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Micro-Credit Marketing

Could Hindustan Lever be onto something big with its Shakti micro-credit programme? A quick look.

By Dipayan Baishya

Shakti: Focus on self help

Is this the stuff of silent revolution? Deep down in the Nalgonda district of Andhra Pradesh, and in 42 other districts across the country, something is happening that could possibly become international B-school 'case' material in years to come.

Hindustan Lever Limited (HLL), India's premier FMCGs marketer, is experimenting with rural micro-credit under its Project Shakti. Just going rural, of course, is nothing new to HLL, which gets more than half its turnover from the Indian hinterland (in fact, its move to get urban-savvy in the early 1990s made news). Nor is it novel to talk about reducing pack sizes and marking down 'price points' to lift non-users into a consumption category.

The difference now is that HLL is working on different variables altogether. Instead of sub-dividing pack sizes into uneconomic little units to suit the poor consumer's wallet, micro-credit works by banding consumers together to fatten their collective wallet to suit more sensible pack sizes. And so it is that HLL is busy encouraging rural women to form self-help groups that use the classic principle of resource-pooling to enable higher consumption and quality-of-life levels.

The basic idea is simple, really. A lone housewife cannot afford, say, Wheel detergent, on her own budget. But six women's pooled money can get her the purchase, with five waiting their turn for the monthly pool to finance their own needs. By and by, everyone gets access to what they want. All it takes is some organization - plus some trust and commitment. And the effect is much the same as a bank loan, in its most elemental form.

Project Shakti was launched in late 2001, in a few districts of Andhra Pradesh, with the idea of creating sustainable partnerships among low income rural households, with the help of locally-networked NGOs, NBFCs and banks. Group cooperation has another advantage: it hastens the spread of information, particularly on matters of personal and civic hygiene, on which HLL's sales depend rather heavily in rural India.

Statistically, the project is unassailable. Approximately 700 million people live in India's 700,000-odd villages. Some 95 per cent of these people live in villages with populations of less than 2,000 people. This is the real market, in a sense, of the future... if only these people could all afford HLL's products.

Self-help groups for the purchase of products alone, HLL recognizes, will not be of much help beyond a point. What's needed is rural revenue generation opportunities, and here again, larger forms of micro-credit can provide small-scale funding. Project Shakti's long term aim is empowerment, and for this, HLL has started introducing the self-help groups to business opportunities. People can, for example, become local distributors for HLL.

It works, says HLL. Many women, for example, have become rural sellers of HLL products, and have managed to create sustainable micro-enterprises for themselves. With an initial micro-credit sum of around Rs 2,000 (organized by NBFCs or NGOs), they're earning a claimed average net margin of Rs 2,150 per annum. The next loan can be even bigger if the business shows potential.

Self-help groups can run joint businesses, too. Some self-help groups have turned into thriving businesses, selling Rs 10,000-Rs15,000 worth of products every month, on which the groups make a gross profit of Rs 700-Rs 1,000 a month.

In all, Project Shakti is helping HLL deepen its product penetration levels as well. The difference in Andhra Pradesh is notable, claims the company, and now it is waiting for results from Karnataka and Gujarat. Overall, the project now covers some 6,000 self-help groups in 4,700 villages in three states. By the end of the year, the project would have reached Madhya Pradesh and Uttar Pradesh as well. If the project shows signs of success in the so-called 'Hindi heartland', this might well come to be regarded as the first major breakthrough in rural marketing in quite some time.

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