Small Fish, Big Catch
Monday, October 8, 2007
Unreached.’ ’Unbanked.’ ’Unelectrified.’ ’Unserved.’ These are the new keywords for business leaders, who are working overtime to tap into the poor consumer market in a win-win deal for businesses as well as the poor.
It was recognised recently yet again when Al Gore conferred a Green Oscar (Ashden Award) on Selco India for “demonstrating that it is possible to run a renewable energy business, which is both a striking commercial success, and which lifts people out of poverty, too”.
Bangalore-based Solar Electric Light Company or Selco India is a private business that seeks to provide affordable and commercially viable solar energy services to rural people in Southern India.
Says managing director H Harish Hande, “We are proving that poverty, sustainable technologies and climate change solutions are not only inter-related, but also commercially viable.”
Operating with the help of 125 employers out of 25 mostly rural centres in Karnataka, Kerala and Andhra Pradesh, Selco provides solar energy to 80,000 previously unelectrified clients (more than 3,00,000 people).
A two-light solar home system costs Rs 12,500 and four-light system costs Rs 20,000, including installation and one-year-service contract, which can be financed from rural banks, leasing companies, and micro-finance organisations.
After an initial down payment of up to 15% (in case of commercial banks), the repayment is to be made through equated monthly installments of up to Rs 400 for a maximum of five years, which can be paid back from the extra income borrowers are expected to generate with the help of newly available electricity.
In five years, the company plans to diversify from a rural solar company to a rural energy service company with an additional client base of 2,00,000 and expand its portfolio from solar lighting and solar electricity to offer products and services for cooking with biogas, biomass and dryers.
It’s not only budding entrepreneurs who are exploiting untapped business opportunities in social markets, but also established global players. Recently, wireless telecommunications research and development major Qualcomm unveiled its Fisher Friend mobile application, which leverages wireless and ICT technologies, for providing real-time information to fishing communities.
Explains Kanwalinder Singh. president, Qualcomm India & SAARC, “Qualcomm is highly motivated by how our technologies can improve people’s lives, and we are continuously creating a technology environment that enables innovative and effective solutions to be developed and delivered successfully.”
Launched by Qualcomm under its Wireless Reach initiative in collaboration with the MSSRF, Tata Teleservices and Astute Systems Technology, Fisher Friend enables fishing communities to work safely and earn more by accessing necessary information anytime, anywhere at the press of a button.
The target is to provide CDMA2000 wireless connectivity solutions to 65 Village Resource Centres in West Bengal, Orissa, Maharashtra, Andhra Pradesh, Karnataka, Tamil Nadu, Goa, Gujarat and Kerala.
Emerging businesses don’t necessarily have to be completely out-of-the-box business solutions. Even established global majors are embracing new vision to tap into unreached markets. In June, computer technology giant Microsoft India launched Unlimited Potential.
After reaching the first billion people, Microsoft is targeting the next billion people by 2015. Says Ram Narayanan, director (Emerging Segment Market Development), Microsoft India, “India is an important market in the world and we are making long-term investments to provide relevant and affordable access to technology to the unreached in the country.”
Education will be the main vehicle. Microsoft is tapping into the pool of schoolchildren under a Connected Learning Framework called IQ. School going children will be offered dedicated education solutions from key partners. The need-based programme will offer tutorials for homework, English language, competitive exams, etc. Another initiative, the MSN IQ Beta Education Channel will serve as a knowledge bank for educational and edutainment content.
Similarly, MultiPoint has been designed for Indian government schools where the ratio of students per PC is very high. Using simple technology, it ensures that the dominant child does not appropriate the PC to himself and multiple users share it equitably.
Microsoft is not new to the educational sector in India. Project Shiksha, started in 2002, focussing on IT literacy, has so far enrolled 1,60,000 school teachers and eight million students in government schools across the country.
If others are not unveiling new grand visions for the bottom of the pyramid, they are busy consolidating their existing businesses and adding innovative products and services.
In May 2007, Citibank and SKS Microfinance announced a Rs 1.8 Billion financing programme. The tie-up envisages Citi buying loans originated by SKS and disbursal of loans of Rs 5,000-Rs 20,000 to 2,00,000 unbanked customers in 7,000 villages in 11 states this fiscal.
Active since 1999, the Citibank Microfinance Group has been already working with micro-finance institutions (MFIs) like Hyderabad-based Basix and Mumbai-based Swadhaar and offering financial services and products to the unbanked. The group has been also offering loans of Rs 1,000-Rs 25,000 to economically active and low income individuals.
Last December the bank also deployed a specially developed, first-of-its-kind biometric ATM to bond better with its customers as well as to lure new ones. Equipped with multiple language capabilities as well as a voice enabled navigation facility, the ATM guides customers by simple displays and operations.
Besides, the bank is also exploring the possibility of offering insurance and remittance products. Elaborates Alok Prasad, business manager of the Citibank Microfinance Group in India, “Focussing on financial inclusion, we are finding structured ways and innovative means of providing a full range of financial services and products for savings as well as credit to the unbanked. The aim is to get the bank to customers rather than get customers to the bank.” It’s a big business proposition, considering that estimates say that 40% of Indians don’t have a bank account.
A pioneer like ITC’s e-choupal is always on an expansion trajectory. In next six years, it’s targeting to reach a billion people. Set up in 2000, e-Choupal has today 6,400 kiosks to service 4 million rural customers or nearly 20 million people in 38,500 villages of Madhya Pradesh, Karnataka, Andhra Pradesh, Uttar Pradesh, Maharashtra and Rajasthan. The farmers are engaged in the cultivation of soyabean, coffee, wheat, rice or shrimp.
Set up by ITC’s International Business Division, e-choupals run by trained farmers or sanchalaks leverage information technology to provide information, products and services.
Whether it’s information on scientific farm practices, market prices, weather and risk management, all information is offered in vernacular language. Services include facilitating purchase of produce from the producer.
It’s a win-win situation. Says S Sivakumar, chief executive of ITC’s Agri-businesses, “While farmers benefit from increased productivity and market driven prices, ITC gains by eliminating supply chain add-on costs, resulting in lesser cost of procurement despite paying higher prices.”
Another pioneer Hindustan Unilever Limited too has ambitious goals to expand its direct reach footprint in rural India. The company is targeting to have on roll 1,00,000 entrepreneurs to reach 600 million consumers in 5,00,000 villages by 2010 under its Project Shakti.
Today the micro-entrepreneur driven project reaches three million households spread over 1,00,000 villages having a population of less than 5,000 each. The initiative has turned 37,000 underprivileged women into entrepreneurs, providing a sustained source of livelihood to them. These entrepreneurs get skills enhancement training too. They are also enabled to access micro-credit.
Explains Sanjiv Kakkar, executive director (sales and customer development): “Project Shakti is a unique initiative that works for both business and social development. It has been able to create a sustainable and scalable business model with the ability to reach out to the unserved or underserved markets.”
Selco, Microsoft, Citibank, ITC and Hindustan Unilever may be successful examples, but they are touching only the tip of the iceberg of the poor market in the country. The total bottom of the pyramid market comprising a population of 924 million (95% of the total population earning up to $3,000 annually) is worth an annual spend of $ 1,205,668 million (85% of the annual national expenditure) in India, as per The Next 4 Billion: Market Size and Business Strategy at the Base of the Pyramid, which was brought out recently by the International Finance Corporation and the World Resources Institute. And it doesn’t call for another report to point out that the bulk of this poor market is still waiting to be tapped!