In this article, we explain how con­cepts such as P2P funding, microfinance and e-commerce point to the potential of transform­ing rural marketing strategies.

1. P2P Funding:

P2P funding is the practice of lending money to individuals or businesses through online services that connects lenders directly with borrowers. P2P lending websites, through online services, connects borrowers and lenders of money and have become popular in mobiliz­ing funds for lending to poor people in developing and developed countries. Through P2P borrowing, or crowd-funding, poor people can take a loan to start a small business, which increases their income and help them upgrade their living standards.

This is how P2P funding works – the website lists the loan requirements of the individuals giving details of how the money will be used. Lenders select the lender or the project that they wish to fund and pay the website through their credit card. Funding is done in parts, so that lenders may give as little as they wish, sometimes as low as US$10.

In India, on a P2P site, Rang De, one can make a social investment of as less than Rs.100. Once the total amount required is collected, it is given to a local partner, such as an NGO, who disburses the loan to the borrower who starts repaying the site as soon as it is possible. The money is thus returned to the lender, sometimes with a nominal interest, who may then choose to re-invest it or withdraw.

A number of sites have started such funding – Babyloan, Kiva, MicroPlace, Lendbox, and so on. In India, Rang De claims to have raised Rs. 434 million as social investment with 99.83 repayment rate. It has 9,421 social investors and disbursed about 48,000 loans, of which 93 percent were women. Mint (2016) reports that in 2015 alone, around 20 new online P2P lending companies were launched in India and some 30 start-ups in the P2P lending business are operating in India.

The RBI has proposed to define the rules for this emerging business. Johnson et al (2010) however, opine that P2P sites do not result in reducing transaction costs as envisaged and suffer from verifiability of information provided- solving these issues will decide whether peer-to-peer lending ever becomes a reality.

2. Microfinance:

Affordability of rural consumers can be improved by providing small loans by which they can start businesses and thereby earn a living for themselves. These micro-loans, called ‘microcredit’ (providing small loans) or ‘microfinance’ (providing financial services) were pioneered by Muhammad Yunus, who turned conventional banking on its head by giving loans to people who are too poor to access traditional banking channels.

Micro-loans, some­times as low as US$27, are given to people living in extreme poverty, who do not have access to formal sources of finance, and have nothing to offer as collateral required by tra­ditional banks. Yunus and the Grameen Bank he had founded were jointly awarded the Nobel Peace Prize in 2006 for their efforts. In 2011, Yunus co-founded Yunus Social Business-Global Initiatives to empower social businesses to address and solve social problems around the world.

This thinking, described by Yunus and Jolis (2007) in Banker to the Poor, resulted into an innovation in banking which changed the lives of millions of poor across the world. Micro- loans are given by the Grameen Bank to extremely poor people to buy, say, a sewing machine or a cow, with which they could start a small business. No collateral was required and a bank­ing system was created, which is based on mutual trust, supervision, accountability, participa­tion and creativity.

Microcredit addresses the issue of affordability for rural consumers. It helps them become producers by starting small businesses and the resultant increase in income leads to consump­tion of branded goods. It also leads to better living. Khandekar and Zaman (2011) report that microfinance is a big instrument in poverty reduction—it reduces by 1.6 percent per year among borrowers.

Moreover, microfinance programmes have spillover effects on the non- borrowers—their poverty level goes down by 0.3 percent a year, they conclude. Each bor­rower, for instance, has to commit to 16 ‘decisions’ including educating children, hygiene, planting seedlings and stopping the practice of dowry. Many microcredit institutions also spawn SHGs leading to better individual and social decisions.

The idea has spread worldwide. Loans are provided to women in groups of five, signing for each other’s loans, so that they could support one another.

Difference between Microfinance and Conventional Banking:


i. Small loans, poor borrowers.

ii. Lending based on trust or social capital.

iii. Rural and BoP customers.

iv. Microfinance institutions go to customers through agents.

Conventional Banking:

i. Large loans, rich borrowers.

ii. Loans only on collateral.

iii. Mostly urban customers.

iv. Customers go to the bank

Micro-payments, or making small payments through smartphone apps, can further help in rural marketing initiatives. Customers and small traders can make payments by using these apps, even if formal banking channels do not exist.

3. E-Commerce:

E-commerce is another strategy that promises to transform rural marketing. As Internet access improves in villages due to various government and private initiatives, e-commerce can play a great role in both- (a) supplying goods to villages and (b) encouraging villagers to become producers and supply their production to the rest of the country. Already, e-commerce com­panies have invested in logistics to fulfill orders from small towns and villages.

But the suc­cess of e-commerce depends on increasing purchasing power in rural areas. This can be done by providing help to start specialized manufacturing in village clusters, as has been done in China. The portal Alibaba has helped develop village manufacturing clusters, called Taobao villages, which produce goods and supply on the Alibaba platform. This has transformed poor, remote villages into prosperous producer villages.

It is time that companies harness the power of Internet to empower villages. This can indeed be done. In India, companies such as Fabindia and Jaipur Rugs have helped villages make products to international standards that find an easy market in India and abroad. The government helps market village produce through KVIC and state crafts emporia. NGOs have also helped in the marketing of food processing articles and other produce in cities.

E-commerce companies also list some village products in their portfolio of goods offered. But a wide transformation of villages, which can be brought about by linking villages to the national and international marketplace, has been missing so far. Established companies have also not invested in supply chains that originate from villages due to a vari­ety of reasons.