Saturday, May 31, 2008

Some attempts to penetrate into rural markets : a look at Rural distribution systems

Rural India lacks proper distribution systems. For example, observe this: even though unprecedented growth in mobiles exist in urban India, but rural India remained with marginal growth. And in order to cross 100 million subscribers mark, each of these Mobile service providers: Airtel, Reliance, vodafone, BSNL, Tata Indicom, etc know very well that its all about how to catch rural peasants. Here, obviously rural distribution channels become the key.

The following sector-wise distribution details (of various corporates) describe the recent attempts/strategies followed in India:

1. Telecom Sector: Recently Airtel and Samsung have tied up with IFFCO to sell their mobiles and services. IFFCO is (the world's largest) Indian farmers co-operative of fertilizers. It has about 37,000 member units spanning all-over India. Some of the other telecom giants & DTH service providers are looking at dying PCOs as a channel of distribution.

2. Automotive sector: Hero Honda wants to change the rural market dynamics which is hovering around 10% (of households owing a two-wheelers). Its strategies include selling during festive seasons, tying up with new dealers, providing finance with local co-operative institutions (guess the number of such institutions, it is 1,08,779). Meanwhile, Bajaj is launching a Bike, specifically to suit rural Indian youth needs. It is setting up 20 outlets in affluent, but severely underpenetrated, rural districts. Moreover, it has created specialist dealerships for rural markets, called 'Rural Dealerships'. Bajaj wishes to train the sons and daughters of village VIPs, who are also the opinion makers and thought leaders of their respective villages. Bajaj’s non-banking financial arm, Bajaj Auto Financial Ltd (BAFL), is trying to involve the rural self-help groups (along with specific controls, on this micro-financing, to avoid the end-buyer not to use the credit amount for other purposes).

3. FMCG sector: Indian part of Unilever, HLL, sells its goods through rural women who become its sales-representatives. These women are trained by HLL and usually supported by Microfinance or local self-help groups. ITC has created a supply chain infrastructure something called "e-choupal" system. E-choupal is run by an agent, typically covers about surrounding 10 villages (within 5 KM radius).

4. Financial Services sector: More or less, all the banks are using at agent-based model as the typical branch-based model does not work here due to cost economics. Some of these banks including ICICI are looking at tying up with micro-finance institutions and local self-help groups (or creating them if already do not exist). Many banks have solutions for Mobile-based services to reach rural consumers directly into their hand. ICICI has gone further in tying up with large corporate majors having significance presence rural India and providing loans/banking services to their distributors/traders and also it is working in tandem with postal department.

5. Soft drinks: Pepsi and Coke have mastered something called "Hub and Spoke" model. Using this system, initially the goods are transported to hubs (towns) from the plant and later the stock is transported to spokes (using all types of transport vehicles: Cycle, Rickshaw, Auto, hand-cart, camel-cart, etc). They also use annual haat and village fairs.

6. Pharma sector: Nicholas Piramal has focused on general practitioners, to cater to rural markets to increase its penetration with a field-force of 800 people. Most of the pharma companies are looking at post-office as their distribution platform. Some of these companies conduct health-care workshops in the rural areas by tapping the local doctors.

7. Medical Care: Telemedicine is the direction for all the top hospitals in India are headed to. ISRO, Narayana Hrudayalaya, SRMC -Chennai, AIMS -Kochi, Apollo hospitals, Aravind Eye hospital, etc have championed this telemedicine system using VSAT/WiFi/BroadBand/etc for the past 6 years.

8. Consumer Electronics: LG has set up 45 area offices and 59 rural/remote area offices. Samsung rolled out its 'Dream Home' roadshow which was to visit 48 towns in 100 days in an effort to increase brand awareness of its products.

9. Media: Newspapers are sold using auto-drivers, boat-drivers in Kerala.

Other sectors will be updated later.

Friday, May 30, 2008

Importance of psychology in medical treatments

I usually do experiments on myself. And yes, I do enjoy those. Here, I am disclosing one of such experiment.

Rural people for that matter, most people on earth, care about their health a lot. It is their weakest point. When a person is healthy he takes all sorts of risks and believes that he can do anything on earth, however, the case is different when that very same person falls ill. That's it. All his courage becomes a mirage. His/her whole world starts falling and life becomes very difficult. He/She looks for support everywhere and from everyone.

Claim: I believe psychology plays a profound role on our health. If you believe that you don't have a health issue even when you suffer from that problem, then it is very likely that you recover from it by 50% without any medication. This is true with most typical problems such as Fever, Cold, Cough, Headache, etc.

My experiments in this regard: For the past 11 years, I have been practicing as follows. I always believe very strongly that I am healthy enough and do not get any health problem. So it is usual that I don't get any health problem. Even when I get a health problem, I just ignore it and do not think about it. This has made me to recover from those health problems very quickly, within hours or few days. This is the same case even when I had Malaria.

For all those people who don't buy my argument, please do experiment on yourself (of course, you should trust yourself while such experimentation).

Structuring the unstructured -Opportunities everywhere!

Recently I gave this presentation in a barcamp held in Mumbai. It is not containing full details that I want to project. However it gives a glimpse of my thoughts.

Wednesday, May 28, 2008

Almost free refrigeration using earthenware pots: A radical innovation for peasants

Refrigerator is very expensive?? no problem. Purchase a Zeer (see the picture). Mohammed Bah Abba is a grass-root innovator who invented this pot-in-pot cooling system and now, it has become extremely popular in many african countries, including his native country, Nigeria.

Science part comes here:
The pot-in-pot consists of two earthenware pots of different diameters, one placed inside the other. The space between the two pots is filled with wet sand that is kept constantly moist, thereby keeping both pots damp (slightly wet). Fruit, vegetables and other items such as soft drinks are put in the smaller inner pot, which is covered with a damp cloth. The phenomenon that occurs is based on a simple principle of physics: the water contained in the sand between the two pots evaporates towards the outer surface of the larger pot where the drier outside air is circulating. By virtue of the laws of thermodynamics, the evaporation process automatically causes a drop in temperature of several degrees, cooling the inner container, destroying harmful micro-organisms and preserving the perishable foods inside.
Now coming to the developmental economics, every year many farmers all over India, due to lack of proper preservation systems, sell their produce at throw-away prices. It is true and in fact, I was grown-up my whole life listening to those horrible stories such as 1 Kg of vegetables for 15 Paise (0.01 USD) or 25 paise. Then the farmers throw them on highways as they cant fetch the price of transport. Surprisingly, at the same time, in a 100 KM near-by vegetable market in any town/city is sold at Rs. 20 per KG. There are many reasons for this unbelievable difference in the price. Some of these are:
  1. Farmers take loans for the purchase of seeds, pesticides, health issues, family ceremonies etc from local people who pressure up for repayment as soon as the crop is ready for sale. (Possible solution for this issue is institutionalized micro-finance)
  2. They don't have preservation systems. (This is where, possibly, Pot-in-Pot system would be helpful)
  3. They are often mislead by middlemen. (Update of market prices would be greatly helpful, and many telecom companies are working on this)
  4. Farmers don't have enough investment to take it to the near-by city market. (ITC e-Choupal kind of systems are helpful in this regard ).
Clearly this is a business opportunity to sell these pots in various sizes. Anyone listening there?

Tuesday, May 27, 2008

Financially viable rice husk power generators in rural Bihar

Power generation from agricultural residues is nothing new in this country. Coming to power generation from rice husks, Thailand has been proactive and have two decades of experience. However, in most of these projects, financials are what makes them not so interesting when those are to be scaled up.

Recently Ernst & Young has come out with a report which estimates renewable energy installed capacity in India would become 20GW by 2012 and this makes it, the third largest RE market in the world.

Recently two Indians (one of them is a student from Virginia, US) from Husk Power systems (HPS) have come up with a viable business model to produce power by burning rice husks. There are many advantages in such models:
  1. Optimal utilization of wastage, both rice husks and ash
  2. Reduction in carbon emissions
  3. Less dependency on fossil fuels
  4. Reduction of wastage in utilizing the power
  5. Stability of power
  6. Regional control over distribution
  7. And of course, not the least, possibly lower cost
Coming to this Swades movie type HPS project, running at 95% capacity, a single village setup would gross about $22,500 a year - but cover their cost of operation when running at just 40% capacity. Each plan can be staffed by three villagers: One to feed around 100 pounds of rice husks into the generator each hour, one to maintain the equipment, and one to collect payments from customers. Currently it has piloted in two villages in Bihar.

Villagers will require pre-payment for all electricity generated, and they will spend more to wire the village using double-insulated wire that is more difficult to illegally tap into than standard wire. Since electrical meters cost $10 to $15 each, and an average household will consume only about $15 to $18 of electricity per year, Husk Power will instead use a $1 circuit breaker to distribute electricity to a branch line serving four or five households. A Husk Power employee in the village will conduct a basic energy audit to determine how much electrical load the branch of houses will need and will install a circuit breaker that allows only that much current to reach the houses. Any illegal tap or other excessive consumption will trip the circuit breaker, cutting off power to all four or five houses, giving the community an incentive to work together to prevent excess consumption.

There are many other power generation projects based on rice husk. Some of them are:
  • Agni Energy Services, Hyderabad
  • BHEL in Punjab
  • Nahar Spinning
  • Shivalik Power & steel, Chattisgarh
  • Kalindi Power, Chattisgarh
  • Vandana Vidyut, Chattisgarh
  • Indo Lahari, Chattisgarh
  • Laxmi Rice Mills, Punjab
  • Ankur Scientific Energy,
  • Hindustan Motors, West Bengal
  • Usher Agro Ltd,Utthar Pradesh
  • Amrit Bio Energy and Industries,West Bengal
  • Non Conventional Energy Development Corporation of AP
  • IISc, a research project
Main difference between these projects and HPS project is that HPS is purely based on rice husk where as the rest of those companies use other fuels as well. Moreover, all of them are supported by government, but not HPS project. Complete details on HPS project is available in this ppt file. A video is shooted in the village to have some comments from the villagers.

Saturday, May 24, 2008

What/when all these services will emerge from a Mobile phone?

I believe that mobile is one of the most revolutionary thing happened in our lifetime. It would become the key enabler in the process of human development (socially/economically). The reason for this are the following services, which would be available on a mobile sooner or later if unavailable now.

Note : All the following services would never be available on a single mobile phone. Any subset of these services would be sold in the market. So it means, one will keep multiple mobiles.
  • Voice/Video Calls (local/national/international)
  • Documentation/Video Recording/Audio Recording - Blogging, Remotely updating office work, Softwares- Word/Excel/Powerpoint/etc, Creative Designs such as drawing,
  • Messaging/Chat/File Transfer- one to one, group messaging, group discussions, automatic notification, RSS feeds,
  • Alarm/Watch/Timer -
  • Mirror -
  • Radio -
  • Mouse -
  • Search for person/object/location details - where, who, what, how, when-, object identification through photos,
  • TV -
  • Music - Tune identification through audio recording, songs for download on iTunes kind of platform,
  • E-Commerce - size fitting, ordering groceries, Insurance policy, Photo-prints,
  • Ticketing or Booking - Air/ Train/ Bus/ Car/ Movie/ Hotel/ Events/ Any professionals' appointments/ etc
  • Video/Audio on Demand - Movies, Story telling for children, Live video/audio streams
  • Access to content on web - Videos/ Images/ News Papers/ Magazines/Horoscope etc
  • Friendship/Dating networks
  • Matrimonial services
  • Stocks/Investment
  • Navigation systems - Maps, Diksuchi,
  • Banking
  • Location based payments (similar to credit/smart card) for uses such as parking lot fee, AVM, Pay autowala (firstly it calculates out the what is the prevailing rates in Mumbai and then payment), ..
  • E-Books
  • Teaching/Training - E-Pen, Live streaming lectures, Materials such as Lecture notes, Presentations, Audio/Video Lectures,
  • Interactive Gaming
  • Diagnosis - Temperature, BP, Pulse reading through Stylus
  • Scanning - paper/photo,
  • OCR -
  • Barcode Reader
  • Projector
  • Object Location Identification - RFID
  • Dictionary/Encyclopedia
  • Translation (Text/Voice)
  • Voting
  • Survey/Quiz/Feedback/Complaints/examination systems
  • Application filing - Jobs, loans, admission, other government services,
  • Remote access - Computers, Mobiles, TV, Fridge, Micro oven, Electric switches,
  • Identification - Software Key, Digital signature, Finger print scan, password,

However, there are certain limitations to mobile which are the reasons for having limitations on the number of services. These are:
  • Display size - May have TV/Monitor output.
  • Memory - Remote storage may be used
  • Processor performance - May use resource of another remote high performance computer
  • Battery power
  • Keypad - A foldable printed paper type wireless keypad may be used
  • Interoperability
  • Signal reach - signal boosters may be used
  • Environment
  • Water/Heat/Cold/Fire/chemicals issues
  • Standing - Physical stand may be used with flexibility in height & width
NOTE: This article will be updated for more details on each of these service. Typical details are mentioned in the following.

When is the service expected?
Whether the legal framework is ready?
Technology background
How can above constraints limit a particular service?
What are the driving factors?
What would be the possibly business models?
What are current and future developments in that arena?

More details:
Personal use/Office work would possibly drive the penetration of mobile services. Possibly adult and filmi content would drive the videos and images businesses. TV on mobile - Currently technology is ready and government is making its framework. Radio on mobile is already exist. And the number of channels -.

TO BE UPDATED & of course, I love to hear your comments on your take on these services.

Social Inclusion and Financial Inclusion

Currently there is a lot of discussion going on about "Financial Inclusion", all the governments and other international organizations are sincerely attempting to do something about it. In general, the poor prefer social inclusion more than financial inclusion. This is evident from the fact that in many villages in India, still have the local punishment for certain crimes is through social exclusion.

Indian government has been trying to tackle this problem through reservations both in education and jobs. Private organizations do attack this social inclusion problem through promoting financial inclusion. Clearly, financial inclusion is the first step in this direction but this alone can't end the social exclusion issue. Better education, freedom to pursue own interests may end this social evil. Most importantly, this problem can't be solved through reservations. First of all, government should not disturb this natural process. Otherwise the problem could further be worsened.

Friday, May 23, 2008

Two Indian health-care service models that I love!

Aravind Eye Hospital is one of the largest eye-care network in the world. However, that is not the reason for my love and mentioning it here. Aravind Eye Hospital in many ways competes with Sankara Nethralaya, which is also a very large eye-care network and has huge following from as far as Bangladesh (patients travel all the way to the southern city, Madras or recently known as Chennai). Both of these hospital systems have best technology, good number of doctors, very good processes, good follow-up, very good infrastructure etc. However, the business models that these two adapted are radically different.

Sankara Nethralaya is a typical hospital with better amenities, charges the customer relatively less and largely runs on two financial reasons. Firstly, it is the volumes that reduces the cost here and secondly it is a non-profit Hindu trust, so it attracts donations from Hindu community all over the world.

Aravind Eye care system is very innovative in covering up its finances while treating the poor at low cost. Its model is like this: patient is charged based on amenities that they would avail during the treatment. It means, if you take up expensive ward to be in then you would be charged at premium. And on the other hand, the poor can be low-cost ward in order to be charged less for the treat. What does this mean, the rich are provided better amenities and in turn pay up premium charges which also pay up the poor who may not be able afford surgery costs. And moreover large volumes in number of patients makes the hospital infrastructure better utilized and in turn, costs are further reduced.

Because of this innovative business model, which can be described as BoP in practice, it started attracting the number of social capitalists all over the world. One of them is Google Foundation. It has recently funded this organization while expecting profits on its investment.

Another bit of interesting piece is that Aravind Eye Hospital in Pondicherry has interesting treatment for Myopia. They teach certain eye-exercises for about a week and if one practices for few months it would definitely show a clear difference in eye vision.

For a long time, I have a lot of reservations on ethics in medical profession. It is basically outlined as following. If a person has more issues with his/her health, then it is beneficial to the health practitioner. So it is likely that modern medical professionals may not provide right treatments by keeping the problem alive for more number of days (and/or increase the problems) in order to increase the revenue. Few other reasons are making this problem even deeper such as the number of health professionals is abysmally low and the cost of health education unbelievably expensive. It is obvious that the system would produce more corrupt practitioners because honesty may not pay their cost of education. It is just a simple Return on Investment issue. For example, if a patient enters into a hospital having fever, then he may be treated for fever but his treatment procedures might lead to other health problems whose symptoms may appear after few months/years. This is very practical way of thinking because, there are no audit procedures exist in the health industry, in general. In many places, I did find this kind of attitude particularly in rural India among health practitioners.

So I was looking at business models in health services wherein
1. if a patient is treated quickly or rather aptly then it should benefit the hospitals financially.
2. it should be like less number of patients should lead more revenue to the hospital.

Satisfying these two basic objectives, Narayana Hrudalaya has recently started a unique health care service model to cover large number of poor peasants in Karnataka (a state in India). Yashasvini is a health insurance program covering 2 million farmers costing each of them 10 Rupees (0.25 USD) a month (Government is also a partner in this program and it is unclear how much is its contribution, apart from providing infrastructure). Here, as numbers are very large, they are able to get the volumes which are cutting down the cost dramatically. Moreover, it also led to the efficient use of technology.

Thursday, May 22, 2008

Rural services in demand : Based on consumer expenditure

The primary goal of this lengthy article is to project a bird view on rural services in demand, and in turn, to provide you the opportunities exist in this unorganized services domain. Each of these services can be served by the organized sector and can become as giant as Microfinance majors such as SKS/Basix.

I have spent considerable time in Rural India (about 15-20 years). Based on this and coupled with recent observations (in tribal locations, villages, small towns) led me to write about these services in demand.

Note: 1. These observations are based on personal expenses (of rural villagers) alone and professional expenses are not considered.
2. These are my own personal observations noted over a period of time and are not carried by any systematic empirical evidence.
3. Order of the services is based on demand.

Marriages/family based events:
Rural Indians are really crazy about celebrating family functions which include: Marriage, Death, Child birth, Puberty (similar ceremony exists even for males), Festivals, etc. We can understand the craziness of Indians in general from this fact: 50% of the packaged sweets of the famous "Haldiram's" are sold during Diwali season alone.

Typically Rural Indians are very conservative about their expenses, however during the ceremonies they just don't care about the costs. This weakness is being cashed during festivals/marriage-season/melas/haat by the local businessmen who are able to sell the stock usually at double the price and importantly, most of it. So the money spent at these times is repaid by villagers, usually, over their lifetime.

Typical expenses during a marriage (I am specifically mentioning about marriage is for the reason that it is the one which covers the large of part of their life-time expenses):
  • Dowry
  • Invitation expenses
  • Band
  • Gold/Ornaments
  • Cloths
  • Lighting/Arrangements
  • Commuting expenses (during invitations to a week later to the marriage day)
  • Food/Alcohol
  • Others such as Flowers/Haldi/ Kumkum/ Puja articles/ Cereals/etc
NOTE: Unlike urban marriages, typically rural marriages are held near to home, also all the arrangements (labor works/ cooking/ accommodation/etc) are being supported by other villagers, and so, those costs are not covered.

Religious/Caste-based events
These events are similar to above ceremonies except for the following basic differences.
1. These are periodic
2. These are organized by groups of people unlike marriage kind of ceremonies where-in a single family hosts it.
3. Although many people love to spend on these events but there can be many people who does not like to spend but they do co-operate in organizing them and spend due to social pressures.

Typical expenses during a religious event:
  • Lighting/Arrangements
  • Moorthi (statue of God)
  • Puja articles from each household
  • Food/Alcohol
  • Commuting expenses (sometimes this could be very large)
  • Band
  • Recording Dance
  • Drama or similar artistic celebration
  • Other expenses needed as per the festival/local customs/season
Rural villagers are not knowledgeable about hygienic living, so are prone to long-term diseases. Most importantly, they are very much scared about these diseases. This is very much cashed by local health practitioners. Usually, these guys are under-qualified, do not have proper skills to diagnose/treat the patients and also do experiment on those poor villagers. However, surprisingly, these health practitioners are almost treated with demi-God status.

Typical expenses during the medication include:
  • Doctor fees
  • Medicines
  • Commuting
  • Change in food habits/life-style
  • Others specific to the health problem
Child expenses:
Typically the number of children in a home are anywhere between three to ten. Although expenditure on a single child could be less but when you consider all the children, child expenses makes a major share of their total family expenses. Let us consider this example: when a mother purchases stick-ice cream, she would purchase for all the kids. So, this makes her not to purchase regularly. Health of a child is a serious concern.

Typical expenses on a child:
  • Health
  • Education
  • Food and shop-eatables such as chocolates/colas/sweets etc
  • Cloths (usually these are recycled and so, relatively lesser expenses compared to urban Indians)
Commuting expenses:
As the villagers are more social and so keep commuting regularly. It could be for marriage kind of ceremonies or religious trips or to visit relatives or health issues or to avail government services or money exchanges etc. Usually, they commute family as a whole and so, this becomes one of their major expense.

Typical expenses during travel are:
  • Fares
  • Stay
  • Food and other eatables such as chocolates/colas/sweets etc
  • Other expenses specific to the purpose of visit
Miscellaneous observations:
  • Rural India has the penetration of the following beauty related FMCG products: Soap, Hair-Oil, Shampoo, Fair creams (surprisingly yes, they are beauty conscious).
  • Mobile is the single most favorite entertainment gadget (more than TV, Radio, Tape recorder, etc)
  • They are all movie/cricket-mad lovers
  • Regular household items are very few: Cloths, Vessels, Cereals, Lentils
This has already become pretty long and so I will continue this with a new article covering how these can be converted as organized services. Of course, I would love to hear comments either by voice/text.