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Global Microfinance & Grameen


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Presentation by Dr. Jane Ives, Director, Global Grameen & NGO Student Internship Program, Thunderbird School of Global Management, 29Oct2009, Lokey Graduate School of Business, Mills College

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Global Microfinance & Grameen

  1. 1. Rural Village Marketing and Microfinance: Global Strategies in Emerging Markets Jane Ives, Bentley Collage Frank Cutitta, Global Branding Institute Martin Sours, Thunderbird Chris Fussner, TransTechnology Corp. CGB The Center for Global Branding BENTLEY COLLEGE
  2. 2. Orthodox View Rich Get Richer Need Equity to Get a Loan Large-Scale Multinational Banks Do the Lending Rural Poor Are Bad Credit Risks
  3. 3. From Microcredit to Microfinance Microfinance Institutions (MFI) Are the Key Income, Credit, Investment Cycle Breaks Poverty Reduces the Need for High-Cost, Traditional Credit Creates the Smoothing of Consumption of Nutrition and Education Goods and Services
  4. 4. The Concept of “Social Energy” Fosters Positive and Rational Risk-Taking Allows Leaders to Arise at the Local Level Creates a Dynamic of the Diffusion of Ideas and Optimism throughout the Society
  5. 5. Innovation Topical Term in Today’s Microfinance Activities Represents the Groundwork of Financial Institutional-Building Represents an Understanding of the Livelihood of Target Clients Captures the Nuanced Context of the Local Setting Leads to Voluntary Savings Products Provided by the Association for Social Advancement (ASA)
  6. 6. Providing Choice: A Key Microfinance Activity Offers Both Liquid and Illiquid Microfinance Products Life Insurance Contractual Savings Products Flexible Opportunity for Village/Rural Poor to Both Save and Borrow
  7. 7. Multiple Microfinance Forms: Traditional, Informal, and Modern Moneylenders; The Traditional, Regressive, Potentially Exploitative Method of Borrowing Informal Groups, esp. Housewives Groups Modern Forms—NGOs, Grameen Bank Key Elements Based on Trust, not Law nor Contract Borrower Must Join a Group High Priority Given to Social Capital
  8. 8. Grameen Bank and Women’s Empowerment Grameen Bank, Established in 1983, Targeted Bangladesh’s Very Poor Loans of $12–15 Bought a Sewing Machine, Goats, Ducks, etc. Women Have Better Repayment Rate(s) than Men Break the Cycle of Moneylenders Who Offered Long-Term Loans
  9. 9. Key Islamic Issues Daden Financing of Crop Rotation (Forward Sales of Crops which Substitute for Interest) Profit Sharing among the Group Also Replaces Interest Loans Based upon Land Worked Trade Credit Based on Product Worked, Like Jewelry
  10. 10. Rural Marketing “Rural” Is, Above All, a Mindset Rural Is Agricultural Dependent Rural Distribution Is Essential but Difficult and Uses Small-Scale Transport Affordability Means Small Unit Size to be Marketed/Sold Products Must Compete with Long- Standing, Natural Products For Cleaning, etc.
  11. 11. Rural Marketing: The Four “A’s” Availability of Product and/or Service; Attention Must be Paid to Distribution Channels Affordability; Product Has to be Priced Realistically Acceptability; The Product Has to be Relevant and Desirable Awareness; Brand Management Is the Key Here
  12. 12. Rural Marketing Building with BRICs The BRIC’s markets (Brazil, Russia, India, and China) markets will be the world’s largest economies over the next 40 years. However, the bulk of their populations live outside the urban centers. 700 million people in both India and China live in what is described as rural villages…roughly two-thirds of their populations!
  13. 13. Rural Marketing Need for Distribution Networks MNCs are spearheading microfinance programs which extend rural distribution. P&G, HP, and Unilever have sophisticated corporate programs encouraging entrepreneurship among impoverished. Hindustan Lever’s Projects Streamline, Shakti, and Bharat are considered showcases of corporate responsibility. All new Unilever employees spend 6–8 weeks living in rural villages where inhabitants earn about $2 per week.
  14. 14. Strange Bedfellows Unilever teams with Oxfam to measure hotly debated MNC links in reducing poverty in Indonesia. Results inconclusive but broke new ground on MNC and NGO joint initiatives. Did find that some 300,000 jobs created as a result of Unilever’s external distribution value chain.
  15. 15. Rural Marketing Consumer Education Rural villagers need to know a products benefit(s) before the brand can be sold. Live demonstrations are critical. Van tours to the “hattas” (perodic markets) for a “dekko” (Hindi for a “see” or “demo”). Women’s self-help groups (SHGs) are a critical component of microfinance, entrepreneurship, and consumer education.
  16. 16. Rural Marketing Education Rural marketer must be both educator and student. Some products may be used in rural settings differently than urban or suburban areas. Example: Same soap may be used for laundry, dishes, and body. Buy three different products, or find one that works well with all?
  17. 17. Rural Marketing Packaging Lack of storage space, appliances, and basic utilities. Shelf stable but attractive. Must be easily deliverable on unusual modes of transport (bicycle). Pouch packs and sachets popular.
  18. 18. Rural Marketing Pricing Agrarian economy provides inconsistent personal cash flow—buy after the crops are harvested. Despite extremely low income, little-to-no housing or utility costs provide disposable income. Price:performance ratio is much more important than just cheap goods.
  19. 19. Rural Marketing Marketing Technology Infrastructure Blend of ancient tribal custom and latest technology. Trailblazing E-Choupal Network links 1,000 villages where it touches 3.5 million farmers. n-Logue’s village hubs and kiosk. Mobile phones are microcredit start-up staple.
  20. 20. Rural Marketing Marketing Technology Infrastructure Internet connections increase marketing communications options through village center. Online product dekkos and Web-based competitions via streaming video. Printers provide ability to produce pass-along collateral. Databases of village “CMO” e-mails for ongoing communication.
  21. 21. Rural Marketing Creative and Messaging Transliteration of urban messages very risky given diversity of rural languages and cultures. Literacy limits amount of copy. Village choupal (gathering place) is still prime delivery venue. Wall paintings, transport ads, and banners are very popular. “Star power” works but is not universal across villages.
  22. 22. Rural Marketing Buzz and Word of Mouth Buzz and word-of-mouth marketing are already built into tribal culture. Heavy reliance on young villagers working or studying in neighboring villages/cities for “what’s cool” in outside world.
  23. 23. Bangladesh Specifics 1970s—Young activists want to rebuild the country with village- based groups 1980s—“Target Groups” approach, minimizing paperwork and decentralizing decision-making Early 1990s—Greater emphasis on individual borrower accountability Today—Diversified financial services
  24. 24. Sri Lanka Sarvodaya Economic Enterprise Development Services (SEEDS) Founded in 1958, incorporated in 1972 Based on a vision of a new social order Sri Lanka’s largest NGO with global linkages Provides training, introduces new technologies, and links producers and end-clients
  25. 25. Philippines A vision of a viable, private, accessible microfinance market Create a greater role for the private sector Establish a market-oriented financial credit policy environment Capacity-building in local deposit mobilization, project management, and use of information technology
  26. 26. Energy: A New Frontier Links between energy and microfinance need to be strengthened Microfinance clients need access to reliable energy services Success can involve multiple clients; energy providers, poverty reduction, and economic development donors Costs of energy must match consumers’ income flows
  27. 27. In Sum Microfinance: A key element in fostering an ethical, market-driven economy Key institutions are in play • Microfinance Institute • ACCION in Latin America • Citigroup Microfinance Group • Grameen Foundation and Bank • The Kearny Alliance • World Council of Credit Unions