Friday, 10 July 2009

Gettin' By - With Changing Money

This is part of a series called 'Gettin' By', about the informal job sector in Liberia. Please read this for explanation

Profession: Moneychanger and Phonecard Vendor

Location: Street Corners, Storefronts, Money Booths

How it Works:
The existence of money changers hinges on two basic realities: a dual-currency economy and a banking system that is so slow, its not worth waiting every day to get the better rates. A small niche,but an important one.

Liberia, like many developing nations around the world, uses the US dollar, as well as its local currency, the Liberian dollar, or ‘Liberty Dollah’. Many people – myself included – are paid in US dollars, receive US dollars from overseas or run businesses that operate primarily on US. But most local goods and services officially demand the use of Liberties.

And so changing must transpire.

At the booths, its almost exclusively a US changing into Liberty racket, though they will change the other way if you want. Street changers peg their exchange rate (written on the booth in the photo as 70, which means you get 70 Liberty dollars for each US buck) so that they make 5 Liberties for every $ 5 US they trade.

Typically, this rate is made over two transactions. One, changers set the rate a few per cent higher that the rate at Central Bank by a few Liberty: if Central Bank rate is $ 67 or 68 LD, then street rate will be around 70. Fairly straightforward.

The second flip is a bit more complex, and gets into the strange business economy here. Moneychangers (or the people who run the booths) take advantage of their US dollars to buy off street vendors. Essentially, street vendors depend on Greenbacks to purchase their raw goods – toiletries, rice, used clothes, socks and underwear, food – from the Lebanese merchants who control the supply chain. But, they sell the goods for Liberty on the street, or in the small shops. So, moneychangers use USD to go around and buy up the Liberties at an inflated rate, and bring it back to their booths to sell.

For example, if changers are trading at 70, they’ll charge 71.5 - 72 to purchase USD. This is done to the tune of a $40 US here, $200 US there, etc. Small-small.

Phone cards are bought in packs of 10 for $ 47 US, and sold for $ 5 /card at money changing booths. Also available is making phone calls on trader’s phone (in lieu of no pay phones), transferring money ($US 1 - 2) onto phones, and occasionally other services like loaning, or buying petty goods they have lying around (see plastic bags hanging top right photo, sold for $ 5 LD, or the shoe sitting on top of the box, $12US)

Money Earned: Top changers can trade up to $ 1000 US/day, meaning they make $ 1000 LD, or about $ 15/ day off that. They also sell 2 – 3 sets of phone cards, meaning another $ 10 US, maximum. This is rare though.

Some – as in many – only trade a mere $ 2 – 400 (and so earn only a $ 3 – 6 US), and sell a handful of cards, maybe $ 2 – 5 US more. Your gross depends on your commitment to hustling for connections. Knowing local business owners, and offering loans to the right people makes the biz a lot more profitable, and gives you a good local rep. All this increases your flow.

Lastly, the lowest earners are younger men that are paid a day rate by the people who supply the overhead. They usually get a flat rate $ 5 for a 12 (ish) hour day, plus limited use of phones and phone cards.

Variables and Dangers:
Holding so much money is a huge risk for so little cash. Strangely though, there are very few robberies, despite the fact that money often gets left out in the open. Changers tend to sit in pairs, or work outside businesses. This means a small, loyal army is on mutual watch, and will chase down any thief, and likely beat them senseless, or to death. That this occurs with some regularity in Liberia seems to serve as a fairly strong deterrent

Rain closes up shop for most, and sitting in the hot sun all day sucks.

Point of Reference: The cheapest cell phones in the country cost $ 35 US, and a scratch card


Anonymous said...

This picture and post is great :) Your Gettin' By series is really unique and interesting to follow. Thanks!

Nikunj said...

This is great. Really interesting.

Is there any stuff going on with mobile phones and money trasnfer?

Anonymous said...

Are you too busy yelling at the only female surfer in Liberia to write more blog posts?

mr_john said...

Great series. I always wanted to do a similar series in Jakarta.

Incidentally, a book came out recently called Portfolios of the Poor. I suspect you'd like it.

Lee said...

I'm really annoyed I can't use the money-changers in Southern Sudan any more. They're so convenient!

Marcus said...

That picture deserves another shout out! Well done!

Marcus said...

I think that photo deserves another shout out! Well done!