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Micro-finance and Rural India Marketing

Posted on Monday, Jun 5th 2006

This week’s Economist has a great study on India. I strongly recommend you read it.

I wrote a piece over a year back presenting the thesis of merging the models of home based sales reps and micro-finance, called, Tupperware Party Around The Village Pond.

One of the the Economist stories describes “Project Shakti” by Hindustan Lever that has implemented exactly this solution. “Shakti entrepreneurs” are village women who are offered tiny loans to support direct-to-home distribution networks for shampoos. It already reaches 80,000 villages, and by 2010 expects to employ 100,000 entrepreneurs covering 500,000 villages.

It’s brilliant, and should become a standard model.

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Micro-finance is great, however, I personally find Shakti Entrepeneurs troubling on several levels, here is one that is visible: Shampoo was never a part of the rural landscape, now the awful packages have become a part of the landscape. Besides that visual/environmental blight, what about the replacement of traditional products with “chemical” shampoo. We buy Shikakai at health stores in the west at a ridiculous premium, people in rural India, with darn good heads of hair I might add, have used it for centuries. Now, rather than harvesting and making it themselves, they have to buy it in non-biodegradable packages. There are definately far better applications of microlending.

Madan Kumar Monday, June 5, 2006 at 11:38 PM PT

Hi Madan, Your point is well-taken. However, with 400 Million people that live on less than a dollar a day, it is quite important that this population starts getting integrated into a system of “trade” and “capitalism”, rather than focusing on making Shikakai from scratch to maintain beautiful heads of hair, while remaining hungry, dying of poverty, unable to afford healthcare, etc.

This is where micro-lending comes in. The more “earning capacity” can be created in rural India, the per-capita income will accordingly go up. Micro-entrepreneurship is a very effective way of doing so, and if large companies / MNCs deploy marketing dollars into these efforts, a win-win results.

This is why, I find the Shakti Entrepreneur model absolutely brilliant.

Sramana Mitra Tuesday, June 6, 2006 at 4:37 PM PT

Probably not the right forum to debate/discuss the virtues of cosmetics as a path out of poverty and better health or what it means to live on $1 in rural vs. urban areas, etc. Your point on trade is well taken, though. I’m a huge fan of micro-lending but not the Hindustan Lever model.

Madan Kumar Wednesday, June 7, 2006 at 10:35 AM PT

Hi Mitra,
If you can provide the link or full title of the article that appeared in ‘The Economist’, which you’ve mentioned in your blog is highly appreciated. Thanks!!!

Stanley Wednesday, June 7, 2006 at 11:34 PM PT

Here is the link to the Survey on India. There is a series of articles.

Sramana Mitra Thursday, June 8, 2006 at 12:13 PM PT