Nokia Siemens Networks

African microentrepreneurs place trust in mobiles

Individually their operations may be very small, but collectively their contribution is enormous – the microentrepreneurs of sub-Saharan African account for as much as a quarter of their respective country’s economy and a majority of new jobs and employment.

Defined as running businesses of one to a handful of people, usually family members, many microentrepreneurs are engaged in vital agricultural activities such as selling food in roadside markets. Others make handicrafts; while some engage in every other conceivable activity that involves local products and services, from taxis to DVDs to hairdressing. 

 “African microentrepreneurs are hugely important to economic and social life in many countries. This informal sector is referred to as a self-organized grassroots economy – largely unregulated and outside tax regimes. An astonishing 90 percent of all jobs in Africa fall within this segment. Supporting such an economically sustainable class helps spur local economies, which ultimately leads to a positive economic and social transformation,” comments Mr. Jussi Impiö, head of Nokia Research Africa (NoRA).

The mobile as a tool for business growth

Many small enterprises, Impiö adds are engaged mostly in subsistence earning and exist in isolated clusters. They often lack even basic business premises, especially in rural areas, and learning and growth opportunities are limited. It is easy for competitors to set up, and the operations of microentrepreneurs are vulnerable to outside forces such as very cheap imports. “Microentrepreneurs need tools to help them organize, diversify and grow more effectively and we are seeing increasing use of mobile phones for a range of applications, even though there are few services yet designed specifically for them.”

One key application Impiö points to is the rapid growth in mobile banking services that allow money transfers without needing a traditional bank account. “You don’t need ID or a fixed address to be up and running with mobile money transfers, and it has become hugely popular. Kenyan telecoms operator Safaricom, for example, has rapidly become the biggest bank in East Africa.” Another critical use for mobile phones is obtaining information. “People lack access to media such as newspapers and press freedom is limited in some countries. Mobiles offer a route to national and community information.”

But for microentrepreneurs, the mobile phone has also become an indispensable tool for conducting day to day business. “You now see traders in many places in Africa using mobile phones to help them work much more efficiently,” says Impiö. “It has been a dramatic change – a few years ago it rapidly became a necessity for microentrepreneurs to have a phone to keep up with others who had one. Instant information about who needs what goods and when is now critical for remaining in business.” While trading agricultural products is the biggest sector, a big growth area is related to mobiles themselves – such as taking batteries to charge handsets in areas without electricity, and loaning and selling phones and SIM cards.”

The social dynamics of microentrepreneurship

A study of microentrepreneurs, carried out by Nokia Research Africa, reveals several in-depth examples of how mobiles are being used.*  “One of the most interesting is Beatrice, a fruit and vegetable seller in Nakuru, a city in Kenya’s Rift Valley,” says Impiö. “As a retailer, she makes extensive use of her mobile to receive orders from customers such as local schools, to give delivery instructions to drivers, and to send texts to people who owe her money. Beatrice also uses other functions such as to do lists and the phone’s calculator to check expenditure, and she can also make and receive payments via Safaricom's banking service.”

But as Impiö adds, Beatrice is at the center of a complex business and social network that in Africa tends to be more about peer support rather than the more aggressive competition seen in markets in developed countries. “There is a lot of trust and support in carrying out transactions and helping others to find the right product and trading information about bargaining for goods with wholesalers, for example.” In Beatrice’s case, she also shares a stall with a partner, and her husband runs another stall selling soft drinks, and they help each other and other stallholders. There are also a lot of women – at least 50 percent in both urban and rural areas as microentrepreneurs who take care of trading, and they tend to run smaller operations that focus more on economic security than their male counterparts. “Social networks are very important in the success of these microbusinesses,” says Impiö.

Challenges in microentrepreneurship include increased competition arising from population growth.  More and more players are entering markets and maintaining trust among larger groups as trading circles expand. “We see the mobile phone as a crucial enabler for helping to build rich social and business networking for, say, amalgamating bigger orders and bargaining for better prices from providers across often long supply chains, and for promotional marketing,” says Impiö. “Microentrepreneurs could certainly benefit now from more advanced services, and there should be good opportunities for operators to provide low cost fixed monthly payment plans that include data access, as affordability is still a big issue in these communities.”

There are some 300 million Africans living in absolute poverty without any mobile phone coverage, notes Impiö. “By providing mobile communications to these isolated rural communities, Africans would be able to access information such as healthcare, banking, market information, etc… in the hopes of enriching their lives.”