Moussa Kane is providing entrepreneurs in West Africa's giant informal economy with incentives and training to move into the formal sector. By raising awareness of the disadvantages of the informal economy and securing credit and management training for informal-sector entrepreneurs, Moussa is creating a model for broad social change.
The New Idea
Moussa Kane has begun to organize Mali's informal economy into a formal association that compiles data on the informal sector and provides basic services to impoverished entrepreneurs. The association provides startup equipment and in-kind loans to entrepreneurs and offers business and financial training to help small ventures succeed. His organization is the first company of its kind in Mali to be owned by its due-paying members, and it is financed and run entirely by members of the informal sector. Its services will be accessible to the approximately 40 percent of Mali's population involved in the informal sector.
Other attempts to organize the informal sector have been top-down projects initiated by the government, multilateral donors, and economists. All have been structured so that the government reaps the obvious benefits. There has never been a system of incentives for members of the informal sector, nor has there been any thought of including them in plans for their organization. Moussa's experiences as a member of the informal sector will help him successfully organize his peers and eventually spread his network of support across West Africa.
The volatile nature of the so-called informal sector (composed of people working on the "black market," in which labor is neither registered nor taxed) makes it difficult for West African states and multinational agencies to get accurate statistics on its size. Moussa and his organization estimate that 40 percent of Malians work in the informal sector – a clear majority of the work force.
Although it provides basic sustenance to many, the informal sector is disorganized and risky. Members of the informal economy, like the street vendors that crowd Bamako's avenues, do not have access to loans, are harassed by the government for their occupation of unregistered public space, and are vulnerable to complete collapse in the event of an illness or accident. Furthermore, most "informal entrepreneurs" do not understand the essentials of bookkeeping, business management, and resource allocation, and are therefore unable to turn a consistent profit.
Moussa disagrees with economists who claim that people stay in the informal sector to the burdens of taxation and regulation. His experience in the informal sector has taught him that most businesspeople simply do not have access to the right training and information to organize themselves. "We can get organized without searching for money from the Europeans, the Americans, or from international agencies," says Moussa. "The root source of the problem is not the lack of production but the fact that each person produces in disorder, without information." Rather than providing help and incentives for informal sector entrepreneurs to enter the formal economy, the Malian government has typically adopted repressive measures.
Through the Malian Fund of the Informal Sector (CMSI), Moussa helps entrepreneurs working in the informal sector organize and succeed, and eventually make the transition into the formal sector. The CMSI, created in 1998, is a mutual company financed by regular member contributions. Its decentralized structure in the 701 communes of Mali allows it to work closely with its clients, whom it finances through low-interest, in-kind loans paid for by its non-refundable membership dues. The dues are very inexpensive, and are affordable for the poor working in the informal sector.
The loans serve several purposes. First, they help launch new businesspeople who have no capital for initial investments in equipment. After conducting a careful assessment of the feasibility of the entrepreneur's idea, the CMSI will purchase equipment and loan it to him/her. The entrepreneur will then gradually pay off the equipment and gain ownership of it. Second, the loans provide a safety net for CMSI members in the event of illness or accident: CMSI will cover the costs of basic food and health expenses on the condition that these are paid back once the worker regains health.
CMSI members who pay the minimum fee of 375 CFA Franc (U.S. $0.60) per week can access loans of 25,000 to 500,000 CFAF (U.S. $39.68-$793.50), while those who contribute 550 CFAF (U.S. $0.87) per week can access 40,000 to 10,000,000 CFAF (U.S. $63.48-$15,870.00) worth of financing. For members who contribute 700 CFAF (U.S. $ 1.11) per week, the credit line ranges from 50,000 to 15,000,000 CFAF (U.S. $79.35-$23,805.00). The fund imposes a regressive tax for members who contribute monthly or quarterly, but the same competitive annual interest rate of twelve percent applies to all cases. Project and management training designed to help fund members succeed in the formal sector is free for all fund members.
The contributions of thousands of CMSI members, even at the weakest rates, are already bringing in many million CFA francs to the fund, which is quickly creating the pool of resources needed to run its loans program. As Moussa explains, one cannot change the practices of the informal sector without incentives like low-interest loans. When informal sector businesses want to take out loans from the fund, they must be registered, pay dues, and submit to basic transparency requirements. Thus, Moussa helps his colleagues to formalize their business activities and make them eligible to enter the formal economy.
The CMSI also trains all of its members in basic business and financial management. Seminars are run for new members before they become eligible for loans, and the initial loan then serves as a first application of their lessons. Loans are discontinued if the members are unable to provide consistent, timely financial and strategic reports. The training sessions and requirements of financial discipline constitute CMSI's core agenda: to teach the poor the tools, information, and discipline they need to succeed.
Moussa's other goals include setting up a reliable statistical system by computerizing membership information, and reforming the anarchistic occupation of public spaces by informal sector operators. Each member of the fund is issued a card with computerized data that will play a major role in controlling and maintaining the transparency of CMSI's activities at various levels. Monitoring informal sector businesses via computer is a huge step toward understanding and catering to the domestic economy. To develop this monitoring technology, Moussa has been working closely with software companies in Bamako, and has recruited the support of several of the fund's members to finance the project. Moussa has also worked to provide street vendors with officially registered space for their sales, and has succeeded in altering the dynamics of street business in Bamako significantly.
Moussa explains that his project's first positive feedback came when entrepreneurs working in the informal sector expressed their willingness to participate in the endeavor. His next step was to secure the government's sanction for his work. Moussa managed to secure the support of key Malian ministries, which will prove important for his program's success. He lobbies various government departments by detailing the benefits (principally in terms of tax revenue) the government could reap from his project. At the same time, he works with government to put in place additional legal and fiscal incentives for informal entrepreneurs to move into the formal sector.
Moussa's project, though still at the pilot stage, is progressing very quickly. He has already set up institutional mechanisms to manage the fund's investment pool so that it conforms to the legal requirements in Mali and in the West African Economic and Monetary Union. The CMSI started in Bamako and will soon spread to other regions of Mali through its members and networks of informal sector unions; Moussa's vision is to create a nation-wide network over the next few years. To accomplish this, he has launched a media campaign to raise CMSI's visibility and created incentives for membership growth. During the well-known Malian television discussion series Parlons-en ("Let's Talk About It"), Moussa held a debate in the Bamana language with the aim of spreading information regarding CMSI and its objectives to a larger audience. The broadcast marked the launch of Moussa's communications campaign, and he has since negotiated several contacts with the Malian media to publicize his initiative.
More importantly, Moussa allows members to sell memberships to others and keep 10 percent of the initial membership fee. The CMSI therefore grows on its own as word spreads of its services. There are currently over 2,000 members, and that number has grown from 200 in less than a year.
In the 1980s and early 1990s, Moussa traveled and worked in Africa, Asia, Europe, and North America. During his travels, he learned about business management practices and a variety professional associations. He quickly saw the need for such associations among the members of West Africa's huge informal economy.
He came back to Mali in 1987 and set up his own successful business in the informal sector. During this time, he became interested in the close relationship between micro-economic and macro-economic success, especially with respect to the informal sector's relationship to Mali's economy as a whole.