Suman Layak and E. Kumar Sharma November 25, 2010Ajay Adiseshann faced a moment of truth while visiting his native village Ganapathi Agraharam in Thanjavur district of Tamil Nadu during the recent festive season. The Founder and Managing Director of PayMate, a domestic money transfer service that caters to the people at the base of the economic pyramid, knew that the bank branch nearest his village was 40 kilometres away. However, there was a Tata Indicom PCO in the hamlet and PayMate had a tie-up with the telecom provider for its money transfer service. The residents of Ganapathi Agraharam are yet to benefit from PayMate because it is not operational there yet, but the service provides the dabbawalas of Mumbai and the taxi drivers of Mumbai and Delhi a facility to send money home cheaply and quickly.
Consider "paraskilling", another successful model discussed by the Monitor report. Here a service or a process is re-engineered so that it can be performed by even low-skilled workers. Jain Irrigation Systems, a listed company with a turnover of over Rs 3,400 crore in 2009-10, which started with drip irrigation and then moved into contract farming, has adopted this model now. Says Anil Jain, Managing Director, Jain Irrigation: "We are now hiring local villagers who will be designated gram sewaks and will work for us at the local level. We will continue to hire agriculture engineers, but the gram sewaks will make our presence felt at the local, village level."
While Jain may have adopted this model today, it is something that ITC had first tried a long time ago with its e-choupal model, which employs a "sanchalak" at the local level. The e-choupals are Internet-based information kiosks giving villagers information about, among other things, weather and crop prices. ITC also uses the network to buy produce for its business.
Indian companies and entrepreneurs are making inroads into this emerging market at the "base of the pyramid". In October, the International Financial Corporation or IFC, the World Bank outfit that invests in the private sector, recognised 12 companies among its borrowers that were leaders in developing "inclusive" business models. Three Indian companies made the cut: Jain Irrigation, Apollo Hospitals Enterprise and Financial Information Network & Operations (FINO).
"Under our Apollo Reach Hospitals programme, we today provide health care at 35 per cent of the cost of the treatment in the bigger cities. Today we are present in 10 locations and plan to get to 50 in the next 24 months," says Preetha Reddy, Managing Director of Apollo Hospitals. The biggest challenge, however, she feels, would be talent availability. "Right now we are confident of staff for our 50 hospitals but I cannot be sure when it gets to 250."
Nevertheless, it is apparent that players, both big and small, are now seeing the virtues of taking an ultra-low cost, innovative healthcare model to smaller towns and villages. There are other companies in this space. Consider Vaatsalya Healthcare, which also follows a model of affordable healthcare in the smaller towns, or Healthcare Global, which takes cancer care closer to patients in remote locations with a hub-andspoke model.
FINO uses technology to allow financial institutions to serve underbanked populations in India through mobile point-of-transaction terminals and smart cards. (See Shining Models Elsewhere). So far, FINO has enrolled over 20 million people in 21 states and provided them access to remittances, deposits, credit, insurance and other financial services.
While many models target consumers at the bottom of the pyramid, there are others which work differently. Take Rangsutra, a public limited company part-owned by over 1,000 textile artisans, mostly from the remote regions of Rajasthan. "The main purpose is to ensure that traditional rural artisans find employment and to address the need to transform their skills to meet the requirements for modern products," says Sumita Ghosh, Founder and Managing Director.
The artisans collectively own 26 percent of the company's shares and receive dividends. Rural venture funds such as Aavishkaar have also invested in the company. It secures orders from large retailers and production is then based on an assured demand. Rangsutra is not only growing but has also become viable. The four-year-old company has increased its sales from just around Rs 26 lakh in the first year to around Rs 5.5 crore now.
Says Jain: "Addressing the bottom of the pyramid is not about selling shampoo in smaller sachets. It is about providing services that empower the category and allow them to first earn and save more."
A lot of companies such as Tata Chemicals and Mahindra & Mahindra have started outreach programmes for farmers and are trying to go beyond their traditional products like fertilisers and tractors to offer contract farming, agriculture information and knowledge services. Sometimes these projects started as corporate social responsibility programmes and later turned into revenue generators for the companies.
It is important, then, that all the models should make business sense for the targeted segments at the base of the pyramid.