Piggly Wiggly..It's not about Pig..but store!!

Piggly Wiggly is world’s first true self service grocery store, which was founded by American entrepreneur Clarence Saunders on September 6, 1917 at 79 Jefferson Avenue in Memphis, Tennessee. This concept patented by Saunders in 1917, although the Gerrard brothers, founders of the Alpha Beta grocery market chain were already using the concept in their store in Ponama California, but it was not so polished. Clarence Saunders added very new things in grocery retail format that is considered as standard of supermarket format.

A true entreprenuer: - Piggly Wiggly’s founder Clarence Saunders born in Virginia. Saunders left school at 14 to clerk in general store. In 1900 he was nineteen years old and earning $30 a month as a salesman for a wholesale grocer. Through his experience he learnt that many small grocers failed because of heavy credit losses and overhead. He applied his learning in his very new store format. Though this format of grocery market was drastically different from its competitors, the style became the standard for the modern grocery store and later supermarket. The name of store is quite attractive and attention seeking. The story behind this name is that once he saw from a train window several little pigs struggling to get under a fence, which was the same way how customer struggled to get things in store. He wanted a name that would be talk about and remember. It was an example of store positioning.

Piggly wiggly – the store incorporated shopping baskets, self service branded products and checkout of front, attractive aisle displays and rearranging the store to force customers to view all of the merchandise. Piggly Wiggly was first to:

·         Provide checkout stands.

·         Price marks every item in the store.

·         Feature a full line of nationally advertised brand.

·         Use refrigerator cases to keep produce fresher longer.

·         Put employees in uniforms for cleaner who know the location of their favorite products in their local store knew where they were in every store.

·         Standardize product location in their local store where they were in every store.

·         Design and use patented fixtures and equipment throughout the store.

·         Franchise independent grocers to operate under the self service method of food merchandising.

On its peak Piggly Wiggly had 2660 store and annual sales of $180 million. In November 1992, Saunders attempted a squeeze on the substantial short interest in the stock running the share price from 40-120 and profiting by millions on paper. As a result stock exchange removed the stock of Piggly Wiggly. Saunders reputedly lost nine million dollar in the attempted corner. Following these events, the company was divided into strategic units and sold to regional grocer’s chains including Kroger, Safeway. Management of Toyota corporation were inspired by Piggly Wiggly’s just in time inventory strategy and used this model to develop its Toyota production system, a philosophy by which the company organize its manufacturing and logistics, including its interaction with suppliers and customers.

A revolutionary idea: - the concept of self service store is a revolutionary beginning in brand market. It started the new era of segmentation, targeting and positioning. After starting of self service format it became very important for brand owners to differentiate their products from other same products. The packaging of product and brand recognition became very important because now customers have various choices on one shelf and they were free to choose anything. This concept added new dimension in brand’s life. It allowed brand to show their power of positioning on the shelf. Customers became more aware of brands and were able to compare two different brands. Self service format also brought concept of inventory management and wide assortment. This concept gave chance to many companies to innovate for differentiation and strong positioning. It was a starting of true brand war. In store promotions also became very important to attract customers. It also innovated the new concept of impulse buying. Without self service, modern branded packaged goods, as we know them, would not exist.

Nadeem Shaikh

GLCRMM 1012

Brand Equity

The fields of finance and operations have been quantized successfully but its the marketing parameters which are yet to be quantized beyond doubt. One of few parameters which has been quantized is brand value which we generally know as Brand Equity.

David Aaker defined brand equity as 'set of assets(and liabilities) linked to a brand's name and symbol that adds to (or subtracts from) the value provided by a product or service  to a firm and/or that firm's customer'  

In short it helps us analyze and quantize the perception of the customers or population when a particular product is compared to a similar product or a substitute product.
Elements that can be included in the valuation of brand equity include (but not limited to): changing market share, profit margins, consumer recognition of logos and other visual elements, brand language associations made by consumers, consumers' perceptions of quality and other relevant brand values.

The brand equity is generally measured at various levels
At company level the brand value is measure taking into consideration the market capitalization, projected profits and the financial health of the company.
At product level  a branded product is  compared with a similar product with no brand and the premium the branded product can command when compared to the previous one.
At consumer level the brand association is calculated in terms of brand recall and recognition.


 Further reading:
[link] 
[link1]

 PRABHAV GARUDADHWAJAN

GLCRMM 1012

Mass Marketing!!!!!!

Two decades ago when the country had just one channel 'Doordarshan' the channel had a captive audience without any age bar, right from chunnu munnus to babus to chachas to dadis everyone were its audience. But now with the onslaught of media houses which start a new channel every six month  creating a niche for itself,  one question which arises is- Does mass marketing as a practice exists anymore? I guess not.

The first factor which supports my argument is the number of channels and their target audience.

Say a dedicated[stereotype]  star plus viewer[read female 27 and above] would hardly take interest in watching star world.. say a 'serious' news channel viewer would hardly take any interest in watching India TV which is yet another [so called] 'news channel'.

Second factor is again based on the fact that kind of ads which are shown
We all know that a scroch brite ad would not come in star sports or cartoon network as the channels itself caters to one particular segment of customers with very well defined common characteristics.

So basically any marketing effort which is put in place is from the beginning a sort of micro marketing and not mass marketing. Even if you say that products like coke or any biscuit is shown on almost every channel, there again the company is targeting one particular segment in its ad barring a few cases where celebrity endorsers are used[ saif and kaif offer-- lays]

Now with such clear fragmentation of market on how many channels are you going to put out your advertisement is the basic question? How is that decided? Even if you put it out.., how efficient will be your marketing strategy.. How is it qualitatively measured? what is your ROTI and ROMI. Is there a better way to market the product.., can there be an innovative way of both advertising and selling?

The answer according to me is micro marketing which is aided with on ground aggressiveness than wage a TV ad war.

P.S- When it comes to waging an on the ground assault, the best example which comes to my mind is D-Mart. This is one brand so deeply rooted to ground that it is next to impossible even for an organisation like future group to uproot them. D-Mart doesn't believe in marketing too much, but the main differentiating factor for them is 'pure business' they work with best set of business practices keeping customers in mind. 

 

- Prabhav G.

GLCRMM1012

“Kellogg’s Mate”- Why it failed??

“You are what you eat”..is a belief what made Kellogg’s a must breakfast every morning. It was set up by brothers Will Keith Kellogg and Dr John Harvey Kellogg in year 1870’s. In 1876, while experimenting with different ways to cook and crush wheat to make it more palatable without losing its goodness, he inadvertently ran a batch of cooked wheat through the rollers that had been standing around for a day or so. And out of the other side came… Kellogg's Corn Flakes! (a prototype version)

Let’s look at one of biggest idea failure of Kellogg’s. This shows sometimes improper research and failure to understand consumers can be great problem to brand, however big it is.

If you are given choice to eat Kellogg’s Corn flakes, how you would like to eat it, by pouring refrigerators cold milk over cereal bowl, or eat it at room temperature’s warm milk and cereals? The company failed to understand the choice of consumers. They launched product Kellogg’s Mates – “all-in-one” breakfast package in year 1998 with a $30 million TV and print advertising campaign, with a view of accelerating trend of convenience foods, increasing in working hours in United States causing short of time to prepare breakfast quickly. Kellogg’s Mate was a concept in ‘kit form’ - a four oz. box of cereal, a four oz. container of aseptically packaged milk [no refrigeration required] and a plastic spoon. The line consisted of four popular Kellogg’s brands; Corn Flakes; Fruit Loops; Mini Wheats; and Frosted Flakes.

However, despite of great efforts by Kellogg’s, it failed to make position in minds of customer. Let’s look all the major factors of failure one by one as studied by various marketing professionals and journalist:

1.      Breakfast Mate used the concept of warm milk. It contained “aseptically packaged” milk which did‘t need refrigerator. Many Americans who have tried drinking aseptically packaged milk—something available in the U.S. from local and international dairy sources—have complained that it tastes "burnt."

2.      The product suggested keeping the container in refrigerator, since most of Americans pour cold milk over cereals when they serve. This lead to more confusion among consumers. Breakfast Mates was not in a location where you would generally expect to find breakfast cereal. The expense of trying to re-educate the consumer to look for cereal in the dairy case proved too enormous—way beyond, apparently, what Kellogg’s wanted to spend on selling the new line.

3.      TV commercials, ad showed how parents tell their small children to serve breakfast themselves by using of Breakfast Mates and let them “sleep in”. But packing of this product was too far from child-friendly, as many a time young hands squeeze the soft side of packing too hard, causing spill of liquid all over the table. Thus what ad was communicating to consumers was too different from actual situation.

4.      Breakfast Mate was portable packet to be used when one is out of his home. This can be kept in lunchbox, briefcase, brownbag, and desk drawer. But the problem was the milk get warm up at the ambient temperature. This caused the change in taste of milk.

5.      Breakfast mate was charged premium for convenience. Its retail price was in range from $1.39 to $1.69 depending on retail store. Consumers felt that was too expensive for what they perceive as a four. Oz. box of cereal.

After a one-year market exposure, the company announced that it was discontinuing Breakfast Mates in year 1999. Convenience, ease and a handy spoon isn’t everything it seems—not when you’ve got cold cereal and warm milk. A company should look at all dimensions while launching a new product, sometimes looking only at one particular parameter and overseeing others can be fatal.

Reference:

“Brand failures The truth about the 100 biggest branding mistakes of all time”- Matt Haig

www.kelloggs.com

http://www.mrbreakfast.com

                                                                                                 Dishti Naik

                                                                                                 GLCRMM1012

Abhinav Prajapati
GLCRMM1012

Zara’s supply chain management practice

Zara is third largest apparel retailer of the world. Its supply chain model made it so special to achieve this success. Zara has achieved this designation not by traditional way of management but by exceptions. Zara’s supply chain management makes its store capable to exceed the customers’ expectations. That’s why Zara has more store visit ratio that industry average. One of the Zara’s success factors is execution of efficient vertical integration between manufacturing, distribution and retailing. Zara’s supply chain is so efficient that it can place a garment in any store around the world in a period between two to three weeks.


The biggest strength of Zara is its ability to spot emerging trends and react quickly. Zara’s strategy mainly works on pull strategy rather than forecasting and mass production. Zara’s 200 designers travel around the world to identify latest trends. Its store managers regularly send data about current inventory and sales to the central office to identify what customers would like to buy. By this strategy Zara is able to maintain the exclusivity of its products. The new stock is arrived twice a week which makes its store unique in service and quality. The other important thing is new trends and designs are based on store manager’s analysis and customer’s interest and not only on designer’s creativity.


Zara has very efficient balance between outsourcing and manufacturing process to ensure quality. The required style and trends is made by Zara while the basic design and knitting is outsourced. Zara’s distribution channel is quite expensive than other retailers. Its distribution network mainly works by planes and trucks rather than trains and ships to deliver the product twice a week. By this system Zara has achieved 98.9% accuracy in distribution process.


Though Zara’s supply chain model is very accurate and makes Zara’s store exclusive, but after recession this model is quite tough to manage. Where other retailers are shifting their production unit to Asian countries to minimize the cost, Zara has not shown any sign to minimize the cost. It has been working on maximizing the revenue for a long time. It could be tough decision for Zara to continue its way of work. Zara’s IT system is so simple and outdated which is again not suitable in this tech savvy business world. Zara’s vertical integration is also now considered as not efficient according to present business scenario. The disadvantage of this system is the lack of economies of scale which made Zara unable to produce large quantity of products.



At the end, the changing business environment, emerging global trends, economic stability of the world and customers buying behavior would decide that should Zara change its supply chain model and business method or not.


1. Zara has a centralized distribution system which is not cost efficient.  How can  the cost incurred for activities if sorting, rerouting and resorting merchandise and stores between manufacture  be minimized without compromising the accuracy of 98.9% in its shipments?


2.  How efficient is vertical integration in ZARA? Why it is now considered as outdated and discuss the factors  to be considered  while implementation of economies of scale?





                                                                                                  Dishti ,Nadeem

                                                                                                  GLC_RMM 1012

Nirma..Marketing strategy!!

As soon as one hear the word “Nirma” the first thing that strikes almost everyone is the decades old jingle “Doodh si safedi Nirma se ayi..”.Apart from that low-cost has become synomous to Nirma.Nirma was the invention of Karsanbhai Patel,a chemist from Gujarat who worked for the Department of Mining and Geology. Nirma was founded in 1969 and was named after Karsanbhai Patel's daughter Nirmala.He was experimenting to develop a detergent for door-to door selling in oder to earn some extra income and so Nirma came into existence.

The USP of this detergent was that firstly it was phosphate free unlike other washing powders secondly due to good quality and low price and thirdly becaue of the distribution model adopted by Patel which was door to door selling.At that time when the Surf was priced at Rs 15 per kg ,Nirma costed only Rs 3 per kg.Due to these reasons the popularity of Nirma grew in Patel's hometown and so he started the packing of Nirma washing powder in the room of his house itself.Instead of relying on any other source for the distribution of the detergent he would actully sell it on his bicycle on the way to office.Initially he hasd diffculty in pursuading the local shopkkeeps to stock his detergent and so he recruited housewifes to sell and create demand for the detergent.

Nirma was becoming popular mainly in the lower end segment due to a number of factors.Firstly even after a good start and success they did not give up on their philosphy of “providing quality products at best prices” .Second factor which contributed to the success was their promotional efforts and distribution network.They used around 400 distributors who would supply to over 2 million retail .One factor which diffrentiated it from its competion was that Nirma also had a deep penetration on the rural sector too which was untapped by Surf which mainly operated in the upper segment.

By 1970 HLL took notice of Nirma but did not give it a much thought as they thought that “this is not our market”.Their perspective was that Nirma is a inferior quality product and it can not affect Surf''s business.But soon HLL realized the potential danger from Nirma due to its increasing market share.To combat the competition it launched Wheel.Wheel just like Nirma catered to the low end segment. HLL also developed door to door distribution stratergy for Wheel. It was in 1980 that Nirma moved ahead of Surf.

In 1982 that Nirma launched it's first TV commercial with it's famous “Washing powder Nirma, Nirma” jingle.Since then the jingle has been a part of all Nirma communications.By 1985 Nirma had become a popular brand in households.

Patel now was thinking of cost reduction without affecting the quality of the detergent.So it planned for a backward integration to reduce the cost of the raw materials.It was planned to set up two plants at Baroda and Bhavnagar. Today it produces 90% of the raw material in their plants itself.They further eliminated the intermediaries and adopted the policy of directly supplying the order to the distributors using their own vehicles.In some places like Andra Pradesh ,Tamil Nadu where it was difficult to reach on short notice depots were maintained.They further started with in-house prinitng to reduce the cost of packaging.

Nirma was operating in the low end segment,and the upper segment was yet to be explored by them and so expanded in the beauty segment in the mid 90s.People were skeptical if Nirma would be able to repeat its success in the premium segment or not.Even in the premium segment it kept its prices lower than the competing brands.It created a sub premium brand by selling high fatty and rightly scented soaps at much lower prices.To combat competition from HLL it positioned its products against it like Nirma Bath against Lifebuoy, Nirma Beauty Soap against Lux.

One intresting study was conducted by Sansika Marketing Consultant -Nirma's Marketing Firm that in North people prefer pink color soas,in South people like green color soaps and sandal soaps.Hence it tried to segment the market on that basis.This time to succed in this segment it passed the benefits to the retailers and offered them huge margins .An unbelievable margin of 140% was given on Nirma Shampoo.

But the problem was that the soap segment had too many competitors and the market was too much fragmented and made it difficult for any soap to have a large market share.Here the USP of Nirma of low price did not help in the premium segment.People thought it was a cheap brand andwere almost ashamed of telling that they use Nirma toilet soaps and shampoos.Nirma did not get much success in the premium segment.Its venture in the toothpaste and shampoo failed though the salt Sudh is doing well.

Today it is the second largest toilet soap brand in India and has one of the largest volume sales with a single brand name in the world.

Neha Bisht

GLC RMM1012

India Ignored- the other India!

India, a land of stark differences is nothing short of a nightmare to any marketing professional, but the credit must go to numerous professionals who have gone into deep dark corners of Indian psyche to find out the commonalities and strike a balance.

But to what extent has this worked in the nascent retail industry is the question.

A review/ report
Far away from the financial and technological hotspots dotted with BPOs and IT companies are the places like Nagpur, Ludhiana, Hubli Jabalpur which we commanly refer to as tier-II cities.

These cities and numerous towns have their own set of population who are predominantly self employed. Their aspirations and demands are totally different from the salaried middle class in the cities.Then sense of identity, behavior and fashion sensibilities make them different from their salaried counterparts in the large metros.

They do not carry any fancy credit cards but on the other hand proudly wear a gold chain which is visible, sport an equally fancy watch and would wear anything which would make them stand out of the crowd than blend in.

This self employed person is far more value conscious as he himself is a businessman. Any offer or a discount would make him think about the actual value of the product. He would go to the local market in order to get the best 'deal'.To him shopping is more about 'winning' the best deal than buying things. This particular behavior is mostly confined to 'needs'.

The very same person when it comes to 'wants' would pride himself to get the best product from the best place even if that means shelling out a few extra bucks. The ticket size of such customers will also be much higher compared to his metro counterparts.

Now after knowing his lifestyle and preferences a question remains with all the retailers. What should be the strategies to be adopted in order to tap this large chunk of population which could be hugely profitable! 

- Prabhav

GLCRMM10-12

Sail to Sell !!!

Whenever the term ‘selling’ knocks our mind, the cliché statement elicits ‘Jo dikhta hai wo bikta hai.’

But with the proliferation of number of products in the market and the consumer buynamics (buying dynamics), apart from selling what sells, the retailer needs to be aware what he is able to sell. In short, selling is more or less like sailing; facing smooth as well as rough times due to the ever-changing waves of consumer shopping trends and art of buying, procuring and reselling. 

Nowadays, the phenomenon of growing number of consumer products with low rate of sales per retail outlet is evident in various sectors: apparels, electronics, spare parts, appliances and even some food items. In terms of sales velocity these products might fall into three categories: slow movers, very slow movers,….and deadly slow movers. For example, in electronics segment the music CD players have become slow movers due to the availability and affordability of portable music players (iPod, MP3 players etc.).

It brings forth that the low-volume SKUs (Stock – Keeping Units) have become a serious problem as it is yet not 100% possible to determine accurately the needs of the local and diversified customers and due to which most of the goods are not moved from the store as planned.

This takes an account of a convention that most sales and inventory practices in consumer products industries are based on high sales volumes. Every store should draft an effective strategy for managing low-volume SKUs, i.e. every store should in principle carry the full range of products, even if in very small quantities.

It may seem counter-offensive to the general strategy of having rich assortments but its effectiveness could be comprehended for small retailers with a coherent approach.

Small retailers need to plan sales conservatively and maintain lean inventories to keep from slashing prices down the road.  Since heavy inventories lead to excessive markdowns and reduced margins – which becomes a chronic problem.

There's not much that a small retailer can do about inventory levels at this point beside reducing prices and liquidate and move on to the next season. Yet this can become a vicious cycle and eventually owners need to find a way out.  

The low sales volume SKUs might turn into a “Dead Inventory” over a period of time and the vendor may not be considerate enough to take back these products.

Selling dead inventory is not like running a clearance sale. Dead inventory is different than clearance merchandise; it's generally older and lacking a current demand. If any layer of dead merchandise is found out that customers aren't responding to, pull it back and bring something else forward, then bring the first layer back forward at a later time at a greater discount. If retailer attempts to move it merely by taking an additional markdown without remerchandising it, as usually done with clearance merchandise, he only reinforces the merchandise in the customers mind and it may not be desirable even at that new, lower price.

eBay, one of the resorts - eBay has emerged as a viable avenue for retailers to sell off dead inventory, but not everything necessarily can be provided on eBay. If the retailer is sitting on highly identifiable, branded items with an established market position, even if those items appeal to a very specific customer, eBay may work for him. The typical eBay shopper is sophisticated and well informed. They are usually looking for something specific, and they understand the value of what they are looking for, so the retailer has to price the merchandise sharply.

Thus, the objective for any small retailer should not be to maximize sales, but to maximize profitability and cash flow. Carrying too much inventory can decimate both. Inventory is a double-edged sword, the necessary evil of retailing. A retailer has to have it, but too much of it can rob him of the cash flow he needs to cover the expenses. Managing inventories around well thought out sales plans, avoiding chasing the last sale should help him to see an almost immediate improvement in profitability and cash flow. Therefore, stocking small quantities of the consumer products at each store and centralizing replenishment are useful decisions in reducing inventories without raising costs. A little of everything can go a long way.

References:

1. http://www.hurlbutassociates.com/Turning-Excess-Retail-Inventory-Into-Cash/

2. 'To Boost Sales, Stock a Little of Everything' Q2 2010 — Supply Chain Quarterly, AT Kearney Research and Publications

Abhinav Prajapti

GLCRMM1012

CEAT : Get a grip-be idiot safe

We all are living in an advertisement age. Today marketers are not only exploring TV commercials as media for positioning their brands, but they are also show casting the social messages in a very effective manner. Youth today are highly influenced by the hype of media, TV ads, and celebrities. Today people are more attached to commercials; we try to link our daily activities with what we see in TV.

I want to focus your attention on one of the best time commercial I have came across. I am talking about new campaign ‘Get a grip-be idiot safe’ by CEAT Ltd .The brand has recently launched new products in its bike Tyres Category. This commercial is promoting the benefits of having CEAT Tyres i.e. provides superior grip which gives better brake control for riders. 

The commercial ‘Get a grip-be idiot safe’ is concentrating on Indian roads as full of idiots -who do not follow traffic rules which leads to fatal accidents, and by using CEAT tyres user can become Idoit-safe on roads. This is due to its superior grip of tyres a rider can stop a bike quickly and can avoid a miserable accident.

CEAT have launched two ads under ‘Get a grip-be idiot safe’. One of the ad is showing husband with his pregnant wife returning home late night on their bike. They were involved in discussing about some movie. While driving, suddenly a car crosses them with full speed and husband applies brake to avoid accident. The ad has tried to connect emotionally with audience by showing scared face of pregnant women.

Other interesting commercial under ‘ Be idiot safe’ portrays the typical condition of  Indian roads where a person keeps on talking on cell phone while walking on road carrying a baby. This theme shows a classic example of how pedestrian in spite being wrong (i.e. crossing road ignorantly while talking on phone) blames rider angrily by passing idiotic comment “ Aby Andha hai kya”.

CEAT as part of their marketing campaign have explored some innovative options by launching their website called www.beidiotsafe.com. This site focuses on traffic etiquettes and involves its users in a very creative way. It’s a purely social initiative which is done to bring awareness in people by show casting different types of riders who violate traffic rules and drive dangerously.

Overall, thumbs-up to this campaign which is a 360 degree marketing initiative. It’s a best blend promoting both the USP of product and social awareness for traffic rules. Campaign theme of this type helps brand as well as society at large. We are looking forward to more such advertisements. Let’s take an initiative to bring a change in Indian society along with some business profits. After all marketing is all about earning profits and satisfying consumers. Who better knows this than us (future MBA executives)!!!!

                                                                                                              

                                                                                                         -Dishti Naik

                                                                                                        GLC RMM10-12

Microfinance....a model of changing society!!!!!!

"One of the most distressing consequences of globalization is the increase in the wealth of a few while hundreds of millions of people still live in poverty. However, microfinance is a powerful tool to begin to change that."
-- Marilou van Golstein Brouwers

Which is the key that will end extreme poverty to enable the poorest of the poor to get their foot on the ladder of development? Microfinance is the key, catering the needs of bottom of pyramid. They provide financial services which usually involve small amounts of money - small loans, small savings, etc. "Microfinance" helps to differentiate these services from those which formal banks provide

How Microfinance emerged? Let’s go back in 1970, when some organization started to engage actively in giving microloans to some people. The pioneering of microfinance is Dr. Mohammad Yunus, who began experimenting with lending to poor women in the village of Jobra, Bangladesh during his tenure as a professor of economics at Chittagong University in the 1970s. He launched an action research project. This was to examine the possibility of designing a credit delivery system providing banking services targeted at the rural poor. The Grameen Bank Project (Grameen means "rural" or "village" in Bangla language) came into operation. Later on this bank was came into action as Grameen Bank

Now let us understand how microfinance institutes (MFI) works i.e. their lending models. Following are its models used by MFI throughout the world (explained in detail at GDRC’s website):

1) Association

2) Bank Guarantees

3) Community banking/ Grameen Bank/ Village Banking

4) Co-operatives

5) Credit unions

6) Group

7) Individuals

8) Intermediateries

9) NGO’s

10) Peer Pressure

11) Small business

However, MFI uses two basic types of model in India:

SHG (Self Helping Groups) &

Grameen/ Joint Liability Groups (JLG)

First talking about SHG model- it’s an association formed by up to 20 members (not exceeding 20 members).Here loan taken by group is liability of entire group. Even if one member of group gets into defaulters list entire group is deemed to be defaulter.

Some Features:

-          Group can be formed as all-men group, all-women group or mixed group(women group is preferred)

-          Usually assist by NGO’s in initial period to prepare people for entire process of MFI

-          Often SGH are found involved in many social activities in addition to financial transactions i.e. taking up of social issues like dowry, girl child killing, alcoholism

-          Proper organizational structure i.e. Group President, Secretary, Treasurer

-          They maintain their own books of accounts like daily transactions, saving, loans repayment, expenditure, etc.

Second is Grameen model / Joint Liability Groups which is most widely used and accepted credit delivery model in world today. Influenced by Dr. Mohammad Yunus ‘s Grameen bank credit delivery system.

Some features of Grameen Bank model:

-          Bank branch is set up with branch manager and a centre managers covering about 15-22 villages

-          They identify prospective clientele and explain them functioning, purpose & mode of operation.

-          Primary group of 5 prospective members are made and 5-8 such group (can vary) together form Centre. Initially only one or two from group are eligible for providing loan

-          This group is observed for a month for their discipline of abiding to bank rules

-          If first eligible borrowers begin repay principle plus interest over period of 6 weeks other members of group automatically becomes eligible for a loan. This pressurizes individual member from group to repay loans on time

-          MFI interacts directly with these groups in form of regular meetings, focused on financial transactions.

-          Flat interest rate is charged and instalment size of repayment is small for weeks. This reduces the burden of loan repayment on individual

-          The interest rate on all loans is 16 percent. The repayment rate on loans is currently - 95 per cent

-          This model is more strict in its rules, policies and systematically planned

Distinguishing feature of this model from SHG model is that, SHG model is developed as holistic development of society a financial transaction is a part of it, while JLG is focused more on providing financial services to poor people.

Other features of JLG:

In urban India Grameen model is typically called as Joint Leading Group, where group is formed and these group come together to borrow loan from MFI. There is one Group leader in JLG and all group members share the responsibility of repayment of loan. Here the groups are formed by people of homogeneous community or locality.

Reference:

http://www.grameen.com/

http://microfinanceafrica.net/tag/group-lending/

Dishti Naik

GLC RMM 10-12