Category: Deeshaa (Rural Development)

WSJ writes:

WSJ.com: When you design products for the poor, what must you keep in mind?

Mr. Fisher: The No. 1 items will be money-making devices, and money-saving ones only if they’re extremely cheap. You need something easy to maintain without many tools, and something that can be easily transported, because the poor live in remote areas. It can’t require a pickup truck. Human powered — maybe no petrol and no electricity. It has to be energy efficient. You’re dealing with 80 watts of human power.

Mr. Polak: You have a whole different range of affordability when you’re surviving on a dollar a day. We see it a little differently on quality versus affordability. People will pick a product that only lasts two years if it’s cheap. But some of the design principles are the same [as when you design for the rich] — you look at a tool and identify the key contributors to cost and look at ways to design around them.

Sramana Mitra points to a paper by Kirk Magelby and writes: “MicroFranchising is a development tool that seeks to apply the proven marketing and operational concepts of traditional franchising to small businesses in the developing world. The primary feature of a MicroFranchise is its ability to be streamlined and replicated. The businesses are designed for microentreprenuers and usually target development issues such as health, sanitation, and energy.”

The Economist writes in a survey: “After this year the majority of people will live in cities. Human history will ever more emphatically become urban history.”

The Mint has an article by Atanu Dey and Reuben Abraham:

India has a choice of futures, say, in 2030. Will the majority of Indians continue to live in 600,000 small villages engaged in near-subsistence agriculture or will they be in living in 600 well-planned vibrant cities (or 6,000 towns of 100,000 population, for that matter) working in non-agricultural sectors and enjoying a rich social and cultural life?

Depending on how we use our resources, the latter future can be a reality. Achieving that reality would be the greatest challenge for India and arguably, the most rewarding as well. Rather than trying to trap people in villages and agriculture, the focus should be on the creation of new urban centres which will lead to economic growth and development of people

Atanu Dey has put up his presentation on RISC made recently at ISB. It is good supplemental reading to the ongoing Tech Talk series.

India Knowledge@Wharton writes:

On one side are the fast-moving consumer goods (FMCG) and the consumer durables companies. On the other are consumers in rural India, potentially the largest segment of the market. Finally, the two are coming together.

The fact that this has not happened in the past is not for want of trying. In Mumbai and New Delhi corner offices, executives have long recognized that to build real sales volumes they will have to reach outside the big cities. In several categories, rural India already accounts for the lion’s share. According to MART, a New Delhi-based research organization that offers rural solutions to the corporate world, rural India buys 46% of all soft drinks sold, 49% of motorcycles and 59% of cigarettes. This trend is not limited just to utilitarian products: 11% of rural women use lipstick.

The Economist writes:

Microfinance is in vogue thanks partly to the IFIs, which provided grants, loans and training to untested microcredit institutions. The private sector shunned the riskout of ignorance, a lack of expertise and fears that making money from the poor would look predatory. The pioneering work of donors means there are now some 10,000 microfinance institutions lending an average of less than $300 to 40m poor borrowers worldwide.
…
Only a fraction of the world’s 500m impoverished micro-entrepreneurs have access to the financial system. There is not enough donor or socially responsible money in the world to meet the demand. That’s why microfinance needs private-sector capital. Aid agencies, philanthropists and well-meaning social investors can help attract it by investing only where commercial outfits will not. When the children come of age, the best parents step aside.

A note from Nokia: “Mobile communication is revolutionizing economic and social life in rural India, spawning a wave of local entrepreneurs and creating greater access to social services according to a new study by The Center for Knowledge Societies (CKS) commissioned by Nokia. The research identifies seven major service sectors including transport, finance and healthcare that could be radically transformed through mobile technologies.”

Atanu Dey writes:

I briefly surveyed all major areas of technological advancement, from transportation to medicine to entertainment to whathaveyou. In every single sphere, the conclusion was unavoidable, that though the advancement was made with an eye to benefit the rich, eventually the poor benefited as well. I could not come up with an instance of any technology that was developed successfully specifically for the poor. It appears to be an empirical law. How do I explain that?

A little pondering and I had what I consider the economic reasoning for that empirical fact. Briefly the story goes this way. Technology advancements have high fixed costs, the recovery of which require high initial prices. The rich are early adopters and pay for the privilege, thus underwriting the development costs. As the marginal costs are typically low, economies of scale kick in and average costs approach the low marginal costs. Note that there is a time element to the whole story. First, it takes a bit of time for the high fixed cost of development to be recovered. Second, as time goes by, there is “learning by doing.” Firms figure out how to do things more efficiently. Average costs come down further. Finally, marketplace competition forces prices to reflect low average costs.

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.