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brokers, who are the facilitators of the transaction. They fill out the forms for the farmer, lobby with the authorities, and ostensibly make the process easy. The total cost of the transaction for the farmer consists of the fee paid to the broker for his services (an uncertain percentage of the value of the transaction), the registration fee, and the bribes paid to corrupt officials. The process is so opaque to the farmer that the broker and the officials have opportunities to be arbitrary about the quality of the title and the value of the land. More important, they have the ability to decide how long the process will take. They can give this particular case the level of priority that they think is appropriate.
Corruption is about providing privileged access to resources and recognizing the time value of money. Corruption is a market mechanism for privileged access. Bureaucrats use microregulations to control access, transparency, and therefore time.
TGC is about eliminating the opaqueness in the system and providing ease of access. Changing laws and regulations does not help the ordinary citizen if the system is not transparent or if access is not easy. From the point of view of the citizen, TGC must fulfill four criteria:
1. Access to information and transparency for all transactions.
2. Clear processes so that selective interpretation by bureaucrats is reduced, if not eliminated.
3. Speed with which the processes can be completed by citizens.
4. Trust in the system (with its faults). Trust is a result of the first three criteria and is a crucial component of TGC.
The Andhra Pradesh e-Governance Story is a good example of building TGC.
8. Development as Social Transformation
We have looked at the BOP as a viable and profitable growth market. We have also understood that treating the BOP as a market can lead to poverty reduction, particularly if NGOs and community groups join with MNCs and local companies as business partners. The development of markets and effective business models at the BOP can transform the poverty alleviation task from one of
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constant struggle with subsidies and aid to entrepreneurship and the generation of wealth. When the poor at the BOP are treated as consumers, they can reap the benefits of respect, choice, and self-esteem and have an opportunity to climb out of the poverty trap. As small and micro enterprises, many of them informal, become partners to MNCs, entrepreneurs at the BOP develop real access to global markets and capital and effective transaction governance. MNCs gain access to large new markets, developing innovative practices that can increase profitability in both BOP and mature markets.
National and local governments have an important role to play in this process. They have to create the enabling conditions for active private-sector involvement in creating this BOP market opportunity. TGC is a prerequisite. Governments now have new tools to create TGC in a short period of time. Further, new technologies and new approaches to reaching the BOP such as SHGs and direct distribution (creating millions of new entrepreneurs) can also create a respect for the rule of law and commercial contracts among the BOP consumers (for example, as they access credit through the microfinance route) and local entrepreneurs. The capabilities to solve the perennial problem of poverty through profitable businesses at the BOP are now available to most nations.
However, converting the poor into a market will require innovations. The methodologies for innovation at the BOP are different from and more demanding than the traditional approaches, but so is the opportunity for significant profitable growth. Finally, BOP markets represent a global opportunity. Lessons learned at the BOP can transform MNC operations in developed countries as well. BOP can be the engine for the next round of global expansion of trade and good will. If we follow this approach, what impact will it have on the BOP consumers? How will their lives change?
Development as Social Transformation
We have come full circle. We have made three transitions in our thinking. First, we demonstrated that the BOP—the poor—can be a market. Second, when we accept the BOP as a market, the only way to serve that market is to innovate. The BOP demands a range of innovations in products and
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services, business models, and management processes. Third, these innovations must be accompanied by increased TGC, making the government accountable to the citizens and making it accessible and transparent. Market-based ecosystems can also facilitate the process of making transparency, access, and respect for commercial contracts a way of life. The intellectual transitions that are the substance of this report and its implications are shown in below figure-13.
How can these changes impact life at the BOP? As BOP consumers get an opportunity to participate in and benefit from the choices of products and services made available through market mechanisms, the accompanying social and economic transformation can be rapid. The reason for this is that BOP consumers are entrepreneurial and can easily imagine ways in which they can use their newly found access to information, choice, and infrastructure. Let us look at some examples.
Figure-13 (BOP Transitions)
Source : Fortune at the bottom of Pyramid, C.K. Prahalad
The ITC e-Choupal infrastructure was created for farmers to have access to information regarding prices as well as agriculture-related information, as shown in below table-5. The system was configured to make them productive farmers and to make the supply chain for soybeans more efficient so that there was a win for both the farmer and ITC. That was the intent.
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Features Description and Operational Goals
Weather Users can select their district of interest by clicking on the appropriate region of a map. Localized weather information is presented on regions within a 25-km range. Typically, 24–72-hour weather forecasts are available along with an advisory. The advisories are pieces of
information directly related to the farmer, which he can put to use. For instance, during the sowing season, a weather forecast for days
following rains might include the advisory that instruts the farmer to sow when the soil is still wet.
Weather data is obtained from the Indian Meteorological Department, which has a presence even in small towns and can provide forecasts for rural areas.
Pricing The e-Choupal Web site displays both the rate at which ITC offers to procure commodities and the prevailing mandi rates. ITC‘s next-day rates are published every evening. The prices are displayed
prominently on the top of the Web page on a scrolling ticker.
News For the soyachoupal Web site, relevant news is collated from various sources and presented. Aside from agriculture-related news, this section also includes current affairs, entertainment, sports, and local news.
Best Practices Here, best farming practices are documented (by crop). Here again, the information presented is actionable. For instance, in this section, the farmer would not only find what kind of fertilizers to use, but also how and when to use them
Q&A This feature enables two-way communication. Here a farmer can post any agriculture-related question he needs answered.
It took farmers fewer than three months to understand the strength of the Internet, and they started using the system for a host of other, non-business-related and socially beneficial tasks. They found that they could connect with each other and chat about a whole range of issues, not just agriculture and prices. They found that the PC could be an entertainment device. It could be used to play movies, listen to songs, and watch cricket (a sport that is a national obsession in India). They could print out the classroom grades of their children. They also became sophisticated in tracking prices,
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not just at the local mandi or ITC prices, but also for futures at the Chicago Board of Trade. They correlated intuitively the futures prices with the prices they should expect in selling to ITC or others.
They established a clear link between global price movements and the prices in remote villages of northern India. Just three months earlier, they were hostages to the vagaries of the local merchants in the mandi. They also became experts at e-mail and chat capabilities. The list of dominant, unplanned activities that evolved in three to six months among the villages connected by the system is shown in below Table-6.
Table-6 ( Unplanned Activities at e-Choupal: The Social Transformation)
News Dainik jagran, Web Dunia
Market Prices One sanchalak actually followed Chicago Board of Trade prices for a month and arrived at a correlation with the local market prices. He used this information to help other farmers decide when to sell.
Entertainment Movie trivia.
Rent CDs to watch movies on the computer.
Music downloads from the Internet.
Sports Cricket-related news.
Education Students use the Internet to check their results and grades online.
Communication E-mail.
The sanchalaks have e-mail accounts on Yahoo! Chat.
Some sanchalaks frequent chat rooms and chat with other sanchalaks and ITC managers.
General Interest/Others Information about cell phones.
Breaking Down Barriers to Communication
ITC worked hard to create interfaces in the farmers‘ native language, Hindi. It also provided software that made it possible to type Hindi characters using a standard English keyboard. The preferred language for writing e-mails and other electronic communication, however, is Hinglish, or Hindi typed with English characters. The reason for this is that combining vowels and
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consonants to create Hindi letters is a cumbersome affair on a keyboard. It sometimes takes three keystrokes to render one letter. All the sanchalaks agreed that this was the only aspect of computer usage they had not yet mastered.
Undeterred, the sanchalaks started to use the English keyboard to write e-mails in Hindi. They could move fast in building both the capacity to communicate with the outside world and the ability to make themselves understood. The creativity in building communication patterns can be illustrated by one of the e-mails between a sanchalak in a remote village in northern India and the researcher in Ann Arbor, Michigan. There appear to be no barriers. The student in the United States was educated, rich, sophisticated, and well traveled. The farmer probably never traveled beyond a cluster of villages, was poor and uneducated. All those boundaries were broken by the possibility of asynchronous communication through e-mail. Its not known how long it took to compose this e-mail, but suspect probably not long. It is straightforward and to the point. The e-mail is shown in below Figure-14
Figure-14 : Email communication
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The use of the infrastructure in creative ways is not confined to the sanchalaks. Across the board, BOP consumers can use the systems they have access to in ways unimagined by those providing the systems What is the real change for those at the BOP? The real advantages of a private-sector network can be captured, as shown in below Table-7.
Table-7 (The Drivers of Social Transformation) Dimension of Social
Transformation
Traditional Emerging
Access to information Limited Unlimited; large firms, government, and bureaucracies in areas of interest to them.
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Could be regional, national, and global.
Patterns of interaction Limited Infinitely more; word of and access to knowledge mouth turbocharged.
Ability to make independent choices
Low High and can get very sophisticated through dialogue and interaction.
The simple case of the ITC e-Choupal, if repeated 1,000 times, can transform a country. We find increasingly that women from different villages who have never met each other are in chat rooms discussing complex issues like interest rate fluctuations and political positions to take with respect to specific issues. They also use it for more family oriented topics. In one chat room on the n-Logue network in southern India, the women were discussing the status of their grandchildren or other relatives living abroad. The newly found advantages are the building blocks of a market economy:
transparency of information, universal access, dialogue among various thematic communities that form autonomously, and a discussion of the risks and benefits of various courses of action, such as Should I sell my corn today or hold back? These four building blocks are dialogue, access, risk benefits, and transparency (DART). These are the same building blocks that are leading to more consumer activism in developed markets.
BOP Consumers Upgrade
Contrary to popular belief, BOP consumers are always upgrading from their existing condition.
MNCs and large firms oriented toward the top of the pyramid sometimes look at what the BOP consumers use and think of it as downgrading from the products they are selling. These products are seen as cheap. On the other hand, for the BOP consumers, the newly found choice is an upgrade from their current state of affairs. For example, when Nirma, a startup, introduced a detergent
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powder in India, the established firms in that business—both MNCs and large Indian firms—considered the product as low end and not of interest to them. At that time, the total tonnage for high-end products was about 25,000 tons. Nirma was a new category, upgrading the BOP consumers from poor-quality, locally made soaps, and the brand built an impressive market of 300,000 tons. The lessons were not lost on the incumbents. The size of the market at the BOP is significant (300,000 tons versus 25,000 tons at the top of the pyramid), but more important, Nirma was a product uniquely fashioned for the poor who wash clothes under a tap or in a running stream rather than in a washing machine. The same process is evident in a wide variety of businesses, including financial services. When the BOP consumers opt for a loan from a bank, as opposed to a local moneylender, they are upgrading. When they use iodized salt over the locally available unbranded salt, they are upgrading. When they get access to good-quality building materials and a design for how to add an additional room from CEMEX, they are upgrading. The examples can be multiplied. The message is simple: For the BOP consumer, gaining access to modern technology and good products designed with their needs in mind enables them to take a huge step in improving their quality of life.
Gaining Access to Knowledge
We have already examined the benefits of access and transparency and how that impacts the asymmetric information that was (and is) the norm in most BOP markets. However, when BOP consumers get access to digital technologies, the pattern of access to knowledge changes. For example, in the EID Parry Agriline example used in this report, the farmers had a concern about the quality of a particular crop: betelnut. They used their PCs and the attached cameras to send pictures of the affected leaves to a central agronomy center 600 miles away. They received advice from the agronomists at a remote location. That certainly improved their ability to solve the problem.
Examples such as this one are proliferating by the day. It is becoming well accepted in some parts of India that telemedicine is the way to go to get remote diagnostics based on PCs. Shanker
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Netralaya, for example, brings world-class eye care to rural India. It has vans fitted with optometric equipment that connect via satellite hook-up to the hospital. Senior doctors can review complex cases on a two-way video conferencing hook-up and discuss with the patients their problems. They can also offer a diagnosis based on images presented on a split screen. They can then recommend a course of action. This incredible access to high-technology solutions is changing the way we think about the BOP consumers. Increasingly sensitized to what is possible, they are also demanding high-technology solutions to their problems.
Identity for the Individual
One of the common problems for those at the BOP is that they have no identity. Often they are at the fringe of society and do not have a legal identity, including voter registration, driver‘s license, or birth certificate. The instruments of legal identity that we take for granted—be it a passport or a Social Security number—are denied to them. For all practical purposes, they do not exist as legal entities. Because they do not have a legal existence, they cannot be the beneficiaries of a modern society. Voter registration in vibrant democracies, such as India, provides one form of identity.
Erstwhile communist regimes had a system of documenting everyone, including the location to which they belonged. In Shanghai, for example, all the migrant workers were undocumented for a long time. They did not officially belong to Shanghai and, therefore, could not participate in programs such as government assigned housing.
This picture starts to change as a private-sector ecosystem emerges.The individuals in an SHG have an identity. They are recognized as legal by the ICICI Bank. They all have a name, a designation, a group to which they belong, and a scheme in which they participate. The same is true of the eSeva service provided by the government of Andhra Pradesh. Now all citizens who pay their utility bills or register births and deaths have an identity. In fact, many BOP consumers are elated to see their names on a computer screen. This is universal. The poor in Brazil, when they shop in Casas Bahia, get an identity. They get a card from the company, and that tells the world who they are. Consumers
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proudly display their Casas Bahia cards as proof of their existence and their credit worthiness. A similar situation exists in Mexico. When CEMEX organizes women, it not only gives them the tools and the materials required for them to build a kitchen; it also gives them a legal identity. The women are bound to the firm and vice versa. Neither party can break the contract without penalty.
That is a proof of legal identity. The importance of legal identity cannot be underestimated. Without it, BOP consumers cannot access the services we take for granted, such as credit. Hernando de Soto documented the problems of a lack of legal identity at the BOP. The status of a non person in legal terms can confine people to a cycle of poverty.
Women Are Critical for Development
A well-understood but poorly articulated reality of development is the role of women. Women are central to the entire development process. They are also at the vanguard of social transformation.
For example, Grameen Bank‘s success is based on lending only to women. The entrepreneurs who used the micro finance made available were women. The Grameen phone ladies are the entrepreneurs. In the cases in this report, there is adequate evidence of the role of women in building a new society at the BOP. The SHGs at ICICI Bank are all women, as are the Shakti Ammas at HLL. These women are entrepreneurs responsible for saving and accessing credit. In the case of CEMEX, the company works only with women. Amul, a milk cooperative, depends on women for their milk origination in villages. Women also collect the cash for the milk and, therefore, have achieved a new social status. Access to economic independence can change the long
For example, Grameen Bank‘s success is based on lending only to women. The entrepreneurs who used the micro finance made available were women. The Grameen phone ladies are the entrepreneurs. In the cases in this report, there is adequate evidence of the role of women in building a new society at the BOP. The SHGs at ICICI Bank are all women, as are the Shakti Ammas at HLL. These women are entrepreneurs responsible for saving and accessing credit. In the case of CEMEX, the company works only with women. Amul, a milk cooperative, depends on women for their milk origination in villages. Women also collect the cash for the milk and, therefore, have achieved a new social status. Access to economic independence can change the long