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CHAPTER 2 DESCRIPTION OF RESPONDENTS’ TRANSACTIONS The Financial Diaries are a unique tool that provides insights into how respondents earn income, prioritize spending, and use financial tools. Understanding each of these facets allows us to better understand the priorities and behavior of respondents on a week-to-week basis. This chapter summarizes these different transaction types in order to create a holistic understanding of how respondents earned and used money and which financial tools they relied on to manage these flows. INCOME In this section, we explore how respondents earned income through the sale of goods or services, including their own labor. We refer to any cash inflows that the respondents generated through the sale of goods or services as “income.” In all cases we are referring to respondents’ gross income—the revenue that flowed into their hands from the work they did or sales they made. This is especially important to keep in mind in the case of micro-retail businesses, which typically had considerable business expenses. When we discuss how respondents managed their cash flow in Chapter 4, we will provide more insight into the way in which micro-retail business owners juggled their business income and expenditures. SOURCES AND LEVEL OF INCOME On average, the Diaries respondents had 4.8 sources of income and earned ZMW 253 per week. Segmenting the data by livelihoods reveals that micro-retail businesses had the greatest number of income sources (6.8), followed by farmers (6.5). Formally employed respondents earned the most per week on average (ZMW 623) followed by micro-retail businesses (ZMW 476). Table 4: Income and Income Sources by Livelihood Number of Income Sources Average Weekly Income (ZMW) Micro-Retail Business 6.8 476 Farmer 6.5 121 Informal Labor Services 4.5 150 Formal Employment 2.5 623 Dependent 1 1.9 24 INCOME VARIATION Low-income people are vulnerable not only because their incomes may be insufficient for covering their expenses, but also because their incomes vary considerably from week to week and month to month. This is one reason why it is important for low-income people to have access to good financial tools—one of the most important functions of financial tools is to enable people to manage fluctuations in income so they can avoid going without food or other necessities. We measured the variation of respondents’ incomes in two ways. We looked at the coefficient of variance (COV), which is a standardized measure of how much a respondent’s income deviates from their average income. We also counted the number of weeks in which respondents earned no income (zero income weeks). The data reveal that respondents had great variation in their week-to-week income, with dependents having the greatest variation among all the livelihoods. Micro-retail businesses, on the other hand, had the least amount of variation when compared to the other livelihoods. 1 Though intra-household transfers dominated the inflows that dependents received, many of them also earned income outside of the household. The data reported for this group in this table and below refers only to the income dependents earned through the selling of goods or services, including their own labor. Go To Menu 11

Table 5: COV and Zero Income Weeks by Livelihood Average COV Zero Income Weeks as a Proportion of Total Weeks Micro-Retail Business 1.4 32% Farmer 2.1 53% Informal Labor Services 1.9 51% Formal Employment 2.0 74% Dependent 3.9 88% The number of income sources a respondent had was strongly associated with the variation in their income—the larger the number of income sources, the lower the variation measured by the COV (Figure 8). Figure 8: Average Number of Income Sources by COV 12 Go To Menu