New Delhi, March, 22 2007 - Aware that the next chunk of growth in the mobile space would come from rural markets, handset manufacturers are looking at microfinancing to increase sales in rural India.

The concept is in its initial stages with some starting pilot projects. However, everyone agrees that microfinancing is the way forward for increasing mobile penetration in rural markets.

The country has a mobile subscriber base of about 150 million with only 4% rural penetration against 40% in urban areas. The 1.2 billion population of the country is split 70:30 between rural and urban areas and industry analysts maintain that 60% of growth henceforth would come from rural markets. There are 423 large towns in the country, 4,728 small towns and 6,00,000 villages.

Devinder Kishore, director marketing, Nokia India, said the company is looking at microfinance models for increasing sales and is looking for collaboration with banks and service providers. However, he did not divulge specific details about either the companies or the deals.

Asim Warsi, marketing head at Samsung Telecommunication, said his company was actively exploring the option of microfinancing but it would be premature to divulge anything further at this stage. Warsi said microfinancing could be through retail outlets, cooperatives or any other channel.

Industry observers said it has been illustrated how mobile phones benefited low income self-employed professionals like electricians, painters, plumbers, etc. Microfinancing of handsets would help a larger segment of the populace augment their incomes by improving their accessibility. Besides, stakeholders involved in the financing project would also benefit from their success.

Microfinancing has become all the more important since the possibility of a sub-Rs 1,000 mobile handset has been ruled out in the near future. Rural India can generally afford handsets in the price range of Rs 1,500-2,000.

The potential of the rural market can best be illustrated with the recent Universal Service Obligation (USO) fund bids for projects in rural India, held by the department of telecommunications (DoT), where Bharti Airtel, the country’s largest mobile operator, had put in negative bids. This means Bharti is ready to pay the government to start services in rural areas as part of the project rather than seek funds from the USO.