

[1] 1 USD is equivalent to 73 INR

[2] 1 USD is equivalent to 13,980 IDR

[3] Findings from in-depth qualitative interviews with selected diarists in both the countries

WRITTEN BY

Rahul Chatterjee

manager

Anant Tiwari

manager

Manoshij Banerjee

assistant manager

Rahmatika Febrianti

assistant manager

Ira Aprilianti

assistant manager

Yani Parasti Siregar

associate

The reality of Covid-19 for a restaurant in Zimbabwe

The reality of Covid-19 for a restaurant in Zimbabwe

Many businesses in Zimbabwe have wondered how Covid-19 would affect their operations. Businesses have had to consider different scenarios that could happen because of lockdowns or in the event of Covid-19 infecting their employees. For corner shop ‘2547’ [1], both scenarios have become a reality that they have had to deal with.

 

When Covid-19 first struck in March 2020 the country went into a lockdown for more than 5 months with only essential services such as grocery shops, government operated transport services, health facilities, and water, sanitation, and energy services left operating while other businesses and informal trade were shut down. The lockdown began to ease in August where we saw the gradual reopening of the rest of the economy as non-essential services reopened, curfew times were extended, intercity movement reopened, resumption of school, resumption of flights, and reopening of informal markets. Just as we thought we had turned a corner; the virus flared up again. As from the end of November 2020, the number of local infections has gone up exponentially and in January 2021 a fresh lockdown was put in place. This graph below reflects the income changes over time and shows the gradual growth of income with lockdown easing and with the highest month being December during the Christmas holidays. Unfortunately, the new lockdown imposed on January 5, 2021 has been taking its toll with incomes dropping alarmingly.  

 

There has been an even more direct impact this time around which is illustrated by shop 2547. Shop 2547 is a restaurant that we have been tracking – amongst the 18 shops we are tracking in Zimbabwe – since April 2020. Before the second Covid-19 wave, business was beginning to stabilise from the calamitous effect of the previous lockdown. No sooner had the business recovered to profitable levels that it was hit again, this time very directly through the infection of one employee who tested positive on 30 November and has not been to work since as she has not fully recovered. This resulted in the loss of the businesses’ only till operator and a senior employee who had been with the family for many years. Due to her testing positive, the rest of the staff were tested as well, and two more employees tested positive and have undergone the mandatory days of self–isolation as from 7 to 22 December and are now negative and back at work. Effectively, the shop had lost a till operator, a cook and a butcher. For a small business as theirs, the loss could be felt. Even though other workers stepped up and took on more shifts, the restaurant still recorded a slight drop in income in December whereas other businesses in the study were making their highest incomes that month. 

This graph above illustrates how the restaurant’s December income has fallen instead of being the highest due to the Christmas holidays, which is the biggest holiday period in the country. In addition, the new lockdown in January has had a crushing effect on the business. Although the shop manager feels that they have not faced any stigma, since it is known within the town that there have been Covid-19 cases at the restaurant, this is still a concern as the stigma may not be openly shown. The shop manager expects thought that since the community is aware that they have tested everyone and followed proper procedures, they will still trust the restaurant. 

 

Outside of the Covid-19 infections, the shop has felt several other pinches with supply chains being disrupted due to new Covid-19 related regulations making it difficult to import cheaper raw materials from South Africa. For example, in making fresh chips, supplies such as potatoes and vinegar were cheaper to import from South Africa. One of the shops employees is asthmatic and finds it difficult to work with a face mask which means her productivity is affected. Additionally, the need for social distancing has also affected the number of tables that the business can pitch on the premises at any one time. Whereas in the pre-Covid-19 era the business could handle up to 60 customers at any one time, now it can only accommodate about a third to half of that at a time. However, even with those problems in place, the shop had managed to recover, and it seems that the most difficult times have been the hard lockdowns and Covid-19 infections. 

 

A review of some of the expenses show the spikes in September and October when business was beginning to pick up followed by significant drops in December to January with the Covid-19 infections and a new lockdown in place. These spikes in raw materials, food at home, and salaries are in reflection of the increased income being received during those few months while the spike in toiletries expenses in December does reflect the additional response by the restaurant to protect themselves and their customers through improved hygiene. As the salaries graph reflects, the small business was forced to reduce salary payments during the first lockdown which helped lighten their burden but was much harder for their staff. 

 

We continue to monitor the restaurant’s fortunes closely during this pandemic and hope that our findings can be both useful to the restaurant itself in its operations as well as to inform the larger public and policy makers of the impacts of the pandemic. We also hope that the findings will be useful to development strategies now and in the post Covid-19 era to bring businesses and communities to a normal again. 

[1] Each participant in our study has a numeric research ID which makes it possible to study an individual participant with full anonymity of the respondent guaranteed.

WRITTEN BY

Mhlalisi Ncube

Manager (L-IFT)

Percy Ndlovu

Field Researcher (L-IFT)

Field Researcher Experience – The Corner shop diaries project

Field Researcher Experience – The Corner shop diaries project

My name is Sithokozile Moyo from the second largest city in Zimbabwe, Bulawayo. I hold a BA in Language and Communication studies from Lupane State University in Zimbabwe (graduated 2019). 

For a time since March 2020, Zimbabwe came to a standstill with the arrival of the COVID-19 pandemic. Businesses and people’s daily lives were heavily affected even to the small corner shops in our neighbourhoods. As the disaster was unfolding, one of my former internship supervisors, Mhlalisi Ncube, approached me about doing Covid-19 and livelihoods related research work with him and L-IFT. The idea was exciting given the continuing situation of the Covid-19 crisis. The idea of working from home doing interviews via phone calls was all new to me and different to research work I had undertaken before. Most of my participants were from Bulawayo while a few were from out of town in Lupane in a totally different province but one that I was somewhat familiar with as I had gone to University in the small town. 

I am a recent graduate and employment is hard to find in Zimbabwe so when this opportunity was presented to me, I was very happy. I had to approach small and big shops which were selected for us and explain to them about the research and conduct intake interviews with them. As I was moving around shops in my area some shops were not welcoming at all, some bluntly rejected me thinking I had a political motive. I eventually did a baseline survey of ten shops. From my ten in baseline, six were selected by the L-IFT team for me to proceed to work with. 

Sithokozile collecting data from one of the corner shops in the project
Sithokozile collecting data from one of the corner shops in the project

We were trained together with other field researchers in Zimbabwe via a WhatsApp meeting since it was in the middle of a pandemic and lockdown. It was a bit complicated because we were all used to face to face training. We eventually all got the hang of the app and our work commenced with our final respondents. During the first week of the research, I put on my mask and keeping the recommended distance, conducted the surveys in person and explained the kind of information that they were supposed to provide, and that in future we were going to hold the interviews via phone calls only. For the two respondents outside of Bulawayo, everything was all done via phone calls from the start. 

The participants of the research were to provide aspects of their business and personal lives such as their income, savings, expenditures, loans, and some other aspects that may take place during every week and I would input this into Finbit. The participants understood that the interviews are frequent and that the questions are the same all the time although they might be some changes in the future. Being with the participants for some time now has helped as they know me well and are expecting my phone calls and messages. We now treat our interviews as conversations where they tell me about how their week went, the income they got, the expenses they paid and how much the pandemic has affected their business and personal lives.

Sithokozile collecting data from one of the corner shops in the project
Sithokozile collecting data from one of the corner shops in the project

The most challenging task is that sometimes respondents can get impatient. The other problem I face is calling respondents and their phones not going through, this becomes a challenge because it sometimes takes considerable time to reach them. It was also hard to keep them interested in the project as they wanted to know what they were going to get out of it. We had been told not to promise anything as the research was only for learning and could be used for developing better policies for people throughout the world. However, it was good that in July 2020 all the shop respondents received brand new phones as a way for them to see Finbit for themselves on their phones and in the future use it themselves with little guidance from me. The phones were also a nice way to keep them engaged in the project. Every participant was beyond happy in receiving the brand-new boxed phones and were amazed by the good gesture. In that week and the coming weeks, my respondents have been very cooperative and even more attentive of my calls.  

 My experience has been good, and I am thankful to L-IFT for giving me the opportunity to be part of the research. I had to always exercise patience as some respondents were impolite and impatient. I had to be diligent with them and always probe further to get adequate answers. To me every day is a workday, I interview some respondents even during weekends. I have gained valuable experience and I have become more skillful in data collection and am happy to continue with this work. 

WRITTEN BY

Sithokozile Moyo

Field Researcher (L-IFT)