Growing relevance of the informal market

11 December 2020 | Bankwese
Frans Uusiku, Market Research Manager, FirstRand Namibia



The economic landscape has evolved in recent times and is becoming increasingly characterised by changing consumer tastes and preferences around the consumption of goods and services, combined with a heightened level of entrepreneurial spirit, especially among women and young people in agriculture.

These changing dynamics around value chain development across industries have an implication for the role of the banking sector as an important enabler and catalyst for economic growth. The reality is that the proliferation of informal side-line businesses in the form of hawkers, vendors, etc. has increased now more than ever as households seek alternative income sources due to worsening economic conditions that have been compounded by the impact of the Covid-19 pandemic. The current economic circumstances certainly do not reflect a “business as usual” scenario for both households and businesses and neither does it for banks. Therefore, as a responsible financial services provider, one of our important promises is to continuously question the status quo and interrogate how we should align our products and services in a way that continues to maximise and preserve the wealth of our stakeholders.

While this phenomenon is not unique to Namibia, the growing relevance of the informal market is often mirrored on the belief that “the informal sector exists to fill the gaps left by formal-sector economic activities”. Anecdotally, the informal market has grown more rapidly in the northern regions of Namibia as some people who have recently lost jobs due Covid-19 or could not find work in town, had to move back to rural areas. The inherent lack of tenure security that has traditionally served as a barrier for households to access financial services might have also contributed to these informal market dynamics. As we ponder on how best to capitalise on some of these emerging opportunities in the informal market, the following two strategy questions could serve as a starting point towards this conversation.

First, how can we adapt some features of informal financial institutions to improve our ability to service informal operators and ultra-low-income households?

Second, how can we forge strategic linkages with informal financial institutions to deepen our participation in the informal market ecosystem? This is particularly true for the deep rural areas where proximity to towns remain a stumbling block towards achieving financial inclusion.

Interestingly, a review of the informal market in Namibia shows that a greater proportion of informal traders in the far northern areas are trading in general enterprises such as fresh vegetables, poultry and meat. Whereas the central and coastal regions are mainly dominated by the industrial market such as auto mechanic, welding and upholstery activity. Therefore, from an informal market perspective, the northern region serves as an important jurisdiction for market penetration due to comparative advantage in the production and processing of fast-moving consumer goods along the agriculture value chain.

This implies that there is a relatively high degree of money circulation in the northern economy, especially during the wedding and festive seasons. The region also offers an immense value chain financing opportunity due to a broader market exposure - locally and by extension the neighbouring countries (Angola and Zambia). Therefore, to overcome the current concentration risk and find alternative revenue streams, a value-chain approach is recommended. Credit and lending solutions can be provided to backward linkages and transact and invest solutions can be provided to forward linkages.

Soortgelyk

 

Gesondheidswerkers, leerlinge en onderwysers deel van 343 nuwe gevalle

1 uur gelede | Gesondheid

Sewe Covid-19-verwante sterftes is vandag aangekondig en wel vier in Windhoek, twee in Swakopmund en een in Grootfontein. Die sterftes in Windhoek sluit 'n 63-jarige...

Moller, Hatuikulipi se belange onder vergrootglas

16 ure gelede | Misdaad

Hoofredaksie – Een van die transaksies wat deur die Teenkorrupsie-kommissie (ACC) as deel van die Fishrot-ondersoek gefynkam word, is 'n bedrag van N$8 miljoen wat...

Rekening van N$151 000 bly toe 'jakkals' gly

16 ure gelede | Misdaad

Francoise Steynberg – 'n Vermeende glyjakkals wat vir 'n maand saam met sy gesin in 'n gastehuis op Swakopmund gebly en glo nie betaal het...

Mans vas oor vervalsing van Covid-19-toetsuitslae

16 ure gelede | Misdaad

Kristien KrugerTwee Zimbabwiese mans is Saterdag omstreeks 12:00 op Katima Mulilo in hegtenis geneem vir die besit was vervalste Covid-19 laboratoriumtoetsverslae van PathCare Namibië.Die mans...

Reënweer bring groot skade

16 ure gelede | Weer

Kristien Kruger – Terwyl Namibië die derde week van swaar neerslae binnegaan, is groot skade reeds aan paaie, landerye en ander infrastruktuur aangerig. Windhoekers is...

Weer vir 11 Januarie 2021

16 ure gelede | Weer

BINNELAND: Gedeeltelik bewolk en baie warm in die Noordweste, verre Weste en dele van die //Kharasstreek. Elders sal dit bewolk en warm tot baie...

Regering slaan toe op klaringsagente

16 ure gelede | Regering

Phillepus Uusiku – Die regering is in die finale fase van die instelling van strenger maatreëls vir die lisensiëring van klaringsagente.Die instellings beoog om die...

Nafau wen in hof teen Shoprite

16 ure gelede | Arbeid

Kristien Kruger en Adolf Kaure – Stakende Shoprite-werknemers was Vrydagmiddag verjuig toe die hoërhof in Windhoek beslis het dat ’n interdik teen die Shoprite-winkelgroep uitgereik...

Op die spoor van Hardapdam se opvangsgebiede

16 ure gelede | Infrastruktuur

Kallie Pauw (gasskrywer)Die onlangse wonderlike reën in groot dele van Namibië en verslae daaroor en foto's van vol riviere en dansende boere het mense (soos...