MICROCAPITAL STORY: Indian SKS Microfinance Teams Up with Mobile Phone Vendors Nokia and Bharti Airtel to Provide Service for Rural Customers

Microfinance institutions are teaming up with leading mobile phone makers to offer cheaper handsets customized for rural customers, according to a news report from the Indian Economic Times. The report also noted that Nokia, the world leading mobile phone supplier, is running a pilot project to sell handsets in the Andhra Pradesh state through SKS Microfinance, a non-banking finance company. Likewise, Nokia is about to launch mobile information services revolving around agriculture, education, and entertainment in the rural state of Maharashtra, in addition to partnering with a host of existing content providers to deliver information on seed, fertilizer, and pesticide costs, prevailing market prices for crops, and weather.

Nokia’s dual strategy of hardware and content provision hinges on the idea that the rural poor want more than reliable communications devices – they desire to be able to access rich sources of digital data that can markedly improve their day-to-day decisions. The company is sanguine on its ability to meet these goals. With its large distribution network in the country and operating support for nine Indian languages, the company believes it is well positioned to, “add newer services and expand these initiatives across the nation in a phased manner,” according to Nokia India head Mr. Vineet Taneja.

Previously, a report from Hindu.com announced that SKS Microfinance had linked with India’s largest cellular service provider Bharti Airtel, launching a bundled offer for 2,300 Rupees, or 46.8 USD, including a handset, SIM card, and affordable calling rates. Bharti Airtel’s executive director Mr. Deepak Mehrotra said the scheme was part of the company’s “Grameena Mobile Kranthi,” aimed at making mobile telephony affordable to rural customers. Bharti Airtel in turn entered into a tie-up with Nokia, and hence could offer the 1650 model phone with 25 monthly installments of 85 Rupees, or 1.7 USD. At an early stage, the offer was launched in four branches of SKS Microfinance in Jogipet, Medak, Ramayampet, and Siddipet, to later be rolled out in all branches across Andhra Pradesh. Founder and CEO of SKS Microfinance Mr. Vikram Akula believes the partnership will eventually enable 50 percent of the 2.4 million SKS members across 15 states to become first-time mobile users.

Vendors’ strategy of teaming up with microfinance companies is to certain extent motivated by rural areas’ potential for telecom services growth compared to saturated urban markets. Leading mobile phone makers claim that rural regions are witnessing sales growth upwards of 30 percent per annum. “The mobile phone market in the top 35 cities has been hit severely since consumers are deferring their handset upgrade plans. Moreover, the subscriber penetration has surpassed total population in cities like Mumbai and Delhi. In contrast, the rural markets are growing rapidly in line with the huge expansion plans of telecom operators,” commented division country head of Samsung Telecom Mr. Sunil Dutt. Samsung, which has a distribution tie-up with Indian Farmers Fertilizer Co-operative Ltd. (IFFCO), is looking at further collaboration with microfinance companies and self help groups to increase market penetration. Combined with previous reports covered in MicroCapital regarding mobile banking in Microfinance, this story may indicate a renewed interest in cooperation between MFIs and mobile phone vendors.

Launched in 1998, SKS Microfinance is one of the fastest growing microfinance organizations in the world, having provided over 1.1 Billion USD in financing, as well as maintaining a lending book of up to 425 Million USD. Its services have reached 3.4 million female members in poor regions throughout India. Borrowers may take loans for a range of income-generating activities, including: livestock, agriculture, trade (such as vegetable vending), production (from basket weaving to pottery), and new age businesses (from beauty parlors to photography). SKS also offers interest-free loans for emergencies, as well as life insurance to its members. SKS currently has microfinance branches in 18 states across India, and it aims to reach 8 million members by 2010. According to the MIX Market, the microfinance information clearinghouse, in March, 2008 the bank reported total assets of 336.9 million USD; a debt to equity ratio of 5.36; return on assets of 2.0%; and return on equity of 11.95%.

By Yanni Hao, Research Assistant

Additional Resources:

Bharti Airtel: “Home”

Hindu.com: “Home” “Airtel, SKS Microfinance Tie Up to Offer Package”

The Indian Economic Times: “Home” “Mobile Phone Vendors Dial into the Rural Segment to Drive Growth”

TechTree.com: “Nokia to Focus on Rural India”

MicroCapital Article, December 10, 2008: “TECHNOLOGY FOCUS: Mobile Finance – Indigenous, Ingenious or Both?”

MicroCapital Article, November 24, 2008: “MICROCAPITAL STORY: Globe Telecom Establishes Partnership with and Receives 600k from Gates-funded CGAP for Mobile Banking Projects”

MicroCapital Article, November 14, 2008: “MICROCAPITAL STORY: Indian Microfinance Org Cashpor Adopts ClassifEye Secure Mobile Transactions Solution”

MicroCapital Article, November 13, 2008: “NEWS WIRE: Leading Indian MFI Cashpor Adopts ClassifEye Secure Mobile Transactions Solution”

MicroCapital Article, November 3, 2008: “PRESS RELEASE: Planet Finance to Enhance the Poor’s Access to Financial Services through a Mobile Banking Project in Africa and the Middle East”

MicroCapital Article, October 24, 2008: “TECHNOLOGY FOCUS: Mobile Banking in India – hyped or popular? A CGAP Interview”