Fast Lessons: building trust relationships

Consider the informal sector to be a bit like Web 2.0 - there's lots of money out there but you've no idea how to access it, and you have no idea how much any of the players are worth - or even how to trust them. That hasn't stopped trillions of dollars being invested into the Internet - what's stopping investment into the informal sector?

Tracking, tracing and measuring.

Google has become a multibillion Dollar firm not because they offer search but because they are able to link search terms to related commercial products. The largest gap in the informal sector is sophisticated measurement and tracking. There are a number of ratings firms looking at the informal sector, however they tend to look at it purely from a charity perspective. The microfinance sector is becoming part of the formal banking sector and credit ratings are being extended into this market with the old standards of Fitch and Standard & Poors being joined by PlanetRate and MicroRate, amongst others.

The power of the Web 2.0 movement has been that consumers are directly involved in co-creating the products they then consume. YouTube allows people to create their own movies online, eBay and Amazon have become market-places for other manufacturers. The informal sector could be as much involved in creating products as in purchasing them.

Gujarat Cooperative Milk Marketing Federation (GCMMF) is now the biggest milk producer in the world. They buy their milk directly from individual village subsistence farmers – more than 2.5 million of them across India. The milk is valued according to fat content and volume. They collect an average of 6.3 million litres per day, supply 2 340 million tons of animal feed per day back to the farmers, and earn $ 840 m annually in revenue with $ 30 m exported.

Much of this requires a significant change in the way in which a company is prepared to work: a highly decentralised approach; partitioning of the task (on site / off site, decentralised payments and services); world class centralised facilities to aggregate and control the products as they arrive. Each step is disintermediated from company control and you need to have access to information telling you how stable that partner is.

Whythawk is unique in rating different parts of the value chain, aggregating and deriving results from different sources.

Trust relationships are the most valuable in any commercial venture and you should spend time developing these prior to any commercial venture into the informal sector. You will be required to create unconventional partnerships with NGOs, health organisations, civic associations, stokvels and buying co-operatives.

Fast lessons for building trust relationships:

• Develop strategic partners who will supply you with information you can use to develop new products
• Trust relationships move security issues further down your value chain - they're not your problem
• The communities in which you work will see you as a partner and not as exploiting them
• You are going to have to develop an ability to work with a wide range of unconventional partners