Sunday, October 24, 2010

Do not disturb

One very eye opening fact that is emerging time and again in our research is that rural microentrepreneurs access very small markets. Our first survey found that about three quarters do not buy or sell beyond a 5 km radius and only 2% venture beyond 20 km (the ‘middle men’?).

Here’s a view from Google Earth of a region of rural Tamil Nadu that is 5 km across. It has a cluster of about 12 villages with a population roughly between 4 and 5,000, typical for most of India. That’s a really small market to be limited to.

Contrast this with a view of Chennai which has 100 times that in the same area.

Unfortunately in this first survey we did, <5 km was our smallest category.
Turns out even 5 kms is way out there for most and it’s an even more fragmented market ecosystem than I ever imagined. Most don’t leave their tiny village cluster and sell only in a couple of streets. Recently on a field visit our Micromarkets product manager asked a lady why she only sold to two streets, why not go over to the next two? “There’s someone else selling there”, she told him, “One should not disturb others. You should be satisfied with what little you can get”.


  1. Hi,
    We were surprised with a similar observation in Eastern Europe(similar developing economy).
    Apparently it is their natural understanding of Hotellings Effect for micro entrepreneurs.(Which comes naturally to an illiterate and does not require very expensive courses, that people like yours truly do to finally understand :)).

    Good luck on your work

  2. Surely, these are important results required to find ways to improve the value chain and better the borrower success. I wanted to comment on two aspects of this study results presented.

    Firstly, the entrepreneurs could be given pointers on product improvisations. eg., a basket weaver could be shown to weave a gold/silver glitter specially for the festival season - to command a premium price and also product differentiation. It could encourage others doing the same business to eventually follow suit and as a result, we have improved value chain with better margin created as a local industry.

    Secondly, the use of GPS is great to do important mapping. I wish more of the social entrepreneurship ecosystem would take note. I would delighted to see borrower/micro entrepreneur location designated with a GPS tag as an industry standard. This would help marketeers as well as MFIs as industry identify excessive credit exposure more reliably.

    Kudos on your work

    Bala Bhagavat

  3. It strikes me that this woman's point of view would be difficult to change because she has a point. In a small village, she probably knows her competitor. If she out competes her counterpart and that family goes hungry, she might see their malnourished children on a regular basis. Do we want her not to care?

    I agree with the previous comment that helping them understand and develop differentiation seems vital.

  4. I agree that when you operate in a very small microeconomy with a finite market size it becomes necessary to look out for your neighbors and share the pie nicely. Lack of differentiation is one part of the problem but I think the bigger issue is getting people to expand their market view outside their tiny village so that their market size is not finite and constrained. That's where we're putting a lot of our effort today and is one of the themes that runs strongly through the movie we have just made (Shakti Pirakkudhu or Shakti Rising).