I have been very thankful to receive funding from the MIT IDI Technology Dissemination Fellowship. With their support, I am able to report live from our livingroom here in Amman.
But first… introductions! My name is Hoda Eydgahi and I am a final year Ph.D. candidate in the Department of Electrical Engineering and Computer Science here at MIT; my specific focus is the technology development. My other teammates are:
–John Ikeda (Harvard MPA/ID ’13),who is responsible for the overall management and is also an expert on consumer finance.
–Manoah Koletty (Harvard MPA/ID, MIT Sloan MBA ’13), who is responsible for the financial model.
–Blaize Wallace (MIT Sloan MBA ’13), who is responsible for the business development.
–Mustafa Hani Khalifeh (MIT Sloan MBA ’13), who is our Jordanian expert.
Now. John, Mustafa and I are currently on the ground in Amman. We are working on standing up a pilot program for our social enterprise, Bluelight.
The idea behind it?
Consumer credit is expensive in the developing world. Few people have the cash available for large purchases and formal savings accounts are often unavailable. Many try to save at home for large purchases, but this requires high levels of discipline to avoid temptation along the way. In many countries, poor households actually pay someone to hold their money to avoid this temptation. Bluelight provides households in the developing world with alternatives to expensive credit.
Bluelight is an innovative new consumer finance concept that draws on traditional informal savings tools and cutting-edge behavioral economics research to generate opportunities at the Base of the Pyramid. Bluelight uses the power of microlayaway to help hundreds of millions of households across the developing world make small prepayments to buy consumer goods without going into debt. Retailers such as Sears and Kmart have successfully used layaway payment systems for over 50 years. Last year, over 20% of Kmart’s holiday sales were purchased using layaway. In a layaway program, the retailer sets an item aside for a customer who then makes regular small prepayments towards the item. Bluelight adapts this model for the developing world, making the payments smaller and even more flexible.
We are planning to partner with large, trusted retailers in Jordan, such as Carrefour and Safeway, to manage their layaway programs for them. Bluelight independent agents, typically neighborhood corner store owners, market BlueCards to households and collect prepayments with a scratch card system similar to the system for prepaid mobile phone airtime. Prepayments are tracked using a sophisticated SMS-based database currently under development. Once a consumer completes all payments, she can take the completed BlueCard to any branch of the retail partner to exchange it for a gift card.
Since the concept is potentially Sharia-compliant, we decided that it would be of particular interest to Muslim nations. Jordan is a small country in the middle east where, as we have also learned this week, Zain, one of the biggest telecommunication companies in the region also run their pilot programs. Jordan is a small, emerging middle-income country with reasonable infrastructure. In addition, credit card penetration is relatively low (2-3%). It also doesn’t hurt that our teammate Mustafa is from Amman and has an incredible network of people involved in everything from telecommnications to banking to microfinance institutions.
I return back to Boston on January 20th. Before I leave, the team hopes to meet with potential retailers, local merchants, microfinance institutions, banks, logistics companies, and other potential collaborators; further refine our business model, set up customer surveys (to see what the consumer seeks in such a program); establish focus groups (to inform small groups of 6-8 people about the program, hear their concerns, and enroll them into the program if they are interested); gain a better understanding of the economic ecosystem in Jordan, and to stand up a pilot program (a 3-4 month trial period during which consumers will partake in a small scale savings program).
This week we met with Al-Ahli microfinance bank, Zain telecom, Ministry of International Planning and Cooperation, Millenium Energy. We’ve learned a lot already, but that will have to remain for the next post. Unfortunately our plans for today and tomorrow have been completely destroyed as Amman has shut down due to a total snowpacalypse! We hope to be back on schedule with our meetings on Sunday (Friday and Saturdays are the “weekend” here). Until the next update, stay warm!