Category: Impact Stories

AE Impact Story: Understanding Payment Trends

Aim of the Project

In Barbados, consumers can pay for goods and services using cash, debit cards, credit cards, cheques, or direct debits (automated payments) from their bank account or online services that link to their credit/debit cards. Our client wanted to understand why the use of certain payment methods was declining while others were increasing, as some of the popular payment methods were more time consuming and posed security challenges, and it, therefore, was not intuitive why they were so popular.

What we did

The payment market has four major players:

  1. Consumers – they determine which payment methods they prefer to use to conduct their business
  2. Merchants – they determine which payment methods they are going to accept within their companies
  3. Financial institutions – provide the various methods of payments to both consumers and merchants, and therefore partially influence what is available in the market
  4. Payment processing companies – provide and operate the platforms on which the payments are transacted; in Barbados these include both private companies and Government-operated clearinghouses.

Each of these players could be making strategic decisions that influence the use (or non-use) of the available payment methods. Background analysis ruled out the payment processing companies as potential influencers, as they had not changed any of their fees, rules or processes in the time period under investigation. To determine how the other three players could be contributing to the observed trends, we conducted a survey with consumers, a survey with merchants, and stakeholder interviews with financial institutions. The findings of all three exercises were analysed and collated into a summary report that highlighted the main factors that explained the changing use of payment methods. The results were then presented to both our client and some of their key external stakeholders.

Impact of Project

In light of the findings, our client revised their corporate strategy to better encourage the use of the payment methods they preferred, and developed a supporting marketing campaign. Their approach therefore spanned both marketing and product design, and early indicators suggest that their efforts have started to result in the market changes that they desire.

Determining the Optimum Cost Structure for a Development Programme

Aim of the Project

A Caribbean development programme, designed to support community development through the provision of grants for community projects, was labelled as high cost due to its relatively high Country Administration Cost to Grant Making Ratio. In other words, the administrative cost of providing the grants far exceeded the total value of the grants that were actually provided. One possible explanation could be that the structure of the programme was either not cost effective or it did not allow for the generation of sufficient grants. Antilles Economics undertook a study to assess the root cause of the high costs and determine the most efficient, effective, results-generating, sustainable and cost-mitigating structure to manage the programme. One unique characteristic of the programme was that it was designed to ensure that support was provided on a country-by-country basis and it was important that this decentralized approach was maintained in any solution.

What we did

We began by reviewing a number of documents on the programme to ascertain background information as well as to lay the foundation for the other approaches to be used. We also gathered information on the management and cost structure of similar programmes internationally to identify best practice.

We then conducted interviews with key stakeholders to establish an initial assessment of the pros and cons of the current system as well as to gather details on the process for approving and providing grants. We also solicited ideas from the volunteers that drove the execution of the programme on the ideal management and cost structure as well as where cost-cutting measures could best be applied. This ensured that any recommendations reflected the experience of those working within the programme, were framed within a set of feasibility parameters and allowed volunteers to maintain the flexibility necessary when utilizing a decentralized framework.

Finally, information was gathered on cost-effective technology solutions that could supplement the existing systems and allow for further cost savings. Wherever possible, these solutions were incorporated as complements to the existing system.

Impact of Project

Four reorganization options were identified and compared in four main areas: ability to maintain the spirit, practice and objectives of the programme; flexibility in the business environment; organisational structure and processes; and, ability to effectively manage staff and volunteers. Criteria were established for each key area and each option was scored based on its ability to achieve the criteria. The best-performing option was recommended to the client. Since adopting the new structure, the client reported improved motivation of staff and increased grant requests.

Greening Vehicular Transport in the Caribbean

Aim of the Project

Caribbean countries are largely dependent on fossil fuels to supply most of their energy needs. In Jamaica fossil fuel imports account for 28 percent of merchandise imports, and for 27 percent in both Guyana and Cuba. One of the main consumers of energy imports in the region is the transport industry.

Having regard to this, a study – “Greening Vehicular Transport in the Caribbean” – was commissioned by an international donor organisation. The main goal of this project was to conduct a cost-benefit analysis to assess whether the electrification of transport in a small island economy – Barbados – could reduce dependence on fossil fuels, boost economic growth and enhance sustainability.

Antilles Economics was engaged by the organisation to conduct the study and present the results at a regional workshop involving policymakers.

What We Did

This project required a number of research approaches. First, stakeholder interviews were conducted with individuals in transport, finance, and electricity generation and distribution. Second, a survey of consumers was conducted to assess their willingness to use and pay for electric vehicles as well as their general opinions and views on greening transport. Finally, the primary data collected was combined with secondary data to provide an assessment of the potential impact of greening transportation on foreign exchange reserves, business investment, the environment, fiscal balances and economic growth.

The study found that greening the transport industry could hold a number of macroeconomic and environmental benefits, such as having a national store of renewable energy. The paper also reported that there is demand for electric vehicles but the current incentive structure is somewhat perverse.

Impact of Project

The results from the project were presented to a regional group of stakeholders and policymakers interested in transportation. Since the dissemination of the report more countries in the Caribbean have begun the electrification of their transport industry, particularly in the OECS. In addition, many of these countries have reformed their tax and duty structure to make electric vehicles more economically feasible.

AE Impact Story: Estimating the Size of the Middle Class

Aim of Project

The growth of national incomes in the Caribbean and Central America suggest that poverty rates in the region should be falling and that a larger proportion of the population is moving into the middle-income and higher income classifications. As such, a larger proportion of the population within these countries should be able to afford certain goods. If this is the case, this region would have represented a significant growth market for our client.

Antilles Economics was commissioned to estimate the size of the middle class, its expected growth rate, the average monthly expenditure by middle-income household, and the proportion of that expenditure that was dedicated towards the category of items our client sold.

 

What We Did

Unfortunately, there was no single database that would have allowed us to answer all of these questions for all of the countries under consideration. Furthermore, the definition of ‘middle class’ varies according to the unique income distribution characteristics of each country. As such, we compiled data from multiple reports in both English and Spanish. The data was standardised to ensure comparability and the required estimates were computed using various statistical techniques.

 

Impact

The client used the information to determine whether to increase its investment in the region; to identify the countries that could propel growth in revenues; and, to inform its medium-term strategy for the region generally.

AE Impact Story: Relationship Between Imports and Production/Sales of Poultry Products

Aim of Project

The production of poultry meat is one of the largest areas of agriculture production in Barbados. In 2013, just over 13 million kilograms of chicken meat was produced, more than twice the amount of pork, beef, veal, mutton and turkey combined. The local chicken market is protected from significant competition from imported chicken since importing poultry is only permitted under special circumstances.

The goal of this project was to investigate the link between the imports of poultry, local production/sales and market prices.

What We Did

We employed a number of statistical techniques to investigate the relationship between poultry imports and various indicators of the performance of the domestic poultry industry. In addition to poultry imports, we also identified the other potential determinants of local production and sales of poultry.

The results of the analysis indicated that due to the relatively small amount of imports, there was little to no association between imports and domestic production/sales of poultry in Barbados. Instead, key supply-side determinants played a pivotal role, including the production of other meats and the price of poultry products.

Impact of Project

The results were used to help inform import and competition policies in the local poultry industry. 

AE Impact Story: Modelling the Stability of the Barbadian Financial System

Aim of the Project

The financial system is one of the most important parts of an economy, governing all movements of capital between agents. It also provides useful indicators of the health of an economy and various groups such as government entities, private companies and individuals. Many observers of any economy will therefore pay close attention to developments that could affect the stability of the financial system.

Antilles Economics was engaged by an international body to develop a model of the financial system of Barbados and to conduct an analysis of its stability.

What We Did

This project required a number of modelling techniques, including both regression analysis and statistical analysis. The first step was to build a model that accurately captured the linkages between financial agents and the rest of the economy as well as between financial agents.

We then assessed whether various stakeholders in the economy were responding to legislative changes, economic developments, internal decisions or some combination of these.

Finally, we estimated the extent of the shock that would be required to cause the financial system to fail. We considered three types of shocks: those originating from outside of Barbados; those originating from within Barbados, but outside of the financial system; and, those originating from within the financial system itself.

Impact of the Project

The resulting model and analysis was used by our client to strengthen their surveillance of Barbados. It was also used to help our client determine what additional support it could provide to the Government of Barbados.

AE Impact Story: Forecasting the future of the Barbadian Insurance Industry

Aim of the Project

The great recession that began in 2007 was a period of significant uncertainty. Economic activity in most Caribbean countries contracted, resulting in rising rates of unemployment and reduced sales for most companies.

Our client was a company within the Barbadian insurance industry, which is particularly sensitive to changes in the labour market. The Managing Director believed that the uncertainty within the local and international economy warranted a more rigorous approach to their annual strategy development sessions.

Antilles Economics was tasked with helping the MD understand the economic developments currently affecting his company, as well as anticipating how these developments could impact the insurance company’s revenue stream.

What we did

Antilles Economics has a proprietary macroeconomic forecasting model for Barbados. We used this model to provide macroeconomic forecasts for the next six years. In addition, a new module was constructed to forecast premium income and other company-specific information.

This forecasting exercise correctly predicted the reduction in real GDP in 2008, 2009 and 2010. Using this information and other predictions from the model, we provided additional information on the likely path for both insurance claims and premiums. The model also accurately forecasted the falloff in revenue premiums as well as the reduction in new policyholders.

Impact of the Project

The results of this forecasting exercise formed the foundation of the company’s strategic plan for the next few years, and our client was able to plan for the downturn before it arrived.

The MD presented the projections to the Board of Directors and successfully argued the need to implement revenue-enhancing and cost-control measures as a matter of urgency. Being able to anticipate what has turned out to be one of the longest economic slumps in Barbados in decades allowed our client to develop strategies to minimise its negative impact on the company’s bottom line.

AE Impact Story: Impact of Legislative Change on Demand for Medicines in Barbados

Aim of the Project

In early 2011, the Government of Barbados introduced a dispensing fee for prescriptions filled at private pharmacies. This fee, the equivalent of 30% of the cost of the medicine, was expected to raise US$6 million for the Government and reduce the budget of the Barbados Drug Service by US$8.7 million.

The goal of this project was to identify the implications of this policy change for the demand for medicines, and identify a strategy that would stimulate continued growth for our client.

What We Did

We conducted a comprehensive assessment of the key policy documents related to Barbados’ policy regarding medicines, and surveyed and interviewed four key stakeholder groups: (1) consumers; (2) doctors; (3) pharmacists; and, (4) government and international health agencies. We needed to understand how their behaviour had evolved since the change in policy, as well as their views on how the market demand for medicines would continue to evolve.

The results of the secondary research and surveys formed the inputs into a forecast model to simulate the likely impact of the policy change on market demand over time. In addition, an assessment of the behavioural changes likely to have been adopted by pharmacists, doctors and consumers was provided.

Impact 

The results were used by the client to adjust their marketing and distribution policies in the Barbados market.

Their proactive approach allowed them to grow market share and maintain profitability, despite the negative impact of the policy change on overall market demand for medicines.