Consumer Protection for Communities
Ashoka Fellow Vijay Pratap Singh Aditya and his enterprise, Ekgaon Technologies, have created platform’s that offer financial, health, and agriculture services, to rural customers in India.
Vijay has been working hard to protect consumers. With a growing interest in competing for the “bottom of the pyramid” markets in rural India, Vijay’s technological solutions assists companies in ensuring that customers get better products and services.
Join Vijay and our community in chatting about his work, what's taking off in consumer protection, what challenges are still in place and new trends in globalised markets.
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Ashoka and the Lemelson Foundation held an event at Kenya, Nairobi last month and Vijay was part of this gathering. In prepraration for this event, we asked Vijay about his vision for mobile technology and society. You can see his answers here.
The shift to free markets policies has meant more choices for urban consumers, but rural consumers have been left behind. This is beginning to change, as domestically-owned and international companies expand their positions in the emerging markets by reaching out to rural consumers. At the same time rural producers are being tapped by companies for ensuring supply of quality produce for rapidly expanding retails markets, here again producer find it difficult to make a informed decision due to lack of information and controlled nature of supply chain.
A great deal is at stake including livelihood security of rural producers and consumers.
Early and successful entrants to these markets not only provide products, but also dictate to a great extent how this growing market will be organized and the extent to which rural citizens will have access to a wide range of products, services and markets.
Much of this is achieved through expensive monopolization which becomes counter productive often, at the same time captive customers end up paying higher prices. Often monopolization strategies which works in urban areas are retrofitted for rural consumers, which essentially means that most companies go alone in these markets, thus having higher cost of services as well as higher cost of operations. Value conscious rural customers cannot sustain such markets for long, leading to bursting of the bubble.
At ekgaon we feel the need is for a shared infrastructure development/usage to access rural markets, such that focus is on services and customer gets "Choice", which is only possible through healthy competition at product and services level not at geographical boundary and captive customer level.
ekgaon's work in the field of rural service provision access extends across a wide array of initiatives, programs and software; driven by and in the hope that rural consumers are in control of what services they can access and receive. One of our focus area is to make microfinance (Rural Financial Services) more competitive and value based, we would be happy to get feedback from fellows on there views on the subject.
Vijay, I hadn't really though of the extent to which urban tailored products and services are just pushed on rural markets and citizens are expected to just conform and consume or pass the torch to innovative and hopefully well financed/backed business initiatives.
Your comments really shed some light. Are there examples that you can share of businesses that have successful catered to rural needs and/or come up with models that reflect and serve rural consumers?
I would also be curious to know of any trend setters that turned the urban-rural model of influence around.
Your discussion on rural service provision is very interesting. Can you expand more on your microfinance (Rural Finance) service that is more competitive and value based?
It would seem to me that providing both rural services (healthcare, education etc) along with microcredit would be an important marriage in developing rural markets. The lack of financial services and credits really inhibits rural market growth, but I imagine it also inhibits families, not just businesses. If a family can’t use microfinance to borrow money to pay for education, health etc. that family can’t invest in its future. Your work on making these services competitive and affordable in rural markets really makes a difference here.
I also would be very interested in learning how business can cater to rural needs, and what market research they do to determine that.
Thanks for sharing your insights!
Hi Katica & Elizabeth,
As you have rightly pointed out a great deal is at stake including livelihood security of rural communities when it comes to vicious cycle of credit.
As you might have observed over years, early and successful entrants to rural financial markets not only provide products, but also dictate to a great extent how this growing market will be organized and the extent to which rural citizens will have access to a wide range of products, services and markets (for that matter this is true for all types of services).
These early movers to recover the somewhat higher cost of accessing rural markets, and as part of their strategy for growing market share, companies/organisations in the financial services, health services, and other industries, seek to build proprietary platforms for rural communities that effectively exclude their competitors and tie down there customers. These access solutions are adaptations of approaches that succeeded in urban markets, but are ill-suited to consumers for whom transportation and wage loss are major obstacles, banking or financial sector is a good exampe of this.
As an example, when ICICI Bank (a large private Indian commercial bank) decided to offer rural banking services, it designed mobile phone software that was incompatible with other banks and MFI institutions—limiting the ability of rural customers to compare alternative rates available from other banks, MFIs, or non-banking financial institutions and tied down customer to there enterprise wide system. The effort was to create a captive market in a few rural areas where customers were charged very high interest rates on small loans and received poor returns for their savings. ICICI Bank tried to justify these rates by pointing out that no other institutional investor was willing to invest in the area due to the high risk of default. Unfortunately, this argument overlooked the fact that there already are large numbers of non-bank financial institutions in rural communities lending to customers with the same loan risk profile. This however is true for other NBFC's also, who try to tie down the customer in such a way that they are limited in there choice.
As you have rightly pointed out, rural producers are increasingly getting tied down in a cycle of dependency where loan taken for production is tied to a single crop, for which seeds and other inputs are usually provided by large retailer without assurance of assured market or price, forcing the producers to own all risk in case of failure or lower quality produce, resulting in loss and endangering livelihood security of the family. This phenomenon was widely evident in cotton producing regions of Vidarbha in Maharastra and Andhra Pradesh, leading to mass suicides by farmers from year 2001 onwards. Informed decision making and diversification of risk by exploring other markets can help producers to overcome (to a certain extent) these risk, however due to the way market forces work such information is not accessible to them. Thats where our work comes.
We are working to provide a platform where competitve access to services (including financial services) is enabled and customer has a "value" based choice to make.
For more information on our work, you can look at this video at Youtube - Enabling Door Step Banking
http://www.youtube.com/watch?v=sgCqQ-9nya4
I can send some papers/ if you are interested to go through.
Elizabeth, there are very few cases where rural consumer needs has been understood and a service solution extended to them. I have not come accross a good case for the same (at least in the service area where we work), however I shall look for such cases which identifies with the argument presented.
Hi Vijay,
we are dairy technocrats &engineers group working in rural areas for betterment of milk producers and agro based communities.I have observed that the big names like ICICI are there providing loans to farmers but the bank agent in many cases in name of opening accounts have taken signatures of farmers on papers which the farmers have no knowledge and get them deposit 2 to 5 lakhs in new account and without their knowledge have withdrawn that amount from their a/c through ATM,on reporting the matter to the bank the bank officers simply say that person is not our employee ,he is a imposter,this is how rural financing through schemes of these banks loose repute.The cooperative banks operation is very tedious and marred by local politics.In the name of self help groups the local money lenders are operating their business at 20 to 25% lending rates per month
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