MICROCAPITAL STORY: Nokia and SKS Microfinance to Introduce New Mobile Phone Features for Rural Poor

Nokia Corp, a Finnish telecommunications company and the world’s leading mobile phone supplier, has announced the launch of Nokia Life Tools (NLT) in 12 states across India. As mentioned in a previous MicroCapital story, Nokia has teamed up with Hyderabad-based SKS Microfinance, a non-banking finance company, to deliver these services. NLT is a feature offered on Nokia 2323 and 2330 mobile phones, enabling subscribers to access agriculture-related information, educational resources, and entertainment applications [1]. After the “great success” of a pilot project conducted in Maharashtra testing the rural market for this feature, Nokia vice-president and chief development officer Mary McDowell announced preparations to introduce NLT throughout rural India [2].

On July 13, 2009, MicroCapital reported the launch of a similar product. The Grameen Foundation, in partnership with Google Inc. and MTN Uganda, a multinational telecommunications group, launched Application Laboratory (AppLab) in rural Uganda [3]. AppLab includes up-to-date health and agriculture information, as well as a virtual market for the purchase and sale of goods and services. These services can be accessed by individuals in Uganda who own their own mobile phones, as well as local Village Phone Operators (VPOs) and VPO service users.

The trend towards marketing in small, relatively poor communities on the part of multinational corporations (MNCs) is picking up as microfinance increases purchasing power amongst rural consumers [4]. The idea of providing mobile phone services in remote villages was introduced by the Grameen Bank in 1997, with the Village Phone. A “Village Lady” purchases a phone, making payments over several weeks, and sells airtime to locals.

According to the Grameen Foundation, services like the Village Phone provide an opportunity for MFIs to introduce “mobile communication services and new business opportunities to communities that may have been overlooked by traditional telecommunications access [5].” VPOs acquire a source of income, micro-entrepreneurs are enabled to purchase airtime, and MNCs turn over a profit. Furthermore, the status and earning power of rural women is strengthened due to the target of such services towards females.

SKS Microfinance, the microfinance institution (MFI) partnering with Nokia to launch NLT, was founded in 1997 by Mr. Vikram Akula. SKS’ mission is to provide financial services for the poor. The MFI has provided upwards of USD 1.1 billion in financing, and has maintained a lending book of up to USD 425 million. SKS finances income-generating jobs in the following sectors: agriculture, trade, production, livestock, and new age business. According to the MIX Market, the microfinance information clearinghouse, SKS currently has 3.5 million active borrowers, and a gross loan portfolio of USD 279 million. SKS reports total assets of USD 596 million, a debt-to-equity of 3.6, an ROE of 18.7%, and an ROA of 3.7% [6].

NLT entails a three-fold approach to bridging the information gap between rural and urban life. First, is the distribution of agriculture-related information to rural farmers, such as local crop prices and weather conditions, guidance on efficient farming techniques, and costs of pesticides, seeds and fertilizers. Two additional features offered with NLT are educational resources and entertainment applications. Education includes English lessons, exam preparation, advice on starting a career, and general knowledge [7]. Entertainment includes sports updates, world news, politics, jokes, and ringtones. Nokia is partnering with Pearson, EnableM and OnMobile to provide these services.

Vice-President of Marketing at agri-business company Syngenta India Ltd., Kuldeep Kaul, explains what he believes to be the benefits of NLT. “Agriculture is a local business where timely and relevant information dissemination to farmers can help them make better decisions, helping to boost their productivity and raise farm incomes. Nokia Life Tools is designed to offer location-specific personalized information to individual farmers.” Amit Mehra of Reuters Market Light, a subdivision of information and consulting company Reuters, supported this statement with figures of 100, 000+ farmers across 10, 000 villages who have purchased RML services. “Most farmers have made thousands of rupees in additional profit and reduced losses using the most accurate, comprehensive, timely and personalized information service [8].”

Nokia’s launch of these new services operates on the assumption that the rural poor want to improve their access to information, and are rising to a position where they have the resources to do so. The role of microfinance is a key determinant in the decision of such MNCs to market their products and services to ‘untapped’ rural markets. By involving MFIs in this process, some profits are invested in the communications system within rural economies. “The microfinance institution, or other organization providing loans for the Village Phone business kit, gains revenue from loan interest and potentially from airtime sales and helps set into place a network of phones that can be used as a platform for future innovation.”

While the use of mobile phones for voice communication has proven successful thus far, sceptics of NLT question its utility because of the underlying assumption that users are literate. The literacy rate amongst rural males in India is 58 percent, and 30 percent amongst females [9]. While NLT may aim to fill a palpable information gap, the number of illiterate individuals in these “emerging markets” may make it difficult for useful consumption of this feature. A plausible alternative may be a voice-driven information system, such as IBM’s Hyperspeech Transfer Protocol (HSTP). This system uses voice-activated transactions that allow even illiterate people to surf the web and access relevant information in real time.

Despite Nokia’s lack of any voice-activated information source, plans are still being made to offer a microfinancing scheme for NLT across India. The launch will begin in rural Indian markets, particularly targeted at the female population, and will then expand into other parts of Asia as well as Africa in late 2009 [10]. The success of this plan will depend on several factors, one being the continued growth of microfinance on an international level. As the rural poor learn to earn for themselves, consumption of products and services will become more and more of a possibility, which in turn will help local economic growth. As NLT has not yet been launched in other parts of rural India, only time will tell how successful Nokia will continue to be amongst micro-entrepreneurs.

By Diya Chopra, Research Associate

Bibliography

[1] Nokia Corp.

http://conversations.nokia.com/2009/01/02/best-of-2008-in-services-nokia-life-tools/

[2] International Data Group (IDG) News Service

http://www.idg.com/www/homenew.nsf/home?readform

[3] MicroCapital

https://www.microcapital.org/microcapital-story-grameen-foundation-of-washington-dc-google-of-silicon-valley-and-mtn-uganda-launch-mobile-services-for-microenterprises-in-uganda/

[4] Microfinance Gateway

http://www.microfinancegateway.org/

[5] Grameen Foundation

http://www.grameenfoundation.org/what_we_do/technology_programs/village_phone/