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1、E-COMMERCE FOR THE UNREACHED COMMUNITY Ashir Ahmed Department of Advanced Information Technology, Kyushu University, Fukuoka, Japan Global Communication Center Project, Grameen Communications, Dhaka, Bangladesh Md. Asifur Rahman System LSI Research Center, Kyushu University, Fukuoka, Japan Takuzo Oh
2、sugi E-JUST Center, Kyushu University, Fukuoka, Japan ABSTRACT Most people at the BOP (base of the economic pyramid, the largest but the poorest community in the world comprising 69% of world population) do not have access to e-commerce services. The way e-commerce is designed and practiced today do
3、es not enable their participation. The reasons are: their purchasing power is low, they do not have any means to make online payments, and there is no infrastructure to deliver the purchased items to their doors. To include these 4 billion people, we propose an e-commerce framework by engaging MFI r
4、esources and our recently developed ePassbook system. This paper shows how the BOP community can enjoy the benefits of the e-commerce service by using the proposed model. The advantages of making e-commerce available to the BOP are discussed, in addition to the challenges involved in implementing th
5、e model. KEYWORDS ICT, BOP, microfinance, e-commerce, social services, ePassbook 1. INTRODUCTION E-commerce over the Internet has been in practice for more than a decade. E-commerce enables people to purchase products from a remote place at any time of the day and get the desired products delivered
6、to their doors. It saves time, money and labor. A product seller can upload the product information on the web and can breach the boundaries of the local market to reach the customers on a global scale. A customer, on the other hand, can search for the desired product in a much more extensive select
7、ion space, and find a suitable product. In this way, e-commerce brings benefits for both the buyers and sellers as indicated by the trend in e-sales. From 2002 to 2007, retail e-sales have increased at an average annual growth rate 23.1%, compared with 5.0% for the total retail sales in United State
8、s 1. In order to purchase a product through a web-based e-commerce service, a customer needs access to the Internet and an online payment mechanism, typically a credit card. Presently only 26.6% of world population has access to the Internet 2 and 16.42% hold a credit card (this figure is assumed fr
9、om the fact that 3.3 billion cards were issued globally and on an average each individual holds 3 credit cards 3,4). How about the remaining majority of the population? Do they not have any interest in participating and enjoying the benefits of e-commerce? These unreached are the 4 billion people at
10、 the BOP 5, comprising 69% of the world population shown in Fig.1. Despite their low income and limited purchase capacity, they make frequent purchases within their limited spending power 6. According to 5, there is money at the BOP and their purchasing habits mean that they actually pay more for ce
11、rtain items than wealthier customers. This BoP penalty is the consequence of local monopolies, inadequate access, poor distribution and strong traditional intermediaries. In this article, we introduce e-commerce system to this unreached community. Our model utilizes the MFI resources to act as an in
12、termediary between the supplier and the consumer. In Bangladesh, around 20 million people representing BOP have access to micro-finance institutions (MFI) 7. They carry out financial transactions in a regular basis with their associated MFIs. An MFI member not only borrows money from the MFI but als
13、o maintains a savings account. The accumulated savings of the 8 million Grameen Bank members is around 1.2 billion US dollars 8. An MFI officer meets 300-500 members (clients of MFI) once a week. A list of desired products from the members can be compiled by an MFI officer and a bulk purchase reques
14、t can be handled on behalf of the members. It can be assumed that MFI officers have access to the Internet and know how to operate a computer. The members can withdraw their savings to purchase their daily needs such as soap, shampoo, rice, wheat, salt, and spices. They can receive the same product
15、at a cheaper price through e-commerce. 8.3 million members in Grameen Bank alone have 30 million family members. If we consider soap as a product and one family consumes at least a piece of soap per month, 8 million pieces of soap per month will be the projected market size. An MFI like Grameen can
16、make a business agreement with a soap producer ensuring 8 million soap purchases per month. The soap producer would find it viable to offer a different business plan for such a giant pre-paid customer. If we include other two MFIs in this service, 20 million soap bars can be sold in a month. In this
17、 way, MFI can offer an effective e-commerce service to its members. Introducing e-commerce to the BOP, may affect the present non-e-commerce based businesses. The current business incentives also need to be considered. Selecting the products for the products for this system we need to carefully choo
18、se the products so that they do not affect the present business system but at the same time give a significant price advantage. At the consumer level a person at the BOP purchases the local produce like rice and lentils from the local market where a BoP penalty is rarely applicable. For consumers th
19、e list may contain edible oil, soap, sugar, salt etc. the items that is not produced locally and traditionally marketed from a central location. Our system would allow them to access the central supplier directly, eliminating the intermediary and increasing access to overcome the poor distribution p
20、roblem. There are few other items which the consumers purchases seldom but the local retailers visits the wholesale market frequently. Keeping those items in the list would also allow the BoP people to purchase at a lower price at the time of necessity. The relevant items might be electrical items (
21、bulbs, cables, sockets), traditional clothing (lungi, saree). The list should also include seasonal items to address the demand when applicable. It is our intent to arrange the system in such a way that the gap between producer and consumer is reduced and an unnecessary intermediary disappear. There
22、 are more advantages to including MFI in the BOP e-commerce model. In the present web-based e- commerce system, buyers do not feel comfortable sharing personal information and credit card information on the web. In MFI, the members have long credit relationship with the MFI officers. As the members
23、meet their officer every week, they have some sort of trust relationship with the officer. The officer can collect the money from their savings and forward the money to the supplier of the product. If the seller is not a Grameen Bank member, the money can be sent to his bank account by using a third
24、 party bank. The remainder of the paper is structured as follows: in section 2, we explain the present e-commerce system, the requirements and the limitations. We propose our model involving the MFI resources in Section 3. The advantages of the proposed model and the challenges are also discussed. S
25、ection 4 has the conclusion and the future works. 2. PRESENT WEB-BASED E-COMMERCE SYSTEM In a typical e-commerce scenario, a buyer visits a website. The website contains product information including the product stock status and the price. The buyer fills up a purchase order form which contains the
26、list of items. Upon completing the purchase order form, the buyer is asked to make an online payment using Fig 1: Base of Pyramid (BOP)5 some online payment system e.g. a credit card. The credit card details are communicated through a standard secured communication process. Once the payment process
27、is complete, the list of ordered items is sent to the supplier along with the payment advice, the supplier delivers the purchased items accordingly. Fig.2 shows a typical e-commerce model. There are three major stakeholders in the present e-commerce system: Buyer: is a person who buys a product. A b
28、uyer needs a means to find the product catalogue to select the product, a means to communicate with the seller to place the order and a method to make the payment. In a web-based e-commerce system, a buyer visits the product website, selects the product, makes the payment by credit card, PayPal or o
29、ther online transaction system. Upon confirming the payment, the supplier arranges for the product to be delivered to the address specified by the buyer. In addition to online services, a buyer can also obtain product information through TV commercials or published catalogs and leaflets. The purchas
30、e order also can be processed by telephone, fax or postal order. The payment options are both prepaid and postpaid. Prepaid payment systems include credit cards and bank transfer. Some countries, such as Japan, have post-paid process where the money is collected when the product is delivered. Seller
31、: is a person who sells products. In a web-based system, a seller is a website that interfaces with buyers. Such a website offers a product catalog, an interactive interface to receive customers preferences, a shopping cart system for the purchasing process and an online payment system. The website
32、needs to ensure a secure system to handle customer information. Supplier: A supplier receives purchase orders through the web and checks the payment process. A supplier needs store houses for the products. The storehouses can be either centralized or distributed. In order to minimize the delivery ti
33、me, distributed suppliers can deliver the product from the closest distribution point. A supplier keeps the products in its possession and supplies them to the customers. A supplier can be a producer of the product, its representative, an agent or a distributor. A supplier also ensures the delivery
34、of the product and post-sales services. 2.1 Limitations of the present e-commerce system The present web-based e-commerce system brings enormous advantages to society. However, the participation of the BOP community is missing. A traditional business targets a consumer segment considering their purc
35、hasing power. The cost of maintaining the infrastructure and executing a delivery can be justified by a minimum transaction value. At the BOP, peoples income is low and their purchasing power is limited. The purchase volume is not within the range to justify the overhead. Infrastructure support is a
36、lso required for e-commerce. The following limitations kept the BOP community unreached and deprived them of the advantages of the e-commerce system. (a) Internet access: The BOP community usually does not have an affordable Internet access. As a result, online purchase orders cannot be made. (b) El
37、ectronic payment system: The BOP hardly has any means of electronic payment (credit card or PayPal account), nor do they have any communication infrastructure to support online payment facilities. (c) Lack of awareness of advance payment: The advantages of advance payment for products are not clear.
38、 BOP usually make face-to-face purchases and pay on the spot. Prepaid-based telephony services are popular because the charges are well defined and they consume product right away. (d) Home delivery: delivering a small supply to an individual address makes the delivery cost too high to justify. Fig.
39、 2. Present web-based e-commerce framework BuyerSeller (Website)Producer/ Supplier 2. Product selection and Purchase Request 3. Payment 4. Request Delivery 5. Deliver Items 6. Payment 1. Product Catalog (e) Return handling: return of a small supply makes it difficult to plan an appropriate model. On
40、 the other hand, the BOP community would feel insecure bargaining with remote suppliers. (f) Post-sales customer service: providing post sale customer service to the BOP community is difficult because there is no communication infrastructure to support such a service. 3. E-COMMERCE USING MFI RESOURC
41、ES In this section, first we describe how MFI structure and show how MFI resources can meet the requirements of e-commerce for the poor community. The advantages as well as the impact are also discussed. 3.1 MFI Resources Microfinance institutions can be an excellent vehicle to provide e-commerce se
42、rvices to the BOP. MFIs have been successful in accessing the rural poor and introducing financial services to them. Fig.3 shows the operations and management system of Grameen Bank. Like other Microfinance Institutions (MFIs), Grameen Bank provides financial services to poor people in the remotest
43、parts of the country through a very efficient and closely monitored human network. In Grameen Bank, 8.3 million members throughout the country, are visited by 20,000 center managers once a week. A center manager has the socio-economic status of the affiliated members. These center managers deliver f
44、inancial services (savings, loan, insurance, remittances etc.) to the members. The group solidarity and rapport of the MFI officer with the center members are the main driving forces behind successful operation of an MFI. A center manager belongs to a branch supervised by the branch manager. Branche
45、s are the main activity unit of any MFI which works on and maintains detailed data of the operations. Branches are closely monitored by mid-level managers at the area offices. These mid-level managers work on summary data aggregated from each branch. Top level managers in the headquarters and zonal
46、offices manage the overall operation. This is how Grameen Banks human network is connected. MFI officers developed good relationships with the rural poor in terms of trust in financial transactions. In our previous work 7, we identified that MFIs have created a strong network among the BOP populatio
47、n. Every 5 miles Bangladesh, there is an MFI office provided by at least one MFI: either by Grameen, BRAC or ASA. These three organizations serve more than 18 million members, through 75,000 field staff workers distributed among 8,000 branch offices in the country. An MFI officer visits 300-500 peop
48、le per week. The network is an efficiently managed business with a yearly turnover of around 10 billion US dollars. The collective savings is also significant, at around 2 Billion US dollars. The relationship between the members and the MFI develops over decades. Most importantly, MFIs have detailed
49、 records of their members credit worthiness. They also have moderate record of their transaction abilities over a period of time. Hence, it can be assumed that if we can use the harmony among the members of an MFI and access them through that Fig 3: Operation and Management Framework of Grameen Bank MFI, a good business model can be generated. For example the daily consumption amount of edible oil is very low for one family. But collectively for 2000 members in a branch, the consumption amount is significant enough to make any supplier interested for business. In Section 2, we hav