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Norway Wins the EuroVision Song Contest 2009

2009-05-16T14:55:00.000-07:00

Norway won the 54th Eurovision Song Contest early Sunday in Moscow, when singer Alexander Rybak beat 24 other contestants in the Russian capital.

Rybak's song Fairytale won with 387 points, beating Iceland with 218 of points and Azerbaijan with 207 points.

It was the third time Norway has won the competition, one of the most watched television shows in Europe every year.

Rybak, a 23-year-old ethnic Belarussian who grew up outside Oslo, had been the pre-tournament favorite and he wooed and charmed the crowd with his singing and violin playing in the final at a stadium built for the Moscow 1980 Olympic Games.

Norway Wins the Euro Vision Song Contest 2009

And Norway wins this time. A song personally written by this lovely guy who sings it with a great passion. Fairytale

He is a sexy guy said all the reporters who reported the various results.

The winning was outright. No contest nothing at all. They won with dignity and surpassed the second with more than double the number of points. Breaking the record ever seen in any former contest.

The eurovision song contest is loved across the world and has given birth to many artists who are hard knocks right now.

If you ever want to win a competition, win it like Norway!

Eurovision 2009 LIVE From Mosco

2009-05-16T14:02:00.000-07:00

It's Eurovision, live from Moscow, and also Heidi Stephens' living room. Can the UK do better than last place this year? Join Heidi for the liveblog party from 8pm on BBC1.
Comments (829)

9.51pm: And that's IT for the songs, Carol Vorderman is now wearing a red dress, whilst Ross from Friends is dressed for a funeral.

The lines are opening NOW. Germany, Portugal and Malta are getting my vote. Hypothetically, obviously - I'm not actually voting. I can't even stand up.

Some cosmonauts on the International Space Station are opening the phonelines. How random is that?

I'm off to read your comments and will be back for the voting shortly, once the ghastly mid-show entertainment is over - who was your favourite?

9.47pm: It's the last song! Hurrah! It's SPAIN, who are another pre-qualifier, thus not required to make much of an effort. It is, however, a rather gorgeous blonde called Soraya, who is singing a song that sounds an awful lot like something by Holly Vallance, sung slightly off key.

She is entreating us to both take her and shake her. Happy to oblige, and by the way Strictly Come Dancing would like their wardrobe back. And while we're at it, 1988 would like your backing dancers.

9.43pm: It's FINLAND! Hang on, where's the Finnish rock? Jesus. This has Finland's answer to Daz Sampson (rapping a bit like your dad - DRINK DRINK DRINK), a big Euro-disco beat and some women in very short, very cheap-looking sparkly dresses. One of them appears to be wearing wet look leggings, sigh.

There are fire-jugglers in the background who are a good deal more interesting than this song, which is deeply average Europop at best. Bring back Lordi, I say.

9.39pm: Ooh, it's UK! Wave those flags, people. Which means we only have two more after this!!!

Go Jade - you've got a dog of a song, but do your best. For those of you who haven't been paying attention, it's a giant Andrew Lloyd Webber ballad about how it's her time. Look, there's ALW on piano, looking like Dobby the House Elf.

Did Jade just get hit in the face by a violinist's bow? Excellent. I'm sorry, I really want to be supportive and I'd love to see the UK do better than in previous years, but this song is AWFUL. Jade's absolutely gorgeous and she's got a fantastic voice, but I can't bear this kind of warbly West End lung-buster. She expects to be in the top five, and I hope I'm proved wrong on this one, but I really can't see it myself.

She did do well though. Go Jade.

9.35pm: We're nearly there, people - can't be more than 4 or 5 to go, surely?

It's ROMANIA, and Elena who is another incarnation of Geri Halliwell in a flesh-coloured scrap of a dress, singing about Balkan girls. If this performance is anything to go by, Balkan girls all have ropey hair extensions, ronseal tans and shredded mermaid frocks.

Her hips are ready to burn, apparently. You can get medication for that, you know. A nice bit of cheesy pop – always welcome. More please.

9.32pm: Next up, it's UKRAINE. It's some woman in a red mutton slut-frock and boots called Svetlana, singing 'Be My Valentine'. She looks about forty, in the style of Liz Macdonald from Coronation Street.

There is much grinding in a giant hamster wheel with semi-naked men dressed as roman gladiators. Ooh, she also plays drums. The song is pure filth, with trumpets and a kick-ass baseline. I love it.

9.30pm: The presenters are back, with Carol Vorderman wearing a dress described by Graham (who is improving by the drink) as 'made of cheap wrapping paper'.

The daughter has declared Norway her favourite. She's nine, thus we have established the target market.

9.27pm: It's NORWAY, and a young cheeky little chap called Alexander Rybak. This is the favourite, apparently...umm, sorry?

He's like a little Dickensian schoolboy with a violin and bonkers eyebrows, and it's all very theatrical, with backing dancers in braces doing gymnastics. It's like a stage school performance of Fiddler On the Roof. Could someone please poke him in the eye with his violin bow, please? Fairytale my ass.

This cannot possibly win. I will not allow it.

9.24pm: 9.24pm: Next up ALBANIA –less of a dress, more Geri Halliwell in a pink tutu (Geri's made a few appearances this evening, come to think of it, I should have included it in the drinking game).

She's backed up by a dancer in a head to toe green bodysuit, like a faceless gimpy Jolly Green Giant. It's a poppy little number about how she wants us to carry her in our dreams. I am already having nightmares about the faceless green man. Excellent use of the wind machine, though.

9.19pm: It's time for TURKEY. And they appear to have kidnapped Shakira! She is singing about her beating heart, wildly off key. The vocal is generally a bit ropey, the dance routine looks like it might have been thrown together in her bedroom, but who cares – she's wearing practically nothing and it's a bit of flesh for the dads.

Some acrobats have appeared, wearing a great deal of polyester. Sorry, but flesh or not, this is crap.

9.16pm: My goodness, we've passed 400 comments. Hurrah! Is everyone having fun?

It's GERMANY, and a big band swing number about someone called Miss Kiss Kiss Bang. He is wearing bonkers silver trousers and an open black shirt (hell-o) and his dancers dance in their pants! (hang on, that was The Apprentice). My feet are definitely tapping. He has Dita Von Teese on stage with him! How small is her waist?

For those of you that were listening to deeply shit music in the late 80's, he reminds me of the lead singer of Brother Beyond. Graham thinks it was pants, but I loved it. I never said I had any taste.

9.11pm: Next up DENMARK, and tonight, Matthew, Brink from Denmark is going to be Ronan Keating. it's a song called 'Believe' that was written by Ronan Keating, sung by a man who looks a lot like Ronan Keating, and sounds uncannily like Ronan Keating. He's also raided Ronan's wardrobe.

it's a perfectly pleasant number, if you like Boyzone. If Ronan makes you want to rip your face off, then this is not for you. But it packs a bit of punch, and will probably get quite a lot of votes. From people who like Boyzone.

9.07pm: 9.07pm: It's ESTONIA. I have actually been there, it's definitely somewhere near Finland.

It's the Corrs! Oh, no it's not, it's a strangely beautiful and shiny-faced Estonian woman with a violin surrounded by many other beautiful Estonian women with various stringed instruments. She has a lovely voice, and I rather like it.

Is it the booze, or is the evening looking up? We haven't seen a white outfit for a while, this lots have emptied Tallin of electric blue sequins.

9.04pm: Next up, it's MALTA, who we love because they always vote for us. Aah, so THAT's what happened to Michelle McManus. It's a big diva-esque ballad and she's got a cracking voice.

She's got some serious bling on, and I'm loving this. I am uplifted, and have just sent my 9-year-old daughter to the kitchen for more booze. Don't tell social services.

Definitely my favourite so far. Go Malta!

9.00pm: Ooh, we're back. It's MOLDOVA – more warbling from a girl called Nelly, who looks like Geri Halliwell in Moldovan national costume (drink, sigh). Either that or she's auditioning for Peter Pan. She has lots of male backing dancers doing Cossack-style dancing (drink) and shouting 'hoi hoi' in a pirate fashion. Is it wrong that I love this? Drink drink drink.

8.59pm: It's a random bit with Russian policemen - apparently the rest of Europe is enjoying an ad break right now. Lucky bastards.

I think I might need to suspend the drinking game, because frankly I'm well on the road to completely twatted. I may fall foul of my own moderators, which would be a first.

8.55pm: It's time for BOSNIA & HERZOGOVINA, and it's a Bosnian Les Mis! Bring on Susan Boyle. They've got the full set of vintage military uniforms, and it's all a bit marchy, but I'm loving the banging drums. The lead singer who'd be rather dashing if he hadn't got minging greasy hair. Perhaps they are Bosnia's answer to My Chemical Romance.

8.51pm: Christ, thank god that's over. It's AZERBAIJAN, which I'm sure is NOT in Europe.

It's Aysel and Arash - AKA Dr. Alban and one of the the pussycat dolls, who appears to have inadvertently tucked the front of her dress into her knickers. They have three similarly scanty backing singers in half-frocks and bonkers gold leggings. It an entirely cheesy inoffensive tune, and appears to only have two lines of lyrics, repeated ad infinitum.

8.47pm: It's the host nation RUSSIA, and the crowd are going bonkers. It's a girl called Anastasia, and it's immediately apparently that the Russian Eurovision coffers are well and truly empty, thus winning again this year is absolutely not an option. Bloody awful, and entirely off key. I have actually covered my ears. Move on.

8.44pm: Next up, it's ARMENIA. Blimmin' eck. Where to start? Starts out with warbling and drums, then the Morticia twins rise from the smoke. It's a bizarre mix of snake charming music and Armenian dancing (drink!), accompanied by the backing singers from Dr And The Medics (god, showing my age now). Armenian goth Not really my cup of tea, if I'm honest..

8.40pm: It's GREECE - aww, shame to see Ricky Martin gone to seed, too much livin' la vida loca. Only kidding - it's Sakis Rouvas singing 'This is Our Night'. There's a lot of thrusting, and his white (drink!) shirt and trousers are a tad snug, if you ask me. Now THIS is what Eurovision is all about. Man in overtight white outfit and hair helmet dancing about to some poptastic nonsense. Camp as Christmas, I love it.

What was that in the comment box about a Gaydar liveblog where they are showing their willies? Am I expected to compete? Enough cider and it may just happen. This is our night, after all. Hic.

8.35pm: Next up it's ICELAND, and a stunningly pretty girl from Iceland who has spoiled it all by wearing a blue party dress that has been blatantly nicked off a 1970s toilet roll. Graham describes it far better than me as 'a bridesmaid's dress from 1987'. Don't be funnier than me, Graham, we had a deal.

It's a very sweet little country-and-western style ballad, and she has a very nice voice. Everything about it exudes wholesome niceness – I keep hoping she'll whip that ghastly frock off to reveal a leather basque and thigh boots. Alas, it ain't gonna happen.

8.32pm: It's time for PORTUGAL, lead by Sonia from Eastenders, but alas without her trumpet. Instead we have a whole host of traditional instruments, including a flute, a ukulele, an accordion and a man on the bongos busting some serious moves (drink drink drink!!)

If Jack Johnson was Portuguese, it would sound exactly like this. They all seem to be having a marvellous time, and I'm having a little dance on my sofa. It's very much in the spirit of Eurovision, and I rather like it.

8.29pm: Right, pull yourself together, Heidi. Up next is CROATIA, and a tinkly little ballad of epic dullness, sung very sensitively in Croatian by a rather handsome chap called Igor. He has a female sidekick who comes on to warble, she's got a white dress on so technically we should be drinking, but I haven't actually stopped since Sweden. There is some excellent use of the wind machine. It gets a bit more shouty in the chorus, and then just starts dragging on.

And on.

8.24pm: OK, Graham is growing on me now. He's calmed down a bit. Next up is SWEDEN. Her name is Malena, and it's all a bit opera. Oh, no it's not. Fucking HELL! What IS that?

It's a square-jawed Swede of indeterminate gender, with an impressive set of guns and a dress made from dead birds. It's white, too, so DRINK! Her operatic bits are pretty impressive, but her lower register leaves a lot to be desired.

Ooh, her backing singers are holding masks shaped like sparkly turds! Her final big note provides a terrifying facial expression. Apparently she's a famous opera star in Sweden. Only dogs can hear her now. Jesus.

8.20pm: FRANCE are up next, and a lady called Patricia, who is apparently very famous in France. She looks like Glenn Close, and the song is tres francais indeed.

They had a hard act to follow after wheeling out the brilliant Sebastian Tellier in his golf buggy last year, but this is a dreary stale baguette of an effort from our cross-channel friends. Just because you pre-qualify doesn't mean you don't have to try, you know. Zzzz.

8.16pm: Next up it's ISRAEL, two ladies called Noa and Mira. One of them is an Israeli Arab and one is an Israeli Jew, Graham informs up helpfully, and there song 'There Must Be Another Way' is a political plea for peace.

They appear to be singing it to each other in a loving fashion, suggesting that they've already found another way that works pretty well for them. Ooh, they play old cake tins too!

My ears are bleeding now. There is another way, you're right. It's called the mute button. Move on.

8.12pm: The between-song postcards are making me feel a bit ill. I get terrible motion sickness.

Ooh, the songs are starting! First up it's LITHUANIA. A guy called Sasha Son, at his piano like Gary Barlow in a trilby. What, no backing dancers in crotch-skimming dresses? No pyrotechnics? How very dull. He has now left his piano, yet inexplicably it continues to play. Key change, and he gives up on English and moves into Lithuanian.

I'm sure it's not the worst song we're going to hear this evening, but even now I can feel it leaking from my brain. Forgotten it already, sorry.

8.10pm: It's our hosts! She is wearing a dead flamingo and looks a bit like Carol Vorderman, and he looks like Ross from Friends. I don't know what their real names are, but from now on they are Carol and Ross.

Graham Norton is getting right up my nose. He's not funny, he's just annoying. Shut up, Graham.

8.05pm: A man in a dodgy mac is being carried into the stadium on wires. He's trying to take his clothes off, but they are getting caught in the wires. There appear to be many layers, and he's running through walls.

Oh, I think it's last year's winner. Right, that makes more sense. We get to re-live last year's winning song, Believe, but alas he's miming. Since his outfit is entirely white, and he keeps falling to his knees, we should probably be doing some serious drinking by now. It's going to be a long night, people.

8.00pm: Excellent - the old-style Eurovision music. And it's Graham Norton! It seems very odd not having Terry. Graham says he misses him too. It's grey and dreary outside, he tells us, but there are 20,000 people in the Olympyski stadium expecting a big show tonight. I hear they've spent £30m, so I want one too.

Oh jesus, it's a circus theme, with the Cirque De Soleil. My pathological fear of clowns is well documented. Shudder Hurrah, Graham tells us there are no clowns. Lots of tumbly acrobats though, and the Child Catcher from Chitty Chitty Bang Bang. Who is kind of a clown, but more scary.

7.59pm: Ooh, it's starting in a minute! Are we all ready? Flags? Booze? Nibbles? Excellent.

2.54pm: It's the 54th Eurovision Song Contest! How quickly a year flies when you're having fun. This time last year I was sat on this very sofa reporting on the excitement from Belgrade, and now it's Moscow's turn to put on a big Euro all-singing, all-dancing party. I'll be here liveblogging the whole BBC1 show from 8pm, with a box of wine, a bowl of cheesy puffs and a map so I can work out where the hell Moldova is. Do come and join.

I can't even begin to tell you how much I love the Eurovision Song Contest – family legend has it that, at ten months old, my mother plonked me in front of the 1974 show, and it was the first time I had shut up since the day I was born. Abba won that year with Waterloo, and 35 years on my love for this charming yet-oft-demented contest endures.

I have spurned several Eurovision party invites tonight, and instead invite you all to join in with my virtual party liveblog – bring booze and witty repartee, and leave all your thoughts, musings and comments on the acts and the Moscow show below. Please note that I have a tendency to tell it how I see it, and if I inadvertently mistake Euro-irony/political statement for epic craptitude, I would appreciate it if you wouldn't send me hate mail, as last year. I am a devoted Europhile, and I truly love this show, but let's face it - a lot of it is bloody awful, and the rest is completely bonkers. And this is why we love it.

Tonight we have 25 acts to get through - I'll be endeavouring to provide a live summary on every song (bearing in mind that I have purposely avoided watching any performances in advance, so I have entirely no idea what this evening will bring), including where each act is from and what the hell they're singing about, what they look like, and any other interesting/random facts and observations about the performance I can drum up over the course of 3 minutes. In between, we'll no doubt have a couple of comedy wooden perma-tanned Russian presenters to keep us entertained - by the end my hands will be like claws, but I'll do my best to keep up.

I'll also be keeping a close eye on this year's BBC commentary, which for the first time since the 1970s is not getting the acerbic-yet-weary treatment from Terry Wogan. He's fed up with all the political voting, so has handed the baton to Graham Norton. Will Norton maintain Terry's genius witty piss-taking, or camp it up to the nines? I'm intrigued.

When all the acts are over, we'll be hanging around for the scoring, which is an excellent opportunity to drink a great deal and chat about our favourites, because frankly no-one needs a full report on the scoring unless by some miracle another nation votes for the UK. Of course they've changed the scoring system this year – the public vote only counts for 50%, the rest is down to some mysterious jury panel that I'm sure we'll hear more about later.

Finally, I have a very simple drinking game to help us through the evening, choosing my top five picks from the Sparkly Bag of Eurovision Clichés, as we probably can't keep an eye on any more. Those who wish to join in must take a slug of your tipple of choice is if the LEAD SINGER from any nation ticks any of the following boxes:

- Wearing an entirely white outfit
- Falling to knees during performance
- Playing of local instruments or traditional dancing
- Removal of layers of clothing during performance
- Ill-advised rapping

I'm excited! See you at 8pm!

How To Go About Your Article Marketing!

2009-05-15T15:10:00.000-07:00

Many people usually want to know how to get ideas for witting articles. Well i will quickly explain how i go about my article marketing.

Making Money with article marketing is simple witting articles and publishing them to article directories. It as simple as that, it its simplest terms.

The best directory is of cause Ezine articles. Once your article is accepted there, you can then rewrite it and submit to more directories if you want. That can also help for SEO. (backlinks)

As for getting article ideas, that can really turn out to be trouble especially for newcomers.

I have a number of places where i get article ideas. Forums like this one is are a great place to get some good article ideas.

You can also get ideas from videos at youtube and at article directories themselves.

once you have an idea, make up a list of keywords, then head over to ezine articles, type in your keyword in their search box, and read the articles that have already been written in on that subject, from there you wil learn and then write your own unique article.

Hope this helps.

Bad Economy Affects Clickbank Sales: Drop To Record low Level

2009-05-05T12:45:00.001-07:00

I have always wondered when the so much talked about bad economy will have a very significant impact on me.

I had notice a drop in most of my sales and a some slow down in most on my other activities, but the last month was record low! It appears we are not yet seeing the light at the end of the tunnel as far as the bad economy is concerned.

After noticing that i had not made any sales from my numerous campaigns with clickback, which was kind of strange to me, i for once tried asking them what the problem could be. I was just being curious though.

I asked them to check if all was well with my account. I complain of record low sales, and told them to see if there was something wrong from their end.

Two days latter they replied saying it is not only me complaining, many other vendors and affiliates also were asking so many questions. He told me that general sales have dropped to record low level. That there was no problem with my account and went on to say that it is due to the bad economy.

Now I've had a pinch of the this economy slowdown. It don't fell good at all!

Do You Really Need To Buy Money Making Products?

2009-05-03T05:57:00.000-07:00

There are lost of people advertising all sorts of make money on the internet products. Many, if not all these products assure you immediate revenue once you buy them and properly exploit the information in the package, in most cases e-books and some software.

I write this editorial today to help particularly newcomers in the internet marketing industry to be well conscious of such kind of products that guarantee instant online incomes.

There is much money that can be made on the internet, and many people are in fact making so much just via their computers and internet connection. But if you think it is trouble-free to do that then you better rethink because making money on the internet is not as easy as it may sound. It is given only for those who have an exceptional twist in their philosophy and way of doing things. Just by buying and using one marketing system or e-book will not enable you to start making money suddenly on the internet.

Because of so much hype, many people are flooding the internet eager and hoping they can make some speedy money. Usually these newcomers will give in to just any e-book or marketing system that promises them some kind of mysterious procedure to internet riches. Some of these products say they have some concealed secrets that they have exposed in their e-books, just to make people pay money for these books.
I want to make just one point clear in this article. Most, if not all the information you need to know about how to make money on the internet is out there and it is entirely free. You just need to look of the information and make use of it. You don't need one guru to sell that information to you when you can make some trouble-free research and find it by your self.

Don't give in when someone tells you that he or she has revealed some money making secret in his $90 e-book or marketing system. That is just hype and you will be very dissatisfied when you become aware of fact that that e-book or marketing system fails to make the money as promised by the authors of the e-book.
If you want to make money online, make research on the internet on how to do it. Don't buy the crap I see internet marketing gurus busy selling, because they are just out blown lies. The only people who make money with those products are the internet marketing gurus themselves.

Most of the information you need has been written on Websites. You just need to find them, read and learn. If you want to download an e-book, you can fine thousand of free e-books that will respond to your inquiry. Be careful of internet hype!

long tail keywords, the imprtance of long tail keywords,keywords for effcetive traffic,good keywords

2009-04-23T13:45:00.000-07:00

If you are into internet marketing, then you probably understand that traffic is the most important thing have for your online business. In fact, without enough and constant traffic flowing to your website, you will never be able to make any money on the internet.

Sadly enough, traffic is the main thing that most webmasters find so difficult to have on a consistent basis. Taking into account the fact that the value of any internet business is directly linked to the amount of traffic that business is getting, I am not so surprised why driving traffic to a website has become a real science that has to be studied and mastered with every single detail.

One of the best ways of getting traffic to your website is through search engines. Main search engines like Google and yahoo provide the most targeted traffic since they put your website in front of people who are searching for information regarding your products or services.

Ranking high with these popular search engines has become the most difficult thing as far as internet marketing is concerned, at least for popular keywords such as "Forex" "Credit cards" "Internet marketing" and many others.

Most beginners in internet marketing always make this mistake of competing against the big boys for very popular keywords. If you are a newcomer, and you have chosen your niche to be under the Forex Industry for example, it will be almost impossible for you to rank high with the search engines for a keyword such as "Forex" you can do all the optimization you want, I can guarantee you that you will just end up being disappointed. It can take some very hard work and time to rank high with these popular keywords.

Website ranking high for such keywords in most cases have thousands of other websites linking to them. And they have probably been in the business for 5, 6, or 10 years, or even more! They have taken much time to optimize their web pages for those keywords.

If you are a new comer in your niche, the best thing for you to do is to make a research on long tail keywords that are related to your niche. In most cases these keywords will not be as competitive as the main keywords. Optimize your website with these keywords and you will have more chances of ranking high with the search engines.

You just have to make sure that the keywords or key phases you choose to optimize your website with, have at least a good volume of monthly searches. This will enable you have some traffic to you websites if you happen to rank high in the search engine result pages for those keywords.

Google Alerts is a Very Handy Tool For SEO

2009-04-20T23:07:00.000-07:00

It is amazing the number of tools and services that Google provides for free! In fact the only reason why people don't seem to use them as much i guess, is that they don't advertise these tools as much as possible.

Google maybe the main providers of targeted traffic on the web today, they still don't know how to use that traffic to sell or advertise their own products.

Most of their free tools are not known to the public. They have tools that are free to use, which are so many times better than paid services provided by some third parties.

A good example of such a tool is Google alerts.

We all are aware of the importance of backlinks for SEO and adding your search engine ranks. One difficulty is that it can be time overwhelming trying to websites that we can possible place our backlinks.

A rapid and easy way to find places you may be able to get backlinks is with Google Alerts.

Simply type in your keyword and Google will periodical deliver websites that are interrelated to your keywords or key phrases. Even better you can set it up for blogs, which may be just wonderful for creating back links by commenting. Just make sure in this case that the blog is a dofollow blog!

You can set up as many alerts are you want. You can also set them for daily, or as they happen (might be other intervals, I don't remember). I just have my set for daily. Pretty much every day I get a list of places to get links for each keyword I am targeting.

I have been using Google alerts since Google started providing the service. it is a very handy tool.

You can also use Google alerts to track information about yourself, or your website. You Just create an alert for your name or your website url.

With this, anytime somebody writes about you on the internet, you get that website url directly in your mail.

To some it up Google alert is a very good tool. Thanks for posting about it here so many others could benefit from it as well.

How to Make Google Trust Your Website, So They Will Send Targeted Traffic to It

2009-04-20T13:40:00.000-07:00

Search engine optimization has become the order of the day. People are jumping in it completely unprepared and loosing money here and there to the big hype available on the internet today.

If we can summarize Google in two words, we could say "trust" and "relevance". Try as much as possible to gain Google's trust with your website and they will reward you by sending targeted and consistent traffic to it.

Google as a search engine is well renounced over the world. For your website to rank high with them, it has to have a considerable amount of trust. This is the most basic of SEO, but always almost forgotten by the majority of webmasters especially newcomers in website building.

Most SEO techniques I read on the internet today always insist only on backlinks. While I don't deny the backlinks concept as being the most important SEO point, there are many other things that you may do which will help your website gain more trust from Google. I give 2 of them here: You have to provide a clear privacy policy, and some contact information on your website.

A privacy policy is simply to come out with; it is just a webpage that says the private information of those who visit your website is safe and will not be used in any manner to abuse the visitors' privacy. Many internet users don't read privacy policies, but it is always good to have it there, even if it is just for the sake of gaining trust from Google.

I am amazed with the number of websites I see without any contact information, especially blogs. If you are to have any serious website, then you must provide at least some kind of contact information so people who are interested in your products may send you and email or call you for more information.

I can understand that people want to protect their emails, but you can always have a separate email just for that propose, and it will help make your website more trust worthy from the search engines point of view.

Including quality backlinks to your website, these are the basics ways you can also use so as to gain trust with your website, so that search engines such as Google may send targeted visitors to it.

2 Simple Steps to Make Your Website Rank High in Google Organic Search Results

2009-04-20T13:37:00.000-07:00

We have to accept the fact: search engine optimization is one of the hottest things on earth today, at least on the online world. There are thousands of companies out there claiming they can help rank sites with search engines in 2 weeks or less. While there are quite a number of these companies who know exactly what they are doing, most of the so called SEO professionals are just out there to make quick money at their customers' expense.

I write this article with the aim of helping beginners to know the basic steps in setting up their SEO techniques which could put them well ahead of most of the competition in their chosen niche.

Search engine optimization is a simple notion that is being complicated by the gurus in internet marketing for no reasons what so ever. Maybe they just want newcomers to get frustrated so they will always turn back to hire them for the job.

Here are 2 simple steps to follow so as to rank high with Google and other search engines.

1) When writing content, write as if you were talking with a friend. Some times when I want to write content on a given topic, I call up some friends who know much about what I want to write on, and we just talk over the topic while I record the discussion. Then I write the content just as I recorded it, with maybe few changes, then I upload to my website. The goal here is to use the same words as the internet users will type as search queries when they are looking for the information you are writing on.

2) The second step is a bit more complicated than the first. And it is very important too. It is called link building. It simply means building quality backlinks to your website. Just so you know, if you write good content on your website, then link building will not be that of a problem to you, since people will want to link to your good content from their websites. A good way I found out that you can use to build backlinks to your website is to write how to post. Basically you write and explain how to do something. Maybe how to install Google analytics on your website or how to make videos or anything you can think of and know how to do. You can also make research on how to do something, and then write about it.

Sooner or latter, people will start linking to your website, so as to exploit the knowledge you are providing. This will only help to increase your backlinks and thereby improving your website with better search engine rankings.

If you follow these two simple points, consistently, you will soon notice that your website is doing quite good and ranking very well with most search engines.

Don't Buy Money Making Products From Internet Marketing Gurus

2009-04-20T13:33:00.000-07:00

Internet marketing has become a mad rush. Everybody is entering into it hoping to make 6 figure incomes overnight. Completely unprepared and without knowing how to make their first dollar, novice get caught up in the abundant hype available on the internet and keep thinking they can make fast money just using their computer and an internet connection.

Don't get me wrong here, of cause there are many people who do make money from the internet. But to be frank with you, those people are not the average tom and dick. They have a special touch to every move they take; they work so hard and always try to be ahead of their competitor.

If you want to make money online, then you will have to have your own unique style and try to think differently from the mass. The competition is now so stiff thereby making it more difficult for new comers who are always deceived by the internet marketing gurus into buying crappy marketing systems promising 6 figure incomes, while working just 2 hours a day from the comfort of their homes. Just so you don't get into that trap, if you think you can ever make money on the internet that easy, then you are bound to fail, or you will only realize after loosing $1000 that making money online is a very difficult task.

I have been there, and that is why I am advising you today. Don't buy all the marketing systems that claim you can start making money overnight. The only people who are making money with those systems are the internet marketing gurus themselves.

I read somewhere on the internet, one guy was selling an e-book for $20 in which he claims to reveal a secret that will enable you to make $14,000,000 every month. Come to think of it, why do I need to sell an e-book for $20 if I have a system that is capable of making me such an amount on a monthly basis?

Watch out for the online hype. Don't fall in it and loose your money. Most of what you need as information to make money on the internet is out there and most of it is free of charge.

What You Don't Know About Google AdWords - Luck Counts So Much With PPC Advertising

2009-04-20T13:23:00.000-07:00

All AdWords gurus will always tell you to optimize your AdWords account for maximum efficiency. I don't refuse that, but what they don't tell you is the fact that no mater how you optimize your account, if you don't have a little bit of luck, you will never sell any product.

PPC advertisement is a very competitive area as far as internet marketing is concerned. There are thousands new people entering in it every day. And the more people who start betting on a given keyword, the more expensive that keyword will become. Due to this, many people are finding it very difficult to make money with AdWords.

Some internet marketing gurus have found a soft spot here to exploit to their advantage, claiming that they can teach people how to optimize their AdWords account so they can start making money with it.

It is quite true that the more you optimize your AdWords account, the cheaper clicks you will get, but what you may not understand is that having cheap clicks is not any guarantee that you will be making any sells. That is what the PPC gurus will not tell you, they want to make you think that once you have high click though rates, then you have reached your optimization dreams.

Like it or not, PPC advertising depends so much on good luck. I usually say that about 35% or more of your success with PPC advertising can be directly linked to how lucky you are. That is the only reason that can explain the fact that I once started this new AdWords campaign. During the first 10 clicks, I incurred for that campaign, is made 3 sales! I left the same campaign running for 2 more months, incurring about 250 more clicks, but surprisingly did not make any more sale. So what actually happened? Why did I make 3 sales during my first 10 click and no sale for 250 more clicks?

That was a well optimized account but I just happened to be lucky during the fist 10 clicks then my luck seemed to vanish away.

Optimizing your AdWords account is good, but you should know that there is a great deal of luck that will determine if you will make some sells or not. Optimization alone will not do the trick for you.

The Nofollow Links at articlebase Issue - How do they help for SEO?

2009-04-19T17:38:00.000-07:00

My main post of the day at Internet Marketing Forums. Respond to Community Product Manager at ArticlesBase.

Hi Talia and thanks for posting here.

As Ron already said, the entire articlebase team has earned a great deal of respect for just following this discussion. At least it shows that you are effectively using Google alerts, or what ever alerts system that you maybe using.

I do agree with you on this point: Any backlink counts. Be it nofollow or dofollow link, it can help in one way or the other to drive traffic and promote a website. But from the view point of SEO, all nofollow links are pretty much useless. I mean if we stand by what the main search engines like Google and yahoo are making us to understand.

You mentioned something like search engines following nofllow links as being some kind of usefulness of the link! what good dose it do to my site if some search engine follows my link but cant give a positive vote or maybe index it because it is a nofollow link?

I think, and most webmasters will agree with me that the main reason for submitting to article directories is to provide quality backlinks to your website, that will not only provide instant traffic, but may most importantly also count as positive votes in the eyes of search engines.

Most article directories understood this and I guess that is why most if not all advertise with the following line:
"Submitting articles has become one of the most popular means of generating quality backlinks and targeted traffic to your website. Join us today - It's Free!"

If you doubt it, do a survey and find out the main reason why webmaster write and submit articles. You maybe surprised to notice that more than 51% will mention backlinks before traffic. Most webmasters care for long-term traffic, not short term. And backlinks that count as positive votes provides just that.

You mentioned some doubts if nofollow links don’t count for SEO. It is quite true that no one knows the Google algorithm and what may count for ranking websites. After all we did not participate in writing their crawling algorithm. All the same why on earth will you believe Google when they says backlinks will count as a deciding factor for ranking pages, then for some reason have doubts when the same Google says that some backlinks such as nofollow links wont count?

Youtube still dominates the market for online video

2009-04-19T00:19:00.000-07:00

According to the latest Nielsen Online survey (VideoCensus) video on the habits of Internet users in March, Youtube still dominates the market, both in terms of video views and in terms of unique users.

See detail statistics below

Brand positioning by total video views

1. Youtube (5,479,609)
2. Hulu (348,520)
3. Yahoo! (231.795)
4. Fox Interactive Media (207.528)
5. Nickelodeon Kids and Family Network (196.160)
6. ABC.com (176.931)
7. MSN / Windows Live (168.907)
8. Turner Sports and Entertainment Digital Network (137621)
9. MTV Networks Music (123.888)
10. CNN Digital Network (103.453)

Positioning of brands by unique users

1. YouTube (89.407)
2. Yahoo! (24.761)
3. Fox Interactive Media (14.719)
4. MSN / Windows Live (12.076)
5. CNN Digital Network (9.021)
6. Hulu (8.865)
7. ABC.com (6.881)
8. Nickelodeon Kids and Family (6.391)
9. MTV Networks Music (6.337)
10. Turner Sports and Entertainment (5.822)

How to start making at least $5 Everyday or More

2009-04-18T03:33:00.000-07:00

Click Hidden Money Secrets For Full Story!
Click Hidden Money Secrets For Full Story!

Before you start reading this article, I would like to let you know one thing. Just like any other online money making method, it is always rather easier said than done. You should be ready to put in some work if you intend to use this method in making money online.

You can perform a search query on the numerous online forums. There have been hundreds and hundreds of post just asking how to make $5 a day, which is why I am writing this article.

Instead of worrying about making fast money, it would be better to focus your mind on what your strengths really are (for example Writing, Marketing, Forum Posting, Graphic Design, web design, you name the rest). Once you have an inventory of these strengths, focus on two skills to really hone, and then market you on the BST section on the internet. I propose forums for the start

Offer honest, quality product/service, and you'll see something way more than $5/day.

Now I'll get a little more precise on how you can make $5/day just using the internet:
1- Pick up writing of articles to be the main service that you provide.
2- Begin practicing your writing skill is top-notch. Make sure you know how to write as good a possible. The faster the better and the more chances will be that you will make money online.
3- Write one article of 500 words for $.01 (thus, $5/day) OR 2 articles of 250 words for $2.50/each. You get the idea here. Depending on how strong your writing skills are, you should be able to produce an excellent article in one hour, at the very most. Over time, you will reduce that time and become more efficient.

Even more, I'd say if your writing skills are very excellent, you can charge more for your $/rate. If you succeed to build up your reputation and standing, you'll find people coming to you for your service, and not you going after them struggling to advertise.

As you can see, you could easily meet, and exceed, your daily $5 goals very easily, as well with little effort and time.

Hidden Money Secrets For Full Story!

Is Google Beatable?

2009-04-12T13:16:00.000-07:00

When Google started its search engine some years back, the big boys in the search engine game were already well established and seemed unshakable.

No one including me could bet $1 that after only five years of operation, they will virtually beat the then well established search engines big guys like yahoo and overture and the others.

Now that is history. In a short amount of time Google did just that and they alone provide more than 80% of the search engine search results in the united states alone, and quite a huge volume too internationally. It seems to me that they have monopolized the search engine market and are now almost unshakable, just like Yahoo was some years back before Google took the lead.

They did this by gradually building a search engine that was capable of satisfying the exact needs of search engine users, with the key concept of relevance in the back of their every single move.

Many people say that there is no way a different search engine can overtake Google. While I don't doubt Google’s effectiveness, I am a bit skeptical saying this. If there is anything I have learned in life, it is never say never.

Every company has a life span. I do think that Google not an exception. They may be well established now, just as yahoo was some years back, but they should better keep it up or else some other company may outrank them just as they our ranked the others.

So according to you is it possible that one day a different company overtakes Google and became the main provider of search engine results?

Click here to learn Real Internet Marketing

How to reseach Your Compititors' Search Engine Rankings

2009-04-10T00:09:00.000-07:00

There are over 8 billion website out there. Most if not all websites are created with the goal of making money in the long run. That is why the competition to rank high on measure search engines will never stop increasing.

Many people simply don't know the basics of making research on a competitors website who is better ranked than you. I say this because the question is asked in all the forums i visit so i want to give a small discussion on that in this blog post.

of cause meta tags influence your rankings!!! especially the title tag. The keyword tag is not important in Google's eyes but it is good to put it maybe for other search engines.

It is quite easy for you to check the number of backlinks that are pointing to any site. The good thing you can do is maybe investigate the url of your competitor and yours as well, so you can better diagnose the reason why they are better ranked than you. And i bet you there must be a good reason to explain it. In fact the most probable reason will be that your competitor have more backlinks than you. Page rank too is of great importance and counts in your rankings!

You should do the following research. check the number their links pointing to their website(your competitor) on yahoo. use this search query link:url-of-the-site.com. You of course have to replace url-of-the-site.com with a valid url. This will give you an approximation if the number of links that they have. Then also check your backlinks links.

From that point you will know how much work to put in so as to out rank them. It is not always easy tough, but you have to give it some time and lots of efforts, especially if you are dealing with competitive keywords

Google Ventures: Google announces the opening of an investment fund venture capital

2009-04-07T10:04:00.001-07:00

By Editor, April 1, 2009

It is not because we are on the 1st April that it could be suspected to an April fool joke. Quite on the contrary, Google has announced the opening of an investment fund of venture capital (Google Ventures) to help companies bring their innovative projects to see the light of day. A massive amount of well more than $ 100 million is at stake here. Google believes that in these times of crisis is the ideal time to invest in new ventures that could prove to be "the Next Big Thing."

Google Ventures is open to all suggestions

A post on the official Google blog says that the management of future partners is rather open-minded. "We will focus our initial investments in a wide range of industries such as software, clean technology, biotechnology, and health, the study of consumers and undoubtedly in other sectors where we have not thought about ".

Google Ventures
To apply for Google Ventures, send your PowerPoint presentation of about a dozen slides to ventures@google.com. Moreover, if all this seems a little but suspect, in the same post, Google explains their motives: "Economically, times are hard, but big ideas germinate all the time. In fact, we believe that the current slowdown is an ideal time to invest in new businesses which could have the chance to be "the next big thing" and we will work hard to find. "

Google Ventures: Google announces the opening of an investment fund venture capital

2009-04-07T10:04:00.000-07:00

By Editor, April 1, 2009

It is not because we are on the 1st April that it could be suspected to an April fool joke. Quite on the contrary, Google has announced the opening of an investment fund of venture capital (Google Ventures) to help companies bring their innovative projects to see the light of day. A massive amount of well more than $ 100 million is at stake here. Google believes that in these times of crisis is the ideal time to invest in new ventures that could prove to be "the Next Big Thing."

Google Ventures is open to all suggestions

A post on the official Google blog says that the management of future partners is rather open-minded. "We will focus our initial investments in a wide range of industries such as software, clean technology, biotechnology, and health, the study of consumers and undoubtedly in other sectors where we have not thought about ".

Google Ventures
To apply for Google Ventures, send your PowerPoint presentation of about a dozen slides to ventures@google.com. Moreover, if all this seems a little but suspect, in the same post, Google explains their motives: "Economically, times are hard, but big ideas geminate all the time. In fact, we believe that the current slowdown is an ideal time to invest in new businesses which could have the chance to be "the next big thing" and we will work hard to find. "

Are You A Newbie? If yes, Read this Article to Became a Pro

2009-04-07T07:07:00.000-07:00

Have you ever heard of your friends/colleagues/relatives talk or share about how to start making money on the Internet? I don’t care what your answer to that question maybe, be aware that at this point in time while you are reading this article, I can assure you that some stupid guy out there (just like you and me) is making some money at this very instant.

In addition the high-profile Internet marketers whom you read about earning lots of dollars annually, they sound too good to be true and more like a fairy-tale. Well, it's not strange to feel that way as you are not alone.

However, people often fail to notice the fact that these victorious Internet marketers did not start off being a success story the instant they were born. They started off as normal persons who started off with the purpose of building an online business to provide them with an extra source of income to complement their everyday expenditure.

I can also assure you that there were so many instances which these very people really wanted to give up on the thought of making money online. But why is it always like that? As you have guessed, they were entirely clueless on how to start making money on the Internet and they believe they are going nowhere.
The good news is that the "Never Say Never" approach and enduring human guts triumphs! They struggled on and kept on trying diverse things until one of them worked! And Kaching! Things started to change for the better and…, you know the rest is history.

You see, anybody (in spite of of teaching level, race or faith) can start making money on the Internet, but not everyone wants to think that the Internet is in fact the best tool invented for this intention.

Any success story in making money online is more or less usually determined by how much you really want to take action right now or today and seize an opportunity which maybe a life-changing experience.
So how do you start making money on the Internet and what do we need?
I now present to you what I call the Newbie Formula:

1) An Internet Connection (preferably a pretty fast connection)

2) A Laptop/Desktop (Any one may deliver the goods, but a good mark well be preferred!)

3) YOU! (Yes You the Dummy who want to make more money on the internet)
so now, are you really sure that's all you need? It should be a tale!
Well, of course that can’t be all. You still need to have the most important thing: A winner's attitude. You see, every time I visit Internet marketing forums, I always read observations comparable to the following...
"Hey, I have been trying this out for two long weeks! How come I don’t make any cash?

"Help please! Is online marketing a scam? After three long months, I still did not make a single sale! I am really thing of quitting right now!"

Now, if you are interested you should let me tell you the bitter truth. Do you know when I made my first sale on the internet? Well, I did not remember wrongly, it was my 15th month in Internet marketing. Thank goodness! I did not give up though I taught a couple of time to. If not, I will never be able to taste my first victory.

If you are really serious about making money on the Internet, ask yourself this question, "Do you have the winner mindset?"
If your answer is yes, then you can do it. If for some reason you answer is no, then just quite and return to you day job because that is what will out food on your table and pay your house rents. Internet marketing is not for boys! Its for men like us!

Watson Fru N . http://www.OnlineMeans.com is a seasoned internet-marketer who has been helping hundreds of people over the years to realize their dreams of making money on the internet. He's the author of "Internet Marketing Instructions" A great E-book that teaches the best online Money Making Secrets of all times. He now has a limited time free offer for this same e-book that he has sold thousands of copies! Click on the link below to download and gain instant free access to this hidden money making secret! http://www.OnlineMeans.com/freeebook.htm

Tricks on Writing Very Effective Pay-Per-Click (PPC) Ads: Tips to Quickly Increase CTR and Conversions

2009-04-07T06:33:00.000-07:00

When you write pay-per-click ads you are trying to serve two masters. The search engines, as you are at the mercy of their quality scoring mechanism for your placement and also the customer, whose attention you are trying to pull towards you. But it’s not just any client – ideally you are trying to attract a QUALIFIED client, who is paying attention in your merchandise or service, and that should always be your prime objective.

CTR should play an inferior role to conversions, as conversions pay the bills, but many advertisers get so trapped up in lowering their cost per click (CPC) and increasing their CTR that they lose vision of the end goal; getting people to come to your site who are prepared and able to buy. It doesn’t matter how many guests come to your site, if they don’t become customers they are of almost no use to you. By writing a striking ad you are trying to show your customers what is in your store and persuade them to come indoors.

The first thing to do is search for terms that you are bidding on and see what the top paid ads look like. In lots of cases, there's just not going to be too much you can do (in 95 characters) to improve on what has most likely already been tested. You should take some of the same techniques as the best ads and apply them to your ad copy while adding in what differentiates your company - lowest price, higher quality, greater collection, etc. Then of course... test everything.

For your pay-per-click ads to get a good click through rate (CTR), it is very important to include your keywords in the copy, especially the title. But also try to use keywords in the descriptions as the search engines highlight the keywords and this grabs the customer’s attention. Tests show that this makes consumers more likely to click on your ads as they perceive them as more relevant to their search.

Remember to capitalize all your important words as well as the words in your display url so they have even more impact. You can use dynamic keyword insertion where appropriate in titles, descriptions and/or display urls, but make sure your ads still make grammatical sense when the keywords are inserted.

Try using action verbs in the copy like "explore", "buy", “save”, “find” etc. Think about your unique selling proposition. Do you sell bulk, luxury, wholesale, quantity, etc? You want people who are ready to buy NOW, so make this clear in your ad copy. No need to waste time and $$ on window shoppers.

Don't be afraid to try something different from your competitors to catch the customer’s attention. Give a special offer like "25% discount", "buy 2 get 1 free", “free shipping”, “free estimate” etc. People love deals and giveaways. Just make sure it matches your product or service.

What info do your customers need to make a purchase decision on this product or service? Put as much of it as you can into your copy. The old adage "the more you tell, the more you sell" definitely applies to pay-per-click ads.

Make your ad groups very specific and mirror the keywords in your ad copy. If you have 1000+ items for sale, it would be tough to have a specific ad group for each one. But you shouldn't have one nonspecific ad using keyword insertion for your entire product line either. If you want a way to really differentiate yourself from your large competitors this is a good way to do it.

Many of your larger competitors may be working with 50,000+ keywords and it’s impossible for them to focus on creating individualized ad copy. A smaller advertiser can really benefit from customizing their ads to make their products or services shine. Structure your campaigns so that keywords are grouped into ad groups that can particularly target the product or service being searched for while keeping them at a manageable level.

Here’s a checklist to keep in mind when writing pay-per-click ad copy:
Focus on your most important benefits and your exclusive selling proposal. Free shipping, same-day shipping, wide collection, excellent customer service, industry-leading expertise in your field, discount prices, free information, hard-to-find items, awards you have won, etc.

Decide what is most important to your customers and what differentiates you from your competitors and highlight these benefits in your ad copy. If you are creative you may be able to fit more than one benefit in your ad (one in the title and one in the description). Make sure the benefits you highlight in your ad copy, are also featured significantly on your landing page.

Present yourself as the answer to your customer’s troubles. When a prospective customer types in a query they are looking for an answer to a problem. The solution could be a precise service, product or piece of information. Think about the troubles your prospects have, how you can answer those problems, and then find out how you can present the best solution in 95 characters or less. Show the user that you are relevant to their problem by highlighting the correct keywords, and solve their problem by conveying the benefits you have to offer.
Get the keyword in there at least once if possible.

Different ad copy will pull customers at different phase of the buying cycle so you MUST split test. If you are not already doing this start now! Set your campaign to show ads evenly and create 2 ads for each ad group. Monitor their performance and delete the ad that has a lower CTR. Then create a new ad and test it against the last round's winner. Before you erase the bad ones, make sure you test the CTR at splittester.com.

Never lose view of the main objective – to convert clicks into conversions, and you’ll be on the right track to creating effective pay-per-click campaigns.

Watson Fru N . http://www.OnlineMeans.com is a seasoned internet-marketer who has been helping hundreds of people over the years to realize their dreams of making money on the internet. He's the author of "Internet Marketing Instructions" A great E-book that teaches the best online Money Making Secrets of all times. He now has a limited time free offer for this same e-book that he has sold thousands of copies! Click on the link below to download and gain instant free access to this hidden money making secret! http://www.OnlineMeans.com/freeebook.htm

Do You Really Know How You can Start Making Money From The Internet as many People are doing? Fast and Easy Ways

2009-04-07T05:44:00.000-07:00

How You can also Start Making Money on the Internet Just as many others: Fast and Easy Way

Author: Watson Fru N

As people are in front of the challenges in this present awful economy , I have been receiving several questions from my subscribers who want to know a way to start making money online FAST.

I considered this would be a good chance to revisit a topic I have covered several times in the past.

The truth is that if you want to create a decent income online as fast as possible, the road to follow is promoting affiliate products. When you join an affiliate program you do not have to worry about finding products, stocks, shipping and dealing with customers. Pure and easy you just market other people’s products in exchange for a commission. All YOU have to do is send traffic to the merchant’s site. If your traffic buys from the merchant you get paid you commission as simple as that.

What kind of income can you expect you might be asking? Well...Good merchants pay commission in the range of 20% to 50% of the sales price. The merchants paying less than 20% is probably not worth your time. And why is that? Because if you DO want to make a considerable amount of income, it is going to take some work time and offorts from you.

Oooops! What was that. Do you really have to work? Yes you do, as I guess you are looking for a BUSINESS and not a hobby. The good thing is that when you put some work in it you will soon be what is called a SUPERAFFILIATE.

How can YOU be a super affiliate then and start earning MAXIMUM profit? You will have to:

- Define a niche market and target your chosen product to that market.
- Build trust and relationship with your customers.
- Aggressively market your products at all times on the lookout to tweak your site's design and
sales copy.
- Generate a content rich attention grabbing website to give your customers a good reason
to stop by.
- Always test and tweak your marketing strategies. DO not be contented with a modest
income.

It may all sound overwhelming, but in reality it is quite EASY to be an affiliate. However, it is not as easy as some gurus out there want you to believe. There is no such thing as a "get rich overnight" program. Period. End of story.

Fortunately you do not need to do everything yourself. When you have got your feet wet and obtained a decent revenue stream you can afford to outsource the tedious tasks you do not want to attend to yourself. You can also join clubs and communities where many of the needed tools are available. Joining these communities will in most cases require you paying a monthly fee.

So, even if you are just opening out, have no website and being a computer "dummy" it is still probable to earn your first commission in 1-2 weeks. All you really have to do is take action and stay alert, which means not jumping from one income opportunity to another. Stick to your chosen program and be continual. Then you will get the success you deserve.

About the Author:

Watson Fru N is a professional internet marketer who is specialized in affiliate marketing. Over 6.5 years now, he has helped over 1050 people to start making good money from the internet. He has recently written an e-book titled: Internet Marketing Instructions. Its a step-by-step guide that reveals all the strategies, tips and tricks he is busy using to make huge online profits. Best of all, he is now distributing this e-book completely free of charge! Download a copy of his free e-book if you want to make money from the internet. You will get instant access to hidden money making secrets that other internet marketers are praying you never discover! http://www.onlinemeans.com

Article Source: http://www.articlesbase.com/internet-marketing-articles/how-you-can-also-start-making-money-on-the-internet-just-as-many-others-fast-and-easy-way-854804.html

This is why you Will Not Make Money Online!

2009-04-05T15:17:00.000-07:00

More comments on post today!

Wow, that's kind of a negative title isn't it? I try not to be negative, but it's a hard cold fact, most people do not make money or little money on the net.

Why?

If there was one thing that I've seen over the years (10+) that kept people from enjoying a internet lifestyle, it would b e without doubt, lack of action.

To make money we need to work and take action right? Ya, Ya, we all know it, probably sounds like a broken record to most, but it's fact, not fiction.

I'll be the first to admit that I do not always take enough action. As they say, if I had a nickel for every time...

When I say, taking action, that doesn't mean reading all the money making e-books, or studying the latest get-rich-quick fad. It's all well and good to learn, but far too many people get stuck in the learning mode and don't do anything. I've done it myself and still catch myself from time to time. Actually just recently, probably why I am writing this post

You could read every single PDF page related to AdWords, but the only way your really going to learn is by doing, plain and simple. The only way you’re going to make money is by doing. You could study every traffic tactic ever typed into an e-book, but you won't see a hit till you do something.

So, the big question is... How do you get your self going? One of my ways is to catch myself not doing something and do it. I also find to-do lists and goals to help. Sure not 100%, but it helps.

What about you? How have you gotten your self to take action? Maybe this thread will get us all going?

Some Responses

I identify my self with that post so much.

It seem like you were talking straight to me! Kind of though.

I always want to learn new stuff, and there are always things to learn. But as you said, Learning without practice is worth nothing!

To Free myself from this situation, i try to use a: to do list. Every night before i sleep, i use note pad and write up what i would like to accomplish the next day.

It kind of help because I sleep reflecting on the things i will be doing the next day! And when I get up in the morning I am focused and go straight to the point.

I also allocate some time for learning more things, so i don't feel like i am missing out!

Online Means of Making Money!

Comments on some of the forums I participated

2009-04-04T16:17:00.000-07:00

Hi To all my followers! Today i did not do so much on the internet. In fact i mostly commented on forums and moderated some few posts in one of my forums where i am a super moderator.

since i don't have any content to upload today on this blog, i decided to post some of the interesting comments i made on the forum i was working with. The comments may be kind of shabby, but if you read carefully, you would be able to make out what i am trying to say! Go ahead and enjoy!

Some comments on the forums i participated today!

Revenue from adsesne depends on traffic and niche. If you are in a high paying keyword niche such as Forex or [B]Credit Cards, then you can make some money from adsense provided you have regular targeted traffic flowing into your website. But seriously, don't expect much from adsesne. It is not really a money making method, but it may sometimes supplement you online income. I for one, i don't really care so much about adsesne. There is so much hype around it on the internet, but it is not really worth that amount of hype.

What Counts Most For Page Rank? Banklinks or Content?
I followed an intense debate from another forum i visited. I want us to share some ideas here too.

It all started like this:

-As usual, one member of the forum posted a tread asking for some SEO advice to boost his Google page rank.

-one other guy responded by saying that Content was the main thing to help boost page rank.

-Then the next guy responded and said content had nothing to do with page rank, and went further to say that just backlinks account for page rank.

Post after post and everybody giving their opinions. The debate was so intense that it resulted to insults! I thought we could also share some ideas on this issue on this forum as well.

So in your opinion what counts more for page rank? Backlinks or content

Do You Believe Free Giveaway Events is the best option to build your email list?
As every other thing on the internet, traffic will determine if your giveaways will be successful or not. If you cant drive enough targeted traffic to your giveaway page, then you a bound to fail!

That not withstanding giveaways are a great way to build your list. but you should offer something of value so as to entice the prospect to opt in. something that they can't get for free.

Seriously, This not the hype you read every day. I will truly teach u how to make it!
Are You having a hard time? You are not alone. Be calm cos i can help you. Thank your God for coming to this page!

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Hi once more and welcome again. was just kidding tough. You don't need to know as the other Ron. In fact You can always learn here. That is the mission here in the first place. You should feel free to ask any question you want. There will always be experienced people to answer.

Facebook: integrating Flash applications into Facebook through a partnership with Adobe

2009-03-31T05:40:00.000-07:00

Adobe and Facebook have just announced the launch of a new ActionScript 3 library for Facebook Platform, the platform will be used to create their own applications on the social network. This library will enable developers to use Flash technology to create and make applications more fun, but also to better monetize them.

Adobe Flash and Facebook, hand in hand to make this possible.

Flash technology applications in Facebook is not new, but this new feature (library) that Adobe has introduced in partnership with Facebook will provide an organized and official resource used by developers.

According to Josh Elman (Facebook Project Manager Platform) and Adrian Ludwig (Project Manager at Adobe Flash Product Marketing), this project began in November 2008. Until then, there were many bookstores Flash but none provided documentation worthy of the name. They decided to establish an official support, have rewritten the code of the library with all the public APIs, authentication, sessions ... In this way, developers can design their better integration between Flash and Facebook, and Facebook Connect.

In addition, this new library will better Flash monetize applications. Naturally, the Flash will be real opportunities for advertising (it is already), but new features will open up new avenues for advertisers to attract potential new customers, such as the website of Ben & Jerry, who uses Facebook Connect and Flash to bring users to vote for ice cream flavors and thus invite then to engage in a good discussion on their website.

Ben & Jerry Facebook Connect
Adrian and Josh have also mentioned how CNN had used Facebook to organize and Flash video of the inauguration of President Obama and enable people to transmit it to their friends, turning a simple video streaming video "social".

Here Are The Top 5 Tips For Any Efficient Writing

2009-03-31T03:00:00.000-07:00

As an internet marketer, writing is a very important talent that you can’t do without. Doesn’t matter if it’s writing a long/short e-Book, an article, a blog post, or an email for your email marketing campaign or newsletter, it is vital to get the point across to the people who would be reading your writing, in the right way so they can perfectly understand you. Here we’re going to go through some important tips which could really help you write more efficiently…

One of the 1st points to think of is the reason of your writing. Are you trying to be instructive, or is the main motive to get people to check out one of your link and purchase a product from you?
The medium you are writing for will also make a huge difference. In an e-Book, for example, you’ve got much more room to develop your ideas, and the public will expect more detail than in, say, a blog post or an article submitted to a directory.

Once you’ve got that figured out, you can then think about your readers. For example, do they already know much about the subject matter? Or are they new to it? Are they young, middle age or old? There is no doubt that there is a good chance for your audience to vary fairly widely within these ranges, but it certainly helps if you at least think about it.

Below I explain some top tips for any efficient writing:

1. You should be short and go straight to the point. Most people hate nonsense, and you can really start to lose your audience if you keep beating around the bush, instead of giving the valuable information they need. Many People are always in a hurry, so don’t waste their precious time.

2. You should try as much as possible to avoid needless ‘techy’ jargon. Again, get straight to the point, and do not use a long word when a short one will do! Do not try to impress you audience by using very difficult words, when you can use simple ones that are easily understood by everybody.

3. You should write as you speak. People like to be entertained when they are reading, so try to avoid making your writings seem over formal. I also like adding in similes or emoticons as these without doubt improve the readers’ mood.

4. You should also consider breaking your text into short straight to the point paragraphs. It’s much easier to read and makes the page look more spacious. And that is a good thing. Bulky chunks or blocks of text can in fact put people off from even skimming what you’ve sped you precious time writing.

5. You should think of adding headings. It divides the text and makes it really easy for people to quickly locate the bits they are searching for.

6. And finally, you should ask questions. This is a great way to connect with your readers since it makes them think a little bit. Consider starting most of your paragraph with a question, and then begin answering it, or get your readers to think more about the issues around the question.

Of course, you need to adjust these points to suit your medium, but the fact is that writing actually doesn’t have to be hard. Just follow these top writing tips, tricks and in my belief, you won’t go wrong in your writings.

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Here Are The Top 5 Tips For Any Efficient Writing

How the Arbitrage Theory in Finance, is Applied in Internet Marketing With Little Or No Success

2009-03-30T10:20:00.000-07:00

If you have ever done any elementary course in finance, then you would probably know what arbitrage theory is.

Arbitrage as it is known in finance is when there is a price discrepancy for the same stock listed in two different stock exchange markets. Thereby giving an arbitrageur the chance to make risk-less profits by continuously buying the stock where it is cheaper, and selling it where it is expensive.

Now, if you have ever done elementary finance, you would also know that because of immense competition, this type of situation is very rare to fine in our almost efficient markets of today. In fact in finance, it is always assumed that there are no arbitrage opportunities. Even when these opportunities do present themselves, the effects are minimal because the markets quickly adjust and automatically fix the problem. It may even take less than 5 minutes for an arbitrage situation to be automatically fixed, and wipe out any price discrepancy in the listed stocks.

People have been trying to apply the internet marketing version of the arbitrage theory but slightly different though. They claim that they can use Google AdWords to buy cheap traffic, and then send visitors to a landing page with expensive AdSense adverts hoping that the visitor would click on the AdSense ads. The difference they make form what they spend on buying Google traffic and what they get from Google as a results of clicks on their AdSense ads is considered as their profits.

This sounds kind of wired to me and quite impossible to achieve. Even if you make money from the start, it is quite less likely that you can continuously be making money using this method. I am challenging anyone who says he used this method and continuously made profits for over a period 2 week.

If you are just starting out with internet marketing, don't get caught up with the hype that surrounds this whole arbitrage theory thing and loose sight of some real internet opportunities that you can, and should be targeting, so as to make money on the internet.

Arbitrage is simply not possible in finance, and it is not possible in internet marketing.

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How the Arbitrage Theory in Finance, is Applied in Internet Marketing With Little Or No Success

Posting "How to Posts" is a Good Way to Creating Backlinks For Your Website or Blog

2009-03-29T02:31:00.000-07:00

We are all aware of the fact that backlinks make up the larger part of any effective and successful Search Engine Optimization Technique (SEO). That is why the: How to get backlinks question keeps being asked every now and then on the internet, and people never stop getting enough information on this subject matter. Guess no one will ever be satisfied with the number of backlinks they already have for their websites or blogs. In this case, more is always better.

One good way I found out that can help provide few more backlinks to your websites or blog is by frequently posting "How To Posts". I have been using this method on my other blogs and they have been of great help to me!

But what are “How to Post”? These are basically short manuals on how to do something. If fact anything you can think of. Depending on the niche in which you find yourself, you can frequently write and post interesting “How to Post” on your website and I can assure you that the results will be tremendous.

As people read your website or blog, some will agree and some will not agree with what you are saying, just depending on how controversial the subject is.

Those people who agree with you will usually have the tendency of linking to the given post on your website or blog so that his or her visitors can benefit from the knowledge you provided in your "How TO Post". The more they link to your website, the more backlinks you will be creating.

That is yet another tiny little way of getting few more backlinks to your website which will help in bringing you more targeted traffic and maybe generate a sale!

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Posting “How to Posts” is a Good Way to Creating Backlinks for Your Website or Blog

More Payment Options Leads to More Sales - A Tiny Internet Marketing Trick That Yields Great Results

2009-03-27T15:32:00.000-07:00

I read this post on one of the internet marketing forums.

This is the original post:

If I decide to start a side business (software development), I will want to run it debt free. Meaning that I don't use credit cards, and save up and pay cash for everything.

I think this is a good idea, as it allows the business to grow better, and more fiscally sound.

The hard part would be only accepting cash, check, or debit card from my clients. I know I would lose some customers due to this, but it might be for the better.

And yes, I know there are those of you out there who would say "but you need credit!"

To that, I say: In a small business, what can I buy with credit that I can't buy with cash? I could still buy computers, networking components, hardware, printers, paper, software, etc. with cash. And, I would have less risk, too.

I'd like to get everyone's thoughts.

This was my reply to this guy:

Don't know if you are posting such a controversial post just to stair up reactions or you really mean what you are saying. Let me be Clair with you. You will never make any money if you don't accept credit cards for your business.

I can assure you that. In fact if you miss just one payment method, you loose about 15% to 20% of your customers. read this article below to understand more

I have done some finance, it it is quit a good thing for part of your business to be financed by credit. cant go into the details here but take it from someone who has done finance up to the master degree level.

Article On The Advantages of More Payment options:

Have you ever refused buying something just because your merchant did not accept credit cards? It has happened to me so many times.

Some advertisers usually make this serious mistake of providing very limited payment options to their clients. If you ever want to be successful online, never you make such a mistake. My advice to you today is to provide as many payment methods (options) to your customers as you can.

Every payment method you are leaving out goes away with many potential customers. I would imagine that this is not what you want for your company. You want to sell more and make more profit, right?

I had made a test on one of my business when I added payment by PayPal, I increased my sales by 20%. I could not imagine that such a small change could make such a big difference. Since then, I don't make this mistake again. I make sure all the payment methods are listed and available for customers to make their choice on which of them to use. You should also be doing this for your business.

I also know of a friend who increased his sales in an offline store by 25% just because he put an indication outside his shop that stressed the fact that they also accepted payments by credit cards. Just that information alone brought in so many customers who before would not go in to buy since they did not know for sure if the shop accepted credit cards or not. Sounds easy to do right?

That is really how people are. The bottom line is that people turn to feel more comfortable when you give them the chance to choose between different options. The more the options to chose from, the better are your chances of selling your product to your customers.

More Payment Options Leads to More Sales - A Tiny Internet Marketing Trick That Yields Great Results

Facebook: back on the "perpetual and worldwide license" The Content Published on Facebook

2009-03-27T13:39:00.000-07:00

The founders of Facebook thought they could be able to obtain a perpetual license on the personal data posted on its site but, because of the controversy aroused by the new conditions of use the biggest social network site has decided to flip-flop and return to previous conditions of use. Decryption.

It's obvious, when one runs a social network of over 175 million Internet users, nothing is simple and certainly not the modification of its terms of use because you must respect its users and their rights, especially when you have their personal data, their photos, videos and even their intimate confidences.

The goal was to allow Facebook to keep accounts that were deleted by their users and make them available to Internet friends. For example, a user who shares a photo with his friends no longer has control over the image even when then removes his account.

Hence the idea of a burlesque "perpetual, worldwide license" applies to all content published on Facebook. In short, the shared content (photos, messages, videos ...) will be maintained even if the sender (the owner) unsubscribes. The recipients can then keep them legally. A way for Facebook to shield them from potential lawsuits ...

"Remember that the terms of service, the rules applicable at the site is like a kind of contract that everyone agrees by registering on the site. This is the famous case that one boat ( "I"), without ever really read. "

How can we accept to grant a perpetual license to use? Even with the best will, we can not exclude the fact that Facebook can recover and sell a picture of your baby to a brand of diapers for the promotion of their latest find.

The conditions of use of Facebook are critical as they are extremely broad and vague. Indeed, publishing content to Facebook, you automatically grant a license irrevocable, perpetual, non-exclusive, transferable and worldwide for the use, copying, public performance, public distribution, modification, translation, quotation and distribution of any content, for whatever purpose: commercial, advertising, or otherwise. It is true that such provisions would probably be deemed unfair in the context of litigation.

"This episode reminds the user must be extremely careful with the information they disclose online."

The user must be empowered and learn to protect his privacy. On Facebook, for example, the parameters of privacy can be activated in the menu dedicated from the very inception of his / her profile. Also, note the carelessness of some users, who publish a large number of very personal information without realizing the risks they face. Customers must acquire a culture of protection of personal data so that only the recipients' friends' to view. This unfortunately has shown, in any case, how there is a gap in the establishment of clear legal rules between users and social networking sites. They intended to distribute under certain conditions information that reveal the personality of the Internet without establishing verification of their use. But we must remain vigilant because in the next few weeks, Facebook will have new terms of use.

Using Traffic Exchange Sites to Boost Your Traffic

2009-03-25T14:53:00.000-07:00

Traffic exchange websites are internet sites that receive website submissions from webmasters who join traffic exchange networks. The webmaster who submits the website then have to browse other member sites on the exchange program so as to earn credits, which enable their sites to be viewed by other members through the surf system. This increases the number of visitors to all the sites involved.

Any discussion on traffic exchange that does not mention time is not frank enough. For your website to receive traffic form traffic exchange sites, you have to browse other websites. This can take a considerable amount of time, but for beginners in this industry, times is really what you can sacrifice for some free traffic.

The traffic you get from traffic exchange sites is not so targeted, since many people who are visiting your site may just be doing so to earn credits. But as beginners in internet marketing, it is well worth the efforts.

Traffic exchange site could also be used to test your landing pages to determine which of them converts better, before using Google AdWords and other paid traffic sources.

For your Traffic exchange efforts to be effective, you have to sign up for at least 2 different traffic exchange sites. The more sites you sign up for, the better, since it could help expand your exposure. I would advice your rather sign up for just the few you can actually surf and earn credit, since there is no use having so many accounts when you never visit or login.

After joining these Traffic Exchange Sites, make sure you browse other websites so as to earn credits, which you will then use to let other people visit your website in exchange. That is how these systems work.

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5 Simple Tips To Help You Become The Person You Want!

2009-03-22T12:19:00.000-07:00

I hope you are having a great day and are ready to be taught some easy tips that are sometimes the backbone to a successful career or life.

Some of these tips you may have heard before, but reading them allover again will not hurt you. I promise if you read all the 5 tips and put them to use I am so sure that they will make a big positive impact to your life.

1. Post Your Goals Where You Can See Them

Review them on a weekly, if not daily basis. That way all you focus and the activities which are geared towards accomplishing what you really want in life. If you set your goals and never glance at them over again, you may end up doing things that do not help in moving you towards right direction.

2. Plan Your Work and Work Your Plan

On a daily basis prioritize what is most important. Every evening make a list of every thing you need to accomplish the next day. Then rank your list in order of preference so that you are working on the items that will help you achieve your goals. Allocate time slots for each task and do not let things like emails and other interruptions stop you from finishing your assigned tasks.

3. Learn from Those Before You

Just keep in mind that you do not have to formulate ways to get new people to look at your business. Make sure you ask you sponsor for help. If you get no help from them, ask the next person above them till you get answer to your question. They should be able to show you what is effective for them and the things and methods you can use to achieve the same results.

4. Expand Your Own Knowledge

Take time every day to study something that will move you forward in your life. Whether it is listening to an audio product or reading a book. The compounded effect over time will generate massive results in your life in the long run. If you read just 10 minutes a day for an entire year you would have learned so much about improving your life than the average person will in their adult life. This slight edge will make all the difference to creating your own success.

5. Dream Big

A life worth living is a life worth combating for your dreams. If you do not dream, how will you know what you are working so hard to attain? When you come to the end of your life I bet you will feel much more at ease knowing you gave yourself every chance to live your dream life. Never let anyone steal your dreams!

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5 Simple Tips To Help You Become The Person You Want!

What Percentage of Your Success With Adwords Can be Attributed to Good Luck?

2009-03-21T15:36:00.000-07:00

I always appreciate when I meet people on the Internet who out-rightly say that they have spent more money on AdWords than they have made!

many people especially authors of AdWords manuals are helping Google to make yet more millions daily on AdWords, by telling lies about how they are making a fortune with Google AdWords and that their manuals can teach you how to do same. Come on! Google is already making more than $10.000.000 daily on AdWords thanks to people like you who are buys miss representing AdWords. Give me a break.

I can assure you that more than 80 percent of all those who claim that they are making money from AdWords are just telling lies.

Even some of those who have written AdWords manuals are not making a profit from AdWords. I can assure you that and I know many of them who are my personal friends!

I am not trying to say that people don't make money from AdWords. people do make money, but most of those who make money don't go around singing It on the Internet that they make money from It.

like It or not, success with AdWords depends so much on luck! Yes Luck. And I will say this anywhere, even right to Perry Marshall's face.

let me tell you a short story. Once I launched an AdWords campaign. For the 1st week, I Incurred 50 click, made 5 sales! And gain about $295. I did not change anything on the campaign and It ran for another 2 months and generated well over 1100 more clicks but made no more sales. so what happened? Some gurus will tell me that the product must have gone out of the market. But that is not true because this product was still ranked with Clickbank as one the best selling products!

AdWords Is 60% luck and just 40% optimization!!! Let all the gurus keep on pitching their crappy AdWords manuals and keep helping Google to make their daily $10.000.000.

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http://www.articlesbase.com/ppc-advertising-articles/what-percentage-of-your-success-with-adwords-can-be-attributed-to-good-luck-828004.html

The Vertical Jump Obsession in Basketball Spreading Faster Than You Can Possibly Imagine

2009-03-21T09:17:00.000-07:00

Basketball is a great sport. Now I know you don't need to be an American to make this declaration. Why do I say this? Well, it is because of the experience I had last year when I traveled to a Remote village in one central African country called Cameroon.

I've always wanted to go to Africa, so I made this childhood dream a reality last year. My choice of this African country was due to the fact that I wanted to be away from basketball for a while. And knowing that Cameroon is a big football nation, I thought basketball would be pretty dead there. So I won't have to think about vertical jumps for a while. But I was totally wrong.

After spending 5 days just relaxing and shuttling between my hotel room, nightclubs and parks, I was a bit bored so I decided to ask the hotel receptionist if there was any gymnasium where basketball was played. I explained to her that I would like to check on my vertical jump status. I was asking out of frustration because I knew there won't be any basketball court. I did not even think she would know what a vertical jump is. To my surprise she said there were actually 5 places where I could play basketball just around that neighborhood. She also told me who held the highest vertical jump record!!!

I decided to go check out some of the basketball gyms and see for myself what they have to offer. You would not imagine the excellence of play these guys had there. The teams were so expert that I wonder why Cameroon is so unknown in basketball. After watching for a while, I decided to play with them. The fact that I came from America did not help me at all. Everybody was on me. Why not? After all America is measured the best in basketball, and every American should be able to play. Sounds funny, eh?

We had a short vertical jump contest after the training, and I bet you I was beaten hands down by this local unknown guy who is not even playing professional basketball!! They even had a vertical jump club in their gym. I console myself by saying that maybe it's because of the 5 days relaxing when I did not touch a ball. But deep in my heart I knew something was wrong here.

The vertical jump obsession is real, and it is spreading fast round the world. Particularly within the basketball milieu.

The Vertical Jump Obsession in Basketball Spreading Faster Than You Can Possibly Imagine

Related Articles could also be found at:
Vertical Jump Training Systems and Manuals / Double Your Vertical Jump Leap

Vertical Jump Performance and Strength - Does Strength Contribute to Good Vertical Jumps?

2009-03-21T09:04:00.000-07:00

There are so many coaches and trainers who declare that they can improve vertical jumps instantly. While I am sure that there are quite a number of them who actually do the great work of improving these vertical jump lengths and heights, there are also a good number of them who are just pounding around the bush doing almost nothing to really help their trainees attain their goals.

Most of these coaches would want their trainees to do several push-ups every day, and lift heavy objects, with the aim of improving vertical jump length and height! These methods are not only incorrect, but they waste your valuable time for no good cause. If vertical jumps depended on strength and the largeness of your upper body muscles, then the world strongest man would have the best vertical jump record. But as you may guess, that is not the case.

Of course you need to have some strength to carry out great vertical jumps! But the real secret to increasing vertical jump height is creating the suppleness and power in the lower body, not the upper body as most guru coaches wrongly claim.

You would want to imagine your feet like a spring board on which you spring and try to go as high up as possible, while trying to move your body ahead at the same time. Training with flexible resistance is the best way to create an elasticity and power in the muscles.

It is quite true that it takes some time to get better on your vertical jump, but if you apply this simple principle, you can see result within 5 to 6 training sessions guaranteed.

Article Source:
Vertical Jump Performance and Strength - Does Strength Contribute to Good Vertical Jumps?

Related Articles could also be found at:
Vertical Jump Training Systems and Manuals / Double Your Vertical Jump Leap

Vertical Jump, the Pride and Bragging in Sports - The Higher Your Vertical Jump, The Better You Feel

2009-03-21T08:52:00.000-07:00

There is always a particular pride and brag factor attached to every sport or practice. In track and field events, such as basketball, football, and volleyball vertical jumps are used by athletes as something to brag about between themselves. But what is a vertical jump anyway?

A vertical jump can be defined as the aptitude to raise one's center of gravity higher in the vertical plane exclusively with the use of one's own muscles. It is a measure of how high a human being or athlete can elevate off the ground from a standstill. Some people may go further and define vertical jumps as: The ability to perform jumps of a height many times that of the human body. It could also be explained as being the aptitude to travel long distances with a flitting, nonstop motion as if flying. However you look at vertical jumps, the one thing for sure that is true is that many athletes are now using it as a point of measuring performance. The better you are in your vertical jump, the more pride you have in the team or in your group. In other words, the higher your vertical jump, the better you feel among your team mates.

Since vertical jumps have become so popular in the world of sports, there are so many athletes who would kill, just to bit the recode in vertical jump. As of now, a vertical jump of more than 40 inches is considered as quite extraordinary. That not withstanding there is nonstop tracking and measuring of the various jumps in various tracks and filed events. As more and more people keep training and perfecting their vertical jump skills, odds are that we would in the near future see even more and more athletes performing vertical jumps of 40 inches or and more.

Article Source
Vertical Jump, the Pride and Bragging in Sports - The Higher Your Vertical Jump, the Better You Feel

Related Articles could also be found at:
Vertical Jump Training Systems and Manuals / Double Your Vertical Jump Leap

Vertical Jump Measurement - 3 Common Methods Used in Measuring Vertical Jumps

2009-03-21T08:37:00.000-07:00

With vertical jumps being a reason for pride and importance in the world of sports, there is no hesitation that athletes and coaches would at all times want to measure their vertical jump performance with exact certainty. There is a very stiff competition in this area which only makes measuring more complicated.

How ever, there about three different methods that are usually used to measure vertical jumps, which I gladly explain bellow!

1- A simple method of measuring an athletes' vertical jump is to make the athlete jump and reach up against a flat wall with a flat surface directly under his feet (you can use a gym floor, concert or any other flat surface), then you spot off the highest up he can reach flat-footed. This is usually called the standing reach. Now, instruct the athlete to take a number of jumps from a standstill, marking of the uppermost point which he can reach. Next and last thing for this method is to measure the distance between the two. The distance is the athletes' vertical jump.

2- The above method is not so proficient, and it can lead to different result at different times. There is a second method that is more scientific in nature since it uses a mathematical equation applied from a kinematics equation (h = g*t^2/8) to help calculate the athletes' vertical jump. With this method, a pressure pad can be used to measure or approximate the time an athletes takes to complete his jump, the using our kinematics equation above, a computer will calculate the athletes vertical jump depending on the time in the air. Nevertheless, the main drawback of the method is that an athlete can cheat by twisting his knees so as to extend his hang time (the time he is in the air).

3- Another competent method used nowadays to measure vertical jump is the infrared laser method. This method is quite simple and quite realistic and makes it difficult for the athlete to cheat. An infrared laser is placed at ground level then the height at which the athlete jumps and breaks the plane of the laser with his hands, is measured.

Article Source:
Vertical Jump Measurement - 3 Common Methods Used in Measuring Vertical Jumps

Related Articles could also be found at:
Vertical Jump Training Systems and Manuals / Double Your Vertical Jump Leap

Pay Per Click Advertising (PPC) Versus Search Engine Optimization (SEO) - 4 Advantages of Pay Per Click Advertising PPC

2009-03-21T08:16:00.001-07:00

Is pay per click advertising better than search engine optimization? This is an elementary but unvoiced dispute going on the internet today, in which internet marketing gurus are having a difficult time giving a clear cut respond to.

Pay per click advertising is when advisers use search engines to advertise their products. It is called pay per click because the advertiser's entire advertisement cost depends on the total amount of clicks on his ads. This means that advertisers pay an amount each time someone clicks on their ads. The main pay per click advertising platform on the internet today is Google with Google AdWords. You also have Yahoo with Yahoo Search Engine Marketing, and MSN.

Search engine optimization (SEO) for its part is a procedure where by, webmasters efficiently optimize their WebPages, so that their websites could rank high on the search results pages of the main search engines, such as Google and Yahoo. This type of search result is called natural or organic search results. Ranking high in the organic search results for a popular and profitable keyword is the vision of every advertiser or website owner.

On all search queries performed on Google, Google returns the search results on a search result page. A classic Google search result page has 2 parts. One of them is the result for the natural or organic search which appears on your left hand side. The other section of the result page is called the sponsored links, which appear on your right hand side. Now the million dollar question here is: which side of the search results do you want your website to show up when a search engine user types in one of your keywords? Organic search results or the sponsored links search results.

Just as there are always 2 sides to every story, there are always advantages and disadvantages associated with everything. Search engine optimization against pay per click advertising is not an exception. There are good and bad sites of both methods. There are people for and against search engine optimization, as well as people for and against pay per click advertising.

Most people would speedily jump to the conclusion that search engine optimization is better since it is free. That maybe be true, but don't make the most out of it until you hear and learn some of the drawbacks of search engine optimization (organic search results) and some of the advantages of pay per click advertising. (Sponsored links search results).

I have outlined below 4 advantages of pay per click advertising
1-Pay per click advertising is more targeted. The user clicking on your ad under the sponsored links section knows that you are trying to sell something. So there are more prepared to buy what you may offer, provided the offer is interesting to them.

2-The second and the most important advantage of pay per click advertising is the time factor. Within minutes of setting up your AdWords account, you will start getting clicks to your website. You don't need to perform some SEO mysterious algorithm and wait for ages for Google to index your page and then try to rank high.

3- Magical Targeting. With pay per click advertising you can precisely monitor the exact keywords that convert into buying customers. If you have this valuable information, you can then optimize your campaign by paying only for such keywords.

4-Pay per click is a great Money-Making device. Ok, envisage this: what would be your answer to this question? "Is advertising expensive?" if you say "yes", then you need to re-think. If you say "it depends", then you are brilliant. Most people generally say advertising is costly. Come to think of it, if you could spend a dollar today to make two dollars tomorrow, would you go in for it? Of course you would. That's exactly how a well optimized pay per click campaign works. So next time someone ask you if advertising is expensive or not, tell her that it depends if that advertising is lucrative or not. Advertising becomes very cheap if it is profitable.

Article From:
Pay Per Click Advertising (PPC) Versus Search Engine Optimization (SEO) - 4 Advantages of PPC

WEB-BASED ERP SYSTEMS: THE NEW GENERATION Case Study: mySAP ERP

2009-03-19T15:42:00.001-07:00

COMPUTER ENGINEERING
WEB-BASED ERP SYSTEMS: THE NEW GENERATION
Case Study: mySAP ERP
Marie-Joseph GOMIS

This final thesis is performed at University of Jönköping within the area Of Computer Engineering. The thesis is the final part of the master education with specialization in Information Technology.
Supervisor at ING: Vladimir TARASOV
Examinator: Kurt SANDKUHL
Level: D (Master’s Degree)
Date:
File no. (arkiveringsnummer):
Postadress: Besöksadress: Telefon: Telefax:
Box 1026 Högskoleområdet 036-10 10 00 (vx) 036-10 15 38
551 11 Jönköping Gjuterigatan 5
Summary
Abstract
With the proliferation of Internet, ERP systems like all the domains of Information Technology have known an important evolution. This final thesis project is a study about the evolution of ERP systems, more precisely about their migration to the Web giving birth to a new generation of systems: the Web-Based or Web-enabled ERP systems. This migration to the Web is justified by the difficulty of making possible the communication between partner’s legacy systems and the organizations’ ERP systems. A historical evolution of these systems is presented in order to understand the reasons that lead vendors to adopt the Web Service Technology. Based on different studies, the main technologies such as Web services, Service-Oriented Architecture and Web Application server are also presented. From an interpretative research approach mySAP ERP has been chosen as a case study. This Master’s thesis has been led into AIRBUS France Company within the framework of the SAP Customer Competence Center (SAPCCC) Web site project. The project is aimed at re-building the SAPCCC Web site. The new characteristic of the Web site is to make it accessible by all AIRBUS partners working with SAP applications. To make the Web site accessible by the partners from their own applications located on their own platforms the development has been done thanks to mySAP ERP which is an ERP using the Web service technology. Finally, this thesis presents a comparative study between traditional ERP systems and the new generation of Web-based ERP systems.
Keywords
ERP, Web-based ERP, Web services, SOA, Service-Oriented, mySAP ERP, SAP NetWeaver, Knowledge Management, Enterprise portal
Figure xxx of figures
Table of Contents
1 Introduction...........................................................................................................................6
1.1 Background and Purpose..........................................................................................................6
1.2 Disposition of the thesis...........................................................................................................6
2 Theoretical background.........................................................................................................8
2.1 ERP..........................................................................................................................................8
2.1.1 Definition of ERP systems................................................................................................8
2.1.2 Evolution of ERP systems.................................................................................................9
2.1.3 Architecture of ERP Systems..........................................................................................10
2.1.4 ERP implementation.......................................................................................................11
2.1.5 Benefits and Inconveniences of traditional ERP............................................................11
2.2 Web-based ERP: The New generation of ERP Systems........................................................15
2.2.1 Web Services..................................................................................................................15
2.2.2 Service-Oriented Architecture (SOA).............................................................................18
2.2.3 Why ERP and Web Services?.........................................................................................19
2.2.4 The concept of Web-based ERP systems........................................................................20
2.3 Current ERP Systems vs. Web-based ERP............................................................................21
3 Case Study: mySAP ERP....................................................................................................23
3.1 SAP NetWeaver.....................................................................................................................24
3.2 Web Service Technology for SAP NetWeaver......................................................................26
3.3 SAP Enterprise Portal.............................................................................................................28
3.3.1 SAP NetWeaver Developer Studio.................................................................................29
3.3.2 SAP Knowledge Management........................................................................................29
4 Practical Part: SAP Customer Competence Center (SAP CCC) Project.......................32
4.1 Project Objectives..................................................................................................................32
4.2 Requirement Specifications phase.........................................................................................32
4.2.1 Description of the Former SAP CCC.............................................................................32
4.2.2 New Requirements..........................................................................................................34
4.3 Technological Solution..........................................................................................................37
4.4 Design phase..........................................................................................................................38
4.5 Development Phase................................................................................................................38
4.5.1 Customization with SAP KM..........................................................................................39
4.5.2 Documents Transfer Process.........................................................................................43
4.6 Tests and deployment Phases.................................................................................................43
5 Discussion and Evaluation...................................................................................................44
6 Conclusion............................................................................................................................45
7 References............................................................................................................................47
8 Appendices...........................................................................................................................50
Table of figures
Figure 1: ERP systems concept………………………………………………………………………..7
Figure 2: ERP evolution………………………………………………………………………………...8
Figure 3: Three-Tier ERP systems architecture………………………………………...................9
Figure 4: Advantages of ERP systems…………………………………………………...................11
Figure 5: Benefits of ERP systems view into categories…………………………………………..12
Figure 6: Disadvantages of ERP systems…………………………………………………………...13
Figure 7: interactions into Web Service Framework………………………………………………14
Figure 8: Basic architecture of a Web Service Framework………………………………………14
Figure 9: SOA based on Web Services………………………………………………………………17
Figure 10: Web-based ERP system concept…………………………………………....................18
Figure 11: Technical evolution to an ERP system respecting SOA Architecture……………...20
Figure 12: mySAP ERP framework………………………………………………………………….21
Figure 13: SAP NetWeaver Platform………………………………………………………………..22
Figure 14: Providing Web Services on Open Standards………………………………………….24
Figure 15: Consuming Web services based on Open Standards…………………………………24
Figure 16: SAP Enterprise Portal architecture…………………………………………………….25
Figure 17: process of integrating Web services with NetWeaver Developer Studio…………..26
Figure 18: SAP KM functions………………………………………………………………………...28
Figure 19: Former material Architecture of SAPCC Web Site…………………………………..30
Figure 20: Former SAPCCC Use Cases diagram…………………………………………………31
Figure 21: Physical architecture of SAPCCC……………………………………………………...32
Figure 22: Architecture of SAPCCC…………………………………………………………………35
Figure 23: bottom-up order of a User Interface configuration………………………………….37
Figure 24: the basic components of a user interface……………………………………………..38
Figure 25: Comparison between traditional ERP and web-based ERP………………………..43
Introduction
1 Introduction
1.1 Background and Purpose
Currently the main objective of any organization is to be competitive in its market. However staying in the race includes essentially two points: the customer satisfaction and the profit increase. For achieving these aims it is fundamental for the managers to be able to get the right information in short delay that means an efficient management of the information flow trough the business components of the company. Until the 90s implementing ERP systems appeared as the miraculous solution but soon it appeared that these systems didn’t offered enough capabilities.
Indeed from a general view, all this turns around an efficient communication in companies. But to be efficient a company needs to improve the circulation of internal information but also of external one. This external information is not easily reachable by companies that possessed an ERP system because for a long time ERP systems didn’t allow integration of the partners, customers and suppliers applications within the system. So another solution has to be found. How applications from other platforms can communicate with ERP systems?
So far, there was only one platform on which different applications from different platforms communicate efficiently without any ownership cost: Internet. Internet is an environment that runs on standard protocols-without any owner through which so different applications exchange data. These applications are essentially Web Services that belong to Web applications and can handle the communication between applications written in different languages and located in different platforms. Thereby, Web services organized into a Service-Oriented Architecture represented the solution that will enable a “tri-party business relationships” between the organization, suppliers and the customers. The Service-Oriented architecture will help in improving interoperability between them. Combining the Web to ERP systems has given birth to a new generation of technology: the Web-based ERP systems.
The purpose of this thesis is to try to have a better understanding of these new ERP also called Web-enabled ERP systems and mainly to show that Web services improve considerably ERPs.
For this we will try to answer in this paper to these following questions:
• How Web Services are integrated into ERP?
• What additional values do Web Services bring to traditional ERP systems?
However in order to have a concrete vision on how these systems work we choose to study more deeply a specific ERP via mySAP ERP and its use in a project.
1.2 Disposition of the thesis
In order to give the best understanding of this study, you will find, in this paper, three main chapters. The section 2 presents all the theoretical background essentially from literature reviews, thus u will find the principal definitions and also the characteristics of the different components and technologies used for Web-Based ERPs. The section 3 concerns a case study: mySAP ERP, where a concrete description of how this kind of systems works and how Web services are integrated into it. This section is endorsed by the following section (section 4) in
which the practical part of the thesis is presented, showing how a Web site is built using technologies offered by a Web-based ERP system like mySAP ERP. And finally, in the section a comparative study where we compare the characteristics found in the literature reviews to the practical experience led throughout this final thesis project.
Theoretical background
2 Theoretical background
2.1 ERP
2.1.1 Definition of ERP systems
An Enterprise Resource Planning system can be seen as software solution that helps to the management of all processes and data of an enterprise by integrating the business functions into a single system. ERP systems are composed by different modules related to different departments of a company and that share data through a single and unified database. These modules are in fact, software applications that concern the business activities as finance, logistics, CRM, human resources, supply chain, manufacturing, and warehouse management.
Seddon, Shanks and Willcocks gave a global vision of ERP systems by defining them as “a set of packaged enterprise application software modules, with an integrated architecture that can be used by organizations as their primary engine for integrating data, processes, and information technology, in real-time, across internal and external value chains.”[1]
Currently, ERP systems occupy an important place in companies; they represent an IT solution by permitting a logical data flow between various components of the Information System. They allow centralization and standardization of the information and transform it into useful data used by companies for decision-making. They are also used as strategic business solutions. Indeed these systems permit managers to access more easily to the important and right information and then to be able to take appropriate decisions faster and in the same time to improve their competitiveness.[1]
Figure 1: ERP systems concept [2]
2.1.2 Evolution of ERP systems
ERP systems as all the IT infrastructures have to follow new constraints met by companies. Thus, since their creation during the 1970s, enterprise systems have known a real evolution illustrated by the following figure (figure 2):
Figure 2: ERP evolution [2]
Enterprise Resource Planning (ERP) is a name originally from Manufacturing Resource Planning (MRP II) that followed Material Requirements Planning (MRP).In order to automate their inventory control systems by using inventory control (IC) packages, most organizations adopted and implemented centralized computing systems during the 1960s. In the 1970s, material requirements planning (MRP) systems were mainly developed, for supporting the production planning or the planning of parts requirements according to the principal production schedule. A decade after, the aim of the companies was to optimize manufacturing processes; responding to this a new generation of software systems called manufacturing resources planning (MRP II) were introduced during the 1980s. MRP II permitted the synchronization of the materials with production requirements and included new areas such as distribution management, shop floor, project management, finance, human resources and engineering.[2]
ERP systems appeared in the beginning of the 1990s with the advantage of coordinating and integrating all the enterprise-wide business processes.[2] ERP systems are based on the technological foundations of MRP and MRP II. Presented in the beginning as the “new generation of MRP II”, it transcended soon the industry expectancies and from a technological view offered several benefits.[1]
Today, ERP systems are widely implemented into companies and allow them to better understand their businesses. They can standardize business processes and more easily aggregate best practices. They can also, concentrate their efforts on their customer’s satisfaction and on increasing their profit by creating more efficient processes.
ERP functions concern essentially finance (accounting), human resources management (personnel planning), sales and marketing (sales and order management), operations and logistics (manufacturing, service and maintenance, distribution, inventory management).
Progressively, “vendors added more modules and functions as “add-ons” to the core modules giving birth to the “Extended ERPs” These ERP extensions include advanced planning and scheduling (APS), e-business solutions such as customer relationship
management (CRM) and supply chain management (SCM). In fact ERP is becoming the ebusiness backbone for organizations doing online business transactions over the Internet. Then, Internet-based solutions have been developed for improving customer satisfaction and increase profit. The extension to SCM and CRM is destined to link in an efficient way the organization, suppliers and customers’ systems.[2]
2.1.3 Architecture of ERP Systems
One of the main characteristics of an ERP system is the centralization of all the data from the business functions of a company in a single unified database. However ERP systems are also characterized by their Client/server architecture (see figure 3). The client/server systems functions are performed following three logical organized layers:
􀀹 Presentation Layer: Graphical user interface (GUI) or browser for data entry or accessing system functions
􀀹 Application Layer: Business rules, functions, logic, and programs acting on data received/transferred from/to the database servers
􀀹 Database Layer: Management of the organization’s operational or transactional data including metadata; mostly employs industry standard RDBMS with structured query language (SQL) provisions
Thereby, with client/server technology, the processing of an application could be split between the server and the client workstations, and data management was separate from the servers.[3] Logical arrangement help the ERP user interface to run on the clients, the processing modules to run on the middle-tier application servers, and the database system to run on the database servers.
Figure 3: Three-Tier ERP systems architecture [2]
2.1.4 ERP implementation
Traditionally, ERP are implemented as product based solution, the business define their requirements, come up with the product they want to use to meet their needs and then go by about customizing it.[4]
However things are not that easy, because of their wide scope of application within a business implementing ERP systems requires many competences so companies often seek the help of an ERP vendor or of the third-party consulting. These vendors offer three areas of professional services: Consulting, customization and support.[5]
The consulting team is responsible for the initial ERP implementation and for tailoring the system. Consulting for a large ERP project involves three levels: “systems architecture” for the design of the general dataflow for the enterprise; “business process consulting” during which the aim is to “configure” the ERP system to the organization’s needs and “technical consulting” that concerns essentially the programming.[5]
The customization is the most important part when implementing an ERP system. It is “the process of extending or changing how the system works by writing new user interfaces and underlying application code”.[5] When an ERP is installed the work practices change a lot so the customization is a way to try to give to the users a new work environment that permit them to work an easy way and to get more easily used to this new tool. Nevertheless, customizing an ERP can be very expensive and complex, because many ERP packages don’t support it.
The support also includes maintenance services that start once the ERP has been implemented. The consulting company must assist the staff in keeping the ERP software running in an optimal way.[5]
Implementing an ERP seems to be an enormous project, which cost a lot to companies, so it would be normal to ask ourselves why these systems are perceived as a revolutionary technology. The following section presents the positive and the negative points carried by these systems for the enterprises.
2.1.5 Benefits and Inconveniences of traditional ERP
As each new technology, ERP systems carried their bundle of advantages and disadvantages within companies.
2.1.5.1 ERP systems Benefits
Today ERP systems are present in many companies and give a considerable help in the management of the information flow and mainly in improving their competitiveness. Competitiveness is a result of many aspects that have to be fulfilled. Thus, with the birth of ERP systems, companies have found a tool for reaching this.
Indeed ERP systems offered several benefits such as a single and unified view of enterprise data, an easy way for software configuration and customization, a simplified client/server computing architecture, and reduced considerably the software costs.
Businesses accept ERP because it carries in its way solutions to unsolved chronic problems.[4] Often the Information Systems of large companies are composed by several different software applications. This plurality makes the communication between these applications quite difficult and sometimes inexistent, thus it is difficult for users to get the right information in the right moment. For example, the sales department obligatory works
with the data from the production department, and because of the use of different software applications it can be difficult to access the information an efficient way. This is the first point where the ERP systems step in. Indeed by implementing an ERP system, the different business functions share a single database in which all the data is stored and can be accessed by the concerned users. One of the characteristics of these systems is the presence of a workflow system that permits the information spreading in all the modules that need it for their work. Storing all data in the same database avoids data and operations redundancy; improves the productivity by standardizing processes and methodologies; and reduces the delivery time because ERP minimizes the delay spending in retrieving and reporting the right information.
This concept of centralization gives a single point of customer information in the enterprise.[4] All the departments of a company can access all the necessary information related to a customer and by the way, be able to treat in an efficient way his/her order.
Furthermore, ERP carries a grateful help in standardizing Human Resources information. In large companies with multiple business units, ERP systems allow a unified, simple and general method for following up employee information, benefits and services.[4] All these advantages make ERP systems appear also as a strategic tool for companies because they help the manager to take the right decision for their businesses, thus to stay competitive.
Rachid, Hossain and Patrick, studied ERP advantages and regrouped them in the table represented by figure 4.
Figure 4: Advantages of ERP systems [2]
These benefits were also regrouped into categories by Seddon that divided the practical benefits of ERP systems into five aspects: managerial, strategic, IT infrastructure and organizational. This categorization permits to see benefits of ERP systems from different points of view.
Figure 5: Benefits of ERP systems view into categories [12]
2.1.5.2 Inconveniences of ERP systems
Despite its multiple advantages, companies also need to handle many problems and disadvantages when they implement an ERP. Generally organizations meet problems with their ERP because they don’t a right view concerning the level of investment in ongoing training for all personnel concerned, including those implementing and testing changes that occur. These difficulties are also due to the lack of corporate policies needed for the protection of the integrity of the data treated in the ERP systems and how it is used [5]
The limitations of ERP systems include these main points [4] [5]:
􀀹 Often ERP system is implemented in companies where personnel with inappropriate education in ERP will use it. Installing an ERP leads to important changes in business practices so to an important re-education of the business staffs. The change management for ERP projects asks a lot of investment in order to help people to get used with the news processes.
􀀹 Customization of the ERP software is not always easy because this operation sometimes may involve changing of the ERP software structure, which is not usually allowed.
􀀹 Implementing an ERP system costs a lot to companies, so stay for a long time not suitable for small and medium companies. The high cost of this software is essentially due in part by the customization (the interfaces have to fit the user needs in order to
attenuate the changes) and also because of the integration necessary for communicating with the different partners applications.
􀀹 The system can be sometimes difficult to use (low usability)
􀀹 ERP are often seen as too inflexible and too difficult to adapt to the particular workflow and business processes of some companies, moreover the business process reengineering is defined as a critical factor in the success of ERP implementation.
􀀹 There are frequent compatibility problems with the various legacy systems of the partners, this lead in serious problem for the integration of these applications to the ERP software.
To summarize, ERP systems don’t carried only positive points into companies. They have lot of advantages but installing them also required to pre-study seriously different points and particularly if from a strategic point of view this is the solution for your company. The figure 6 gives a good overview of difficulties companies can meet when they choose to implement ERP software.
Figure 6: Disadvantages of ERP systems [2]
The evolution of the ERP systems is not concerned only by new functions but also by the use of new technologies. In the beginning the fundamental point of these systems was a single and unified database that allowed the storage of all data from all the business functions of an enterprise and a workflow system for sharing this data. Nowadays, the proliferation of Internet has consequences on every aspect of the IT sector including ERP systems that become more and more internet-enabled.[2] This impact influences, a lot, organizations’ requirements and lead to the birth of ERP based on the standards proposed by Internet. These ERP systems have been named “Web-based” ERPs and are essentially use web applications as Web Services.
2.2 Web-based ERP: The New generation of ERP Systems
As ERP systems have evolved and made businesses more and more efficient, a new set of demands sprang up. In the 1970s, the main objective was the automation of the basic business functions; today the companies want in addition automate processes that are unique to their operations. [3]
However, the main reason justifying the migration of ERP systems into the Web is that to improve their competitiveness, companies need to drive collaborative business. Implementing this collaborative business requires integrating their existing heterogeneous IT landscapes and extending this integration to their business partners, customers and suppliers.[6] Internet appears as the solution for integrating different applications belonging to different Information Systems. To answer to these new requirements, vendors have today developed a new generation of ERP systems based on the Web technology: the Web-based ERP.
The fundamental advantage of Internet is that it is a standards-based environment with no owner, so nobody can claim to have new and improved Internet.[7] Any company can access to a web-based ERP as long as it has an Internet connection and the right authorization. The Web allows the creation of an open platform that will permit different applications to communicate easily through the standards offered by Internet.
Web-based ERP systems lean on the Web Services but also on Service-Oriented Architectures (SOA) for building enterprise business blocks in order to aggregate the benefits of multiple Web Services and to simplify interoperability between them.
This chapter is one of the most important of this paper because we are going to look closely what a Web-based ERP is, how the migration to the Web is done and what new aspects Web Services carry to ERP systems. Before developing these points we need to have a brief overview about Web Services and Service-Oriented Architectures.
2.2.1 Web Services
But before we deeply enter in the world of web-based ERP it would be legitimate to make an overview of web services technology.
2.2.1.1 Definition of a Web Service
In essence, a web service is three specific things [8]:
􀀹 A way to find and register interest in a service (UDDI)
􀀹 A transport mechanism to access a service (SOAP)
􀀹 A way to define what the input and output parameters are for such a service (WSDL)
Web services represent an independent platform, not controlled by any one vendor that provides a way to allow applications to talk to one another. To communicate using web services, applications first have to find the service that is located in a library called UDDI (Universal Discovery, Description, and Integration). The UDDI sends the service to the client with the defined interface, then the application can communicate with the service through a standardized protocol called SOAP (Simple Object Access Protocol) built-up using an XML schema. The following schema (see Figure 7) shows these different actions:
Figure 7: interactions into Web Service Framework [8]
Here is a triangle that represents the basic architecture of the Web service Framework (see figure 8):
Service Directory
UDDI
Publish WSDL
Find WSDL
SOAP
Service Provider
Service Consumer
(Client)
Figure 8: Basic architecture of a Web Service Framework
2.2.1.2 Web Services Technology and its standards
Web Services are the new class of web applications. They are based on open conventional standards. They enable the combination of functions in a single process, even if they are implemented in widely different software components. To summer, Web services are independent entities that can be published, searched for and accessed across a network.
The Web Service architecture consists on four main components: Extended Markup Language (XML); SOAP, a protocol that enables the communication between services; Web Service Description Language (WSDL) that describes user interfaces, and Universal Description, Discovery and Integration (UDDI) where all the services are stored.
The concept of Web services appears in the beginning of 2000s. We find several papers where this technology is defined but we can retain the following one, which give us a large view of a web service role and the different components that characterized its architecture.
“A Web service is a software system designed to support interoperable machine-to-machine interaction over a network. It has an interface described in a machine-processable format (specifically WSDL). Other systems interact with the Web service in a manner prescribed by its description using SOAP-messages, typically conveyed using HTTP with an XML serialization in conjunction with other web-related standards.”[9]
􀀹 XML
XML is the foundation of the Web Services architecture. XML is a text-based Meta-markup language, which is used to define other languages. [11] As all the Markup languages it defines a formal syntax for structuring data but also semantics. XML can be seen, thanks to the existence of a syntax and semantics, as a simple and puissant mechanism for capturing and exchanging data between applications written in different languages and based in different platforms and operating systems. [10]
􀀹 SOAP
SOAP is a mechanism used for the circulation of messages between clients and servers. More formally it “is a protocol for encapsulating a message as an XML payload using standard communications protocols such as HTTP” (DDA course) SOAP appears as a simple protocol, easy implement and well supported in the industry.
A SOAP message is XML-formatted and contains four parts: the envelope, the header, the body and the default. The envelope is obligatory because it is the element that identifies the XML document as a SOAO message. The header is an optional part containing extended information within the envelope tag. The request and the response are stored into the body tag, i.e. which method to call up at a remote server or the results when concerning an answer. The fault tag is placed within the body tag; it may exist in case any errors occurred when passing the message. [10]
Since SOAP messages are XML formatted, it will be easy to communicate through this protocol within a heterogeneous network, where web services can be reached from Internet web servers.
􀀹 WSDL
WSDL is an XML document which describes a Web service. This document contains information about the location of the Web Service and specifications of the method that are implemented. (DDA course) Publishing a Web Service actually means to publish the WSDL documents.
􀀹 UDDI
UDDI can be compared to a library where all the Web Services are stored. In reality, the UDDI provides three specific services: traditional White Pages for looking up a Web Service by name; traditional Yellow Pages for looking up a Web Service by topic and Green Pages for more detailed searches based on the characteristics of a Web Service.
Like ERP systems, Web Services constitute a revolutionary invention in the IT domain. Today, they are developed thanks to a variety of tools, for example, Java or Microsoft Visual Studio. However to be really efficient, Web services are structured into a Service-Oriented Architecture in order to improve their interoperability.
2.2.2 Service-Oriented Architecture (SOA)
SOA is a design for linking applications and data in order to achieve the expecting results for service consumers. SOA is also defined as a technical framework for designing software applications that use services available through the Web. Applications in SOA are built as Web Services which enclose well-defined business functions. These services are used by consumers/clients in different applications or business processes. [3]
More formally, OASIS (the Organization for the Advancement of Structured Information Standards) defines SOA as: “A paradigm for organizing and utilizing distributed capabilities that may be under the control of different ownership domains. It provides a uniform means to offer, discover, interact with and use capabilities to produce desired effects consistent with measurable preconditions and expectations.”
The main aspect of a Service-oriented Architecture is the separation of the service implementation from its interface. [13] Therefore, it allows independent services with defined interfaces to be called to perform their tasks in a standard way, without taking in account the language in which they were developed or the platform on which they are located. [14]
Figure 9: SOA based on Web Services [15]
As we mentioned above Web Services represents one of the tools for implementing SOA. Web Services standards are well accepted in the industry and provide greater interoperability between systems. [16]
After this study in which we have got an overview of the both technologies on which the migration of ERP systems into the Web is based, we can now, see in detail how this migration is done, how Web Services help connecting other enterprise applications to ERP system and which benefits this new technology carries to industry world.
2.2.3 Why ERP and Web Services?
Many years ago the main aim of companies was to find the best way for improving the realization of their basic business functions. Today, to in the competition, organizations have to focus essentially on Customer’s satisfaction. The key for achieving expectancies in the best way is an efficient communication.
Communication is the key of the success because if the right information is got, in the right moment, by the right person; then the resulted decisions can only have a positive impact. Since, customer becomes the center of companies’ preoccupations then the services offered by existing ERP systems become insufficient. To achieve this communication companies need to access quickly to the information from the customers, partners and suppliers applications and this is the point where ERP systems have difficulties. Indeed, before the adoption of web standards, one of the biggest ERP disadvantages was the enormous difficulty of integrating external applications (from partners’ systems, so located in other platforms) to the ERP system. Of course this was not the only reason that led on the extension of ERP software to the Web, but also because Internet is a standardized environment that presents many positive points.
To answer to this new demand, vendors choose to use the Web Service technology. Apshankar distinguished a two-fold advantage offered by Web Services in the context of ERP: ease of integration and reduction in costs through the hosted application model.
􀀹 Ease of Integration
Different studies have showed that integration is an important source of expenses across enterprises. For instance, “According to figures from the Meta Group, Global 2000 companies rely on an average of 49 enterprise applications, and they spend up to 33% of the IT budget just to get them to talk to one another.” [4]
ERP systems are complex and not designated for public use. However, currently, customers and partners want to access to the same information employees get via the ERP system, for example, information like order status, inventory levels and invoice reconciliation. The only problem is that nobody wants to change his all information system just for getting the wanted information. So the information has to be reached in simply way without all the ERP software. This is the point where Web Services come in play; in fact, via its URL an enterprise application can call an available service and furnish the appropriate data to the authenticated users in the right time.
The existence of Web Services makes the integration possible with a high quality of service for reliability, security, manageability, routing, discovery, testing, and effectiveness. Web Services use object-oriented technology as SOA for binding data and programming elements in methods in order to make them accessible by different applications.
􀀹 Reduction in Costs through the Hosted Application Model
Deploying a traditional ERP system sometimes involves considerable business process analysis, employee retraining, and new work procedures. Thus from a strategic view adopting Web Services for ERP implementation or improvement takes advantage of the investment made in the legacy ERP applications and provides them a new lease on life.
Another important point is that “ERP provides for integrated, multicomponent applications software, performing multiple business functions. It involves the use of packaged software instead of client-written custom software.”[4] This means less ownership costs for companies that want to use applications.
2.2.4 The concept of Web-based ERP systems
As we spotlighted above, the expansion of Internet in all the aspects of the IT sector had a real impact on companies’ requirements towards their information systems. The ERP systems naturally followed this progress and today several vendors try to use at best the advantages offered by Internet.
The main objective of “Web-based” solutions is to help improving customer satisfaction, increasing marketing and sales opportunities, enlarging distribution channels and having available more gainful billing and payment methods. To achieve this, Internet appeared as the perfect environment because it proposes standards that allow to access systems resources from anywhere at anytime, and this characteristic has helped ERP vendors integrate newer external business modules among them Supply Chain Management (SCM), Customer relationship Management (CRM), Advanced Planning and Scheduling(APS), Business Intelligence(BI), and e-business capabilities. [2]
We also saw earlier that one of the biggest difficulties for organizations was the integration of customers and suppliers’ applications into their ERP systems. So, by adding new modules such as SCM and CRM, ERP vendors offer the possibility to have an efficient “tri-party business relationships” between the organization, suppliers and the customers. [2]
The following figure (figure 10) illustrates the concept of “Internet-enabled” ERP systems.
Figure 10: Web-based ERP system concept [2]
A supply chain management provides sub-modules for procurement of materials, transformation of the materials into products and distribution of products to clients. According to an IBM definition a “Successful supply chain management allows an enterprise
to anticipate demand and deliver the right product to the right place at the right time at the lowest possible cost to satisfy its customers. Dramatic savings can be achieved in inventory reduction, transportation costs and reduced spoilage by matching supply with actual demand” [2] With CRM systems, organizations are able to assemble knowledge about their customers, opening opportunities to assess customer needs, values and costs all over the business life cycle for better understanding and investment decisions. The sub-modules found in CRM usually support systems using Internet and other access facilities with the intention of increasing customer loyalty through improved customer satisfaction, in other words CRM is useful for e-commerce. “E-commerce is the conduct of business transactions among organizations with the support of networked information and communication technologies, especially utilizing Internet applications such as the Web and email, effectively reaching global customers.” [2] Therefore, adoption of e-commerce and e-business solutions is the justification of the extension of traditional ERP systems of most small, medium and large vendors.
From a technical view, extending the ERP signifies that the front-end Web-based Internet-business applications are integrated with the back-office ERP-based applications, enabling business transactions such as order placement, purchasing, inventory updates, employee benefits, etc. to take place between the customers, suppliers and the enterprise based on reliable, relevant data and applications instantly in a border-less domain. [2]
Web-based ERP systems also work with a Web Application Server that is involved to build run and deploy Web services. It works as a service provider and is in a certain manner the basement of these systems. The services are displayed on Web portals for instance and can be accessed by the internal employees trough their Intranet Web site and by partners from their own applications. With the web application server these applications are made available through the Web then they can be accessed without any difficulty and communicate simply with the partners’ applications.
2.3 Current ERP Systems vs. Web-based ERP
At the end of this section we can say without any doubt that the ERP systems represent a revolution in the domain of Information Technologies. With ERP systems organizations found a powerful tool for solving a major problem: the circulation of the information between the different business components of the company?
ERP systems were immediately adopted by big organizations in which several different software applications have daily to communicate. Indeed the principal characteristic of these systems were a unified and central database in which all the data produced in a company are stored and can be accessed by all the business departments. This single point made things so easier because it gave a unified view of the enterprise’s data. Furthermore ERP systems offered others advantages such as: an easy way for software configuration and customization, a simplified client/server computing architecture, and lower software costs.
However as any software an ERP is implemented for end-users of who needs and expectancies often change. To keep their place in the market the vendors have to adapt their products to companies’ requirements. Once they get an efficient flow of the data within the different parts of their organizations, the focus was turned to customer satisfaction and the increase of competitiveness. It appeared that an incontrovertible way to stay competitive is to adopt a collaborative business. Thus, even if they, so far, fulfill companies’ needs, one of the weaknesses of ERP systems was the difficulty of integrating heterogeneous applications. So often, the solution when implementing an ERP is to abandon all the company’s former applications. ERP systems became then insufficient because to implement this collaborative business the organizations needed to integrate their existing heterogeneous IT landscapes but
also to extend this integration to their business partners, customers and suppliers. That’s the point where the Web appears as the key. Indeed Internet is by definition the standards-based environment with no owner through which different applications, written in such different languages and located on different platforms, communicate in an easy way. The base of this communication is the Web service Technology. Basing on this ERP vendors decided to integrate Web technology into their systems giving birth to the new generation of ERP systems: The WEB-BASED ERP.
Comparing to the traditional systems Web services largely helped make ERP systems more flexible and in the same way more accessible to small and medium enterprises. The table in the figure 25 shows us the differences between the traditional ERPs and the Web Service based ERP solutions.
Parameter
Traditional Solution
Web Service Solution
Scalability
Low
Very High
Time Frame for implementation
Very High
Moderate
Maintainability
Low
Very High
Reliability
Moderate
High
Portability
Low
Very High
Cost to Enter
High
Moderate
Cost to Maintain
High
Low
Total Cost of Ownership
High
Low
ROI
Moderate
Very High
Comparison between traditional ERP and web-based ERP[4]
After an overview of the reasons that led to the migration of ERP systems to the Web, the characteristics of the principal technologies used for this migration and the concept of Web-based ERP systems, we will present in the following chapter a concrete case study. mySAP ERP was chosen as a case study related to technological tools used for the SAPCCC project described in further sections.
Method & Results
3 Case Study: mySAP ERP
mySAP ERP is the last descendant of ERP systems family that have been edited by SAP one of the leader ERP vendors. It can be defined as a suite of ERP, CRM and other products that can be linked together using an Internet portal: SAP Enterprise Portal. It was introduced into the market in 2004 and can be seen as the logical suite of the SAP ERPs family. Today there is a new version of this ERP mySAP ERP 2005 defined as the first ERP system whose architecture is identical to a Service-Oriented Architecture framework. [18] The figure 11 is about the evolution of SAP’s ERP since the SAP R/3 4.6c launched in beginning of the 2000s.
Figure 11: Technical evolution to an ERP system respecting SOA Architecture
mySAP ERP is the successor of SAP R/3 and is characterized by the use of Services. For several reasons Services appeared as the future of ERP systems specially because they permit them to communicate with other applications from other platforms. They help improving the flexibility of these systems.
But to use Services it was important to make them communicate in an efficient way so the Service-Oriented Architecture (SOA) was the perfect framework technology to ensure that purpose. We have already seen in details the characteristics of SOA and its mechanism. Remember, Vogel and Kimbell have defined SOA as: “a technical framework for building software applications that uses available pieces in the form of Web Services”. Thus by “service” we mean “Web Service”. SAP, like many other ERP vendors adopted the Web Service technology.
Nevertheless instead of SOA, we talk about Enterprise Services Architecture (ESA) with mySAP ERP. ESA can be seen as the SAP’s interpretation of SOA that expands the concept of Web Services by enabling enterprise-wide, service-enabled business architecture. To compare, SOA can be seen as more of a technical concept and ESA as the draft that allow
services to achieve flexibility, openness and speed, three elements that are fundamental for your business success. [3]
Finally, thanks to ESA, SAP is able to furnish pre-packaged business processes with included connections for applications such as mySAP ERP. [3]
We can see in the figure12, below that mySAP ERP is organized into two sets: components (CRM, SCM, self-services…) and an application builder platform: SAP NetWeaver.
mySAP ERP
COMPONENTS
PLATFORM
Figure 12: mySAP ERP framework [18]
We will focus, our study, on the pedestal of mySAP ERP: SAP NetWeaver and its components particularly SAP Enterprise Portal and SAP Web Application Server.
3.1 SAP NetWeaver
SAP NetWeaver is an application builder platform edited by SAP for integrating business processes across various systems, databases and sources. [19] In this section we are going to see in details the role of SAP NetWeaver, its components, what is new in it for organizations.
mySAP ERP is today one of the most famous ERP in the market of Information Technologies, this is due in big part to its platform SAP NetWeaver that allows its different components to work in an efficient way. The figure 13 shows clearly that mySAP ERP is built on to of SAP NetWeaver. Vogel and Kimbell summarized the role of this platform for mySAP ERP, through a metaphor: “Just as a word processing application sits on top of an operating system as Microsoft Windows, mySAP ERP rests on top of a technology platform called SAP NetWeaver.” Thus to fully understand the potential of mySAP ERP, we need to know the rock on which it has been built. [3]
Here is the schema of the architecture of NetWeaver.
Figure 13: SAP NetWeaver Platform [18]
The different components that composed SAP NetWeaver platform can be divided into two categories: The integration components and the development and management tools. [20]
Integration components are software products for achieving the work of enterprise applications by providing a puissant engine for a specific type of functionality. These components are, actually [20]:
􀀹 SAP Enterprise Portal (SAP EP): It provides a single and consistent user interface to organizations by allowing the creation of software that gathers all the necessary information and software tools.
􀀹 SAP Business Intelligence: As any Business Intelligence tools it provides tools for information integration so people can work with consistent and accurate data.
􀀹 SAP Exchange Infrastructure: It integrates processes and helps applications communicate between them.
􀀹 SAP Mobile Infrastructure: It helps writing interface for SAP applications such they can talk to any mobile devices (cell phone, pager, PDA) people need to work with.
􀀹 SAP Master Data Management: It is a system for harmonizing information that is distributed across a wide variety of applications. Concretely it is a toolkit for building real-time data warehouses for what SAP calls master data.
􀀹 SAP Web Application Server (SAP WAS): It represents the platform application on which all the people, information and process-integration capabilities run. It is the tool for building and running applications such as web services.
Concerning the development and management tools they help create and execute/activate software. NetWeaver proposes four tools:
􀀹 SAP NetWeaver Developer Studio: It is one of the most important parts of SAP NetWeaver. It is an integrated development environment (it supports Java and ABAP programs), a modeling environment for user interfaces (Web Dynpro) and a tool to follow up all the information from the parts of a large program that is being developed by many people (Java Development Infrastructure). NetWeaver developer Studio helps developing applications such as Web Services and Web Dynpro Applications.
􀀹 SAP Composite Application Framework: It is a tool for creating new applications by combining organization’s existing services.
􀀹 SAP Solution Manager
So, SAP NetWeaver can be seen as a set of facilities constructed to work efficiently between them and that the main goals are to make applications work together, build new applications on top of existing ones, and lower the total costs of owning application.[20] Through SAP NetWeaver, SAP provided to organizations a well-done tool to make their work easier. But an important characteristic that makes MySAP ERP a revolutionary product is that SAP NetWeaver is a platform that supports the concept of SOA morphed into ESA (Enterprise Services architecture).
3.2 Web Service Technology for SAP NetWeaver
We have already enumerated the reasons for which Web Services represent the technology solution for the future of ERP systems. So now, we are going to see concretely, how an ERP system can work with Web Services. To illustrate this point mySAP ERP with its SAP NetWeaver technology has been chosen as a case study.
First, we have to get used with SAP’s nominations. Application services are Web Services that expose services from an engine or an enterprise application. These applications can perform actions like deleting an order from the CRM system, but they don’t need to be seen by the business user. To be displayed on a user interface they are grouped into enterprise services that are meaningful to the business user and reflect how a company thinks of its businesses. [20] “Enterprise services” is the name for services. They are technically based on Web service technology but they give a further vision by providing access to business content and functionality in business terms.[3] Finally SOA becomes Enterprise Services Architecture or ESA and represents the framework that organizes Web services into Enterprise services and application services, in order to make them useful for business activities. (See SOA architecture section 3.2.2) In other words ESA is SAP’s blueprint for helping developers design and implement their service-oriented business solutions. [21]
Still respecting the Web services paradigm, SAP ESA contains in its architecture a Web service Provider and a Web Service Consumer. To build and run these Web services SAP provided an application platform on top of which run all the components of SAP NetWeaver: the SAP Web Application Server. The Web service Consumer is represents by
the SAP Enterprise Portal on which the user interfaces are built. The figures 14 and 15 illustrate the structure of SAP ESA and the link between Web service Provider and Consumer.
Figure 14: Providing Web Services on Open Standards [18]
Figure 15: Consuming Web services based on Open Standards [18]
However, using Web Service technology is not enough, even if they carry out flexibility to MySAP ERP, the business users are not interested by how their system work in the back-end, how many engines are involved and so on, they care about the interface that permit them to interact with their system and if this interface allow them to get in an easier way and a acceptable delay the information they need for their work. That’s why the key to
making Enterprise services architecture work in practice is to have the best set of tools for taking advantage of Web services so that developers can create great user interfaces. [20]
To create these great user interfaces, SAP has provided among SAP NetWeaver components, the SAP Enterprise Portal.
3.3 SAP Enterprise Portal
Figure 16: SAP Enterprise Portal architecture [18]
The portal is a control panel that brings in one point functionality from many different applications to help the user do his work. It can be a collaborative platform or a meeting room in which people share thoughts using instant messaging, discussion forums, Web presentation… It provides to customer updated product information and to suppliers a tool for planning their production according to customer demands. The portal is also a powerful development tool for developers; it allows engineers to create new composite applications by combining resources and applications. All the applications running on SAP Enterprise Portal are written in Java.
The portal can be seen as the visual interface between a user and all the fundamental applications and information an organization has put together to address business needs.
SAP EP represents the Presentation Layer of mySAP ERP. It permits to organize information in such way that they enable any user to make quick decision. This information is structured into role-based interfaces so each user can see only the information that is relevant for him or her. [20]
Actually, they are two ways to create user interfaces on SAP EP: either by developing new applications using SAP NetWeaver Developer Studio or by customizing user interfaces using predefined SAP Knowledge Management iViews templates.
3.3.1 SAP NetWeaver Developer Studio
SAP NetWeaver Developer Studio is a development environment for writing Java programs. Its purpose is to improve the productivity of developers and the quality of the code they write. For this, SAP has furnished three fundamental components:
􀀹 Web Dynpro is a modeling environment for creating user interfaces. In this environment developers design the interface of applications (creation of buttons, commands…) with the possibility to write less code, they can then spend less time fixing bugs and can change and customize user interfaces much more inexpensively.
􀀹 The Java Dictionary that keeps track of commonly used data types, for instance addresses, social security numbers, or phone numbers, and also database tables. This improves the reusability of codes and data used in different programs.
􀀹 The Java development Infrastructure (JDI) keeps tracks of the relationships between the different Web Dynpro applications composed by components. The source code and the relationships between these components are kept in a design-time repository and the SAP WAS which builds and runs them knows exactly what to build when a change is made. It is especially useful for the transport and the versioning of applications.
The process of integrating Web Services into the portal by using SAP NetWeaver Developer Studio is the following: first, the developers create Web Dynpro applications in which the user interfaces are designed, and then these applications will be transformed into Web services written in Java code. Finally the SAP WAS will build, run and deploy these Web services and publish them in a UDDI that they can be accessed through the Web and on SAP portal. But to make Web services available on the portal, the developers must create Iviews in order to display them. The different steps of this process are drawn in the figure 17
Figure 17: process of integrating Web services with NetWeaver Developer Studio
3.3.2 SAP Knowledge Management
SAP KM is a tool that offers to developers the possibility to customize user interfaces. For this SAP has provided pre-designed modules called iViews that avoid to create interfaces from scratch. This method is called the Flexible UI (User Interface) Technology and offers capabilities to adapt existing User Interfaces. Indeed iViews are small applications that compose a page in the SAP portal environment. They are tailored to the needs and the role of
Creation of a Web Dynpro application
SAP NetWeaver Developer Studio
Transformation of Web Dynpro application into Web service
Web Dynpro Application with WSDL
Building, deploying, running Web service/ Web Dynpro application
Web service
SAP NetWeaver Developer Studio
SAP Web Application Server (SAP WAS)
Creating and configuring an Iview
SAP Enterprise Portal (SAP EP)
Web service available for use on SAP EP
SAP portal page on runtime
the user and provide essential information and basic functionality. So for the customization the developers just need to configure new IViews based on existing KM templates in order to meet the user requirements. iViews interact with content management services, allowing users to search, create, edit, view and deliver content through portal interfaces. All these services are stored as Web services in the SAP WAS on which the SAP EP runs.
The WAS publishes all the existing Web services on an UDDI, then when a user wants to achieve an action he called the corresponding page via its URL address. The UDDI then displays on the page the corresponding WSDL that allows the user to interact directly with the needed Web service. These Web services are called Content Management Services (CM Services). So the advantage of SAP KM is that the developers skip the first parts of the process drawn in figure 17. iViews can be seen as Web Dynpro applications that have been developed by SAP developers and are made available on the portal through iViews templates.
Moreover for facilitating the access to these documents SAP Knowledge Management offers capabilities to index, classify, navigate, search and publish all the documents produced in the company and stored into KM repositories.
Classification is the system for organizing and identifying content so that users can find it later. Classifying uses several systems calls taxonomies that help in structuring data in ways that reflect how people think in a company so they can easily search and find particular information.
Searching and Navigating is done thanks to a powerful indexing tool called TREX. The applications using TREX can access the TREX functions through the TREX clients that allow access to the TREX servers. TREX server also works as a service provider; it executes requests from the clients: it indexes and classifies documents and answers search queries. The following table (figure 18) enumerates the different functions available on SAP KM.
Component
Description
Integration of repositories
Information is typically stored in various types of repository such as file servers, groupware systems, or document management systems. Knowledge Management uses several preconfigured repository managers to integrate these repositories. The content is accessible through a central point: SAP EP. It is also possible to store documents in one of KM’s own repositories.
Navigation in folders
Portal users can navigate in folders and access the items in the folders of all integrated repositories in an iView in the same way as on a file server. Access to folders and documents is controlled using permissions.
The user interface for navigating in folders can be configured flexibly and modified to suit various roles. Users can personalize the presentation of the user interface. Open interfaces allow developers to extend the user interface by integrating their own functions into the standard system, this operation is called customization.
Search
The search function helps find documents in all repositories integrated into Knowledge Management. The system displays only documents for which the current user has read permission in the results list.
It is also possible to include the content of Web sites in the indexes using Web crawlers. This information is then also available via the search function in SAP Enterprise Portal.
Taxonomies and classification
Taxonomy is a hierarchical structure of categories in which documents are classified according to content, organizational, or other criteria. Documents that are stored in different physical repositories can be included in the same category. Taxonomies portal users to navigate in a uniform structure throughout an organization even if information is stored in heterogeneous storage locations.
After the initial configuration has taken place, the system automatically carries out classification of new and changed documents.
Content Management services
Content Management services enable functions that can be used on the content of all connected repositories as long as technical conditions are met. These services include subscriptions, ratings, public reviews, feedback, and personal notes.
Documents can also be imported into KM repositories from external sources by using the content exchange service.
Document creation and publishing
All portal users can create information in SAP Enterprise Portal as long as they have the appropriate permissions in the KM folder in question.
A user can upload documents that he/her created using a PC application directly to a KM folder. He/her can also use forms to create information directly in the Web browser.
The publishing process is supported by various functions such as the approval workflow.
Figure 18: SAP KM functions
4 Practical Part: SAP Customer Competence Center (SAP CCC) Project
4.1 Project Objectives
The objective of the project has been to rebuild the AIRBUS SAP Customer Competence Center web site (SAP CCC). The SAP CCC is an important Knowledge Base where are stored documents and information useful for SAP users (End-users and developers)
This rebuilt concerns several points:
􀀹 The improvement of existing functionalities, information circulation in order to make them clearer and easier to use.
􀀹 The use of new tools and new environment in order to improve the stability, the design and the maintenance of the web site.
The addition of new functionalities as a Search Tool also the creation of News and FAQ pages in order to get a more complete, dynamic and communicant web site.
Another important point is that today the wish of AIRBUS is to work in an easier way with its partners (customers and suppliers). Therefore the SAP CCC will be “opened” to the external partners who work for AIRBUS on projects concerning the integration of SAP solutions, particularly in order to make available rules and work processes advocated by AIRBUS.
A study about possible technological solutions has been made in order to achieve these objectives and to give to the end-users a product corresponding to their expectancies. The following sections concerned the different steps of the SAP CCC project, from the requirement specifications phase until the deployment phase. But before that let’s have a small look in the situation before the rebuild of the Web site.
4.2 Requirement Specifications phase
4.2.1 Description of the Former SAP CCC
AIRBUS SAP Customer Competence Center (SAP CCC) Website was actually reached through AIRBUS Portal (AIRBUS People) and was used for the consultation and the management of specific documents.
As we said before, SAP CCC is a Knowledge Base where the end-users and the developers can find helpful information for their development project and their activities related to SAP applications. It permits essentially to optimize the costs of the informatics projects by giving to the project teams the possibility to access to the right and necessary documents in a moderate delay.
There are two kinds of documents available on the web site:
􀀹 The General Information Documents: they content diverse aspects related to SAP applications and the indicators for the performances and the statistics of different services.
􀀹 The Sapnotes: they are a collection of best practices, processes, rules and standards applied for the different projects in accordance with the SAP environment constraints. These documents are, so far, created on SAP R/3 on PGI and follow a specific process that is not developed in this paper.
So far, SAP CCC was used for the publication and the consultation of these documents. The publication of these documents followed two different processes. The figure 19 shows us the former technical architecture of SAP CCC.
Figure 19: Former material Architecture of SAPCC Web Site
Based on the schema above we can see that in reality, the SAP CCC was a combination of two distinct web sites running on top of two web servers: a classical IIS (Internet Information Services) web server that permitted to display the principal site and the consultation of the general documents stored locally on the server; and an ITS server which allow the link with the Sapnotes present on SAP.
So, the Sapnotes are created on SAP and the ITS server “translates” the SAP interfaces in order to make them available on a web browser. Then when a user wanted to consult a Sapnote, the request was transmitted to the ITS server which linked the HTTP requests to SAP.
Concerning the Information documents they were edited by a manager locally on his machine and reachable by the users through an IIS server that made them available on the web site via a File Transfer Protocol (FTP). FTP is an open protocol for exchanging data.
The SAP CCC was developed using JSP technology. This technology uses HTML and Java languages and generates Java Server Pages, which were supported by the both web servers. The JSP Technology allowed the servers to link the user browsers to the different database in which the documents were stored. The IIS server provided by Windows possessed a JRUN module that helped in interpreting the Java pages. As for the ITS, it is provided by SAP. The IIS server was hosted on a non-maintained machine, which were non-referenced on AIRBUS Network and used an Operating System (Windows NT) that was not anymore used in the enterprise.
SAP
Sapnotes
Link
Information documents
IIS Server ITS Server
Users
A general Use Case diagram was drawn in order to summarize the different functionalities offered to the end-users by the former SAP CCC. SAP CCC Web SiteConsultInformation documentConsult SapnoteSearch for SapnoteUser******«uses»
Figure 20: Former SAPCCC Use Cases diagram
4.2.2 New Requirements
For years the architecture presented above suited to the expectancies because it permitted to reach the needed information. Today reaching information is not sufficient; business people want also to work with welcoming interfaces what mainly includes a single user interface. They want to see a dashboard that helps them drive a process from beginning to end, without having to know how many different engines have to be implied.
To answer to these new exigencies it has been decided to rebuild the SAP CCC Web site such as users can all information via an only and unique interface. However the Customer Competence Center has to keep its original role of diffusing information to developers (project teams) and business users.
Furthermore end-users are waiting for new functionalities such as the management of the published data directly from the web site, a more powerful search tool with more options in order to get the wanted information in a shorter delay, News and FAQ pages for users.
These new expectancies lead on the review of the physical/technical and logical architecture of the web site and on the study about the most suitable technological solution in respect of AIRBUS volition to use standards offered by MySAP ERP.
4.2.2.1 New SAP CCC physical and logical Architecture
To ensure transparency for the users, it seemed necessary to centralize the storage of documents then they can be reached through a unique server consequently via a unique interface. So it has been decided to replace the IIS and ITS servers by a unique Web Application Server (SAP WAS), which permits to create directly, web content on SAP’s portal (SAP Enterprise Portal) where the SAP CCC is hosted.
In another hand, the logical structure of the web site has been modified in order to propose new functionalities and a more efficient presentation and organization of the data. A search tool will be also available thanks to the KM module.
The SAP Enterprise Portal (SAP EP) runs exclusively on the SAP WAS and is written in a specific language: JAVA.
Figure 21: Physical architecture of SAPCCC
Information Documents
SAPNotes
4.2.2.2 New SAP CCC Functionalities
The new SAP CCC will offer new functionalities in addition of the existing ones. So an administration interface will be available and also news and FAQ pages.
􀀹 An administration interface
In order to be able to manage efficiently the Web site content (add, delete, create, modify… documents), it is necessary to have administration interface that will permit to an authenticated user (means that have access to the portal and who is associated to an administrator role) to manage the data used in the website.
Contrary to the former SAP CCC, the new Web site enables the administration of the site directly through the portal.
• A search tool
Thanks to TREX available on SAP KM the indexation of the repositories will be done in such a way that it will be now possible for the users to launch a multi-criteria search operation. So far, this action was available only for the Sapnotes but it will be extended to all the SAPCCC content (General Documents, FAQ, News…) Furthermore TREX allows a “full-
Web Application Server (SAP WAS)
SAP EP
(SAP CCC)
KM Repository, services
UDDI
WSDL
SOAP
text” search like Google and so on. It will be also possible to launch specific searches for instance only for Sapnotes or General Documents.
• News
In order to improve the diffusion of the information and to make the Web site more “communicative”, a page for News will be added to the SAPCCC. All the users that have access to the Web site can then see what new information is available, for example when a new Sapnote is published or modified or just for informing about any problem or new document of course all these information will be related to the Customer Competence Center activity. All the news will be archived and only the last ones will be directly displayed on the home page.
• FAQ and How To
Still in the worry of allowing users to get the right information as fast as possible, the SAPCCC will propose an FAQ and an How To pages. The objective related to this is to give a better support to the users. Supporting users, actually, costs a lot to the Support Service because it implies SAP experts and a lost of time for retrieving the right answer to the questions, more it is often the same questions. The objective of creating these pages is to minimize the calls towards the Help Desk or in general the solicitation of the supports, key-users included.
The FAQ will provide an answer to frequently questions about particular problems. It is useful particularly for development teams and business teams.
The following schema shows the former support process:
Key-Users
End-Users
Help Desk
(Telephone)
Level 1
Functional
Support
Level 2
Support Technique
(Experts/Maintenance)
Level 3
4.3 Technological Solution
The company purchased mySAP ERP and the SAPCCC will be hosted on the SAP Enterprise Portal (SAP EP).
There are actually two ways to put content on the SAP Portal either by Customizing thanks to SAP Knowledge Management (SAP KM) or by specific development thanks to different tools such as: Web Dynpro for Java, Web Dynpro for ABAP, BSP, J2EE, and Mobile developments
After studying both solutions, we decided to realize the new web site by using only the Knowledge Management (KM) module proposed by SAP Enterprise Portal (SAP EP). First, KM will permit to avoid specific development and to use only SAP standards. Indeed, the volition of the company to use the standards offered by SAP lead us to study more deeply the possibilities offered by the SAP EP and in another hand specific developments are done outside Airbus by consulting companies. Secondly, KM will provide an efficient Search Tool thanks to TREX that is a powerful tool allowing the indexation of all the KM repositories and enabling the user to launch “Full-Text” searching.
So, SAP KM has been chosen to achieve the project because it respects all the SAP standards and also because it offers a very efficient Search tool. This search tool is very important in the way that it will permit to users to reach the right information in a really good delay. In another hand, using SAP standards will make easier the maintenance of the website then any future person that will be in charge of this function will not have to deal with any particular code and as all.
However, one of the constraints was to keep identical the creation and validation processes of the Sapnotes. This is due to the fact that these processes require a specific transaction of which the change will be too important for the users. So the Sapnotes will be still created and validated on PGI but thanks to KM the documents will be transferred, using a RCP UNIX command, on a KM repository created for storing all the data used in SAP CCC.
To summarize, SAP CCC is hosted on SAP EP, and has been built by doing a customization thanks to SAP KM module. To create content with SAP KM, we used standard iViews templates provided by SAP this technique is called Flexible UI (User Interface) technology. The management and the consultation of documents are done thanks to KM features and the Sapnotes Search process is now performed thanks to an indexation with TREX. According to this solution we drew the new SAPCCC architecture presented on the figure 22:
SapnotesEtInformation DocsAdministratorSAP R/3KMTREXDoc InfoSapnotesSAP EPI-ViewsDGIDGA SAP CCC Site Sapnotes Management(cv01...04)------
1 - Indexing2 – Search Request
DS
DS
DOC
DOC
3 – Search Results
SAP CCC Users
RCP
/Z_DGA_F320
Figure 22: Architecture of SAPCCC
The user requirements analysis and the chosen technological solution lead us to the design of the new SAPCCC user interface. So the following sections will presents the different modeling diagrams on which will be based the customization of the web site.
4.4 Design phase
This phase is concerned by the modeling of the requirements listen the section before. Models were drawn thanks to UML. These models are presented in the appendices. You will see three kinds of diagrams: the Use case diagram of the system, several Sequence diagrams in which the interactions between the different elements are showed and finally the Class diagram.
4.5 Development Phase
The development phase is composed by two parts: the customization of the user interface and the transfer of Sapnotes and information documents from the documentary database in PGI to the KM repository (Z_XGA_F320), as shown on the figure 22.
4.5.1 Customization with SAP KM
Customizing signifies build user interfaces that meet user requirements. It concerns the creation and the organization of content on the SAP EP. In fact, SAPCCC is a web application hosted on the portal and composed by several pages built thanks to standard iViews furnished by SAP KM. The aim is to configure these iViews in order to create an interface that reaches the requirements and thanks to the capabilities offered by the Flexible UI technology.
The flexible UI framework enables the navigation through KM repositories to be represented in many different ways on the user interface. To access items in a repository, users use a browse iView that can be displayed in different ways depending on three criteria:
• The role of the user
• The resource and the folders that are displayed
• The commands that are available for displayed items
To present iViews in different ways we use renderer and layout service packages that help create screen areas that suit different individuals. Customizing interfaces that reach the users requirements pass by different steps illustrated by the figure 23:
Figure 23: bottom-up order of a User Interface configuration
1. First the developer creates a new iView in the portal content. This iView is chosen among the different KM iViews templates available. The iView is just the browse that will display the interface; so when the template is chosen and added with a unique ID then the configuration of the interface strictly speaking can start.
2. The second step is the display of a specific resource; to do this the developer creates a Resource Renderer. The Resource Renderer may contain commands necessary for a user; an example will be show later. A command is a Java class that encapsulates an action for one or more items. It contains the data on how to present this action to the user including the whole screen flow needed for it. These commands can also be
grouped into sets called Commands Groups that belong to the Collection Renderer parameters.
3. The resource Renderer is followed by the creation of the Collection Renderer that renders a list of resources in different layouts. It contains a Resource Renderer.
4. And finally the developer builds the Layout Controller also called “Layout Set” defines the visible areas displayed in the navigation iView (see figure 24). These areas are all hard coded in each Java implementation class. The Resource and Collection Renderers created in the preceding steps are used to render the content of each area displayed within the Layout controller. For each area a flavor is defined. A flavor is used to assign a Renderer to a specific area in the layout.
5. The Layout set is then added to the iView parameters. Another important point is the folder where the resources are stored. Indeed, an iView point on a specific folder to display the resources that must be displayed.
6. To finish iViews can be organized into Pages that can also, in their turn, be grouped in Worksets. In the page the developer draw the repartition of the data on the user screen. Once the iViews created and organized the developer needs to define the Roles corresponding to the different categories of users. The definition of a role permits to characterize which resources are accessible by which group of users, in other words it specifies the users’ access rights. Thus only the webmasters can modify the content of the Web site.
Figure 24: the basic components of a user interface.
In the SAPCCC project the customization concerns the four principal modules of the Web site: the Information Documents, the Sapnotes, the Search tool, the News and the FAQ.
You will find in the appendixes section, several screen views of these modules and a complete example of the configuration of a particular User Interface.
4.5.1.1Information Documents Consultation UI
This module enables end-users to consult the information documents available on the Web site. For an efficient consultation the documents will be organized into categories by the Webmasters. Also for each document a descriptive text is created and displayed to help the users during their navigation. The users can open a document in a different browser just by clicking on it and each document is opened in a different tab.
We configured a KM Navigation iView for creating this module. The user interacts with the iView through a page that display it. However, in order to help the users get the documents they need more quickly we created a Search iView only for the Information Documents. The Search Iview appears as a link on the Document Information Consultation page.
4.5.1.2Sapnotes Consultation UI
This module has the same role than the one for the Information Documents. But the documents are not grouped in categories because of the way the files have been organized on the original UNIX server held on PGI. It is also built from a KM Navigation iView and contains a link for the users to search for Sapnotes only.
4.5.1.3News and FAQ UI
An important point is that so far only News UI has been developed during the thesis work. The News module is important because it improves the circulation of the information. They inform the users about any modification that occurs, for instance if a new Sapnote or Information is uploaded or a new version of a document is available, also if a functional problem occurs.
The News UI is not built by the same manner than the other modules of the Web site. Indeed to create the News and FAQ UIs we used forms built thanks to XML Forms Builder. The forms contain data stored into XML elements belonging to a XML data schema.
XML Forms Builder allows developers to create forms for form-based publishing according to the user requirements. [22]
“The Form-based publishing is a Content Management application that furnishes a simple way to create and publish similarly structured XML documents with HTML forms”. [23] The News files are stored in the KM repository (Z_xGA_F320) as XML documents, but are edited and viewed in the browser using HTML forms. The transformations between XML and HTML are based on XSL stylesheets that define which transformations to perform and how to render the document content in HTML. The advantages of this solution are:
• The separation between the layout and the content
• The possibility of presenting in different ways a same content using different XSL stylesheets
• The option of making browser/client specific modifications.
To summarize before the creation of the UI we create first different XML forms with the XML forms Builder.
• News Consultation UI
The forms needed for the consultation of the News are:
􀂾 The RenderList form: this form is used to define the layout of a list entry in the flexible UI. It displays some of the elements of a document, namely in our case, the title, the date and the summary or description of a News item. To display an item the user just clicks on the title; this action call up the Show form.
􀂾 The Show form: it s called up when a user wants to display an entire News item. So this form presents the title, the news text, the author, the date, and the links for more readings.
Once the forms created, we need to display them on a UI then they can be accessed by the end-users. For this we used a KM Navigation iView and “NewsBrowser” as a Layout set. “NewsBrowser” is a standard SAP layout it has been developed by SAP developers and made available in the Content Management repository. It displays the RenderList form without any commands then the end-users can’t modify the items. The appendix 16 shows us the different forms and the Navigation iView.
• News Management UI
This UI is accessible only by the Administrators. It allows them to create, delete, and edit items. The forms needed for the management of the news are:
􀂾 The RenderList form: it displays the same elements than for the Consultation UI the only difference is that some commands are displayed on the Navigation iView. For this we used the "NewsExplorer" layout set in which we add commands as edit, delete, create a new News item
􀂾 The Edit form: it is called by the command “new News” or “edit” (see appendix 16)
Concerning the FAQ only the processes have been modeled, a report concerning the UML models and the administration processes.
4.5.1.4Information Management UI
This part of the site is also available only for the administrators. It is the UI through which they organize the structure of the Web site and to add content.
All the files used in the SAPCCC are stored into a specific repository that has been created just for the project: Z_xGA_F320 (the “x” depends on the environment on which we are working: development, integration and production). The files are grouped in folders and each folder is normally related to an iView. The layout set “AdminExplorer” allows the administrator to copy/paste, move, and create…a folder
For adding content we configured an “Upload” iView which permits to load documents in the KM repository. The process is described by the sequence diagram “Upload a document” (See appendix 1).
4.5.1.5Sapnotes Management UI
As we said some sections above, the process of creating Sapnote will not be changed because of different constraints. According to this, the solution that has been found is to relate the new SAPCCC with the former one. For that we configured a KM Transaction iView which will permit to the administrator to connect directly to SAP R/3 through the portal. Then he can manage the creation of the documents via its SAPCCC administration interface. (See appendix 3)
4.5.1.6Search UI
The Search tool is one of the most important parts of the Web site. It is used by both the end-users and the administrators. We configured a Search iView to create it. Several options are presented to the users then they can launch a search with more details. The search is a text full search. A TREX index has been created, in another hand we configured two more search iViews: the “Sapnotes Searching” and the “information documents Searching”, the characteristic of these iViews is that they pointed only towards the folders that contains the Sapnotes and the information Documents.
4.5.2 Documents Transfer Process
The documents transfer represents the second part of the development phase. Indeed as we explained earlier the Sapnotes and the Documents Information are stored in PGI. Therefore, in order to make them available on the portal, we have to load them in the KM repository created for the project. (See figure 22)
Concerning the Documents Information they have been loaded one by one thanks to the Upload iView. But this method could not be applied to the Sapnotes because only the last validated version of each Sapnote file has to be published on SAPCCC and the large number of files didn’t allow loading them one by one. So to load them we have, at the least for the first time, to transfer all the files present on PGI.
The solution that has been found is to develop a specific ABAP program that executes UNIX Commands in order to collect all the Sapnotes Files in a table in SAP. Indeed the files are actually stored in a UNIX repository, so we first transfer them to SAP where they are stored in a table. The last versions of each Sapnote are then selected and copy into a text file. This file is stored in a temporary repository in SAP. Then a UNIX Script using the RCP command permits to download the selected files from the temporary SAP repository to the KM repository. Once the files loaded in the targeted KM repository, the portal automatically index them (indexers have been already created).
4.6 Tests and deployment Phases
After we created all the necessary User Interfaces and loaded the documents from PGI. We did different tests to be sure that everything is working well. The tests have been done mainly by the current Webmaster.
The deployment of the Web site has been done but for a beginning we deployed it only for internal users. This can be seen also as a test phase because it will permit to correct some elements before making the Web site available for the external users.
Conclusions
5 Discussion and Evaluation
In this section we are going to discuss the differences between traditional ERP systems and Web-based ERP systems through concrete examples taken from our practical experience during the realization of the SAPCCC project. For this we will based our evaluation on the different characteristics presented in the table of the section 2.3 and reminded below:
Parameter
Traditional Solution
Web Service Solution
Scalability
Low
Very High
Time Frame for implementation
Very High
Moderate
Maintainability
Low
Very High
Reliability
Moderate
High
Portability
Low
Very High
Cost to Enter
High
Moderate
Cost to Maintain
High
Low
Total Cost of Ownership
High
Low
ROI
Moderate
Very High
We will give some examples concerning the most representing characteristics:
Reliability: The reliability of the SAPCCC has raised a lot. ESA permits to separate the server side from the user interface that leads on improving the access to the information. The users interact only with the Web service Consumer that, talks to the Web service Provider giving then a better use of the resources and a faster access to the information. Furthermore, TREX gives a better search tool improved by the direct indexation of KM repositories.
Maintainability: by implementing the SAPCCC on SAP EP we have facilitated its maintainability. Indeed the content of the web site can be modified more easily because by using services it is no more necessary to modify the code to add new functionalities. If, for instance, the needs require the addition of new commands, the Webmaster can add these commands directly on the corresponding services accessible on the CM repository and these modifications will not have any impact on the system.
Scalability: Like for maintainability, the system became more scalable; the addition of new commands or new iViews change nothing to the architecture of SAPCCC or on the performance of the Web site and this doesn’t imply to touch the Web services provider’s code.
Portability: By separating the interface to the implementation, we have made the site completely independent of the material environment. Any change can be made in the material architecture, for example we had once got a new version of the TREX indexes, by recreating the indexes, and we just had to modify the name of the index in the search iView configuration to make it work normally.
Cost of ownership: The cost of ownership is really low compare to traditional ERP systems. The SAP WAS provides comprehensive management for all aspects of the Web site life cycle. Capabilities for change management, monitoring and administration support help controlling the deployment and the modification of the different functionalities.
Openness: This characteristics is something particular to mySAP ERP compare to the other Web-based ERP systems currently in the market; the SAP WAS is fully J2EE compliant so in addition of ABAP the Web services can be developed in Java language. In another hand, SAP WAS fully embraces all leading open Internet Technology standards and Web services.
6 Conclusion
The conclusion will permit us to check if our research questions asked in the Introduction (section1.1) have found an answer:
• How Web Services are integrated into ERP?
The integration of Web services into ERP systems are mainly done by using a Service-Oriented Architecture that helps improve the interoperability of different services in order to make them communicate in an easier way. SOA use a Web Application Server in order to build, run and deploy these Web services through the Web making them available to every authenticated user from his/her original application.
• What additional values do Web Services bring to traditional ERP systems?
The different values bring by Web service Technology is presented in the comparison table between traditional ERPs and Web-based ERPs (section 2.3). In the section above (section 5) we confronted the characteristics presented in that table with the observations from our practical experience and it appeared clearer that Web services have several positive points for ERPs. We talked in the beginning of this paper that one of the current objectives of organizations is to make economies; by adopting Web-based ERPs the cost of ownership is lower and the ROI of these systems is much higher because of the less code and development needed for integrating the different systems. Also with Web ERPs, companies spend less money in training their employees and less time in implementing the system. Furthermore as described above, reliability, scalability, and portability are improved and the maintainability of all the applications of the system becomes much easier.
Beyond all the theoretical study, this final thesis project has been above all, an opportunity to work concretely on a Web-based ERP. The SAPCCC project permitted me to understand in a better way how web services are integrated into ERP systems and how they can help in integrating different applications. I had the possibility to talk with some developers that explained me in which way Web services make the job easier for them. Indeed, with Web services technology they spend less time in customizing interfaces for users, because now any user can, from the application he/her works on, interact with any application held on the ERP system. From the managers point of view these systems help do economies and give a better customer satisfaction. And from the end-users’ point of view they don’t have to change their methods of work because they still keep the applications they are used with.
As a developer I built an application that will be used by internal and external AIRBUS users from their own applications. So I could say that Web service technology help in realizing this aim. The approach used in implementing the new SAPCCC is innovating in the way that all the modules can now be reached by external users through the Web. Indeed, the iViews are Web services with a unique URL for each of them and any authenticated user
can from any application located in any platform reach the SAPCCC. For instance, some internal users working with another application have had the access to the Sapnotes Consultation UI of the SAPCCC. For that we furnished to developers of that application, called PM Toolkit, the URL of the Sapnotes Consultation UI with which they create a direct link on their application.
To finish this project help me in working on all the part of a project, from the requirements specification to the deployment phase.
References
7 References
[1] Second-Wave Enterprise Resource Planning Systems- Implementing for Effectiveness
Peter B. Seddon, Leslie Willcocks, Graeme Shanks, 2003
Cambridge University Press, Cambridge, ISBN-13: 978-0-5218-1902-2
[2] Mohammad A. Rashid (Massey University–Albany, New Zealand), Liaquat Hossain
(Syracuse University, USA), Jon David Patrick (University of Sydney, Australia), 2002
The Evolution of ERP Systems: A Historical Perspective
Idea Group Publishing, http://www.idea-group.com/downloads/excerpts/193070836XExcerp.pdf
[3] Andreas Vogel, Ian Kimbell, 2005
mySAP ERP for Dummies
Wiley Publishing, USA, Indianapolis (Indiana), ISBN-13: 978-0-7645-9995-8
[4] Kapil Apshankar, April 2002
Enterprise Resource Planning and Web Services: The Third Wave
Tect Ltd. http://www.webservicesarchitect.com/content/articles/apshankar01.asp
[5] Wikipedia encyclopedia: Enterprise Resource Planning http://en.wikipedia.org/wiki/Enterprise_resource_planning
[6] mySAP Technology, 2002
SAP Web application Server: Building Reliable Business Applications – Version 1.2
SAP AG
[7] The Process of Migrating ERP to the Web
Peter Shikli, 2002 Bizware Online Applications, Inc. – APICS http://www.bizware.com/apics01.htm
[8] Vladimir Tarassov, 2006
Web Services & .NET
Lecture 3 - Development of Distributed Applications
School of Engineering, Jönköping University
https://pingpong.hj.se/courseId/3469/courseDocsAndFiles.do?nodeTreeToggleFolder=570935
[9] David Booth (W3C Fellow / Hewlett-Packard), Hugo Haas (W3C), Francis McCabe
(Fujitsu Labs of America), Eric Newcomer (Iona), Michael Champion (Software AG),
Chris Ferris (IBM), David Orchard (BEA Systems)
Web Services Architecture
W3C, 2003 http://www.w3.org/TR/2003/WD-ws-arch-20030808/
[10] Marcus Ekelund, Andreas Larsson, Nov 2004
Web Services: A Comparative Study
MSI, Växjö University, ISSN 1650- 2647
[11] Kurt Sandkuhl, 2005
XML Concepts and Document Type Definition
Part 3, Lecture 2
Information and Enterprise Modelling
School of Engineering, Jönköping University https://pingpong.hj.se/courseId/3160/courseDocsAndFiles.do
[12] Li Fang, Sylvia Patrecia, June 2005
Critical Success Factors in ERP Implementation
IT and Business renewal, Jönköping International Business School
Jönköping University
Source: Proposed enterprise system benefits framework (Seddon et al., 2003, p 79)
[13] http://www.developer.com/design/article.php/2207371
[14] http://en.wikipedia.org/wiki/Service-oriented_architecture
[15] Gerhard Wiehler (Siemens), 2004
Web Services and Service-Oriented Architectures: The impact on Business
Applications
Siemens
[16] http://en.wikipedia.org/wiki/Service-oriented_architecture
[17] SAP Tech, 2006
SAP NetWeaver
[18] http://en.wikipedia.org/wiki/Netweaver
[20] Dan Woods, Jeffrey Word, 2004
SAP NetWeaver for Dummies
Wiley Publishing, USA, Indianapolis (Indiana), ISBN-13: 978-0-7645-6883-3
[21] Karl Kessler, September 2004
Web Service Technology for SAP NetWeaver
SAP AG – Wellesley Information Services (http://www. WISpubs.com)
[22] SAP Help Online
http://help.sap.com/saphelp_erp2005vp/helpdata/en/4c/9d953fc405330ee10000000a114084/frameset.htm
[23] SAP Online
http://help.sap.com/saphelp_ep50sp5/helpdata/en/8f/fe743c74fa6449e10000000a11402f/content.htm
[24] SAP Help Online
http://help.sap.com/saphelp_erp2005vp/helpdata/en/69/d96b9ba84611d5993600508b6b8b11/frameset.htm
Appendices
8 Appendices
Appendix 1: SAPCCC Use Case diagram
The use cases are grouped into three groups:
• The group concerning the Sapnotes and The information Documents because the users interact with the Web site in the same way when the they are working with them
• The Sapnotes because with the new Web site the administrators can create and validate directly the documents. SAP R/3 is accessible through the portal thanks to an iView that permits to link the both applications.
• The group concerning the News and the FAQ

Appendices
Appendix 2: Sequence diagram: Upload a document
Appendix 3: Sequence diagram: Create a Sapnote
Appendix 4: Sequence diagram: Search for a document existing in the KM repository
From the search iView the user can launch a full text search and it is also possible to choose options search.
Appendix 5: Sequence diagram: Add a new folder in the Repository.
This operation is necessary to organize the files and is necessary when configuring an iView, especially Navigation iViews.
Appendix 6: Sequence diagram: Consult News or FAQ items.
Appendix7: Sequence diagram: Create a News item

Appendix 8: Sequence diagram: Delete a News or FAQ item

Appendix 9: Sequence diagram: Create a New FAQ item
This sequence is different with the one for the News items because creating an FAQ item means give an answer to a question that has been proposed often. For this a special form: the ListEdit Form is available for them in which they can filled their questions. This list will be consulted by the administrators and they will choose the consistent ones and then give an answer by using the Edit form

Appendix 10: Sequence diagram: Propose a question to the Webmaster through the FAQ UI
As we explained in the appendix 9, the users can propose questions in they don’t find an answer in the FAQ UI.

Appendix 11: SAPCCC Class diagram

Appendix 12: SAPCCC Welcome Page. It is composed by two iViews: the News and the Remarks
Appendix 13: Sapnotes UI
Appendix 14: Search UI.
In this page are displayed the results of a search. You have a summary of each document done automatically, the tool also proposes to the user related expressions for a more targeted search.
Appendix 15: Sapnote Management UI
Appendix 16: Components of the News UI
• The Edit Form
• XML Forms Builder: the design of the different forms (Edit, RenderList, Show)
Appendix 17: Information Management UI and the components of the UI (layout controller, resource and collection renderer, commands)

Entrepreneurship and Microfinance- A tool for empowerment of poor- Case of Akhuwat-Pakistan

2009-03-19T15:19:00.000-07:00

School of Sustainable Development of Society and Technology
Master Thesis
15 ECTS-points,
Business Administration,
Advanced level,
Spring term 2008
Entrepreneurship and Microfinance-
A tool for empowerment of poor-
Case of Akhuwat-Pakistan
Thesis Tutor
Tommy Torsne
Authors
Zahid Mustafa zahidbinmustafa@gmail.com
Nodirbek Ismailov nodirbekismoilov@yahoo.com
Västerås June 2008
2
Acknowledgement
In the name of Allah, the most beneficent the most merciful.
We would like to express our endless thanks to everyone that helped to make this thesis possible.
First of all, we would like to give foremost and special thanks to our advisor, Tommy Torsne for his guidance and recommendations during and especially the time after seminars which he spared for us.
We will never forget the support and knowledge contribution of Leif Linnskog during the whole program and we felt his contribution of knowledge was of great assistance during our research work.
We also would like to thank Dr Amjad Saqib, executive director of Akhuwat, for cooperation and providing us with all important and essential information. We also acknowledge his generosity for the time which he spared for interview even though there is a big time difference between Pakistan and Sweden.
We also acknowledge great help from the Microfinance experts, especially Zahid Hussain Awan, Manager of International Banking services, Qatar International Islamic Bank. We thank him for reserving his valuable time and effort to answer our questions.
Especially we would like to express our thanks to all our friends for their supports who always asked us about thesis process and achievements, encouraged and inspired us to finish this thesis.
Lastly, we would like to give special thanks to our parents whose prayers enabled us to complete this work. They raised us, taught us, supported us and loved us. We dedicate our work to them.
Alhamdulillah
3
Abstract
Purpose: Our main purpose is to carry out a research on combining microfinance with entrepreneurship for poverty alleviation, empowerment of poor and sustainable development.
Target group: Students, researchers in Microfinance field, MFI’s, NGO’s and Governmental structures.
Research Question: How do micro entrepreneurship, social entrepreneurship and microfinance serve as a combined tool to reduce poverty, empower people, and contribute to sustainable development in Pakistan?
Approach: We used qualitative approach for research. The data have been collected through interviews which held as structured and unstructured, and as secondary sources web page of the organization, statistics of Pakistan and Book of organization have also been consulted.
Delimitations: Due to distance problem between Pakistan and Sweden and, it was difficult to organize interviews at large scale from borrowers and this can reflect limited information about micro entrepreneurship. It is worthy to say here that Islamic microfinance is quite new practice and very limited data was available. With this, we mainly emphasized on microfinance and entrepreneurship as a combined tool, therefore, there is not enough discussion on Islamic microfinance. But we try to elaborate a complete picture of Islamic microfinance. Originality/value: This paper emphasizes on both Microfinance and Entrepreneurship, as case study we choose Akhuwat organization which started to give loans to poor people without interest. Also we focused on Social Entrepreneurship side of organization which challenges to other MFI’s with innovative type of loaning. Research will give a vision to Akhuwat and other micro financing organization that how they can develop activities more successfully.
Future implications: During our research we investigate that there is need to carry out more research on lending methods other than solidarity group. The other area is micro entrepreneurship that needs to be more investigated by researcher because in developing countries micro business with only traditional ways will not be so successful. There will be need of more innovation in production system or in business processes. Islamic microfinance is quite new way for lending loan. It is needed that researcher of western world also do research on this method. So that clear result should come and method becomes more mature.
Social Entrepreneurship also need to be discovered from many points, especially relation with profit and non for profit, public, private and nongovernmental models.
Keywords: Entrepreneurship, Microfinance, Social Entrepreneurship
Paper type: Master Thesis
4
Abbreviations
ADB (Asian Development Bank)
AKRSP (Agha Khan Rural Support Program)
CED (Credit and Enterprise Development)
CPI (Consumer Price Index)
FY (Fiscal Year)
GDP (Gross Domestic Product)
HDI (Human Development Index)
HID (Human and Institutional Development)
IMF (Islamic Micro Finance)
IMFIs (Islamic Micro Finance Institutions)
LSE (Large Scale Enterprise)
MDG (Millennium Development Goals)
MFBs (Micro Finance Banks)
MFIs (Micro Finance Institutions)
MTDF (Medium Term Development Framework)
NRSP (National Rural Support Program)
NWFP (North West Frontier Province)
PKR (Pakistani Rupee)
PLS (Profit and Loss Sharing)
PMN (Pakistan Microfinance Network)
PPAF (Pakistan Poverty Alleviation Fund)
PRSP (Punjab Rural Support Program)
SBP (State Bank of Pakistan)
SME (Small and Medium Enterprise)
WHO (World Health Organization)
5
Table of Contents
1 Introduction……………………………………………………………………………..….…..7
1.1 Motive and Background ........................................................................................................ 7
1.2 Research Question ................................................................................................................ 8
1.3 Target Group of research ..................................................................................................... 8
1.4 Aim…………………………………………………………….………………………………………8
2 Methodological Approach ...................................................................................................... 9
2.1 Scientific Ideals ..................................................................................................................... 9
2.2 Research strategy .................................................................................................................. 9
2.3 Methods for data collection ............................................................................................... 10
2.3.1Interview ........................................................................................................................... 11
2.4 Structured Interview Design-conducted from borrowers ................................................... 12
2.5 Open ended Interview ......................................................................................................... 12
2.6 Secondary Data Sources ..................................................................................................... 13
3 Literature review and Theoretical framework ...................................................................... 14
3.1 What is Microfinance .......................................................................................................... 14
3.1.1 Microfinance Activities .................................................................................................... 14
3.2 Microfinance-A Development Tool ..................................................................................... 15
3.2.1 Financial Intermediation ................................................................................................. 16
3.2.2 Social intermediations ..................................................................................................... 16
3.2.3 Enterprise Development Services .................................................................................... 16
3.2.4 Social Services ................................................................................................................. 17
3.3 Microfinance Models .......................................................................................................... 17
3.3.1 Grameen Model ............................................................................................................... 18
3.3.2 Progressive lending-Banco Sol Model ............................................................................ 18
3.4 Microfinance-Interest free(Islamic Microfinance) ............................................................ 19
3.5 Empowerment .................................................................................................................... 20
3.6 Entrepreneurship…………..……………………….…………………..….……………………...21
3.7 Micro Entrepreneurship………………………………………………………………. .............. 23
3.8 Social Entrepreneurship .................................................................................................... 23
3.8.1 Definition of Social Entrepreneurship…………………………………..…..………...……...24
3.8.2 Models for Social Entrepreneurship………………………………...…..…………………….26
3.8.3 Services For Poor - A New Phenomenon………………………………..………….………..28
3.8.4 Sustainable Development and Social Entrepreneurship…………………………………….29
3.9 Conceptual Framework…………………………………………………….……………………..30
4. Pakistan, Microfinance, Entrepreneurship –Empirical findings .................................... 33
4.1 Pakistan- Some basic statistics ........................................................................................... 33
4.2 Microfinance market in Pakistan ........................................................................................ 34
4.3 Practices of Microfinance in Pakistan ................................................................................ 35
4.4 Islamic Banking Practice in Pakistan ................................................................................. 35
4.5 SBP and Islamic Microfinance ........................................................................................... 36
4.6 Entrepreneurship in Pakistan ............................................................................................. 36
4.7 Borrowers of Akhuwat – Stories of Micro enterprises ……………...……………………….37
4.8 Poverty alleviation and empowerment strategy .................................................................. 38
4.9 Akhuwat-Some historical facts............................................................................................ 40
4.10 Organizational structure................................................................................................... 40
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4.11 Philosophy of microfinance, lending by Akhuwat ............................................................ 40
4.12 Expansion of Outreach of the company ............................................................................ 42
4.13 Financial management of Akhuwat .................................................................................. 43
4.14 Profitability and Sustainability ......................................................................................... 43
5 Analysis of data and interpretation ..................................................................................... 45
5.1 Empowerment and Microfinance- Need of combined strategy in Pakistan........................ 45
5.2 Expanding outreach of Akhuwat-Empowering more people .............................................. 45
5.3 Why Akhuwat adopted Islamic microfinance-Was there any need? ................................... 46
5.4 Akhuwat’s Innovation for lending loans ............................................................................. 48
5.5 Challenges to Akhuwat’s way of microfinance ................................................................... 49
5.6 Social services and intermediation by Akhuwat ................................................................ 49
5.7 Contribution of Micro entrepreneurship in micro enterprise and some success stories of Akhuwat ................................................................................................................................... 51
5.7.1 Gulzar Ahmad-A microentrepreneur bring quality in competitive market ...................... 52
5.7.2 Sofia BB- Innovation in Production system ..................................................................... 53
5.8 Social Entrepreneurship and Akhuwat ............................................................................. 53
5.9 New way of serving poor in Microfinance field ................................................................. 55
5.10 Contribution of Akhuwat to sustainable development ...................................................... 56
6 Conclusion ............................................................................................................................ 59
Reference List
Appendix
7
1 Introduction
In this section, we discussed motive and background of study and readers find basic introduction of research topic. This part leads to research question and then introduce the target group.
1.1 Motive and Background
Pakistan is one of the most populated countries of the world with 164.7 million inhabitants with population growth rate 1.8 percent. Two third of the population is living in rural areas. According to SBP (SBP, 2007), working age population (15-59 years) is increasing which was 51% in 1998 and in 2006 it is 57%.
In 2006, about 23.94% population is living under the line of poverty which was 34.46% in 2002. According Global Monitoring Report 2006, there is significant increase in economic growth. There is improvement in Social Sector Development and now Pakistan has shifted from Low Human Development group to the category of Medium Human Development. Despite all these improvements, poverty is a major issue which every government is combating against.
Pakistan is a country with high population growth with increasing ratio of labor force. According to Economic Survey 2006-07, Pakistan has 50.5 million active labor forces while 3.1 million out of this is unemployed. If we look unemployment gender wise, despite of women ratio of population which is 49.6%, ratio in labor force is only 25 percent (10.08 million out 50 million) of total labor force. Government has taken many steps to increase women participation in labor force, still women ratio is very less to over all labor force and it is not matching to world standards and trends about women participation in business and job opportunities. (SBP, 2007)
All facts show potential to work in microfinance to encourage people and specially women to develop their own entrepreneur so that men in general and women specially can contribute a productive part of society to make it a sustainable. To combat unemployment, only big companies or public sector are not enough for job creation but it would be better if people start their own business for making society productive.
Microfinance is not a new idea; it has been successfully implemented by Grameen bank. Back to 1976, Muhammad Yunus took initiative of lending loans by developing solidarity group of women in Jobra village. Many MFIs adopted idea adding with new strategies and now serving poor in effective way. This successful approach is now famous as Grameen Model (Khan, Rehman, 2007).
Microfinance is now being considered as one of the most essential and an effective driving force for poverty reduction and alleviation. Akhuwat’s case attracted us because of its unusual strategy for microfinance, different from Grameen bank. Akhuwat lends loan without interest to poor people of society but taking one time membership fee and this money is used for operating expenses. Money in credit comes from donations that have no demand of return.
While social entrepreneurship plays great role as looking to the world real and see clearly what is happening and feel responsibility for financially weak people and help them as much as they can. It is also a big challenge to the entrepreneurs and big organizations that they should take steps to eliminate unbalance between different levels in society. In other way, this way encouraged us to choose this problem and also we, both, are from Asian countries (Pakistan and Uzbekistan), it means we are in the same boat and we have the same problems in our countries regarding the poor layer of society and living standards of people. We think that empowerment of poor people by microfinance and with combination of micro entrepreneurship is a great idea. You can never help people just giving money but you can help people giving them job and help to create their small businesses in order to optimize their share of production to the society. All these issues lead to research on this topic that how microfinance is contributing for entrepreneurship in low income communities of developing countries, how sustainable society is evolving as the result of doing own
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business in low income communities and how Akhuwat’s way of microfinance is supporting all of this process. To analyze all these issues, we formulate following question for research on our topic:
1.2 Research Question:
How do micro entrepreneurship, social entrepreneurship and microfinance serve as a combined tool to reduce poverty, empower people, and contribute to sustainable development in Pakistan?
1.3 Target Group of research
Entrepreneurship and Social Entrepreneurship is emerging thread in business and lot of research is doing on this. Much research work has been done on microfinance and entrepreneurship while discussing Grameen model. But our research will lead a new horizon for both fields in term of combining microfinance and entrepreneurship and especially we are investigating interest free microfinance with entrepreneurship. Research will give a vision, to Akhuwat that how they can improve microfinance lending process, and other Microfinance institutions (MFIs) that how they can develop process in more effective way. Research will also provide a new horizon to MFIs towards a new approach of microfinance. Further, students, researchers in Microfinance field, NGO’s and Governmental organizations can extend research in this area to address the issue of poverty alleviation and empowerment of poor.
1.4 Aim
Most of research has been done either microfinance or entrepreneurship separately. But in our opinion there is close relationship between these two fields. As social entrepreneurship is doing a lot for credit pool of MFIs with social services, micro entrepreneurship can be found in micro enterprise. Our aim is to conduct research on the issue that how entrepreneurship and microfinance can work as a combined tool for poverty alleviation and empowerment of poor.
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2 Methodological Approach
This section gives view to readers about scientific ideals and research strategy, adopted in this research. Different methods for data collection have been discussed and readers find the motive of selecting interview as tool for data collection. In last, issues regarding structured and unstructured interview and secondary data discussed.
According to Fisher (2004), research in management and business is different from other research fields because in management and business research, there is vital role of relationship between theories, practice, knowledge and actions. So keeping in mind this background, in the following sections there is our proposed methodological approach which we will adopt in our thesis work.
2.1 Scientific Ideals
For our research, which philosophy is suitable to conduct research, and which tradition we should follow to find correct findings from our research work?
In today world, science has major contribution in development and advancement of society. To do, valuable knowledge and continuous research make it possible. Now important question arise how this research work is being conducted in different fields. Different research ideals require different methodology, data technique and research methodology. Most famous approaches are interpretivism, positivism and realism (Saunders, Lewis, Tronhill,2007) but important and most using approaches are positivism and interpretivism. It is important to note that every approach or ideal use different research techniques so ultimately research will conduct and proceed in different ways.
According to Neuman (1994, interpretation is based on observation, and for observation, detailed interaction with people is needed. For this, long interviews are conducted and then interpret data from these interviews. While in positivistic approach, consider any object, doing experiments and then precisely comparison facts, numbers while extracting results. In contrast, interpretive approach use huge amount of qualitative data and from this huge amount, researchers interpret and deduct result. So in interpretive approach, researchers emphasize on subject while doing research, but not on any external object and do not compare it to any other object.
As our research question, we are conducting research on relationship between microfinance and entrepreneurship for poverty alleviation and empowerment of poor. We will study microfinance but with this we uncover this issue so that we can see microfinance while effecting entrepreneurship, either positive, negative or none. In our opinion, our research approach is not completely positivistic because of there is no any comparison of special object, doing experiment or survey and then deducts result but it is combination of objective and subjective mechanism. We will see subjectively see how social entrepreneurship and microfinance contributing in poverty alleviation. But sure with this we will study and explore underlying mechanism of microfinance. So our approach is not following only one approach but to both. Other reason to support our arguments that we conducted long interviews with many borrowers, experts then extracts information.
2.2 Research strategy
Researchers use strategy and follow outline to do their research work. Either they collect information, empirical data and test it and generate any law or theory or they generate hypothesis from already present theories and knowledge. After this they collect empirical data and scrutinize hypothesis with collected empirical information. Both methods differ from each other in modality by which these strategies are conducted and the literature available on the topic of research. These
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two famous strategies for conducting research are deductive and inductive. To choose one of any strategy it depends on the choice of topic for research.
In deductive approach, researchers consider and study, first of all, theory, then generate hypothesis and this hypothesis is tested by the help of empirical data that resulted in conclusion drawn. Conclusion depends on data and information which is available during research (Bryman, 2004). So conclusion will be more reliable if more data is available. In this approach, researcher build hypothesis on the basis of his/her knowledge and theories available and then scrutinize hypothesis with empirical data. According to Bryman (2004), normally, deductive approach is attached with quantitative research.
On the other hand, the inductive approach is being done by studying and taking into consideration the empirical observation first and then researcher goes on to build hypothesis which leads to the development and consideration of new theories or making addition in existing theories(Bryman, 2004) . In inductive approach, human observations have keen role to pursue research.
It is important to include here that when there is lot of availability of literature on research topic, probably deductive approach is used. So it’s a little easy way to develop a firm background on research topic rather than inductive approach. While, if there is less amount of literature available and there is debate on any topic, for this, most suitable way is inductive. Therefore researchers have concern to collect empirical data as much as possible so that they can get required knowledge from it and then generate a new theory or contribute in the old one. It is a notable point that in deductive approach, consideration of theory comes before hypothesis and empirical findings while in inductive approach, empirical findings and research come before theory and hypothesis.
In our thesis research, we used deductive method because of literature availability and its flexible design. But some part of research work has no plenty of literature support. These parts included interest microfinance and micro entrepreneurship. But still there is sufficient work and literature is available and by the help of this empirical data, we can continue our research work.
2.3 Methods for data collection
Till this point, we have discussed about scientific ideals- positivistic, interpretivist and realism. After this, we discussed different approach for research and particularly we see inductive and deductive and consider some points about differences between two approaches and saw which approach is suitable in what situation. Now after deciding which ideals we will choose, the research approach, move to discussion on methods for data collection. As Brewerton, Millward(2001) described that selection of research work suggest one or more methods for data collection. But it is important to selecting any method, see advantages and disadvantages of each data collection methods and think which method is useful for your study so that maximum and correct information can be collected. Because of, research works mainly base on empirical data, so selection of data collection methods become important in this regard. These methods generally divide in two categories, qualitative and quantitative.
Quantitative methods used to collect data in numbers, graph or figure. Quantitative methods used mainly in quantitative research design and in this type of research study is objective and emphasize on variable or object by which information collect. According to Neuman (1994,pp.97), variable is a central idea in this research design. Therefore for measuring values by comparing this object or variable, researcher needs quantitative methods. For example, education is a variable but it has different values by different people like school education, college or university education. So in quantitative research, and in methods, it is important to selection of variables and their attributes because study depends upon these variables and attributes. As Neuman (1994), variables are of three types, independent, dependent and intervening variables. Variable which identifies condition that act on something else is independent while dependent variables are those that come on result of
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another variable and intervening variable come between relationship of independent and dependent variables
While Qualitative methods use to collect data in words, pictures etc. Qualitative methods use in inductive research process. These methods use when there is need of in depth study about behavior and characteristic of research topic. Therefore in qualitative methods, like interview, huge amount of data is being collected and from this amount, required data is collected. According to Silverman (2000), quantitative research and methods used in this research simply reports about object and reality but on other hand, qualitative methods and research cover the behavior and values of research. The other major impact of qualitative methods is flexibility which help researcher to collect data in depth and in detail.
There are advantages and disadvantages of both methods but we cannot conclude which one is more suitable. Actually, the selection of methods mainly depends upon the nature of research topic and availability of data. If on one side, qualitative methods facilitate researcher in term of flexibility in data collection but on the other hand this flexibility produce a huge amount of data. And for researcher, it may become difficult to extract correct and precise data. But in quantitative methods, researchers gather precise data. One important argument that qualitative researchers give in favor of qualitative technique is that, dependency on only quantitative methods may become cause of missing of social and behavioral construction of variable or object (Silverman, 2000). Therefore, there is no one solution. As Brewerton, Millward (2001, pp.11) stated that “In practice, qualitative methods can be used to generate quantitative data (e.g. interviews ca be content analyzed for different themes and these themes can then be frequency analyzed) and vice versa (e.g. a survey incorporating a series of open comment boxes)”.
According to Fisher (2004), methods are used for data collection are interviews, questionnaires, panels, observations, documents or databases etc. These methods then major categorize in to two streams which are qualitative and quantitative. Surveys, questionnaires, databases are used as quantitative method while interviews, observation etc used as qualitative methods. Generally we specify which methods are suitable for which research strategy but according to Fisher (2004), during research, researcher can use either qualitative or quantitative methods or combination of both.
2.3.1 Interview
A famous tool for data collection is interview which is used by researcher on any stage of research work. There is flexibility while conducting interview and information gathering through interview, because researcher can conduct interview at any time and researcher gets information in huge amount. As mentioned by Brewerton, Millward (2001), interview can be combined easily with other data collection methods also. For example, questionnaire can be conducted by help of interview. With these advantages, the major disadvantage with interview is difficulty to collect precise information from huge information gathered by interview. With useful information, lot of useless information is also gathered during interview. So filtering information is probably difficult from huge amount of information, gathered by interview. According to Fisher (2004, pp132-133), interview can be conducted in open, structured way, or combination of both techniques, base on flexibility of researcher and respondents and research work. In open interview, interviewer and interviewee talk openly with each other like discussion. Researcher have prescribed plan and questions to be asked but he/she give open room to respondents to give answer as much as flexible. Advantage of this way is that interviewee feel freeness to answer questions and interviewer can get information which he/she can not get normally. But major disadvantage is that a lot of raw information is gathered with useful information and researcher may get problem to sort out the useful one. The other way to conduct interview is pre-coded. In this, researcher asks pre planned questions, no less no more. In this type, there is no flexibility to ask questions or put any additional
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questions. It may look like an interview cum questionnaire. Advantage is that researcher get precise information but chances of missing of some issues which can be raised during interview but not raise. While, third way of conducting interview which is semi-structured, lies in between of these two approaches. Researcher have planned questions on research issue but with this he ask supplementary questions during questions to explain issues and then sub issues (Fisher, 2004)
We adopted qualitative approach for data collection and use interview for this. We conducted open ended interviews with managing Director of Akhuwat and some experts. While structured interviews were used in case of borrowers. Aim of these interviews is to collect information about working methodology of microfinance, problems, future aspects, effect on poverty alleviation, social entrepreneurship, micro entrepreneurship, working structure of microfinance-interest free and other aspects. While in secondary data, we emphasized on State Bank of Pakistan reports, other MFIs’s reports, reports from Pakistan Microfinance Network, Finance department, Government of Pakistan and other organizations and we selected information in a more diversified way.
2.4 Structured Interview Design-conducted from borrowers
Motive behind to conduct structured interview from borrowers was that poor borrowers are illiterate and were not able to fill the questionnaire. Therefore we conducted structured interview in Urdu language so that they can respond easily and we can get full information.
Interview was designed with open and close ended questions. Strategy to develop such kind of questions is due to providing facility to respondent to give answers with full detail. And where we need fixed value of our questions, we need close ended questions. Questionnaire is designed with six major portions including personal data, information about business and financial status, micro entrepreneurship, micro finance and poverty information. Start interview with personal data including name, address, gender etc and then switch to business information which followed to details about financial information of business. The next part of questionnaire is leading to getting data from respondents about micro entrepreneurship. Desire of this part of interview to come in to know about any kind of innovation, risk taking factors and profitability which respondent use in his/her business different than others. In this part, most questions are open ended, because we want to give full room to respondents to express their ideas, implanted in their business. This part follows to questions about micro finance. Objective of this part is to access to thoughts of user about micro finance, availability of finances, difficulties and advantages of micro finance to their business. Last part of interview emphasizes on poverty alleviation, respondents’ old financial situation, current position, and how all this story of micro finance and entrepreneurship is taking part in alleviation of poverty.
2.5 Open ended Interview
We used unstructured interview for collecting information from Akhuwat’s Managing Director and experts in Islamic microfinance. Major reason is to repository of maximum information from interviewees and asking additional questions to respondents during interview.
Our interviews compromised questions about working methodology of micro finance, what make different microfinance from general banking, is micro finance worked only in developing countries, disadvantages of microfinance, Akhuwat history, motive and financial position. With this, we include questions about microfinance-interest free, it working methodology, what make different from general microfinance and practicability of microfinance-interest free. We also raised questions about membership fee, interest rate, and its future prospect. We emphasized on issues in depth like; is there any difference between interest rate and membership fee; there is no difference between Islamic Banking practices and microfinance-interest free practices; this system may find difficulties in future if more people join this system.
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2.6 Secondary Data Sources
Secondary data sources have keen important to find information that is already proved and researched. These sources are used to formulate effective research questions, develop theoretical framework, and source for empirical data. We consulted Mälardalen University Library, different journal databases and research articles, websites, reports about poverty, MFIs, and micro entrepreneurship. Empirical data is contributing a portion of our thesis work. We are using State Bank of Pakistan annual reports, National Human Development Reports, A working paper ‘Challenges and Prospects’ of Microfinance in Pakistan’ by Khushhali Bank Pakistan and different reports from Pakistan Microfinance Network , and other many research papers.
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3 Literature review and Theoretical framework
In this part, we described different theories and readers will look on previous research on the research topic. We discussed microfinance, its different models and how microfinance contributes in poverty alleviation, and theories about entrepreneurship and social entrepreneurship. In the end, on the basis of literature review, we build conceptual framework that will use while analyzing empirical data.
3.1 What is Microfinance?
Poor people are not able to access loans from commercial banks normally because of lack in guarantee and collateral. But there are many other reasons also involved for which commercial banks were not willing to finance poor. These reasons are included that poor have less education, no proper experience and training, high expenses on transactions of small loans and lower rate of profit. Therefore limited option to access loan leads to push poor people in more poverty. This situation resulted in emerging the idea of micro lending and microfinance. Microfinance, therefore, a way to finance people, those have no collateral or any property for guarantee. Microfinance is a way of financing to poor for their business, to alleviate their poverty, empowering them, giving social benefits on sustainable way. According to Agion & Morduch (2005, pp.3), due to microfinance, there are many possibilities have emerged including extending markets, reducing poverty and fostering social change. But there is wide spread confusion that microfinance is just lending loan to poor but as we mentioned that microfinance is no more only loans but covering the issues of poverty alleviation, putting social impact on poor and educating poor to savings. Therefore, MFIs, today, not only NGOs but serving as a complete banking system. This discussion lead to us that microfinance is a form of financial services for poor to help them for their business activities by giving micro credit.
According to Ledgerwood (2000, pp.1) “Microfinance has evolved as an economic development approach intended to benefit low-income women and men. The term refers to the provision of financial services to low –income clients, including the self employed.” While according to ADB (2008) “Microfinance is the provision of a broad range of financial services such as deposits, loans, payment services, money transfers, and insurance to poor and low-income households and, their microenterprises.” These statements are elaborating that microfinance is a financial services but designed specifically for poor to improve their lives in sustainable way.
3.1.1 Microfinance Activities
Economic activities base upon sellers and buyer and their capacity. Sellers, before market their product, look at buyer intention and capacity. On the other hand, banking activities depend on both sellers and buyers. Lenders (financial institutions) finance both sellers and buyers for their activities. Commercial Banks invested in projects at large scale while with this, banks invested in consumer finance also. While MFIs usually don’t invest in consumer finance, but give finance only for micro enterprise. MFIs encourage people to lift up their standards by doing businesses and earning from them and this is a consistent and sustainable way. In fig (2), microfinance is dedicated only to poor and explicitly for business activities. But with this, there are some indirect impacts of microfinance on the micro borrower which are alleviation of poverty, improvement in healthcare, increase in literacy and other social impacts.
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Fig 1: Economic activity by commercial banking MFIs Finance Micro Entreprenurers Pay back SocialPovertyHealthLiteractyEffect Effect
Commercial Banks/activities
Buyers
Sellers
Finance
Finance
Pay back
Pay back
Fig 2: Economic activity by MFIs
According (Ledgerwood, 2000, pp.1), there are many activities and characteristics are included in microfinance. Some are:
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Small and short term loans
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Social collateral rather than financial collateral
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Access to larger amount of loan if repayment performance is positive
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Search and access the real poor and their business demand
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Continuous monitoring of business
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Loan on higher interest rates due expensive financial transactions and risk factor
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Easy way to access finance, therefore not too much paper work, and easy and short procedures
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Offering saving services to borrowers even for smallest amount
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Offer training services to borrower’s business development
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Literacy training to borrowers so that they can come up with competence to daily business problems and its solutions
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Health care, social services and other skill training services to provide borrower a sustainable base for their business development
3.2 Microfinance-a Development Tool
In developing countries, people from low income communities have innovative idea for their business, even as shop keeper or house hold products manufacturer, but they have no financial resources to implement their ideas. This low economic activity in low income communities due to lack of financial resources lead them to more poverty and poor life standards. Generally financial services cover savings and credit activities and there is same concept about MFIs. But according to Ledgerwood (2000), MFIs work for general financial services with this they provide insurance and payment services to their clients. But important aspect of MFIs is not only financial intermediation but also providing social intermediation and social services to their clients. Social intermediation and social services contain many activities including trainings, management development, and financial literacy activities. Furthermore, many MFIs, arrange get together where experienced people guide others, where they give useful suggestions, tips and other tactics for their business. Therefore microfinance is providing financial services with social services. Normally, social services are not applicable in general banking system. So, microfinance is not simply banking
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system but development tool, combining both financial and social intermediation (Ledgerwood, 2000). In following, there is discussion about different services provided by MFIs.
3.2.1 Financial Intermediation
Financial intermediation is by far the most primary objective of MFIs because without loan/money social intermediations can not work. As prior discussions that poor face barriers to access finance from general financial service institutions. MFIs, in this regard, become a bridge to access finance and in result to poverty alleviation, health care and education literacy (Ledgerwood, 2000). MFIs are providing many financial services including credit, savings, insurance credit cards, payment services etc. But almost all MFIs are lending credit by default. It is not necessary that every MFI should facilitate their customers by all these services but MFIs can facilitate anyone of these services or all. According to Ledgerwood (2000,pp.66), “The choice of which financial services to provide and the method of providing these services depend on the objectives of MFI, the demands of its target market and its institutional structure.”
3.2.2 Social intermediations
Social intermediation that cover the issues of group formation, leadership training and cooperative learning, is secondary role of microfinance for borrowers of MFIs. Development in Social capital is a basic ingredient of sustainable development in poor’s life and especially in society. Ledgerwood (2000, pp.64) defines social intermediation that “the process of building the human and social capital required by sustainable financial intermediation for poor.” Now question rise, how social capital be acquire and strengthen? Social capital is actually links between clients of a group and multiple groups, and between MFIs and borrowers. These links establish on the basis of strong foundation of trust and cooperation (Agion&Morduch ,2005). The ratio of social capital will increase with increase in business activities among members, and financial transaction between lender and borrowers.
Social capital normally develops through group activities but there are other ways to develop it by individually. In group social intermediation, activities performed inside the group with some help from outside to develop institutional capacity and human resource. In group, most of members belong from remote areas, having less literate and experience about business and financial transaction. So from group formation to selecting leader, developing networks and working mutually, MFIs support borrower to deal with these issues. Therefore, these members need training in record keeping, book keeping, accounting, training about business activities and tactics, and negotiation skills Ledgerwood (2000).
3.2.3 Enterprise Development Services
MFIs, not all, support to borrowers, either in group or individual in different enterprise development services like marketing, business and accounting training etc. This service can be divided in to two parts, enterprise formation and enterprise transformation. In enterprise formation, MFIs provide technical support to group or individual in start up of business, development and maturing ideas and maturing the skills. While, in transformation of enterprise, MFIs arrange trainings for their borrowers, workshops and get together for developing latest skills in their business area (Ledgerwood, 2000).
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Fig3: Minimalist and Integrated Approaches to Microfinance (Source: Ledgerwood ,2000,pp.65)
3.2.4 Social Services
According to microfinance practitioners, poverty can be addressed by financing poor for productive activities which in result come up to their access to life necessities. But financial lending is only a one tool to poverty alleviation. Poor needs more than microfinance to address the problems of poverty and accessibility to other life needs like food, health, family planning, education, social support network and so on. Therefore, Ledgerwood (2000) addresses that MFIs serve to their clients with additional social services with financial intermediation. The best way to contact with their clients is in the form of group, that is the easy way to literate them, giving health care and other facilities. So in this way, MFIs role is productive in the life of poor by offering financial services with supportive services. These supportive services, actually, play important role in sustainable human development and livelihood of the poor (Khan , Rahman, 1998).
According to Ledgerwood (2000), social service should not mix up with financial or social intermediation because financial intermediation is primary service providing by MFIs. That means, there should be no additional cut off from loans in account social service but it should be provide by secondary means or by subsidies.
3.3 Microfinance Models
In spite of having innovative ideas for business, if there is no access to financial resources, these ideas go in vain. Microfinance changes whole scenario and reaches out poor to materialize their ideas and get financial benefits. According to Sengupta, Aubuchon (2008), there are now nearly 70
Financial Intermediation
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Working Capital
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Fixed asset loans
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Savings
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Insurance
Social Intermediation
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Group formation
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Leadership training
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Cooperative learning
Enterprise development service
•
Marketing
•
Business training
•
Production training
Social Services
•
Education
•
Health and nutrition
•
Literacy training
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million poor people who are getting benefits from 2500 MFIs in over 100 countries by microfinance.
Conditions of poor are different in different countries in world. These conditions are related to social, ideological and political issues (Weiss, Montgomery, 2004). Therefore, there are some distinctive differences between approaches and motive of microfinance. We will see briefly two approaches, one is very famous Grameen Model, originated from Bangladesh and other is Banco Sol, in Bolivia.
3.3.1 Grameen Model
In Grameen model, primary unit to whom lending fund is a group of 5 members that organize and apply for loan. In first round, loan is granted for two members to invest in their business. If these two members become successful to repay amount, then four to six weeks later, next two members are granted for loan. Last one member will be eligible for loan if previous two repay loan successfully. Repayment of loan open door for next loan and then go on if all members repay loan successfully. If anyone of group member will default in her loan, whole group will disqualified for further loan. So this rather to financial collateral, social collateral is involved.
Each group has its own president and secretary to coordinate all activities among their own group and to communicate and coordinate with other groups. Eight groups are then organized at center level, by which a bank officer deal with these all eight groups. This center of eight groups has its own center chief and center group leader (Khan, Rehman,2007). According Sengupta, Aubuchon (2008), first time, bank granted loan $100 and bank require to repayment of 10 percent amount, at rate of per annum, weekly. This repayment ensures to user for loan security, and also encourages them for savings. Along with five percent of loan deposited in group account for emergency and social need. For example, in case of need of health care of any one member, in case of emergency, this five percent deposit will be use.
In Grameen model, unique and innovative approach of group lending is used. As Sengupta, Aubuchon (2008) described that group lending have many benefits. First, group usually organize in members who are neighbor to each other, those can understand each other well and recognize their needs. Second, if anyone of group member will not present in group meeting, leader or other member can pay its installment. We can say that there is a kind of mutual understanding between all members. Third, in south Asia generally, and in Bangladesh specially, there are social pressures among members of society with social bindings with them. If one member of group will not pay even one installment, social pressure will be levied from all eight groups on this member. Ultimately she will try to pay installments. This leads to the reduction of risk.
3.3.2 Progressive lending-Banco Sol Model
Grameen model of microfinance emphasize on lending to villagers and keep loan lending on in smaller amount. The other core concept of model is formation of groups and these groups are eligible to take loan, no option of loan for individuals. Idea of progressive lending (Agion&Morduch, 2005, pp.119) introduced to lend loan to individuals with group lending. Amount of loan will increase after completion of every repayment schedule. But other characteristics of Grameen model (Group lending) are included in this method, like targeting to poor, women, group formation, and public payment. No doubt, progressive lending is an extension of group lending (Grameen Model) but now many MFIs are adopting this approach. In this model of “Progressive lending”, microlenders are flexible about collateral and lend loan to group with individuals also. This method is very helpful in areas with low population densities or highly diverse population where group forming is not so easy due to different ratio of safe and risky borrowers. This model is adopted by Banco Sol in Bolivia. In Bolivia, there was different situation
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when populist regime left government and there were high ratio of unemployment in urban areas. To come to fulfill the need of time, Banco Sol started operations in microfinance with progressive lending. Therefore we can say that microfinance approaches are evolved due to different political, ideological and social conditions. According to Weiss Montgomery (2004, pp.3) “Microfinance in Latin America developed under quite different conditions. In Bolivia, a collapsing populist regime led to widespread unemployment. Banco Sol, a pioneering microfinance institution in the region, developed to address the problem of urban unemployment and provide credit to the cash-strapped informal sector. The notion of commercial profitability was embraced relatively early in this approach.”
3.4 Microfinance-Interest free (Islamic Microfinance)
Most of MFIs are providing micro lending on more than 20 percent interest even reaching 30 percent which is higher than commercial banking. Reason for these higher rates is of high institutional cost, giving loan on door steps, small loan amount and higher number of customer therefore increased expense to maintain all operations and risk factors. This high interest ratio put pressure on loan borrower which can affect the overall success of business.
New and emerging approach is introducing interest free microfinance (Islamic Microfinance). As in Islam, charging interest (Riba) on liquid cash is prohibited because by Islamic teachings, money is not an asset for earning profit (Dhumale, Sapcanin, p.1).Islam emphasizes on social, ethical, moral factors for distribution of wealth and guide towards social and economic justice. Islam rather than interest, encourage profit because earning profit evolve productive activity and involve in profit and risk sharing between lender and borrower (Dhumale, Sapcanin,p.1-2). Basic motive behind this approach is more than profitability, repository of wealth but collective wisdom of development of business, sharing profit and loss and collective struggle for business development. So the final gain from this is social benefit rather than profit gain and maximization which is helpful to microfinance and micro entrepreneurship. Microfinance –interest free can be handled in many ways but we will discuss three famous methods which are Mudaraba, Musharaka and Murabahah (Segrado, 2005).
Mudaraba (Participation financing): Mudaraba mean transaction between financial institution and borrower and for this option, both capital provider and entrepreneur have no pre decided amount as an interest but will work on basis of profit sharing and both will share this. According to Zaher,Kaber (Segrado,2005, p.11), ”Mudaraba is a trust based financing agreement whereby an investor (Islamic bank) entrusts capital to an agent (Mudarib) for a project. Profits are based on a pre-arranged and agreed on a ratio. This agreement is akin to the Western style limited partnership, with one party contributing capital while the other runs the business and profit is distributed based on a negotiated percentage of ownership. In case of a loss, the bank earns no return or negative return on its investment and the agent receives no compensation for his (her) effort”.
Musharaka: This is same like as joint venture between two or more persons or institutions. According to Segrado (2005), “Two parties provide capital for a project which both may manage. Profits are shared in pre-agreed ratios but losses are borne in proportion to equity participation”. So it will not be based on profit sharing business but it depends on decision making and management capacity and role in business.
Murabahah: In this model, MFIs first buy items and then resell it to borrowers with adding some reasonable profit/markup (Habib, 2005). After this, agreement will be establish to return amount to lender. Installment will then make over, and duration of pay will be decided. Owner ship of good will remain in name of MFI until all credit will be cleared. It is important to quote here that markup or profit add on actual amount by MFIs is consider administrative cost, and it is demand of Islamic practices that profit margin should be as much as minimized. Dhumale, Sapcanin (p.10) resemble Murabahah as “The Murabahah contract is similar to trade finance in the context of working capital
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loans and to leasing in the context of fixed capital loans.” Murabahah consider the suitable method in IMFIs due to its clear and easy to understand methodology.
Qard-e-Hassan:The Prophet Muhammad (PBUH) says “the inmates of Paradise are of three types: one who wields authority and is just and fair; one who is truthful and has been endowed with power to do good deeds and the person who is merciful and kindhearted towards his relatives and to every pious Muslim, and who does not stretch out of his hand in spite of having a large family to support. [Sahih Muslim]” (Hossain, 2004). Teaching of Islam encourage to rich poor to help poor so that poor can also benefit with social services and uplift their standards of life.
Qard Hassan’s principal is that lender give loan to borrowers with out any profit/extra amount or interest and debtor is supposed to return back as soon or pre decided date but lender will not press to return back as soon (Mirakhor,Iqbal, 2007). Qard Hassan’s working is same as conventional MFIs but there is some differences like no interest will be charged and there will be no strict fine or charges on default or delay of amount.
While expressing the rules regarding Qard Hassan, Hossain (2004) outlined as following:
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There should be proper contract between lender and borrowers in which all terms and conditions will be written
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Date of payment must be specified
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Loan contract should written
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Getting two witnesses
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Charging membership or administrative fee.
3.5 Empowerment
Poverty effects not only on individual’s life but also on society as a whole. Poverty is one of the main reasons in cause of less empowerment of poor especially in developing countries. Empowerment is broad concept to define because many elements involve in it. These elements influence by including political, social and power system in the country. Empowerment covers many issues and when there is discussion on empowerment it includes many elements. According to PREM,WB(2002) these elements are, self-strength, control, self-power, self reliance, own choice, life of dignity, fighting for rights, independence, decision making, being free, capability , access to basic human needs etc. Misra (p.3) describes empowerment as a power to the people and self governance. He quoted “Empowerment builds self-reliance and strength in women, preparing them towards gathering the ability to determine the choice of life. This adds to the command over resources outwit insubordination and signify their social role”. Due to different social, political, economical conditions, we can not define a one definition for empowerment. Here are two definitions that address most of factor linked with empowerment. According to Batliwala (Makombe,2006,p.52), empowerment mean “take control over material assets, intellectual resources, and ideology. The material assets over which control can exercised may be physical , human , or financial, as land water, forests, people’s bodies and labour , money and access to money. Intellectual resources include knowledge information, and ideas. Control over ideology signifies the ability to generate, propagate, sustain, and institutionalize specific sets beliefs, values, attitudes, and behavior-virtually determining how people perceive and function within a given socio-economic and political environment”. While according to PREM,WB(2002,p.11), “Empowerment is the expansion of assets and capabilities of poor people to participate in , negotiate with , influence, control, and hold accountable institutions that affect their lives.”
According to PREM,WB(2002), strategies for empowerment is taken at individual, government, civil society and private sector level. Usually these efforts lead to empower people in context of sharing of power, freedom of information, access to resources and health and education services.
These strategies normally share four types of elements: First, Access to information, its mean every citizens including poor have direct access to information because information is power. Second, Inclusion/participation, that’s mean there should be opportunities for poor that they can participate in decision making and they should be included in all financial and political policies. Third is accountability, that’s mean officials, public servants, private actors should be accountable not only to some specific institutions but to their citizens for performance. Fourth and last one Local organizational capacity, its mean that people can work together, organize themselves, mobilize and utilize resources and solve problem at community level.
3.6 Entrepreneurship
Entrepreneurship is one of the most widely used term in business, management, economics and other related fields. One of important thing is that entrepreneurship has different meaning for different people, some use it in the meaning of innovation, some use for creativity, risk taking, leadership, and profit maximization or in social context, and some consider it as start up of business, new production methods and many other different meanings. Davidsson, (2004) describes it that entrepreneurship is rich phenomenon which makes it a resourceful field. While defining entrepreneurship, we consider some school of thoughts that have major role to define this field. Entrepreneurship, under the flag of Schumpeter school of thought (Swedburg, 2000), is about innovation in organizational process, thinking up new combination, entrepreneurial behavior and motivation of entrepreneurs. While according to Gartner (Thornton,1999), entrepreneurship is about creation of new organization or new startup, creating values and entrepreneur mean owner-manager. In Krizner’s view (Swedburg, 2000), entrepreneurship is searching opportunities and exploiting them so it reflects towards the alertness capability of entrepreneur towards profit opportunities.
Timmons (Bengtsson, Peterson, 2008) describe different component of entrepreneurship and named it entrepreneurial process. Model emphasizes three entrepreneurial components, Opportunity, Resource and the Team.
According to Timmons (Bengtsson, Peterson, 2008) in following fig (4), there is description about each factor which describes best about entrepreneurship and role of entrepreneur is growth of firm:
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Fig. 4 Timmons entrepreneurial process model (Source: Bengtsson, Peterson, 2008,p.6)
Opportunity: where there will be more imperfect market there will be more opportunities to exploit. According to Timmons (2008, p.7), “The greater the rate of change, the discontinuities, and the chaos, the greater is the opportunity…”. Entrepreneur will have more room to exploit opportunities. So important job is to search opportunities and yield them. This is a core characteristic of entrepreneur that he/she should be opportunistic.
Ambiguity
Business Plan
Fits and gaps
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Resources: Resources are not always first priority of entrepreneur, innovative business idea is at top of his/her priority list. No doubt, new business always needs lot resources but if there will be no business idea then this money is useless. According Schumpeter (Reisman, 2004), entrepreneur have strength to stand up and resist if he/she feel any problem even in the form of resources. If entrepreneur have problem to access financial resources from bank, he/she may have capabilities to see alternative ways to access resources.
Team: Team in firm always stand firm with organizational objective. It is also core characteristic of entrepreneur and important factor of entrepreneurship, that entrepreneur make up team and utilize team strengths to achieve firm’s objective. This is team work, which works in uncertainty.
Entrepreneurship-Two distinct schools of thoughts
Two schools of thought about entrepreneurship are famous while defining entrepreneurship; these are Schumpeter’s theory of entrepreneurship and Austrian theory of entrepreneurial discovery.
Schumpeter theory of Entrepreneur
Schumpeter’s theory of Entrepreneur is evolved while contributing knowledge in theory of economic development by Joseph Schumpeter. According to Schumpeter (Swedburg, 2000), innovation is that to combine materials and forces, which are under reach, with different method or with new combination to produce a new innovative products. By this definition, it is important to consider that Schumpeter emphasize innovation rather invention. According to Mondal (p.6), “Schumpeter’s model works through the transformation of production function. A production function is the technological relationship between inputs and out puts.” Further to elaborate innovation and resulted products, in following there are five forms: (1) the introduction of new good for users or new quality of good (2)the introduction of new method of production-handling production system in new way (3) the opening of new market-where company do not entered before, even existing or new market (4) the conquest of a new source of supply of raw material (5) the carrying out of the new organization of any industry, like the creation of monopoly organization. These all steps indicated a kind of innovation by combining sources, materials and function and producing a new product or service.
Other major contribution of Schumpeter theory also discusses motivation of the entrepreneur. First, it discusses about the desire and will of entrepreneur to establish an organization where entrepreneur can work independently and enjoy power. Second, that he/she has will to become successful in his/her business. And third is joy and satisfaction on reaching his/her goals (Swedburg, 2000).
According to Gartner, McDaniel (Mondal, p.5 ), that when we think about entrepreneurship, there are many factors attached with it like economic, personal and sociological variables and their combination. Personal characteristics also attached as entrepreneurial behavior, these characteristic are included need of achievement, risk taking propensity, locus of control, beliefs about wealth and material gain and business growth.
Theory of Entrepreneurial Discovery-Austrian perspective
Austrian Theory of Entrepreneurship (Swedburg, 2000) , entrepreneur anticipating market and need of customers exactly and correctly, produce more cheaply than competitor and earn profit. Entrepreneur makes it useful for customers and hence as it will be more useful, entrepreneur can earn more. This idea is directly indicating to earning profit while anticipating market and customer needs in advance. By this theory, it is showed that successful entrepreneur will be that who can earn more profit.
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Entrepreneurial discovery emerged in Austrian economics by evolving two elements. One, market is act as entrepreneurially driven process and other is knowledge which can be increase by market interaction (Kirzner, 1997). Austrian entrepreneurial discovery theory has three main concepts which are entrepreneurial role, the role of discovery and rivalries competition. From discussion, we can perceive that Austrian approach emphasize entrepreneurship with economic activity and market process.
Both theories have different and similar aspects on entrepreneurship. Different authors have different approaches on entrepreneurship; this may be due to their research, the environment in which they are working, the previous research and literature available. Innovation, risk taking and creativity are almost essential part of both theories. Schumpeter’s theory mainly emphasize on innovation, emphasizing to redefine and regroup resources to produce new product or service. And innovation always has risk with itself. By producing new product, accessing new market, adopting new production system, all lead to risk. In case of Austrian theory of Entrepreneurship, anticipating market and customer need is somewhat need an innovative idea and it also lead to risk. So compete this, creative mind, technique is needed. According to Boettke,Coyne ( p.5), “As compared to Schumpeter’s characterization of the market process as creative destruction, Krizner emphasized that markets tend continually …towards equilibrium, as consequence of continually-stimulated entrepreneurial discoveries”. So Schumpeter emphasize on creative destruction while Austrian approach argue towards market knowledge which priory unknown.
3.7 Micro-Entrepreneurship
Microfinance is emerging tool for economic development, poverty alleviation, empowering of low income communities and contributing a new role in micro-entrepreneurship (Mondal, p.1-3). It has gained a prominent role in developed and also developing countries. Most of research on micro financing is developed on issue of poverty alleviation and empowering of poor but there is very less shed light by researcher on Micro enterprise and Micro-entrepreneurship. Our studies will based on this our initiative that how micro financing is contributing in entrepreneurship? Is there entrepreneurship and entrepreneurial abilities and activities exist in owner and in business? If study will reflect answer ‘yes’, then how micro financing is contributing to entrepreneurship? And if answer will be ‘no’, then justify it.
According to Mondal (p.3), there are two types of microfinance borrowers; one is Micro borrower and other Microentrepreneur. Micro borrower has mind like capitalist who is aim to earn profit while doing business. So micro borrower get finances from MFIs (Micro Finance Institutions), after paying back, again they will get finances but only motive is to generate profit but not any entrepreneurial achievement. On the other hand, microentrepreneur financed their business and brings innovation, creativity and doing a different from others.
In our work, we will see this aspect of microentrepreneur. For this, initial and essential is to develop definition of micro entrepreneurship. For definition, we will work different theories of entrepreneurship, examine different entrepreneurial abilities, different characteristics as microentrepreneur.
3.8 Social Entrepreneurship
Social Entrepreneurship concept is known in practice as which includes a wide range of activities like individuals in enterprises devoted to making a difference; social purpose business ventures devoted to adding for-profit motivations to the nonprofit sector; and nonprofit organizations that are reinventing and making innovations as a change makers by drawing on lessons learned from the business world (Peredo, McLean ,2006).
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3.8.1
Definition of social entrepreneurship. Critical review between for-profit and non-for-profit social entrepreneurship
Nowadays we can hear a lot of things about Social entrepreneurship concept and we define it in this part of our thesis. We should first look at the concept of both sides “social” and “entrepreneurship”. As stated in Oxford Advanced Learners Dictionary (Fifth edition, 1995) “Social” means concerning the organization of and relations between people and communities. “Entrepreneur”- a person who starts or organizes a commercial enterprise, esp. involving financial risk, it means this is risk taking action. In Webster’s dictionary the concept “Social”- of or relating to human society, the interaction of the individual and the group, or the welfare of human beings as members of society, “Entrepreneurship”- French, from Old French, from entreprendre to undertake. “Anyone who samples this array of material may be left wondering exactly what social entrepreneurship is. Is it just the application of sound business practices to the operation of non-profit organizations as some seem to suggest” (Reis, 1999), or is it a more radically different approach to the business of doing good? It is said that ‘‘social entrepreneurship is emerging as an innovative approach for dealing with complex social needs’’ (Johnson, 2000: 1), especially in the way of decreasing public funding. What is it that makes this approach so promising? Before as part of answer to this question we should first understand what the phenomenon is. Explainers, both scholarly and popular, and advocates of every kind, understand it in different ways. The concept needs to be clarified just to make those comments and that advocacy eligible (Peredo, McLean, 2006).
“One can ask fruitfully both what makes social entrepreneurship social, and what makes it entrepreneurship. On both points, there is a variety of perspectives” (Peredo, McLean, 2006,pp.57). Dees (1998,p.3) speaks for many when he declares, ‘‘Social entrepreneurs are one species in the genus entrepreneur’’. At first we would like to describe the theories in entrepreneurship which comes in our research as a broad activity. An entrepreneur is simply one who starts up and/or runs a small business. Some dictionary definitions reflect this use. The Canadian Oxford Dictionary, for instance, defines ‘‘entrepreneur’’ as ‘‘A person who starts or organizes a commercial enterprise, especially one involving financial risk’’ (Barber, 1998, p. 467). We can say this definition as a very simple one. Of course it is impossible to talk about entrepreneurship without Schumpeter who contributed huge theory to this concept. He produced the first competent history of entrepreneurship in economic theory and his approach to this topic has deeply influenced the history of economic thought, and is still the dominant one. He described entrepreneurship mostly emphasizing on innovation and entrepreneur is a person who innovates and make a change.(Swedberg,2000.,p.17) Casson defines the entrepreneur as “someone who specializes in taking judgmental decisions about the coordination of scarce resources”(Swedberg,2000). European Commission says: “Entrepreneurship is first and foremost a mindset. It covers an individual’s motivation and capacity, independently or within an organization, to identify an opportunity and pursue it in order to produce new value and economic success. It takes creativity or innovation to enter and compete in an existing market, to change or even to create a new market. To turn a business idea into success requires the ability to blend creativity or innovation with sound management and to adapt a business to optimize its development during all phases of its life cycle. This goes beyond daily management: it concerns a business’ ambitions and strategy.” (European Commission 2003, p. 5)
Dees defines the entrepreneurial aspect of social entrepreneurship as including (1) creating social value mission with the recognition pursuit of new opportunities, (2) engaged in innovation and modification continuously, (3) goal forward action decided without taking into account of existing resource limitations (Dees, J. G. (1998)stated in Peredo, McLean ,2006,pp.58) . And if we
summarize all of the theories entrepreneurship is risk taking, opportunity seeking, change making and requires innovative activities.
Some scientists say that entrepreneurship must be non for profit activity since it is working for people and aimed social activity not profit generation while others say that we can use social entrepreneurship definition as enterprise who mixed both for profit and non for profit organizations.
And now let’s look close to the theories of social entrepreneurship which makes it social.
When we describe entrepreneurship it was broad definition if we talk about social entrepreneurship it is actually narrow definition rather than entrepreneurship. Social entrepreneurs and their actions are driven by social goals, it means in some way to increase in society “social value”, poverty alleviation and wealth distribution.
Dees(1998,p.3) states ‘‘For social entrepreneurs, the social mission is explicit and central . . .. Mission is the central as at the first place rather than wealth creation. He thoughts that Wealth is just a means an end path for mission [emphasis added]’’. he means that there is no place for financial aims in undertaken aim. Anderson and Dees (2002), for instance, ask the question whether earned income generation, resulting from some form of exchange of a product or service, is essential to social entrepreneurship. Their answer is emphatic: ‘‘No! It is not. Social entrepreneurship is about finding new and better ways to create and sustain social value’’ (Peredo, McLean ,2006,pp.59). On this understanding, if people do help to poor people for example, just give food, shelter and others they should not expect any returns from them or just help to endeavors with profits which they earned.
Other commentators described this term in permissive way. The Northland Institute (2001), for instance—a body founded in 1996 ‘‘to improve the effectiveness of community development organizations’’—represents a constituency which links social entrepreneurship with ‘‘social enterprise,’’ a term it defines as ‘‘the use of earned income strategies by nonprofit organizations.’’ The Institute is one of many participants in the field who cite the ‘‘double bottom line . . . the art of simultaneously pursuing financial and social returns on investment.’’ (Peredo, McLean ,2006,pp.59) On this view, social entrepreneurship necessarily involves ‘‘enterprise,’’ in the sense of some form of income-generating venture; bent, however, not on profit but on social benefits. NFPs taking this route are often described as ‘‘hybrids’’ (e.g. Davis, 1997) in recognition of the way that they combine non-profit with for-profit organizational features. A notable example of this form of enterprise would be the Grameen Bank in Bangladesh (Grameen Communications, 1998). Fowler (2000, p.645) has used another definition to this type of social entrepreneurship as usefully labeled ‘‘integrated social entrepreneurship’’ which help to people to create their businesses and use profits again to generate social value. Pomerantz (2003) describes social entrepreneurship as, “Social entrepreneurship can be defined as the development of innovative, mission-supporting, earned income, job creating or licensing, ventures undertaken by individual social entrepreneurs, nonprofit organizations, or nonprofits in association with for profits.”(Peredo, McLean,2006, p.60). So far, there is a shared assumption which divided into two groups that social entrepreneurship is a NFP concept, and a range of opinion as to whether or to what extent they might or must be involved in some form of revenue-generating exchange. However, all publications both scholarly and non scholarly in 15 years period when they talk about “Social Entrepreneurship” concept almost fully 83% referred to examples of not for profit organizations(Peredo, McLean ,2006).
While describing Social entrepreneurship, Peter Brinherckoff stated Social Entrepreneurs are very important to every non-profit organization to lead them to take risk to set more objectives in a more focused manner. Also he related social entrepreneurship with only non-profit organizations, and argued that it is impossible not to use for profit business techniques and tactics in even not for profit mission. He assures that many people’s words about not for profit organizations are already
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outdated that their aim is for public service and not for money, and he strongly supports that it is time to change, if social entrepreneurs are taking the risk it means they use business techniques and surely the main aim is to achieve business objectives. He believes business techniques make not for profit organizations mission go further and faster successfully (Brinherckoff, 2000). Finally, he describes social entrepreneurship as Stewards (Brinherckoff, 2000), who try new things, serve people in new ways and try to have their organizations be fonts of excellence. He states 6 characteristics of Social entrepreneurs:
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looking for new ways to serve society and add value to existing services
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willing to take reasonable risk on behalf of stakeholders
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understand the difference between needs and wants
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understand all resource allocations are stewardship investments
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consider the social and financial return of each of these investments
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always keep mission first, but know without money, there is no mission output
There are a lot of aims under social entrepreneurship. Some companies try to attract the media to be successful in a competitive business environment by showing their social responsibility. For example, Avon Cosmetics allies itself with the cause of raising breast cancer awareness. ConAgra Foods, one of the U.S.’s largest distributors of processed and packaged foods, joins the fight against child hunger by sponsoring afterschool cafe´s. Cause-branding is recommended on the grounds that while it provides needed support for worthwhile social projects, it also benefits the profitability of the business, partly by encouraging loyalty among customers and employees. Companies which ‘‘demonstrate a sense of social responsibility,’’ it is said, ‘‘stand out in a world of increasingly undifferentiated services’’ (Cone et al., 2003,p. 95). After this there is the question “Can we say this Social entrepreneurship?” Answering to this question The Harvard Business School stated that social entrepreneurship should be taken to include undertakings where social goals are added to the firm’s objectives, even where they may not rank first in the firm’s priorities and may be taken on at least partly for instrumental reasons. After all this discussion we can make a range of social entrepreneurial issues in which social value is the only mission of their aims.
Still the line between for-profit and not-for-profit enterprises is hard to sustain as a significant boundary on social entrepreneurship. As one reviewer of the literature puts it, ‘‘socially entrepreneurial activities blur the traditional boundaries between the public, private and non-profit sector, and emphasize hybrid models of for-profit and non-profit activities’’ (Johnson, 2000: 1).
If we generalize the definition of Social Entrepreneurship concept: an activity that taken by entrepreneurs who finds particular social problem and specific solutions for these problems in society; determination of the social impact, the business model and the sustainability of the organization; and creating a social mission-oriented for-profit or a business-oriented nonprofit entity.
3.8.2
Models for social entrepreneurship
Nowadays it is common to see certain companies in the private, public and independent third sectors as examples of social entrepreneurships. Mostly we can see that while private sector social entrepreneurs engaged in social activities and ‘‘more entrepreneurial approaches in the not-for-profit sector’’ (Canadian Centre for Social Entrepreneurship, 2001), and we notice the same framed initiatives of social entrepreneurship in public sector as well. In this part we consider organizational models of entrepreneurship, we apply to private, public and non for profit sectors and also we mention on hybrid or bridge forms which is usual nowadays (Roper , Cheney ,2005).
Private social entrepreneurship
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As recent publications and literatures suggested that working as private social entrepreneur gives three advantages in terms of orienting to planning, profit and innovation. Socially oriented purpose business ventures can draw upon a wealth of experience in terms of market analysis and the conduct of feasibility studies (Campbell, 1998). Perhaps the single most important activity for the new business start-up, or the business that is charting a new course into the social seas, is a systematic process for generating and screening ideas (Thalhuber, as cited in Campbell, 1998).
Generally speaking, then, self-styled socially entrepreneurial enterprises assume greater latitude in adopting and adapting the popular business trends of the day. As we will see in the discussion of leadership that follows, much of this freedom or autonomy is held by value-driven, charismatic leaders (Roper, Cheney ,2005).
Social Entrepreneurship in the not-for-profit sector
Not-for-profit sector is not new for social entrepreneurship; social entrepreneurship has been going with in not for profit sector in a very real sense. Many social-movement organizations, social advocacy groups, and community initiatives have been started and sustained all over the world through the passion, insight, and creative work of people that fit our contemporary application of the idea of the entrepreneur(Roper , Cheney ,2005).
To be sure, part of the entrepreneurial trend in many non-profits has been increased competition for funding resources from private foundations and government agencies ( Leonardis and Mauri, 1992) Actually, not for profit organizations started their actions to provide educational and specific health profit making activities in urban environment and functioned as small business incubators as Wallace(1999) described. While the specific governance, fiduciary, and organizational structures of such enterprises vary greatly, most of these ventures involve at least these characteristics: an orientation toward the regeneration or expansion of economic activity, collective advancement of the public good rather than exclusionary support for private interests, community ownership or control, and participative democratic structures (Pearce, 1994).
Non-profits that assume an entrepreneurial posture are less hesitant to implement concepts and practices from marketing, strategic planning, and systems for the analysis and control of costs. In other words, a certain blurring of sector boundaries is taken for granted, often as necessary for survival(Roper , Cheney ,2005).
Social entrepreneurship in Public sector
Privatization has power to divide ownership sector to two parts as private and public before that we had only one owner public sector which was usual before 1950s. After privatization public sector remains less flexible and less freedom than that of private sector. As Ostrom (1964) stated that public organizations have a more difficult time adapting to changing circumstances and innovating owing to constitutional, executive, legislative considerations, as well as to sheer habit. In short, the private sector allows for greater freedom and experimentation.
As Shockley et al. (2002) stated, in the 1990s, the theories and models of public-sector entrepreneurship overwhelmingly stressed rational economic calculation and especially direct responsiveness to market data. But, Kirzner (1999) argued, this mechanical idea of entrepreneurship as applied to public sector overlooks the fact that true entrepreneurship is something more and beyond mere calculated responses to the environment of decision; it entails an ‘‘alertness to hitherto unnoticed opportunities’’ (p. 39)
In public and third sector the stages of social entrepreneurship is certainly different than other sectors. To reach financial wells as well much greater, but policy and regulations constrained by only presidents of the companies or by government. In this way, third and independent sectors will
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arise and make partnership with governmental sectors to create combination of organizational interests in a project focused way(Roper , Cheney ,2005).
3.8.3 Services for the poor. A new phenomenon: Social entrepreneurship (SE). Growing number of initiatives
As we know human needs are main reason to company’s decisions about which products or services to produce. In spite of unlimited volume of human needs, companies still struggling to survey to find new markets and value propositions, and for large corporations the challenge for growth has become as important aim. But even if there are a lot of companies struggling and producing products and services and making a lot of money but still in societies especially in non-industrialized countries basic needs of millions of people remain unmet, mainly because these customers are willing to satisfy their needs but unable to pay for products and services( Seelos Mair ,2005).
The World Bank (2003) says that services to satisfy basic human needs, especially those that contribute to health and education, are not serving poor people in terms of access, quality, and affordability. The main reason for this failure is that public spending, as a matter of fact, is not reaching poor people. But if still they reach, they are in poor quality and inefficiently.
A growing number of initiatives all over the globe seem to be defying the obstacles that have prevented businesses from providing services to the poor. Collectively, those initiatives constitute a phenomenon that has been dubbed “Social entrepreneurship”. Employing novel types of resources and combining them in new ways, SE is a rich field for the discovery of inspired models of value creation( Seelos Mair ,2005).
As we defined the term of “social entrepreneurship”, it is used to refer to the fast growing number of organizations that serving poor by meeting their basic needs that established existing markets and institutions have failed to satisfy( Seelos Mair ,2005).
Some examples of Initiatives which clearly reflects social Entrepreneurship as a huge spots in this type of business are “The Institute for One World Health” (USA), “Sakem”(Egypt), “Grameen Bank”(Bangladesh).
“The Institute for OneWorld Health” (USA) founded by Victoria Hale, a research scientist with Genentech and former reviewer of New Drug Applications for the Food and Drug Administration, was aware of the economic and logistical barriers that prevented pharmaceutical companies from developing drugs for Third World countries. To overcome these barriers, she founded One World Health as the first US non-profit pharmaceutical company. One World Health has adopted an entrepreneurial business model to deliver medicines to those most in need in developing countries. Large philanthropic organizations and governments provide much of the initial funding. Being a non-profit company is an enabling structure for social value creation, as One World Health can access capital that business entrepreneurs usually cannot.
“Sakem”(Egypt) founded by Ibrahim Abouleish in 1977 on a piece of desert land north of Cairo, which was very small company indeed at the moment a multi-business firm that not only creates economic, social, and cultural value, but also has a significant influence to Egyptian society. If we see its contribution to sustainable development of society, its businesses fund spent to build institutions such as schools, an adult education center, and a medical center. These institutions cater directly to basic human needs; furthermore, Sekem fills an institutional void in Egypt by providing structures that people trust and that help them to escape the poverty trap and gain control over their lives. On the environmental side, it has pioneered biodynamic agriculture in Egypt. It has deployed a new system of plant protection for cotton, which has led to a ban on crop dusting throughout Egypt. By 2000, pesticide use in Egyptian cotton fields had fallen by more than 90%. In 2003, Ibrahim Abouleish received the Right Livelihood Award in recognition of his achievements in
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integrating commercial success with social and cultural development. Founded in 1980, the Right Livelihood Awards are presented annually in the Swedish Parliament and are often referred to as the “Alternative Nobel Prizes.” Their purpose is to strengthen positive social forces, and to honor and support those offering practical and exemplary answers to the most urgent challenges facing the world today.
Our third initiative is Muhammad Yunus, an economics professor who founded the Grameen Bank in 1976 to supply credit to those who would not qualify as customers of established banks. Today, Grameen operates 1191 branches, serving over 3 million poor people in 43,459 villages in Bangladesh. Grameen Bank grants unsecured loans to the poor in rural Bangladesh.
It differs from other lending institutions on three counts. First, the loans can be repaid, and on time. Second, only the poorest villagers, the landless, are eligible. Third, the bank makes efforts to lend primarily to women, who are not only economically but also socially impoverished ( Seelos Mair ,2005).
While many researchers try to define social entrepreneurship theories and emphasizing how to find out solutions of sustainable development how to satisfy unmet human needs in developing countries which unable to pay, our examples in practice definitely show that inspired entrepreneurs have shown us new paths and solutions, basing their designs on local needs rather than on the centralized assumptions of large institutions about what needs to be done.
3.8.4 Sustainable Development and Social Entrepreneurship
Nowadays, while many companies are aiming to get as much profit as possible and trying to add some value to economic and social goals, but still there are a lot of social, economic, environment and health problems in the world. And with sustainable development goals we should reduce poverty and keep balance in society. And the main gun to reach sustainable development goals as discussed by many scientists is “Social Entrepreneurship” which is not many works done yet but we can already see some perspectives that already started to add their value to sustainable development. When we describe the concept of Sustainable development we apply to Brundtland’s (1987) definition who described it “Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”If we scrutinize this definition carefully, we can see a lot of value inside it such as human basic needs, future generation’s needs and definitely to make changes by changing norms and behavior to create opportunities ( Seelos Mair ,2005).
To realize this definition, the United Nations defined a set of Millennium Development Goals (MDGs), based on a resolution adopted by the General Assembly in September 2000. These MDGs comprise eight specific, quantifiable and monitor able goals (with 18 targets and 48 specific indicators) for development and poverty reduction by 2015. These Goals include human rights, health, education, and environmental issues. Multinationals companies as the efficiencies of markets, combined with the resources and managerial expertise, are considered crucial success factors in achieving these goals. As Margolis and Walsh (2003) emphasized, “Manifest human misery and undeniable corporate ingenuity should remind us that our central challenge may lie in blending the two.” Former United Nations Secretary- General Kofi Annan, in his address to the World Economic Forum on January 31, 1999, called on global business leaders to embrace a set of shared values and principles in the areas of human rights, labor standards, and environmental practices. Kell and Levin (2002) describe the formation of a Global Compact network consisting of several hundred companies, dozens of NGOs, major international labor federations, and several UN agencies to collaborate in creating a more stable, equitable, and inclusive global market by making shared values and principles an integral part of business activity everywhere. Likewise, the European Commission (2002) has called for more direct corporate social responsibility (CSR) as a
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business contribution to sustainable development. Despite these welcome commitments, the United Nations Development Program Human Development Report (2003) provides evidence that, for many people on this planet, life remains grim, and hope for improving their situation is frail( Seelos Mair ,2005).
Social entrepreneurship combines the resourcefulness of traditional entrepreneurship with a mission to change society( Seelos Mair ,2005). The complexity, scale, and scope of the world’s environmental and social problems and challenges seem overwhelming, tempting us to resign ourselves and doubt the capabilities of our institutions to improve things. However, inspired entrepreneurs have shown us new paths and solutions by making changes and creating new models to serve poor needs and basing their designs on local needs rather than on the centralized assumptions of large institutions about what needs to be done.
First of all, there is no such thing as non-social entrepreneurship; in fact, Reynolds, Bygrave, Autio, Cox, and Hay (2002) stated that in developed and even developing countries majority job places are created by social entrepreneurs—certainly as important social function. So Social Entrepreneurship is like business entrepreneurship, they find outs and acts upon what others miss such as opportunities to improve systems with new models, create solutions, and of course invention of new approaches. Venkataraman (1997), who states about Social entrepreneurship, understands that social wealth creation is a product of economic value which done by entrepreneurs. In Social Entrepreneurship he continues, social value creations stands as the first and primary aims of the objective, while economic value functions only to reach sustainability and self-sufficiency( Seelos Mair ,2005).
3.9 Conceptual Framework
After developing theoretical framework, it is important to discuss how we will integrate and coordinate theories for our research work according to our research question. Our work is covering two main topic; entrepreneurship and microfinance with discussing three factors; poverty reduction, empowerment of poor and sustainable development. We will evaluate these theories with empirical data that how entrepreneurship and microfinance can work as a combined tool for empowerment of poor, poverty reduction and sustainable development in society.
In our work, we are going to investigate entrepreneurship on micro enterprise level. Most of the studies emphasize on SMEs and LSE while discussing entrepreneurship but there is small amount of literature available on micro entrepreneurship. Micro entrepreneurship is hard to find on micro enterprise level because poor normally have no room for doing new experiences due financial threat and they are not educated and trained. As entrepreneurship is not available in every SME or LSE , in our opinion, this is same in microenterprise. In research work, we study two strand of entrepreneurship; Social Entrepreneurship and Micro Entrepreneurship. The other major issue in our research work is microfinance. Microfinance is a kind a special financial service by which poor can get finances for their business. Social entrepreneur work in neglected segment of society and today most of the social entrepreneur are working for empowerment of poor. The other major effect of social entrepreneurship is distribution of wealth to poor segment of society. As fig(5), by combining microfinance with entrepreneurship(social entrepreneurship and micro entrepreneurship) can stimulate the progress poverty reduction and empowerment of people.
Entrepreneurship Social Entrepreneurship Micro Entrepreneu
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Wealth Distribution Poverty reduction, Empowerment and Sustainable Development
Fig. 5: A basic conceptual framework for doing our research work
Fig (6) is showing a detailed structure of our research work. Starting with microfinance, Grameen model is most widely used lending method in microfinance and most MFIs adopted it. But this is not only a one model, with this, Progressive lending- Banco Sol Model, by which individual loans can be graneted, is also in practice. Islamic Microfinance adopted characteristics of both model, but eliminate interest from loan. To understand microfinance myth, methodology, characteristics and its uses, there is need of depth study of different model of microfinance. But mainly our study is emphasizing that microfinance is not only financial services but it is a complete development tool that include social services and intermediation with financial intermediation. Therefore microfinance is not only reducing poverty but also putting impact on poor’s life by increasing their life standards by providing social services. While Social entrepreneurship is effecting on poor by providing them such opportunities where they can utilize their strengths and make opportunities fruitful. In our study, we examine the role of social entrepreneur in wealth distribution and sustainable development in society.
Entrepreneurship theories mainly examined in SME sector and large scale organization. In our study it is very interesting to examine Schumpeter theory of innovation and Austrian theory of Entrepreneurial discovery while taking different cases of micro enterprise. By entrepreneurial behavior, implementing innovative ideas and exploiting profit opportunities, poverty reduce with more speed and even micro entrepreneurs can get more profit by bringing innovation in their production system.
By considering microfinance a development tool, and exploiting opportunities through entrepreneurial ideas, can become a successful and speedy tool for alleviating poverty and empowering poor.
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Fig. 6: A detailed conceptual framework for doing our research work
And/Or
Micro Entrepreneurship Schumpeter theory of Innovation
Schumpeter theory of Innovation Social Entrepreneurship And/Or Microfinance Grameen Model-Traditional Microfinance lending method
Islamic Microfinance-Akhuwat Model
M
F as a Development tool
(Social Intermediation and Social Services)
Act as
Poverty Reduction
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4. Pakistan, Microfinance, Entrepreneurship –Empirical findings
In this section, we present empirical data collected through conducting interviews from borrowers, Akhuwat’s administration and Islamic banking experts. Empirical data is including facts and figures about poverty, unemployment, economy and microfinance. Furthermore, there is detail information presented about Akhuwat itself and successful stories of different entrepreneurs- borrowers of Akhuwat.
4.1. Pakistan- Some basic statistics
Pakistan became independent in August 14, 1947 after a long political struggle against British regime. Pakistan is located in very important strategic location in South Asia, share eastern border with India, north-eastern border with China, while south-west border with Iran and Afghanistan is at western and northern edge. Country has total area 796,095 sq km.
Administratively, country is divided in four provinces, Sindh, Punjab, Balochistan and NWFP, with tribal area (Federal Administrative Tribal Area-FATA), Azad Jammu and Kashmir and Federal Territory, Islamabad. Country have total 153.96 inhabitant contributing 2.5 percent of world population and 2nd largest country by population by population with PGR 1.8 percent (SBP Annual report). Sixty five percent of total population is living rural areas while 35% in urban areas. (Pakistan-“Some Basic Facts”-2008)
Education
Education figures are not encouraging in Pakistan. Now the country’s literacy rate is 54 percent which is still behind from other neighboring countries like Indian with 61 percent and Sri Lanka 90 percent. Currently, there are 0.23 million educational institutions in the country where 33.38 million students are enrolled and 1.35 million teaching staff are serving. While among these institutions, 0.08 million institutions are working in private sector where 0.632 million teaching staff are employed. Government is spending 1.84 % of total GDP on education (SBP-a, 2007).
Health:
Health sector in Pakistan is progressing from last few years in term of per capita health spending, life expectancy, infant and maternal mortality rates, provision of immunization to children, the provision of human and physical health infrastructure. Life expectancy is low in Pakistan that is 63.2 years in male and 63.6 in female, from other regional countries like 71.7 in male in Sri Lanka 70.2 in China. This low average in life expectancy in Pakistan is due to poverty, low health spending, lack of infrastructure and lack of awareness. Pakistan is using US$ 18 per capita for health which is very less than that of recommended amount of US$ 34 set by WHO and health get portion of GDP only 0.51 percent (SBP-a, 2007).
Poverty
Poverty is a one of major problem that is facing by country. But due to increase economic activities and governmental policies, there is some good figures came about poverty and poverty reduction. In Pakistan, people living under poverty line are 24 % which was 34 % in 2000-01. Poverty ratio is almost double in rural areas as compared to urban. For example, in 2006, poverty ratio was 14.96 % while in rural areas, it is 28 % (SBP-a, 2007). Table(1) shows that extremely poor in country is 1 percent, ultra poor contributing this figure 6.5 percent while poor is 16.4% that sum up to 24 percent.
Table 1: Comparative Poverty Profile (% of population)-(source: PRSP,2006,p.8)
Poor/non-poor Categories
2000-01
2004-05
Extremely Poor
1.1
1.0
Ultra Poor
10.8
6.5
Poor
22.5
16.4
Vulnerable
22.5
20.5
Quasi Non-Poor
30.1
35.0
Non-Poor
13.0
20.5
Total
100.0
100.0
Employment
In Pakistan, there is 50.5 million active labor and 46.9 million are employed. In urban areas, people are more unemployed than rural areas especially women which are 15% are unemployed. While increasing in labor force, that was 24.78 million in 1981, due to economic growth, many employment opportunities has been created but still there is a big gap between unemployment and employment ratio(SBP-a, 2007).
Economy of Pakistan
Pakistan is mainly agriculture country and textile has major portion of country’s export. Pakistan’s economy is accelerated with fast growing speed since last four years due to heavy investments in telecom sector, large scale manufacturing industry, automobile, real estate and banking industry. For fiscal year 2007, GDP growth was 7.0 percent and it is expected for FY 08 also, although there are problems in law and order situation and political instability. Besides favorable condition for economic growth and increase in GDP with declination in external debt, still there are problems facing by economy that are lower ratio of tax to overall contribution to GDP, high inflation rate and increase in oil prices. Due to sudden increase in food inflation, poverty is converted in term of transitional poor to chronic poor. According to SBP, for consistent progress in economy, there is need to provide opportunities and facilities both agri and industry sector. For this purpose, there is need to execute such financial policies where farmer, especially, can get finances for their crops that , in result, will lead to more productive activities. Let look some interesting figure about country economy. GDP growth from FY 03 to 2007 is increasing mode and crossing 7.0 percent.
4.2 Microfinance market in Pakistan
Microfinance practices are not so new in Pakistan but limited numbers of MFIs are working in Pakistan and there is comparatively limited outreach with compared poverty ratio in country. We found few institutions working in agri sector in 60s. Agricultural Development Bank of Pakistan (ADBP) which is now working as Zarai Taraqiati Bank of Pakistan (ZTBL) is one them. Even ADBP was financing smaller farmer but still, collateral was taken to lend loan, therefore it was not a pure microfinance. In 80s, there was a prominent development in establishing of MFIs when Agha Khan Rural Support Program (AKRSP) started their operations in northern part of country, in three sectors those were community development through community based organizations, infrastructure development, and resource mobilization through savings and credit (PMN,2002). These all programs are in operation today also. After initiating of these programs, many rural support uninitiated by different provincial governments by name of Sarhad Rural Support Program (SRSP), National Rural Support Program (NRSP), and Punjab Rural Support Program(PRSP). Rural Support Program is mainly based on microfinance methodology (SBP-d, 2007). While in urban areas Orangi
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Pilot Project was working in poor segment in cities. In 90’s, NGOs like Kashf Foundation, Daman, and Taraqee had started their operations in microfinance sector, based on both rural and urban areas. With major initiatives of NGOs, outreach is increasing to areas having chronic poverty. In Musharaf’s rule, government have close look on microfinance and empowerment of poor, therefore it came up with the strategy of initiating of microfinance ordinance 2001, establishing First Microfinance Bank and Khushhali Bank (Rehman,2007).
Through microfinance policy implemented by ordinance, MFIs can be established in regulated (Deposit-taking) and non-regulated (Non-Deposit-taking) institutions. Estimated clients, according to SBP-d(2007), is between 25-30 million and due to high inflation rate , increase in oil prices and worldwide trend of increasing in commodity prices, there is chances of increase in clientage. Another different positive signs in development of microfinance sector are noted those are; provision of an enabling policy environment, institutional development of existing MFIs and evolving of new MFIs with sound basis, supportive infrastructure , encouraging government policies, use of technology, human resource development and management, and most important is enhancement in outreach of MFIs.
4.3 Practices of Microfinance in Pakistan
In Pakistan, different practices are being used in microfinance. Three types are famous and mostly used:
Community Based Organization (COB)
These organizations are established for execution of infrastructure development activities and resource mobilization through savings and credit. COB’s strategy is initiated by different RSPs and widely in used by Agha Khan Rural Support Program. Now most of rural support programs are integrating microfinance by cobs with other community development activities. NRSP have their operation at national level and approach to almost every part of the country (PMN,2002).
Solidarity Group Model
Most of NGO MFIs are following group solidarity model that is also known as Grameen model. MFBs and MFI like KASHF foundation are using this model. It is a fastest growing model as most of MFIs are adopting it because of its wide practices round the world (BWTP, p.3)
Individual or /and family based
Some MFIs, and MFBs, with Grameen model, are lending loan to individual and /or ‘family based’. In the ‘family based’ process, loan is given to a family as a whole and there will be two are three guarantors. In this type of loan, social collateral is used as guarantee.
4.4 Islamic Banking Practice in Pakistan
Pakistan freedom movement was based on slogan of a “two nation theory (Separate country for Muslims)” and major slogan was a state with Islamic system and practices. Founder of Pakistan, Muhammad Ali Jinnah, emphasized the significance of Islamic finance industry while addressing at inauguration of the State Bank of Pakistan, said: “I shall watch with keenness the work of your organization in evolving banking practices compatible with Islamic Ideas of social and economic life. We must work our destiny in our own way and present to the world and economic system based on true Islamic concept of equality of manhood and social justice.” It was a clear guideline set by the founder for financial services but unfortunately, in world as a whole, there were not so many practices of Islamic banking. Therefore till 1973, government did not take any major step for Islamic Banking. In 1973’s constitution, a clause was introduced to adopt Islamic financial practices and eliminate interest. In 1979, initial step was taken towards Islamic finance by starting operation of NIT (National Investment Trust) and ICP (Investment Corporation of Pakistan) by interest free operations and investments. The major step was taken in 1984 that was elimination of Riba (Interest)
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from banking system and in January 1, 1985 all financing to Federal and Provincial Governments, public sector corporations and public or private joint stock companies was directed to be only through interest-free modes
Islamic banking is regulated and monitored by State Bank of Pakistan that is responsible to all legalities and setting policy framework. Pakistan constitution directed to state that, in country there will be banking system according to Islamic teachings and bank provide financial services that must be interest free. But due to less practice of Islamic banking throughout the world, in Pakistan also, it seems that in 90s, government started of taking steps for Islamic banking.
For this purpose SBP adopted three-pronged strategy for promotion of Islamic Banking in Pakistan.
1.
Establishment of full fledged Islamic banks in private sector
2.
Islamic banking subsidiaries
3.
Stand alone Islamic banking branches of existing commercial banks
As per information provided by SBP, at the end of year 2007, six full fledged licensed Islamic banks have their operation throughout the country with 185 branches while SBP gave license to 12 commercial banks for establishing stand alone Islamic branches. In Islamic banking, there is high growth rate and now sharing 3.8% of total Pakistan banking industry and 3.6% of total deposits in banking industry. Islamic banking industry have PKR 178 billion (US$2966 million) worth assets and deposit of PKR 124 billion at the end of September 07 as compared to PKR 159 billion and PKR 108 billion respectively at the end of June 07.
Many Islamic finance services are in use in Islamic banking industry including Murabaha, Ijara, Musharaka, Mudaraba, Dimin. Musharaka, Salam, Istisna, Qarz/Qard-e-Hasna.
Murabaha Financing is contributing 44.91% of total financing on September 2007 as it was 40.9% on June 2007. Second most widely used mode of finance is Ijara which is contributing 28.8% of total financing. Diminishing Musharakah has increased by 47% from June 2007 term, and contribute 26.1% of total financing. (See appendix B&C)
4.5 SBP and Islamic Microfinance
For microfinance, MFIs and for establishing MFBs, SBP has formulated guidelines and give outlines for their operations. SBP also describes Islamic microfinance products. Guidelines are aimed to broaden the availability of microfinance to poor at large scale and at macro level. SBP has initiated of establishing of Islamic Microfinance division to regularize and encourage Islamic microfinance in country. According to SBP, Islamic microfinance services and products can be offered by different types of financial institutions which are listed as:
1.
Full-fledged Islamic Microfinance Banks(IMFBs)
2.
Islamic Microfinance Services by Full-fledged Islamic Banks
3.
Islamic Microfinance Services by Conventional Banks
4.
Islamic Microfinance Services by Conventional Microfinance Banks (MFBs)
(Information is based on Islamic Banking Bulletin by SBP-e,2007)
4.6 Entrepreneurship in Pakistan
After independence of Pakistan, and by intervention of military, a hidden cooperation established between military and bureaucracy and they intervened all policies of the country. Policies developed during this era were mainly under influence by this approach and decided to run economy not by public-private partnership but with shadow of only public sector. Due to rent seeking activities, direct corruption was observed by bureaucracy, state owned enterprise, licensed based business and make economy with less entrepreneurial approach. According to Haque(2007,p.8), “Rather than entrepreneurship, policy planned for investors and investments
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became the norm. Incentives were offered to attract investment. Such incentives included licensed monopolies in protected markets, cheap land and credit and subsidized inputs. ”
Entrepreneurship’s meaning was misinterpreted by bureaucracy, economic policy makers and government itself and did not give a proper place in economic policies of country. Government and economic experts mislead entrepreneurship and consider entrepreneurship as a part of big industrial activities rather to its genuine meaning and missed entrepreneurship at micro, small and medium enterprise.
Policies for Large Scale Industry
As it has been discussed that government misleads the meaning of enterprise, which is considered as large industry, according to Haque(2007), different policy measure such as tariff protection, import licensing schemes and control on imports has been taken rather productivity or encourage industrialization for growth. This policy leaded to elite and rent seekers in large industry rather than entrepreneur.
Neglect of Micro and SME sector
Normally, for people, industrialization means large scale industry and even at government level, most of policies are only favoring to large scale organizations. But from the beginning, small scale firms dominant Pakistan industry, and even business at micro level are contributing a successful role in Pakistan economy. According to Haque (2007,p.12), “Today almost 40 percent of business takes place in the informal sector and still as compared to the large scale industry, the small scale enterprise and industry continues to face unfavorable policies. ……...The small scale and the informal sector may be mush more dynamic and productive than what government figures have continued to show till today. It is also important to note that the small scale sector is the breeding ground for innovation but continues to attract little research.”
4.7 Borrowers of Akhuwat – Stories of Micro enterprises
We conducted interviews from nine borrowers to study entrepreneurship and entrepreneurial behavior among microfinance borrowers. These borrowers got loan from Akhuwat either for starting or for continuation of their businesses. Among these 9 borrowers, two are females while remaining are males. We are surprised that most of them are doing business with experiencing few new things in their production process.
In following we are presenting two successful stories of micro enterprise from nine interviewees. In analysis section, we will analyze of these businesses and examine that weather entrepreneurship exist on micro enterprise level or not.
Gulzar Ahmad-Madina Traders
Gulzar Ahmad is 40 years old, doing business with name of Madina Traders, producing plastic clips by modeling machines. These clips are used in different machines and equipments and different industries are the buyers of these clips. Before starting of this business, Mr. Ahmad was working as an employee in a company where he was getting PKR 3500 (US$ 60) per month, doing work 6 days per week and 8 hours per day. He has 6 dependents, two sisters and brothers, wife, and 3 kids. With amount of PKR 3500, it was very difficult to maintain life only with basic human needs. According to him, he had been thinking that he should start his own business even a smaller one otherwise it would become totally difficult to spend life. On a suggestion from his friend, he contacted Akhuwat and applied for loan 5 years ago. In a month, PKR 10,000 loan was granted and he started his business. After a few months, he reconsiders his business strategy and decide it is better to bring new ways in his business. For this, he started using the imported raw material used in clips, and bought a new automated machine by investing PKR 18,000 personally with PKR 12,000 borrowed from Akhuwat. These steps boosted his business and eventually from profit, he bought raksha (a
three wheal carry bike) which he used to transport his products to end clients. Now his monthly sale is exceeding PKR 45,000 which is contributing PKR 12,000 to PKR 14,000.
Sofia Bibi- No name of business
Sofia Bibi having primary education with only 5 grades, started business in with a new idea of embroidering on face of shoes with silk and sell it to big firms in Lahore city like as English Shoes. Few years back, she and her husband were both unemployed. She has 5 kids and total members of family are 7 with husband. When she was unemployed, he started to think about her business. She had idea about business but due to unavailability of finances she was not able to start it. When she came to know about Akhuwat, she applied for a loan and after getting first loan she started her business. She introduced embroidered head of shoes and this idea was quit new in market and now this type shoes are imported to UAE, KSA and London. At start, she get loan PKR 5000, and started business. After repayment of her loan, he get loan thrice time more and that were PKR 10,000, 12,000 and 15,000. Recent days, sale of her product is PKR 18,000 to PKR 20,000 and she is now earning profit PKR 7,000 to 9,000. Due to her innovative idea he got prize of PKR 10,000 from Governor of Punjab province. Her future plan is to construct outlet for her products.
4.8 Poverty alleviation and empowerment strategy
Pakistan Poverty Alleviation Fund (PPAF) is apex institution in country for microfinance and to deal with poverty alleviation and empowerment of poor. PPAF adopt strategy to alleviate poverty and empower of poor by expanding its operation in four fields which are:
•
Credit and Enterprise Development
•
Community Physical Infrastructure
•
Human and Institutional Development
•
Health and Education
Funds use for activities in poor communities. PPAF execute its plans by their partner in public and private sectors by giving them resources. In following, there is discussion about strategy of PPAF regarding poverty alleviation and empowerment of poor:
Credit and Enterprise Development
PPAF is premier source of funding and, with its partner organizations, covering 1.27 million current microcredit borrowers. PPAF had disbursed KR 16.6 billion with partner organizations in 80 districts. Credit and Enterprise Development division is responsible to lend regulate and disbursed loan while considering with deep concern about geographical coverage and gender equality. In FY 2006-07, micro credit loans to women reach a record number, 266,495, the ratio of active female is 54% of total borrowers. Women borrowers are very low in number in start of PPAF that was 1.74 percent in 2000-1 but with now policy is emphasizing to lend loan to women with equality.
Fig 7: Growth in credit portfolio on Women-only Pos and CED Borrwoers by Gender (1999-2007) (Source: PPAF,2007,p.9)
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Another major approach which has been taken by PPAF is to make balance between male and female borrowers because there was big gap between them and other issue which has been tackled about shifting of paradigm of lending loan from agri sector to other sector like small enterprise and livestock. At the end of year 2007, agriculture has major portion of 37% but if we include live stock with it, almost more than 50% of total disbursement. While small enterprises have 36 % of total loans (PPAF,2007).
Community Physical Infrastructure
For empowering of people, human development and poverty alleviation can be developed by community physical infrastructure with other mechanism. Physical infrastructure make possible to give quality of life and access to different facilities like drinking water supplies, sanitation facilities, irrigation and others.
CPI division of PPAF has been spent PKR 3.918 billion through 44 partner organization. By June 2007, PPAF had financed over 13,498 infrastructure schemes, benefiting approximately 991,010 households in 110 districts including 4 tribal agencies. For FY 2006-07 PPAF initiated different infrastructure schemes, largely concentrated on four core sectors: drinking water supply with 467 schemes, 649 irrigation schemes, and sanitation with 538 schemes and roads with 237 schemes (PPAF,2007).
Human and Institutional Development
With trainings and sharpening technical skills, financial resources can be utilized with more productivity. PPAF conducted training and skill enhancement programs by this unit for strengthening the institutional and human resource base of partner organizations and participating communities. In current year, PPAF spent PKR 450.87 million that was PKR 392.54 million in FY 2005-2006.
Trainings are conducted in two sectors, one is for partners staff and other for borrowers. The number is increasing every year and this approach will lead to best utilization of micro loan. Mostly trainings are conducted for management skills, vocational skills, enterprise development skills, agriculture management skills, and live stock management skills (PPAF,2007).
Health and Education
Health and Education is 4th tool to alleviate poverty and make health and education facilities possible to poor. It is response to poverty with combining microcredit, community infrastructure, institutional development and skill enhancement for better livelihoods.
From last two year, PPAF’s Community Health Centers are providing health services to 81,000 patients, 75 percent of whom were women. While in education sector, total 8,610 enrolments were reported and 71 percent of whom were girls. Total fund disbursed was more PKR 100 million through 9 partner organizations in education sector while in health sector, it was PKR 63 million (PPAF,2007).
Fig 8: Geographical Dist. For Education Fig 9: Disbursement for health
(Source: PPAF,2007,p.29) (Source: PPAF,2007,p.29)
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4.9 Akhuwat-Some historical facts
Before Akhuwat was established and there were not any ideas to establish it, Dr Amjad Saqib was working at the Punjab Rural Support Program (PRSP) and there interest were charged 20 percent which he found it very high and it is not suitable to Islamic rules, even formal banking interests were lower which was available to ‘creditworthy’ affluent individuals. Then Dr. Saqib felt it disturbing and however he wanted to start his own microfinance program where the loans were in the form of Qarz-e-Hasna(Helping someone in need with interest-free loans; these are preferred over charity). And with the first initial donation amount of Rs. 10 000 in 2001 Akhuwat was formed and the first loan was given out to a woman. The main mission, objective of Akhuwat provide interest free credit to the poor as the result to increase in their financial and living situations. (Akhuwat book,p.4)
Akhuwat derives its name from the history which first experienced by people of Madina (Saudia Arabia)shared their wealth with “muhajirin” immigrants from Makkah and the name is ‘mua-khaat’ or brotherhood. The main philosophy of this story is based on to share the resources of society with poor and needy people. Also for Akhuwat, microcredit is a means to an end and here meaning of an end is a vibrant, economically strong society, based on shearing resources. (Akhuwat book,p.5)
For initial few years Akhuwat was only a giving money to poor to see how microfinance which gives credit without interest would work, but soon by 2003, hard work of Akhuwat had showed its fruits, the donations had increased to Rs. 1,5 million and loan recovery rate was 100 percent. As a result of consequences, Akhuwat registered as formal institution under the societies registration act of 1860. (Akhuwat book,p.5)
So far till now, Akhuwat working in 17 branches in the Punjab (Pakistan) and with 7,150 active clients and its total amount of disbursement in 5 years reached up to Rs 150 million which is very good success in very short period. During these years Akhuwat still remains its mission to give free interest loans to the poor people and also to increase their volume by starting the same activities in other cities. Also after visit of Governor of Punjab, Lt General Khalid Maqbool in 2003, was the reason of bringing main trust to Akhuwat. The Governor wanted to observe it in practice by meeting with clients, which generated more publicity. The donations and applications for loans has increased tremendously and every month 1000 new loans given out in Lahore (Akhuwat,2008).
4.10 Organizational structure
The board of ten members which consists of philanthropists, civil servants and businessmen governs Akhuwat. As defined in the Articles of Association, the main responsibility of Akhuwat rests on the board. And their main functions are formulate and approve policies, provide guidance and direction on different matters and as salient responsibility they provide marketing services for Akhuwat and most important to mobilize funds for loans. The board meets quarterly to review operations and take policy decisions and its review take place every 3 years where change make take place on board. (Akhuwat book,p.5)
Dr. Amjad Saqib runs Akhuwat as executive director. The organizational structure mainly consists of the Operations department, and matters pertaining to the Human Resources, IT and other issues are managed by the Program Manager. Organization with 52 person team which shows it is still small company.
4.11 Philosophy of microfinance, lending by Akhuwat
To achieve its goals Akhuwat is running two types of programs microfinance program which is directed to increase the income of poor and second program is social development program for improving the quality of life of the poor.
Microfinance program consists of Group based loans, Individual loans and rural credit program. Akhuwat started to give loans with The Group loans methodology in 2001 and brought individual loans into action in 2003. Group lending loans were focused especially on women who organized in Self Help Groups which consists of 10 people each. And group selecting the leader who would be responsible person as a leader and 10 women should save selectively Rs 3,000 to be eligible for receiving the loans. After that group will receive loans by turn but for return of the loans would be responsible the whole group, however there is no any interest rates but there is membership fees which 5 percent from amount of loan should be paid because says Dr Saqib to feel the responsibility of the loan and they should value it if there not would be any fees the money would be just free meal. In group lending, meetings held every 2 weeks with loan group members and Akhuwat member staff and they discuss the further achievements of the group, problems and also some lessons to teach group members about business ethics to develop their further business successes. (Akhuwat book,p.7)
Disbursements0.81.22.45.17.80.212.830.22.60510152025303520022003200420052006MillionsGroup LoansIndividual Loans
Fig 10:(Akhuwat book,p.8)
Individual loans and Akhuwat methodology
Akhuwat has a large portfolio of individual lending with a total of 14,711 beneficiaries and it has devised a rigorous appraisal method to ensure maximum recovery. In 2005, individual loan disbursements grew by almost 390 percent and in 2006 they grew by 135 percent. Almost all process of individual loans takes place in Mosques and churches. Mosques and Churches are the most important places to people and it is more reliable places also everybody believes each other and trust is very strong there. According to Dr. Saqib, the decision was deliberate as he states, ‘for far too long, we limited the use of mosques to just prayers. In between, they are desolate. With our offices in mosques, we have saved tremendously on operational costs. We don't pay rent or utility bills’. Furthermore, it increases the participation of people. It also attaches a religious sanctity to returning the loan on time as the concept of accountability is intensified as it is a place of worship and also gives the whole process a feel of ‘barkat’(means blessing). “In a Muslim society, mosque has always been a centre of community interaction. We also want to utilize this institution for the betterment of people living around it. We also like to work in churches as one of our branches was established in a famous church of Lahore”, Dr. Saqib explained. People who has business idea and plans bring it to mosques and Unit manager of Ahkuwat checks it carefully does it work or not, he checks also the situation of family, their income must be less than Rs 1000, after checking all qualities family members of the loan taker will sign the paper to be responsible for loan as family in mosque, the reason to include the sign of the family members to encourage all family members to work hard to return the loan and also maximize the benefits to for the whole family. Recently, the name of the individual loan changed to “Family loan” for productive purposes (Akhuwat,2008).
As soon as Unit manager finishes checking application he passes application to The Branch manager who undertakes his own appraisal of applicant. After completing, application be discussed at credit committee which consists the Unit managers of the Branch, Branch manager and the Area manager After checking the applicant carefully, the final decision is made after 30 days. If
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committee approves application they give money to applicant in mosque. In disbursement of loan process participate several people like Imam of the Mosque, community members and Akhuwat staff from the branch and head office. But before receiving loan applicant has to pay 5 percent loan fee for Akhuwat membership and also to secure the risk he should pay loan insurance 1 percent from total amount. In case of death, family members of applicant will receive Rs 5000 to cover funeral expenses, if he was the only earning member of family then they provided with monthly Rs 1000 during three month. If client is handicapped then the loan will be canceled and client is provided with wheelchair. Since the loan disbursed to the client, Unit managers have to monitor them in order to repay loan on time 7th of every month. And after repaying the loan credit committee discusses matters how the loan was useful and what aspects to be increased or does he had any difficulties to repay it and after that they decide to give loan again or not(Akhuwat,2008).
Also Akhuwat works on other types of loans. Loan products are family loan, Liberation loan, Housing loan and other products. Family loan as we discussed it above, the most given loan type and also contains 91 percent of loan portfolio. Loan amount is from some thousand till Rs 25,000, but most common loan for the first time is Rs 10,000 and installment Rs 1,000 a month.
Liberation loans consist 5 percent of loan portfolio of Akhuwat. These loans have to be approved by head office, if amount raise more than Rs 25,000, Executive director has to approve it(Akhuwat,2008).
Housing loans as well exists in loan portfolio of Akhuwat since last year. Its range is Rs 40 to 50,000 and has to be repaid in 2 years. Akhuwat is doing this loan cooperation with Al-Noor Umar Welfare trust, another voluntary organization. To other loans include health, marriage and Education loans; even if these loans are non-productive poor people need these loans to use medicines, educate their children and to get married. The maximum amount of these loans Rs 15,000. These loans are to be repaid within one year (Akhuwat,2008).
Akhuwat also teaches its clients with technical training. They give latest news business techniques and market information’s. Also they provide internships to new learners with skillful businessmen who already established its enterprise to get enough experience from practice in order to run its own business in future. Akhuwat coordinates activities with other NGOs and Social Welfare Organizations so that social services can reach their own clients (Akhuwat,2008).
4.12 Expansion of Outreach of the company
Akhuwat with its core and different program, did it very successfully when it started to expand. There were only 3 workers at the beginning but now this number has increased. The Board is responsible for the review of organization and decides how to expand the outreach. But for sure it depends on the finance how much donations received and credit pools, it is unpredictable. The growth plan for the last year 2006-2007 was to provide with loans to 10,000 individuals and open new branches in eight cities. As usual plan, they always take map from previous year and they double that numbers for next year to expand the outreach. Dr Saqib says that they looking forward to cooperate with organizations to expansion in new cities. The outreach is to teach them to the model and provide them with credit pools and leave them do it independently outside of Lahor. He sees success not in sustainability figures but in how widely is the model spread and replicated and how effectively and efficiently the poor are served. He says that “Numbers overwhelm but saving the life of one person is akin to save entire mankind. While doing so, one must also observe the limits set by Allah Almighty”. (Akhuwat book,p.14)
4.13 Financial management of Akhuwat
Mobilizing funds
As we stated above mobilizing funds for Akhuwat is the main function of The Board. The committee of each branch has the right to undertake initiatives to mobilize funds. Every year before Ramazan organization hosts for fund-raising function and invites more than 1000 people. Also Akhuwat is well known according to press which helps to raise funds. Akhuwat has its web page which was created by volunteer students who wanted to donate in their own way. Some volunteers are also working on marketing plans how to mobilize the funds, The Board also tries to contact with partner organizations which help to bridging with funds (Akhuwat,2008).
Asset, Liability and Equity Composition
Akhuwat’s asset utilization (percentage of assets comprising loan portfolio) is around 78 percent and this is better than the industry average of 42.5 percent. And its operations are financed by grants and donations and since the 2002 Akhuwat received more than Rs 60 million as grants, this grants was Rs 30 million only for the last year and it means the grants increased almost 158 percent against the previous year grants.(As stated in figure 11) (Akhuwat book,p.16)
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Fig 11: Grants received by Akhuwat Grants received0.971.827.1510.9928.3505101520253020022003200420052006MillionsYear
The financial picture of Akhuwat at the end of March 2007 was approximately as follows:
Assets, or uses of finance
Liabilities, or sources of finance
Long term loans $ 11,000
Donations $ 983,000
Loans $ 831,000
Cash and bank $ 141,000
Total $ 983,000
$ 983,000
Income and expenditure for the year 2005/2006
Grants $ 8,000
Fees $ 57,000
Total
$ 65,000
Expenses $ 75,000
Loss
$ 10,000
(Pakistani rupees have been approximately converted to US$ at the rate of Rs 60=$1.00)
The operating losses were covered by special grants, which were made for the purpose, and it was calculated that the five per cent fee would cover the full operating costs by the end of the year, as the program expanded. (Akhuwat book,p.32-33)
4.14 Profitability and Sustainability
However, as Akhuwat does not charge any interest on its loans, and only charges a membership fee of 5 percent, it is unable to cover its costs which stand at 7 percent, organizations performance on
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profitability and sustainability improving steadily. Nonetheless, as Akhuwat increases its outreach it will be able to lower the cost and in time will be able to cover its operating expenses. At the same time, OSS and FSS were 77 percent for 2006 and show that Akhuwat is not sustainable at the present as it cannot cover its operational and financial expenses. But, Akhuwat’s operational efficiency is very high at 7.13 percent, while the industry average is 22.4 percent. Due to this financial indicator Akhuwat can achieve sustainability easily. (Akhuwat book,p.18)
According to the model, Akhuwat is not charging any interest fees for clients; otherwise they could easily achieve sustainability for 100 percent. Even if they do not charge any interests, due to their outreach expansion, the costs per borrower fall due to economies of scale, sustainability will also increase.
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5 Analysis of data and interpretation
In this section, we analyzed empirical data by the help of conceptual framework, developed after literature review. We presented analysis regarding need of interactive strategy of microfinance and entrepreneurship, social services and intermediation by Akhuwat and sustainability issue.
5.1 Empowerment and Microfinance- Need of interactive strategy in Pakistan
Need of microfinance in Pakistan is crucial because of low poverty, major population living in rural areas, low human development, low skilled labor, non availability of basic human necessities and low number of opportunities to access of finance for business setup. The country has got struggling figures about poverty, education, health and business opportunities.
In country, unemployment rate is more in rural area while by gender; women are more affected by unemployment. In urban areas, more than 15% women are unemployed. It is due to many reasons including cultural problems, traditions, education, small number of business opportunities and hurdles to access to finance. Therefore Pakistan has big market for micro businesses that directly needs microfinance both in rural and urban areas.
Comparative Poverty Profile, (table1, p35), shows that people live under poverty more than 24 % while 6.5 is ultra poor. Further more, due to high inflation rate, poor economic conditions, bad law and order situation, political instability and increase in oil prices are pushing people from ‘Vulnerable’ category to ‘Poor’ category, that lead to unemployment also. By which these conditions put pressure on poor to come with different strategy to fight against poverty, and the best way that government, and society as a whole to encourage people for business , bring innovation in their idea and there should be easy access to finance. Microfinance can be a one product that can facilitate poor to start their business.
Different sectors that are involved for poverty reduction and empowerment of poor are education, health, micro loans, water supply and sanitation, social security and welfare, rural development and others. But this is very tragic situation in country the expenditure of these factor as per percentage to GDP is very low. Expense on education sector is only 1.84 of total GDP, while Health is only 0.51 percent. How any government can empower with these low budgetary expenses?
As we mentioned in start of discussion, Pakistan is country where microfinance could become essential tool for poverty alleviation, there is need of microfinance activities at large scale by MFIs with extensive support of government. Microfinance and encouraging people to implement entrepreneurial ideas in their business, both public and private sectors must take initiatives in microfinance field so that poverty can be reduced and poor’s empowerment will be possible.
5.2 Expanding outreach of Akhuwat-Empowering more people
Akhuwat is working in two provinces, Punjab and Sindh, covering the cities, Lahore, with eight branches, Rawalpindi, Faisalabad, Multan, Gujrat, Karachi, and small towns including Sharaq pur, Dijkot, Samundari, Chiniot, Lodhran, Jehanian, Duniyapur and Krore Pucca. Akhuwat is emphasizing to lend loans in urban areas but by approaching small towns, outreach is expanding to rural areas also. Pakistan is mainly emphasize on agriculture, and textile products which are 70% of total export and two third of population is living in rural areas, so there is excessive need to expand microfinance operations in rural areas. The other major reason to expand outreach is unavailability of microfinance or availability with higher interest rates. In urban areas, women are more empowered because of literacy, accessibility to human needs, and more business opportunities but in rural areas, women have not large number of business opportunities. Akhuwat’s strategy for outreach should be based on:
•
Expanding outreach by expanding operations to more small towns and rural areas
•
Expanding outreach by increasing in borrowers
Outreach of Akhuwat
Expanding outreach by increasing no. Of borrowers
Expanding outreach by increasing in no. branches
Donation/Grants to increase in credit pool
Fig 12: Outreach expansion paradigm
As in fig (12), outreach of Akhuwat can be increased by expanding credit pool. If there will be increase credit pool by donation or any other mean, it will effect on outreach because more finance will open the door to cover more poor. The second way to increase credit pool is by adding profit, getting from lending operations, and adds it to credit pool and circulate it. But in case of Akhuwat, only 5percent is charged on loan as an membership fee, while the administrative cost is more than 7 percent on each lending. Therefore, there is no contribution from Akhuwat’s own operation in to credit pool. This is the area where there is need of improvement and practice with innovation and entrepreneurial approach.
5.3 Why Akhuwat adopted Islamic microfinance-Was there any need?
Pakistan foundation was based on “Two Nation Theory” and from the start, it was basic demand of people that access to finance should be easy and it should be basis on Islamic teachings.
After introduction of clause in 1973’s constitutions that Government will take steps towards interest free banking, in 1979, initial step was taken towards Islamic finance by starting operation of NIT and ICP by interest free operations and investments. All banks now have two types of loans, PLS (Profit and Loss sharing) account for deposits and current account. As we have already discussed that more than 95 % of population is Muslims, and try to adopt Islamic practices. This is the reason that Islamic banking sector is growing with fast speed and now Islamic banking have 3.8 % of total deposits in banking sector of Pakistan and this percentage reached in few years only.
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When I questioned from Zahid Husain about advantages of Islamic banking that why Islamic banking practice’s growth is so high, he replied that Islamic banking system has been misinterpreted in past that only Muslims are only the customers and Islamic banking system is only for Muslims but it is not so true. He said that Islamic banking system a wide range of products including Musharaka, Mudaraba, Murabahah, Ijara and some other products related to insurance. The important advantages of Islamic products are that these are at principal of profit and loss sharing. On deposit side, profit is not fixed but distribute after some specific period that is fluctuated and it is more than traditional banking system. While on investments and lending loan, it is based on same profit and loss sharing principal with some other methodologies. These principals attract both investor and borrowers to share ideas and expertise and put efforts from both sides to make a
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successful business. He also said that Islamic banking system follows the moral values, when any company is defaulted or when bank charge profit on any product. When I asked about challenges and problems regarding Islamic banking system, Zahid Hussain replied that one of the major challenge is misconception that Islamic banking system is executing in only Islamic countries and only Muslims are utilizing Islamic banking products but it is not right as prescribed. He gave example that Citi Group, HSBC are also securing their market in Islamic Banking. According to him, this misconception should be removed. The other is issuing of credit cards by Islamic means. In this area, there is needed to be more research to formulate a model for credit cards.
In our opinion, three factors are important in growth of Islamic banking in Pakistan. These factors are:
•
Strict Islamic teaching about prohibition of Riba (Interest) on loans therefore people are very keen to follow teaching of Islam and use such banking service which are interest free.
•
Constitutional and legal aspects about interest (Riba) and its prohibition, therefore banks are responsible to adopt Islamic banking practices.
•
Profit and /or loss sharing based products attract customers to adopt.
Due to these reasons, 6 Islamic Banks and 12 commercial banks with Islamic products are gaining and maximizing share of bank industry year by year. Now Islamic banking sector have share 3. 8% of total Pakistan’s banking Industry with deposits of PKR 124 billions.
By the help of this discussion, we can perceive that Islamic Micro Finance (IMF) practices will grow in rapid mode and borrowers will adopt Islamic microfinance practices. Microfinance banks and strategy adopted by SBP for microfinance is quite new. After ordinance in 2001, microfinance practice got boosted and with 6 MFBs and many NGO MFIs, microfinance outreach has reached to more than one million borrowers which is projected to reach to 3 million by 2010. Islamic microfinance is quite new and from empirical data, we found that no one is practicing IMF practices except Akhuwat.
Discussing issue with Zahid Awan about practices of Islamic microfinance, and its products, he elaborated that IMF is in practice from era of Holy Prophet (PBUH) by inventing Qard-e-Hassan way by which Holy Prophet (PBUH) encourage rich people to give finances to poor people those have nothing for guarantee and give open to repayment so that they can use this money in business, earn profit and repay it. But this way is not in practice as a banking service or microfinance service.
According to him, in following there are some advantages of Islamic Microfinance:
•
IMF products, like Musharaka and Mudaraba, are based on partnership of both lender and borrower that increase participation of both sides in business activities
•
Profit sharing schemes can minimize risk on loans and this can be advantage for borrower also to increase productivity of business and earn more profit.
•
By Murabahah scheme, IMFIs can minimize risk factor by increasing risks
•
Poor borrowers, normally, more loyal to their business because they have no other way to earn and hard worker, therefore default rate is low in microfinance. By adding Islamic teaching, binding is stronger and therefore poor return loan with motivation.
•
Islam teaches every rich Muslim to give loans to poor or give charity to poor. IMFIs should minimize profit as much as possible because of Islamic teachings for poor. So IMF is very suitable microfinance services for poor
•
Islam encourages Muslims to give Sadqa, Ushar, and Zakat to poor. Zakat is compulsory on every rich Muslim to give 2.5 percent of his total wealth to poor. Sadqa is not compulsory
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but Ushar is compulsory on every landlord. The amount collected by these accounts must give to poor. IMFIs have more resources to collect funds and charity to finance poor.
While discussing the challenges to Islamic microfinance Zahid Hossain indicated:
•
Risk factor is high in MF, therefore being a new field, there is high risk involved on IMF products
•
Every MFI has huge number of borrowers because of this they collect a very low amount as loan. IMF produces like Musharaka or Mudaraba are based on partnership between borrowers and lender, and profit can be share if daily transactions can be recorded. But for micro business, people do not keep daily record, even no written slip or record. Another reason is that, borrowers may be illiterate, so they will not be able to record it. So how IMFIs can manage profit sharing and on what basis, then will share profit?
5.4 Akhuwat’s Innovation for lending loans-adding components in Grameen Model
In Pakistan, three different kinds of methods for lending loans are in practice. AKRSP followed community based organization, while KASHF and most MFIs adopted Grameen Model, while few MFIs are serving individuals also with solidarity group. Akhuwat learned from experience adopted individual lending with innovation and adding few new components in already practice method. Following are some distinct points of model:
•
Every branch is associated with a central mosque in the locality where operation will be started
•
Introduction programs are given after the prayer. Mosques in Islam are a central location for social gathering and provide opportunity to meet 5 times in a day and Akhuwat utilizes this opportunity. While in Church for Christians and Mender for Hindu. It makes it possible to reach more people and repeatedly meeting with borrowers and people.
•
Utilizing of mosque as meeting place, save utilities expense that indirectly facilitate to borrowers in the form of interest free loans
•
Akhuwat calls individual loan to family loan because of interaction with family before giving loans and making wife a copartner of loan.
•
Special check and counter check on borrowers for criminal allegation or drug addiction
•
Disbursement will take place in mosque and purpose is to make sure that matters are looked over in an honest and transparent way. The motive behind this is the religious sanctity to returning the loan on time as the concept of accountability is intensified as mosque is a place of worship and also it gives whole process a feel of ‘barakat’ (blessings).
•
5 percent of total is charged as membership/administration fee.
•
1 percent is charged as insurance of business that give following benefits:
o
Insurance covers risk of death. In case of death, loan is written off and PKR 5000 is provided for funeral expense
o
If that client was only the earning member then PKR 1000 per month is provided for three month for basic expenditure
o
In case of handicapped then loan is written off and provided wheelchair
•
On completion of repayment, borrowers will be facilitated by Akhuwat with additional loan amount
•
“Akhuwat online” idea that will be implemented in near future by which donors can interact online-video conferencing with borrowers and can monitor their donation. By this method, Akhuwat want to increase number and amount of donation. (Akhuwat hand book and interview)
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5.5 Challenges to Akhuwat’s way of microfinance
While studying Akhuwat’s way, there are many things which should be more discussed and some challenges Akhuwat can face in future.
Akhuwat has adopted Qard-e-Hassan way of microfinance in which loan is given to borrower without interest but MFIs can charge some percentage of amount as administrative/membership fee and require two or more guarantor as social collateral. Akhuwat is charging 5 percent as membership fee on loan amount. But when operation will expand, and when there will be big number of borrowers then it will be difficult for Akhuwat to maintain administrative expense with amount of 5 percent membership fee which is not sufficient to cover administrative cost of organization that is 7 percent per loan. Now membership fee is covering 76% of total administrative cost while 24 % short fall is covering by contribution from board of Directors of Akhuwat. When I asked this question to Dr. Amjad Saqib, he replied that Akhuwat is adopting two pronged strategy, one is broadened funding opportunities by implementing different strategies like implementation of “Akhuwat online” and have plan to implement Muharabah way of financing. But it is not still finalized.
Other challenge that Akhuwat can face is lending to individual, even it is successful till now. The problem that organization can face is that if business will go to default and person has nothing to pay and even no group based social collateral which can pressurize him/her like as solidarity group.
To deal individual and to keep check and track loan case of that individual will bring more cost. But responding to this point, Dr. Amjad Saqib said that we, therefore, use Mosque as a hub of loan lending activities to minimize cost and keep close relation with customers. But still, this is question that keeps record of 25000 borrowers take less expense or keeps record of 2500 groups? To get explanation on this issue, we raised before Zahid Hussain, he admitted that the big problem MFIs face is big risk and financial set back to MFIs that result into higher interest rate, there are two strategies to handle the issue of financial risks and high administrative cost; one is to decrease administrative cost by adopting innovative approaches, second is to bring some more innovations in social collateral.
5.6 Social services and intermediation by Akhuwat
Poor need more than microfinance to address the problems of poverty and accessibility to other life needs like food, health, family planning, education , social support network and so on. Therefore, Ledgerwood (2000) addresses that MFIs serve to their clients with additional social services with financial intermediation. Social intermediations are included Group formation, Leadership training and Cooperative learning, while social services are included Education, health and nutrition and literacy training.
PPAF which is an apex institution is doing its operations in community physical infrastructure, human and institutional development and health and education, with credit and enterprise development.
Table 2: Amount spent by PPAF on different social services and social intermediation
(amount is in million )
Sectors
Amount spent in 2007 (PKR)
Credit and enterprise development
16,600
Community physical structure
3,198
Human and institutional development
450.87
Health and education
163
PPAF strategy is supporting the idea that microfinance is development tool rather than only financial service provider. According to Ledgerwood(2000,pp.1) ,microfinance is not simply banking system but development tool, combining both financial and social intermediation.
Akhuwat’s model is also supporting the idea of “microfinance as a development tool”. Akhuwat is not giving micro credit but offering liberation loan, housing loan, loan for education, health and marriage. Akhuwat adopt innovation in one kind of loan, liberation loan, which is not so common in Pakistan. People get loans from one bank on any account and pay it to another banks but no commercial bank is offering that kind of service.
Fig. 13: Disbursement loan by Akhuwat in different social services and in micro lending (Data source: Akhuwat handbook)
Family loan is the same individual loan that we discussed in previous section. This loan is used set up a new business or to extend the previous one. Family loan is 91 % of total loan disbursed by Akhuwat.
Liberation loan is for those poor who borrowed money from other lender on high interest rates. Akhuwat pays principal amount of loan to lender and the borrower then repay this amount to Akhuwat in installment. Liberation loan is 5 percent of total disbursed amount. In Pakistan, especially in rural areas, individual loan lender give loan to poor on more than 30 percent and many cases, rate increase to 50 percent per year. In case of default, poor live like slave and there were many cases reported in media that whole family worked on landlord’s land to repay amount with interest, and they worked many years to repay only few thousands. Liberation loan is somewhat an innovative product that is helping poor to come out from salivary life and start their own business.
Housing loan is not common practice of MFIs in Pakistan. Housing is a big problem in Pakistan because of increase in rates of house rent and houses. Since few years back, real estate is one of such sector where huge investment came that in result increase in prices. Pakistanis living outside country especially in USA invest in real estate because of instability in peace and economy after 9/11 event. Due to these reasons, real estate prices increase and it is very difficult for poor to build their own house. Akhuwat’s housing loans facilitate poor to purchase home or build a new one.
Health, Marriage and Education loans are contributing to lift the standards of poor. Poor people generally invest all amounts which they have and borrowed and if they face any problem regarding
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their health, they will spend money from their business which in result brings down his/her business. To eliminate this pressure, Akhuwat is offering loan for health, education and marriage. These loans positively effect and indirectly give benefit to poor and to his business.
While addressing the issue of social needs and services, Akhuwat coordinates activities with other NGOs and Social Welfare Organization so that poor can get benefits from social services.
Enterprise development: Enterprise Development is another tool that facilitate poor with micro lending. MFIs offer trainings to poor entrepreneurs to develop expertise and skills so that can produce more productive results. Akhuwat offer trainings to their borrower for their enterprise so they can come up to deal their business with technical skills. When I asked the question from all 9 borrowers during interview about training, few replied that they trained and give suggestions to other new borrowers who are first time starter in business. Akhuwat in this way, facilitate borrowers for get together and share their skills, experience. 51
Fig14 : Poverty reduction and empowerment of poor model
From fig (14), we elaborate that by 4 factors, country can fight with poverty and empower poor people. If people will have access to all basic human needs, no threat of finance, they can express their views freely. As we discussed, microfinance is a development tool, combination of micro lending with other factors can make possible to alleviate poverty.
5.7 Contribution of Micro entrepreneurship in micro enterprise and some success stories of Akhuwat
According to Mondal (p.2), poor start business by getting finance from MFIs and act as either micro borrower or micro entrepreneur. Micro borrower get loan and start business and don’t take any innovation in his/her business while micro entrepreneur start business and start trying new ideas, bring innovation in his/her business process. Microentrepreneur takes risk, bring innovation, and do business different from others. This risk taking behavior normally is not present at micro finance borrowers because of having less technical skills, illiteracy, and small number of options to do new experiences. As Timmons (Bengtsson, Peterson, 2008,p.6) describes three entrepreneurial components, Opportunity, Resource and the Team. The entrepreneur exploits opportunities by using resources with the help of a team and produces a new production system according to Schumpeter theory of innovation.
As we discussed in empirical chapter about entrepreneurship in Pakistan that economic policies of governments in Pakistan always favor to large scale industry as government thought that
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entrepreneurship is present in large scale industry therefore no supportive policies for SME sector and micro business sector were issued.
In Pakistan, microfinance borrowers are doing business successfully and therefore repayment ratio is more than 90 percent of many MFIs and for Akhuwat, this ratio is more than 99 percent. Some borrowers are doing business in general way , just to earn profit and boost up their economic condition while few borrowers are also experiencing new business process and try to innovate new production system or reconstruct production system in a new way. The other method they use to reproduce products in lesser cost and sell it on with fewer prices than other market.
In empirical findings chapter, we presented 9 stories of micro enterprises, their business introduction, strategy, way of business and earning. We found that many of them are doing business in innovative way by brining innovations in production system. We selected two micro enterprises and analyzed weather entrepreneurship exists on micro enterprise level or not and what is contribution of entrepreneurship in their business success. We analyzed each business by two theories, Schumpeter theory of innovation and Austrian prospective about entrepreneurship, separately.
5.7.1 Gulzar Ahmad-A microentrepreneur bring quality in competitive market
Gulzar Ahmad got loan from Akhuwat and started his business with the name of Madina Trader. He produced plastic clips with one hand operated machine. During first year, he was thinking that he can produce the same product by producing it in cheaper price but with higher quality than competitor. According (Kirzner,1997) entrepreneurial discovery emerged in Austrian economics by evolving elements:
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Market is act as entrepreneurially driven process
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Knowledge which can be increase by market interaction
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Entrepreneur anticipating market and need of customers exactly and correctly
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Produce more cheaply than competitor and earn profit
In our opinion, Mr. Ahmad’s business case is fulfilling the concept of Austrian theory. He started business with a one machine and supplied his product to market. But he thought that he was doing the same as other doing. There was no such distinction even in prices so in competitive market where big player is present, his survival became difficult. After repayment of first loan he applied loan again of PKR 12,000 and invested his own 18,000 which he earned in first year of his business. He learned from market gained knowledge that with out adopting different approach, it would be difficult to survive in market. Therefore he put three new initiatives in his business; all was carrying risks for such a small business:
1.
He bought a new automatic machine so that he could produce large quantity of clips in less time, with more finishing of products.
2.
He decided to use higher quality imported plastic because his rivals were using local material at small scales. He was first one in market who started to use imported plastic.
3.
Plan to buy his own transport (Raksha, a three wheel motor bike with two seats at back of driver. It can be used for transportation of goods and passengers.) so that he could minimize transportation expense when he supplied clips to different firms. But he planned to buy Raksha few months later.
To expand his business, he started to search some more firms where he could sell clips because now he had more capacity to produce clips with higher quality. At this stage he was succeeded because
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of quality product. At this stage, market process and activity was directly interacting and process by entrepreneurial behavior.
Few months later, he bought a Raksha, and then he minimizes prices because he deducts cost of transportation from total product price. By this step, he was able to produce quality products with cheaper rates and expanded market. After successfully repayment of loan, he got again and purchased another machine and his wife became a team member of his business. He got and utilized opportunities and used his resources in innovative way and work as a team leader by adding his brother and wife in his business. Now his monthly sale has jumped to more than PKR 45,000 and he is now earning PKR 12,000 to 14,000 profits per month. Now his kids are studying in a good standard school, having accessibility to basic human needs, and using his own transportation. Now he is planning to expand his business by purchasing a machine by which he can produce electricity button. So, entrepreneurial behavior is working with more innovative business ideas.
5.7.2 Sofia Bibi- Innovation in Production system
Sofia Bibi started her business by producing silk based embroidered face of shoes to different local shoe produces. We analyze Sofia’s case by Schumpeter theory of innovation. We take following points to analyze the case:
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Introduction of new good for users or new quality of good
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Opening of new market
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The conquest of a new source of supply of raw material
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Carrying out of the new organization of any industry
Generally in Pakistan, embroidery on cloth is very famous and female prefer to wear such kind of suiting on marriage or other social events. Cotton thread, silk, gold, silver are used for embroidering cloths. In shoes, silk is not so famous to use for embroidering of head of shoes. It is difficult to find that how either silk is using in embroidering of face of shoes or not but according to Sofia bb, she did not see anywhere else that anyone can use silk embroidering. But she gave this idea to English shoes by her husband and English shoes were ready to producing of such kind of shoes. In our opinion, there is chances that silk may use before she used but still this idea came under Schumpeter approach because he started her business with an innovative idea that was not so much in practice in market and he produce a new quality of good.
The best practice they started in their business was that they produce face of shoes for a big player in shoe industry, English shoes. It was a new market for English shoes and also for Sofia bb. English Shoes have their outlets in Pakistan, London, Dubai and Kingdom of Saudi Arabia. By this step, Sofia bb opens a new market for her product.
Silk normally use for embroidering of cloth. Sofia Bibi started her business by producing such kind of products where she started to make use of input material in a new form. It was not so common in Pakistan and using raw materials in such way made it possible for her to reach in new market. Due to her innovative idea she got prize money of PKR 10,000 from Governor of Punjab province.
While discussing for future prospect, she has planned to open her own outlet where she can present her own artwork and maximize her clientage and market.
5.8 Social Entrepreneurship and Akhuwat
As we stated at the beginning of our thesis, from our model we divide it into several parts and one of them is to analyze social entrepreneurship qualities from side of Akhuwat.
From our theories there was very good phrase: “what makes social entrepreneurship social, and what makes it entrepreneurship”( Peredo, McLean ,2006,pp.57) On both points we can give a lot of facts in case of Akhuwat towards the theories of researchers. Of course “Entrepreneurship” without
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Schumpeter is unimaginable. As he stated (Swedberg R.,2000, p. 15) that Entrepreneur the person who innovates and makes the change. We can without any doubt say Akhuwat’s executive manager a social Entrepreneur as Schumpeter described. In the early months of 2001, following a visit to a Punjab Rural Support Program (PRSP) community site in Raiwind, Dr Amjad Saquib and his 1985 Civil Service Academy batch mates decided to meet for dinner at the Gymkhana Club. At the dinner, conversation veered toward the efficacy of poverty alleviation programs such as those operated through the Punjab Rural Support Program, where Dr Saquib was General Manager. Dr Saquib’s colleagues said that with such high lending rates (20 %), the microfinance activities could not make a real difference in the lives of the poor. Dr. Saquib suggested that with free capital, the rates could be brought down and poverty alleviation efforts made more effective. Mr. Saleem Ahmad Ranjha, made a spontaneous contribution of Rs 10,000, and requested Dr Saquib to implement his ideas. Thus the Akhuwat credit pool was established and the first donation was loaned to a woman. The group to which she belonged was symbolically named Bismillah(Begin in the name of Allah the most Beneficent the most Merciful) Group. Eventually, the lending pool expanded to Rs.100, 000. In a few months, a contribution of Rs.200, 000 extended the lending arrangement to five-six groups of women. As a General Manager of the Punjab Rural Support Program (PRSP), he found charging 20% interest rate on the loans as disturbing. So in order to alleviate poverty he found out his new model of microcredit without interest.
And also there are many researchers who still argue between not for profit and for profit types of Social Entrepreneurship which some authors assure that Social Entrepreneurship organizations must be only not for profit way, while others think that it may be for creating value for owner as a profit generation. At the same time some researchers states about third type which contains both not for profit and for profit sectors and appear hybrid type of creating social value, but in our Case of Akhuwat, organization is not for profit organization, and never thought to be for profit generating here are the words of Dr Saqib about it: “We have served more than 22,000 borrowers to-date. For us it is neither business, nor industry, hence, there is no question of profitability “. Dr. Amjad Saqib, Executive Director, Akhuwat tells NGO World.
As Anderson and Dees (2002) stated that “Social entrepreneurship is about finding new and better ways to create and sustain social value’’ (p. 192). Akhuwat riches the real people who really need money to do business not to buy cars or get rich and think to go to travel around the world but people who needs to earn some money in order to sustain themselves to buy daily food to live. Social Entrepreneurship concept: an activity that includes ability to find out specific social problems and specific solutions for these problems in society to address it; the evaluation of the social impact, the business model and the sustainability of the venture; and the creation of a social mission-oriented for-profit or a business-oriented nonprofit entity.( A.M. Peredo, M. McLean / Journal of World Business 41 (2006) 56–65).Lets look what Akhuwat doing towards this concept, As we wrote above there is no any interest rate for loans just only At the start of a loan agreement, a membership fee of up to 6 per cent of the loan is paid towards the operational expenses (5 % servicing, delivery, and 1% insurance) of the organization. Minimum loans are for Rs 1,000 and maximum are for Rs 20,000. Loans amounting to less than Rs. 4000 are exempt from membership and insurance fee. Most loans are in the Rs 10,000 range. These are paid back at Rs 1,000 per month. (Akhuwat book, p.10)Yes, operational expanses should be covered but for this amount of money they cover only 70 percent of the expenses and the rest are paid by The Board of Managers. Amazing, Executive director Dr Saqib works for nothing, he does not receive any amount of money as a salary, also The Board of Directors who sustains of Akhuwat to find funds and donations for loans and decide a lot of things in the organization work process work for free. And there are many volunteers such as students who help to open official web page of organization and now helping to donate money through internet, some professionals in microfinance, auditors to check working
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process and many people. For example, another well-wisher suggested a ‘Friends of Akhuwat’ program for the UK, where individuals can donate £100 a year to the credit pool of the organization. These ideas need to be strengthened and developed. (Akhuwat book,p.6)
Dr Saquib, the Executive Director, works on a voluntary basis. The use of the mosque as the organization’s infrastructure has replaced the use of PRSP’s premises. Group loans are mainly administered from the houses of the group presidents where all fortnightly meetings are convened. Core staff consists of fifty five main workers, paid through the operational pool. There had been only two core workers in the organization’s early years. No vehicles have been bought, and those using personal conveyance for Akhuwat work are compensated according to a fixed rate. Volunteers help in the retrieval of payments at the beginning of the month, as well as in reminding borrowers to repay. In general, it was not easy for Akhuwats success as Dr Saqib said: “We feel no embarrassment in asking for favors or contributions from others, or using our contacts for Akhuwat.” All the Directors use their personal contacts and influence to further Akhuwat’s work. They are all apparently convinced that their remuneration lay in the fact that “they are able to carry out God’s work.” We can easily say that they innovated a new type of microcredit organization which works for poorest of the poor and they made a change by bringing a change to the lives of people by giving them hope and place from their ideas to start their business with their own ideas. Yes, they are innovative and they are change makers. (Akhuwat book,p.24-26)
5.9 New way of serving poor in Microfinance field
The World Bank (2003) states that services to satisfy basic human needs, particularly those that contribute to health and education, are failing poor people in terms of access, quality, and affordability. The main reason for this is public spending are not reaching poor people if it reaches it is in poor quality and still their needs remaining unmet. But because of growing number of initiatives of Social Entrepreneurship field who searches new ways and problems in society and solve this society problems in different way. According to Seelosa & Mair(2005,p.48)“Employing novel types of resources and combining them in new ways, Social Entrepreneurship is a rich field for the discovery of inspired models of value creation”. As we gave a lot of examples of initiatives which “The Institute for OneWorld Health” (USA) pharmaceutical organization helps to countries where they cannot reach any pharmaceutical goods which they need it but they can not afford to buy it, “Sakem”(Egypt) as well Egyptian organization not only creates economic, social, and cultural value, but also has a significant influence to Egyptian society. And finally The Grameen bank founded in 1976 to supply credit to those who would not qualify as customers of established banks by Muhammad Yunus an economics professor, And received Noble Prize for his challenges for established organizations to prove that poor people as well has ability to open their own business and able to pay back loan interests at required time zones (Grameen Communications, 2004).
Our actual case study as well in microfinance field which acts with name Akhuwat founded in 2001 by Dr Amjad Saqib. While a lot of established organizations failed to support to give loans to poor people, Akhuwat organization from 2001 till 2006 has 6,000 active borrowers including both the individual borrowers and group loans. Akhuwat has served 13,000 beneficiaries through a credit pool of Rs. 60 million and it has disbursed loans worth Rs. 130 million. Akhuwat has expanded outside Lahore and now has a total of 11 branches in Lahore, Rawalpindi and Faisalabad. All this expansion is done whilst keeping the loans interest free with the same membership fee of 5%. Akhuwat is a novel initiative, which entirely banks on civil society; it has been able to use the existing network of mosques and churches as its branch offices and to bring marginalized communities together for community meetings, loan appraisals and recovery and training events. Akhuwat operates with a small team of core staff and has succeeded in mobilizing volunteers to perform various administrative and professional tasks which have contributed to the low operational
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costs of the organization. Akhuwat does not seek funding from international aid agencies but depends on the generous spirit of its board of directors, local businessmen and philanthropists to contribute to its credit pool. The loans are interest free and there repayment schedule is flexible and decided by the borrowers according to the size of loan and the nature of expected return on micro-enterprise(Akhuwat,2008).
Akhuwat is a concept where a well-to-do family sponsors one or more poor families. Many poor families can be saved from abject poverty by sharing some of our resources. The loan, Akhuwat provides is given for one year and once returned it is lent again to another underprivileged family. The more the society donates the more benefits the poor will reap. The program was started with a paltry sum of Rs. 10,000 and has been able to create a Qarz-a-Hasna Fund or Credit Pool of 60 million rupees. The President of Pakistan, General Pervaiz Musharraf and the Governor of Punjab, Lt. Gen. Khalid Maqbool is amongst the many donors of the fund. The donations range from a few thousand to millions of rupees. The hallmark is total reliance on civil society and on the Pakistani philanthropists imbibed with the spirit of Mua’khat. (Akhuwat book, p. 26)
However, Grameen bank is also serving poor people since 1976, but Akhuwat’s way of micro financing is totally different and has a new model. The interest rates are the first big difference which in Grameen bank this rate is very high, but the same issue in Akhuwat it is interests free and only charged 6 %(5 % for loan 1% for insurance) at the beginning. Second issue is operational expenses which Akhuwat try not to spend much money for operational expanses for vehicles, renting house for offices and salaries of The Board managers who works on voluntary basis.
5.10 Contribution of Akhuwat to sustainable development
As we know we running across with global threats to the world like terrorism, war, natural catastrophes, the hungry and the diseased pictures still busting in newspapers and TV’s and mainly they touches poor people which loose their houses, or death. Even for example, lately, in China’s Sichuan province there was terrible earthquake which buried more than 15,000 people, mostly poor (CNN,14 may 2008)When I asked a question from the Chinese student about disaster and giving him my regrets, and he answer me with deep breath in sane “mostly, the power of nature earthquake buried under shelters are poor people who live in old and not in good situation shelters ”. Yes, again poor people who always in summits of Millennium development goals protected in books but not in action. Such kind of examples are a lot, may be our inks not enough to describe about of them, but anyway everybody must be responsible for poor people even in their own province, region and city. One of such kind of person and organization is Akhuwat under executive director Dr Amjad Saqib. He thinks that “every global problems begins in local places which must be managed locally by social entrepreneurs, that’s why in order to solve global problems, we should find solutions to local problems which in result may cause global problems.” At the same time United Nations called all countries to spread sustainable development problems globally and stated: No single blueprint of sustainability can be found, as economic and social systems and ecological conditions differ widely among countries. Each nation will have to work out its own concrete policy implications. Yet irrespective of these differences, sustainable development should be seen as a global objective.’ (United Nations General Assembly 1987) To put into action sustainable development, United Nations defined a set of Millennium Development Goals which based on The Resolution by the General Assembly in September 2000 in which included 8 specific, quantifiable and monitor able goals for development and poverty alleviation by 2015. Human rights, health, education and environmental issues included to the Goals ( Seelos, Mair, 2005). Akhuwat provide poor people several types of loan products which includes Group loans, individual loans, loans for health, educational loans and house loans. And all of them are available only for poor people and most importantly without interest. If we look at loan portfolio of organization most loans 91 %(13,351st)
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goes for enterprise loans, 5 %(762st) for liberation loans, housing loans 1%(147), education loans 1%(132), marriage loans 1%(218) and finally health loans !%(101). Most loans are given to enterprise loans especially individual and group loans. As we see from portfolio of distribution of loans, the Organization is doing well towards sustainable development goals, which include areas most importantly economic development, for future needs of new generation, health, education and environment problems. (Akhuwat book,p.5-6)
And here we want to give description for Sustainable Development as Brundtland’s (1987) definition of SD as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” And many initiatives of Social Entrepreneurship such as Sakem, BRAC and of course Akhuwat make abstract notion of Sustainable Development definition to move to practice. If we see definition carefully we can notice three aspects in it which : 1) satisfying basic human needs; 2) form communities that establish norms, rights and collaborative behavior; 3) transfer more abstract needs of future generations into action today( Seelos Mair ,2005).
Satisfying basic human needs, as Brundtland(1987) “ report that priority be given to satisfying the essential needs of the poor” ( Seelos Mair ,2005,p.8). Akhuwat as basic contribution to basic needs of people creating job places for people and giving them opportunity to sustain their lives by themselves by providing poor layer of society with group and individual loans without interest. Also Akhuwat’s Group lending program only focused on women who were organized in Self Help Groups (SHGs) of 10 members each and thus relied on social collateral. Main idea is to give inactive layer of society women to be active sustaining their family. And there are some social sides such as 1 % insurance which paid by poor for loan just incase of death the loan is written off and the family is provided Rs.5,000 for funeral expenses. If the client was the only earning member of the household then the family is provided with Rs.1, 000 a month for three months to meet basic expenditures. If the client becomes handicapped then again the loan is written off and he is provided a wheelchair. And also we want to mention about own workers of Akhuwat that Unit Managers get a bonus for 100 percent recovery in their monthly pay and if they have disbursed more than 150 loans and are meeting their monthly target of disbursing 25 loans a month, they are eligible for an interest free loan to purchase a motorcycle. Akhuwat also provides its staff with some medical facilities and educational allowance for their children. Furthermore, staff members get an extra month’s salary every year. (Akhuwat book,p.13)
Changing norms and behavior to create opportunities
As stated by Brundtland(1987) as a second important development aspect that the poor be given the ‘opportunity to satisfy their aspirations for a better life’. And health and social issues ware taken as important aspects before operationalize in economic life ( Seelos Mair ,2005). Akhuwat provide its first loans as a group loans to the group of women who was socially passive in Pakistan. Women in Pakistan were the most vulnerable and had the least rights comparing to the men. As Akhuwat started to give loans to women, their rights in society and economic life increased and with these activities Akhuwat changed the rules and perceptions about women also reduced inequality between genders. As group loan process groups which contain women meet every week to repay their loans and discuss their ideas for future plans. This instilled discipline, mutual support and individual as well as communal responsibility created by Akhuwat. Also unusual type of micro financing which created new model by Dr Saqib also changed perceptions about microfinance that it is possible to give interest free loans and rich 100 % sustainable development. (Akhuwat book,p.18)
To think and create environment for future generations need
As third aspect stated Brandtland(1987) was satisfying current generations need achieved by “without compromising the ability of future generations to meet their own needs” ( Seelos Mair
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,2005,p.9). Future generations need abstract to us and we don’t know exactly what they need but we know that they have to choose it freely by themselves and our main issue as sustainable development is to give them, leave them good environment and alleviate poverty also to eradicate barriers which stops some forces to choose future generation their own needs freely. Environment is our common social asset which we should take care at the same time at the same value. While many poor countries solving their own current problems and forgot about future generation needs. Of course one of these countries is Pakistan. As we stated in previous sections there are many poor peoples in Pakistan and their daily problem is how to find money to feed their children, and they never think about future of their children of course they think but they can not afford for that, for example they don’t have enough money for school and college fees, after growing up they have to go out to find some money not freely but they have to, if you ask some questions regarding their inside feelings about dreams they all wanted to study at Universities be teacher, doctor scientist and so on. Akhuwat started its mission in 2001 and till 2006 they already have given 132 educational loans for poor families to go to universities. Also many poor people can not afford to make a wedding for their children, and Akhuwat given out 218 marriage loans for poor people. And these educational loans are giving their return to sustain future generation children in order to gather loans to study at universities for their poor friends they help to organize to create web page for Akhuwat which helps to gather donations for poor people online. These are the students which Akhuwat help them by giving educational loans as a result they are helping as working in voluntary basis to gather loans for their friends to study at universities. (Akhuwat’s Feasibility report-1, p. 4)
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6 Conclusion
Microfinance is emerging sector in Pakistan because Pakistan is attractive market for MFIs with a population more than 160 million and two third of population is rural based. Need of microfinance is higher than any other country because more than 17 percent of total population are living under poverty line and almost 7 percent among total poor people are ultra poor. Due to illiteracy, poor health facilities and physical infrastructure, condition of poor is becoming worst. Furthermore, poor’s accessibility to finance is very limited and even having innovative ideas for setting up business, they have no amount to start their business. This situation reflects a very bad picture about poverty and increase the need of microfinance and its accessibility to maximum poor people. Steps should be taken on public and private sector to increase the outreach of microfinance.
Entrepreneurship has been neglecting issue in government policies. Today, SMEs and microenterprise are playing important role in economic activities of every country. But in Pakistan, generally, owner of SMEs and especially of microenterprise are doing their business in conventional ways. They don’t bring any change or innovation in their production system and business strategy which result in poor productivity. On microenterprise level, in our opinion, entrepreneurship has become important because by bringing innovation in their production system or business operations, they can save resources, utilize in more productive way and can get productive results. Micro entrepreneurship should be encouraged by MFIs and Government should give entrepreneurship friendly policies.
Microfinance and entrepreneurship bring a new ways for business. Poor, generally, more sensitive for their business, and work hard and they have no other option to survive therefore they always think about their business and try to do something new if they have opportunity. Implementing entrepreneurial ideas in microenterprise bring more profit and productive result. Therefore, combination of microfinance and entrepreneurship is a very effective development tool that can alleviate poverty and empower people with more speed.
Lending methodology of Akhuwat is Qard-e-Hassan, a pure Islamic way of microfinance. As we discussed that Akhuwat is charging 5 percent of total loan as membership fee, but they are bearing 7 percent expense per loan. According to Akhuwat, by increasing their operations, they will minimize their expense and bring it to 5 percent. We reached on this result that this will not be a consistent way in future to minimize the cost because by expansion in operations, there will be need of more expense because of setting up of offices, hiring people and other utility expense. Therefore, to progress in consistent way, Akhuwat should adopt additional strategy of financing with Qard-e-Hassan. In our opinion, Muharabah will be very suitable for lending loan because for Akhuwat, it is the easiest way to do. Akhuwat has offices near to Mosques, frequent interaction with people and borrowers, and field staff meet extensively with borrowers, so by Muharabah, Akhuwat can purchase products or material or anyone which borrowers need, and put some profit and give to borrowers. By this way, Akhuwat can increase profitability, minimize administrative cost and put profit in credit pool for further lending or to use in expanding operation.
Akhuwat is giving loan to individuals, and have finished giving loan in solidarity groups. We investigated this issue and raised questions during interview from different professional and reached this consensus that solidarity-group-lending is more effective than giving loan to individual because to handle individual loan, more expense is used. And when there will be thousands of borrowers benefited from Akhuwat, it will bring a huge burden of administrative cost on organization that can effect the sustainability of Akhuwat. Akhuwat should adopt both strategies of lending loan; individual loan and solidarity group loan. They can differentiate both by defining locality. If locality is dense by population, then adopt group lending otherwise individual loan.
In answering to sustainability and social entrepreneurship, we tried to find out the works done in the field of “Social Entrepreneurship” and its impact to the sustainable development which set
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millennium Development Goals by United Nations. And use these theories toward our case study Akhuwat which works in the field of Micro financing with its new loaning model created according to “Shariah” by Dr Amjad Saqib and investigate what they did to alleviate poverty and contribution to sustainable development. .
As a result we find out that Akhuwat is non for profit organization which gives interest free loans to the poorest people of Pakistan and for sure even in little amount they reduced poverty. And their one of the most important ideology that everybody at first must think about their local problems, if they look at problems locally, there would be no any global problems in the world. Sustainable development problem now globally dispersed and day by day growing number of initiatives of Social Entrepreneurs trying to add their little value to social value creation. Also Dr Saqib said that in the field of Social Entrepreneurship there must not be any words about profit, the core value under it must be social value creation. This organization is contributing economic, social, health and educational values to sustainable development. In short, some headings according to the Brundtland’s (1987) definition of sustainable development, Akhuwats contributions are: Satisfying basic human needs by creating job places for people and giving them opportunity to sustain their lives by themselves by Providing poor layer of society with group and individual loans without interest; Changing norms and behavior to create opportunities, Akhuwat started its work to give loans to women, their rights in society and economic life increased and with these activities Akhuwat changed the rules and perceptions about women also reduced inequality between genders; To think and create environment for future generations need, Akhuwat till 2006 have given 132 educational loans for poor families to go to universities. Also many poor people can not afford to make a wedding for their children, and Akhuwat given out 218 marriage loans for poor people.
In general, as we found out during the research, the contribution of Akhuwat to sustainable development is enormous. We can proudly say that Akhuwat’s way of business is totally Social Entrepreneurial. It has got innovative new model of interest free microfinance and change maker leaders like Dr Amjad Saqib, is alleviating poverty and helping rural poor people with new ideas to create healthy society.
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ies.
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Appendix
(A)
Table 3: Microfinance Outreach of MFBs (SBP(d), 2007,p.19)
Micro Finance Outreach of MFBs
2002
2003
2004
2005
2006
Institution age (yrs)
2
3
4
5
6
No. of Branches
39
56
75
91
145
Total No. of Borrowers
56,939
95,090
177,648
248,091
326,498
No. of New Borrowers
56,939
38,151
82,558
70,443
78,407
Total No. of Depositers
2,773
10,150
18,589
32,577
70,891
No. of New Depositors
2,773
7,377
8,439
13,998
38,134
Average Loan Size (Rs)
6,332
7,969
7,340
9,450
8,721
Average Deposit Size
23,231
38,625
25,229
20,867
20,731
(B)
Table 4: Mode of financing and deposits (SBP-2,2007,p.6) (Rs. In million)
Modes of Financing
June-07
Sep-07
Inc./Dec.
Murabaha
35,767
36,469
2%
Ijarah
24,038
25,738
7%
Musharaka
582
1,394
139%
Mudaraba
-
84
-
Dimin. Musharaka
15,877
23,314
47%
Salam
952
1,276
34%
Istisna
757
39
-95%
Qarz/Qarz-e-Hasma
6
8
28%
Others
1,663
927
-44%
(C)
Modes of Islamic financing Murabaha, 40.90%Ijarah, 28.80%Diminshing Musharakah, 26.10%Salam, 1.40%Musharaka, 1.60%Mudaraba, 0.10%Others, 2.10% Murabaha, 44.90%Ijarah, 30.20%Diminshing Musharakah, 19.90%Salam, 1.20%Musharaka, 0.70%Istisna, 1.00%Others, 2.10%
Fig 15: Modes of financing- June 07 Fig 16: Modes of financing- Sep 07
(SBP-2,2007,p.6)
(D) Education statistics of Pakistan
65
Fig 16: Education in Pakistan, Primary NER, GER and Literacy Rate (Source: Akram Khan, p.15)
(D)
Unemployment rate
Fig 16: Unemployment rate in rural, urban and country as a whole
(E)Table 5: Budgetary Poverty Related Expenditure by Sectors as % of GDP (source: PRSP,2006,p.15)
Sectors
2003-04
2004-05
2005-06
Water supply/sanitation
0.10
0.10
0.13
Educaiton
1.73
1.78
1.84
Health
0.48
0.48
0.51
Social Security and Welfare
0.07
0.03
0.10
Rural Development
0.33
0.23
0.19
66