MyTradeworks
//inMy Tradeworks
What is the problem you are trying to solve?
Out of the 7 billion people on our planet, 1.4 billion still live in extreme poverty, meaning they have to survive on less than US$1.25 a day. Worldwide, 70% of those extreme poor live in rural areas (World Bank, 2012) – most of them in developing countries. Given the forecasts of a 50% increase in the population by 2050 (IFAD, 2011), of which the majority will be in developing countries, the fight against rural poverty can no longer be postponed. Poverty in rural areas has several causes. One of the most prevalent causes is the lack of infrastructure. Without proper transport and access to information systems like the Internet, markets cannot work well and thus business opportunities and subsequent jobs at the bottom of the pyramid are limited.
Imagine a farmer producing a good that he (or she) would like to sell. Due to the large distance to the market he not only has to solve the challenge of transportation but he also does not know if he can find a buyer or what price he can ask for his goods. To overcome his problem, he relies on a “middleman” who buys the goods from the farmer and resells it with a profit margin. This significantly reduces the potential profit for the farmer and also makes him dependent on the middleman. In a nutshell, the basic mechanism of efficient markets – the free exchange of goods and services – cannot work efficiently in rural areas as most of the people neither have direct market access nor transparent information. Without these efficient market structures, people are not only unable to fulfil their basic needs but also have no incentives to produce more if they believe they will not sell it. Under these conditions, businesses cannot advance and subsequent job creation is hindered. Without economic development, investments in improving infrastructure and living standards cannot be realized. Hence, finding a solution to improve this market situation is key in order to fight rural poverty and improve future perspectives for its people.
What is the solution (product or service) you want to realize?
Limited access to infrastructure like Internet or efficient transportation prevents improvements in the way business is conducted and subsequently in the standards of living for rural people. Rather than building roads or installing broadband access which takes decades before benefits can be reaped by those in need, the immense infrastructural hurdles are bypassed by working with what the people already know and use; mobile phones. As a matter of fact, according to CNN (2012) more people in
Africa have access to a mobile phone than to electricity, with a mobile phone penetration rate close to 80% (Business Wire, 2012). Tapping into the unrealized potential of this widespread technology allows the efficient connection of people and their environment.
For this purpose, a platform that matches supply and demand through mobile phones in rural areas will be introduced. The goal is to create a transparent market that connects people through the direct trading of goods and services and build a strong network among the rural communities. This service allows direct market access and can replace the “middlemen”, resulting in a more efficient distribution of resources, which in turn enables economic development in rural areas.
From the user’s perspective, the mobile platform includes the following steps:
1. The user sends an SMS to the platform indicating the item he/she wishes to buy or sell, including information like price range and location.
2. The platform’s software processes the information and matches buyer and seller. In case there is no match, an SMS is sent to inform the user he/she will be contacted when a match is found.
3. In case of a match, the buyer receives an SMS with the three most relevant offers to his/her demand. The buyer also receives the phone numbers of the potential sellers in order to negotiate with them and close the deal.
4. The buyer and seller meet at a place and time that is convenient for both.
Once MYtradeworks has reached a critical user mass, a full marketplace and a network of traders will develop in the rural areas, resulting in efficient market conditions. This enables people to specialize, reach economies of scale, create businesses and jobs and finally improve their future perspectives.
What social impact do you plan to create and how will you measure it?
MYtradeworks will improve the standard of living for individuals in remote rural areas by empowering those at the BoP to engage in more trade. This will spur economic development in those regions. MYtradeworks will connect buyers and sellers directly, allowing them to buy and sell goods at efficient market prices and therewith providing them with more capital to invest in their production. This allows them to grow their businesses, become more specialized and eventually increase their living standards. The individual producers can bypass the middlemen who currently form their only link to the market.
As producers grow their businesses, (additional) jobs for individuals at the BoP will be created. Two different groups of producers are addressed: those who are currently self-sustaining with the desire to turn their activities into a business and those that have a business and want to expand their production. This creates jobs at two levels: at the individual level in the form of for example new farmers and secondly at the level of the community in the form of additional personnel needed to run the expanded business.
MYtradeworks’ social impact can be deemed even more important when taking into account the scalability of the business model. In essence, the business model has the potential to be implemented in all poor, rural areas in Africa, Asia and South America. This means that there is a potential reach of 1.3 billion people (Ifad, 2011) who could benefit from this solution.
In order to measure the social impact of MYtradeworks. Several key performance indicators will be used to measure short-term social impact, and other measures will be used to determine the long-term impact.
What is the business model behind your solution that will make it sustainable?
MYtradeworks business model: low-cost, high-volume network.
The MYtradeworks business model is based on:
1. Enabling a low-cost connection between sellers and buyers in remote, rural areas via existing SMS technology
2. Relying on a large volume of SMSs sent over the network for revenues by charging a premium fee for the SMS
By allowing the sellers to connect with buyers at a minimal price, the benefit (revenue) of being able to sell perishable or excess goods will always be greater than the cost of finding a buyer. Likewise, the buyers’ risk of losing time and money by travelling to a market without information about the goods traded there is reduced significantly. Thus, relative distance is decreased and new markets are created.
Within this model, sellers and buyers are provided with a simple and non-costly way of finding each other via their mobile phone. As sellers do not have to give half their profit margin to the middleman, it is expected that they would be willing to pay the premium for the SMS.
After the initial investment in the MYtradeworks hardware and software systems has been returned, the revenue can be used to maintain and further develop the system. Eventually, an Internet platform that provides a stronger interface for MYtradeworks can be set up. In the long-run there is room for several business extensions such as a transportation service and information provision.
The MYtradeworks business model is not restricted to a single product category, which makes it appealing for a broad range of customers. The value of the network is enhanced with every new user, so there is a great scale potential to be exploited. As the model is not specific to Kenya, since partners can feasibly be found in other similar countries, it is replicable across borders.
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