Microfinance in India

India Knowledge@Wharton writes:

In India, the history of rural finance is typified by the image of a nationalized banking system which has failed to deliver credit and, if it has, not been able to recover it. Microfinance, by contrast, is increasingly being seen as an innovation in lending and the panacea for rural India’s indebtedness to money lenders.

The recent focus on microfinance in India marks a paradigm shift in orientation. The recipients of state-sponsored subsidized loans in the early 1980’s, 75 million poor households today have become the driver of new assets. While no accurate estimate of the size of the Indian microfinance market exists, M-CRIL (Micro-Credit Ratings International), a leading micro credit rating agency based in Gurgaon, puts the estimated demand at Rs. 480 billion ($10.7 billion). That is calculated for 60-70 million households at an average household credit demand of Rs. 8,000 (less than $200).

Indian banks may soon saturate high- and middle-income customers with retail loans and home loans, and are under pressure to move to low-income and even poor households. To do this, they are choosing to partner with MFIs, most of which have current recovery rates of over 96%. Foreign banks with little or no presence outside India’s major metros are also looking to work with MFIs to secure their micro-lending market shares.

Fast Iterations

[via Thejo] User Interface Engineering writes:

“We make a lot of this stuff up as we go along,” the lead designer said. Everyone in the group laughed until he continued, “I’m serious. We don’t assume anything works and we don’t like to make predictions without real-world tests. Predictions color our thinking. So, we continually make this up as we go along, keeping what works and throwing away what doesn’t. We’ve found that about 90% of it doesn’t work.”

NetflixWe were talking with the design team at Netflix. Netflix.com is one of the most successful web sites in the world: the sole customer interaction point of their home DVD-rental business. Over the past 9 years, the site has grown from nothing to serving almost 6 million customers who use the site to prune their rental queues, rate movies, and handle any billing and transaction issues. The designers of Netflix.com have a smashing success on their hands, but we didn’t find them resting on their laurels. They want to get even better, and for them that means iterate, iterate, iterate.

Blogging as Business

The Economist writes:

Now, however, a third category is emerging: the mom-and-pop blog. In the old days, we used to be called newsletter publishers, says Om Malik, a technology writer who quit his job at Business 2.0 magazine in June to work full-time on his blog, GigaOm. He has hired two other writers, and his blog now attracts about 50,000 readers a day, generating tens of thousands in monthly revenues. Costs, including salaries, are around $20,000 a month.

One big reason why his blog works as a small business, says Mr Malik, is that an ecosystem of support is appearing. Like Ms Armstrong, he farms out advertising sales and administration to a firm called FM, launched last year by John Battelle, who once ran magazines such as Wired and the Industry Standard. In his old business of magazines, says Mr Battelle, the cost of acquiring an audience was stupendousat Wired it was about $100 per subscriber. The cost of building a readership for a blog, by contrast, is nil. Once you have a lot of readers, however, the bandwidth costs become significant, and most medium-sized blogs cannot afford to hire the sales people needed to generate sufficient revenue. So FM’s 15 sales people negotiate with advertisers on behalf of blogs they represent, keeping 40% of the resulting revenues.

3 and Mobile Data

Ajit Jaokar writes about UK-based 3’s decision to have a fixed rate pricing for mobile data and follow an open gardens strategy.

For years, the Mobile Data Industry wanted Web valuations without embracing the ethos of the Web.

And everything was done to show how Mobile Data is different

We tried Location
We tried talking of performance.
We tried User experience.
We tried content and also relevance

Most of all, we tried walled gardens and we avoided fixed rate billing

Walled Gardens and the lack of Fixed price billing were the two biggest factors throttling the uptake of the Mobile Data Industry.

Marketing and Social Networks

Technology Review writes:

If any social-networking company has found a way to rake in cash, it is MySpace; for example, Google recently agreed to pay $900 million for the exclusive right to provide Web searching and keyword-based text ads on the site. Of course, targeted advertisements distributed by Google and other companies provide the revenue that keeps many Web-based businesses afloat. But MySpace’s venture into consumer marketing has gone far beyond traditional advertising. The site has given members the technological tools to “express themselves” by turning their own profiles into multimedia billboards for bands, movies, celebrities, and products. Think MTV plus user photos, bulletin boards, and instant messaging.

I realize that in criticizing a pop-culture mecca frequented by millions of people, I risk sounding just as out of touch as DOPA’s supporters. But after spending the last few years chronicling the emergence of social networking and other forms of social computing for this magazine, I had higher hopes for the technology. To me, the popularity of MySpace and other social-networking sites signals a demand for new, more democratic ways to communicate–a demand that’s likely to remake business, politics, and the arts as today’s young Web users enter the adult world and bring their new communications preferences with them. The problem is that MySpace’s choice of business strategy threatens to divert this populist energy and trap its users in the old, familiar world of big-media commercialism.

Nicholas Carr has more.

TECH TALK: Cyworld: Success

Alan Moore of Communities Dominate Brands talked to Benjamin Joffe of Plus Eight Star Ltd, who outlined the early days and key success factors for Cyworld:

According to its founder Young Joon HYUNG, Cyworld’s success is the resul of a combination of factors which allowed his vision to come true. This vision was a development on concepts such as the “six degrees of separation” and an adaptation to the individual of ERP concept (Enterprise Resource Planning). Cyworld’s founder called it ‘PRP’ for ‘Personal Resources Planner’, which he developed during his PhD Thesis on ‘trust-based information sharing’ at KAIST, South Korea’s MIT, in 1999.

This was the founding concept, which could be implemented because of:
1). Korea’s highly advanced broadband infrastructure
2). Meeting with a perfect timing with the digital camera boom in Korea in 2002
3). Persistence until broadband penetration in households reached 60%

Other experts we interviewed mentioned the importance of:
1). Introduction of cybercash (‘dottori’ or acorns) with a large array of payment methods
2). Paradigm shift from the advertising-reliant online services
3). Shift from mass community to personal community
4). Buy-out by SK Communications, which boosted both marketing and technical infrastructure

Business Week had this to say about Cyworld in a September 2005 article:

One feature that has helped Cyworld take off is “wave riding.” It works like this: When you’re reading posts on bulletin boards or looking at photo files, you can click on the name of someone who has added a remark or photo you find interesting and you’ll be transported to that person’s digital room. If you like the art or music, you can introduce yourself and put in a request to become a “cybuddy.” If accepted, you can use your buddy’s goodies — from art to photos — on your own page. The chain of wave-riding visits creates communities on the Net, which often develop into clubs of common interest in the real world: clubs for fishing, bike riding, and going to jazz performances, among others.

Letting users post as many photos as they want is another big draw. The growing popularity of digital cameras and camera phones means youngsters increasingly use digital images to share experiences or express themselves. An average of 6.2 million photos are uploaded to Cyworld each day, many of them directly from cell phones. “I use Cyworld as the photo archive for my family,” says Kim Joon, a 31-year-old software engineer who met his wife through a Cyworld club for virtual “families” in which he first played her husband. “My 1-year-old son will have a photo log of his life in Cyworld 20 years later.”

Business 2.0 wrote about the personalisation and virtual currency aspects in Cyworld in July 2006:

As Cyworld gathered a critical mass of users, it discovered a new business model. Using the site was free; personalizing it was not. If you wanted to decorate your mini-homepage, you could choose from tens of thousands of digital items – homepage skins, background music, pixelated furniture, virtual appliances. But you had to pay for them with “dotori,” or acorns, and you had to buy the acorns with real money.

The virtual goods were cheap – typically less than $1 apiece – and consumers had no problem paying for them. A well-appointed mini-homepage reflected your social standing, and users who did not decorate were considered boring.

This year Cyworld expects to make $140 million in sales, with acorns accounting for 70 percent of that. That means Korean consumers will shell out more than $100 million this year for Cyworld’s virtual inventory. Most of the rest its sales comes from mobile services, where customers pay to upload photos (90 percent of all images uploaded in Korea go to Cyworld).

Tomorrow: Success (continued)

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