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Figure 9: Average Number

Figure 9: Average Number of Income Sources by Proportion of Zero Income Weeks to Total INCOME LEVEL AND VARIATION In the previous two sections, we discussed the level and variation in the incomes of our respondents. These two dimensions of cash flow can have important ramifications for the types of financial tools they need. For example, a person who sells vegetables every day and earns a regular income from those sales has different cash flow management challenges than a person who performs irregular piecework to earn a living, even though their average incomes may be the same. A person who earns enough to save up money for a future purchase or investment has different cash flow management challenges than someone who simply earns enough to survive, even though the regularity of their incomes might be similar. To summarize these different patterns of income, we divided respondents into four segments based on whether their level and variation of income were above or below the median for the sample. We then looked at the distribution of livelihoods across these four segments. This grouping showed that respondents with higher incomes were also more likely to have lower variation in their income, while people with lower incomes were more likely to have more variation in their income. One hundred and twenty of the 337 respondents (36 percent) who reported earning any type of income during the study were in the high-income/low-variation segment, while 118 (35 percent) of the respondents fell in the low-income/high-variation segment. There were 48 respondents (14 percent) in the highincome/high-variation segment, and 51 respondents (15 percent) in the low-income/low-variation segment. The two most populous segments show that there is a relationship between livelihood and segment—dependents were more likely to be in the low-income/ high-variation segment, and micro-retail businesses were more likely to be in the high-income/low-variation segment. That makes sense in that a successful micro-retail business is more likely to have a steady revenue stream, while dependents may occasionally work. However, the relationship between the two characteristics is not absolute. Micro-retail businesses and dependents were found in all four segments. Go To Menu 13

Figure 10: Income Segmentation Model by Livelihood Farmers and informal service workers were also well-represented in all four segments. This finding confirms what we reported based on our interim analysis of the Zambia Diaries—we cannot assume that all smallholder farmers have similar income patterns. FSPs wishing to offer them products or services will require an understanding of their cash flows, including the level and variation of their incomes. We will return to this point in Chapter 4. Finally, the segmentation model shows that respondents in formal employment, who received monthly salaries, were almost all in the two high-income segments. Two-thirds of respondents who earned income from formal employment had highly variable incomes. These respondents typically received their salary payment once during the month and earned very little or no income the other weeks. The remaining third had lower variability suggesting that they received their salary one week and earned income from other sources during the remaining weeks of the month. This additional income reduced their week-to-week income variation. 1 As with farmers, these data suggest that knowing a person’s livelihood may be insufficient for understanding their financial service needs as these two groups of formally employed respondents may require different financial services to intermediate their cash flow despite receiving a predictable, salaried income every month. By definition, individuals in the high-income segments had much higher average weekly incomes than those in the lower-income segments. There was little difference in the income of the two high-income segments, but the low-income/high-variation segment had significantly lower levels of weekly income than the low-income/low-variation segment. The former was about 60 percent of the latter. Table 6: Average Income per Week by Income Segment Segment Average Weekly Income (ZMW) High-Income, High-Variation 404 High-Income, Low-Variation 521 Low-Income, High-Variation 32 Low-Income, Low-Variation 55 The average COV of the formally employed high-variation group was 2.2 compared to 1.65 for the low-variation group. Those with high variation experienced 37 weeks in which they earned no income on average, which is further evidence that this group of respondents did not receive non-salary earnings. The low-variation group experienced 27 weeks in which they earned no income, on average. 14 Go To Menu

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