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World Bank, MS marketing prepaid computers

World Bank, Microsoft are out to see if they can fund sales of personal computers in developing countries.

india Updated: May 25, 2006 10:40 IST

The World Bank's private sector arm and Microsoft Corp are borrowing from the prepaid cellular phone marketing success to see if they can fund sales of personal computers in developing countries, officials said on Wednesday.

"We were trying to understand why we were not being successful and the mobile phone guys were being successful and our hypothesis was they've come up with a terrifically flexible way to acquire their product and services with a prepaid capability," said Craig Fiebig, general manager of Microsoft's emerging markets group.

Microsoft, the world's largest software maker, estimates there are 1.37 billion households worldwide that do not have desktop computers so the potential client base for prepaid computers could reach range between 300 to 400 million homes.

The company chose to test prepaid computers in Brazil, a large middle-income country with annual interest rates of up to 40 percent, to gauge the appeal of selling a big ticket item under a flexible financing scheme, he added.

"If you can make it work there, then you can make it work elsewhere," Fiebig said.

One thousand PCs were put up for sale in Brazil this week for $600, of which consumers pay $200 to $250 while the local branch of HSBC Holdings Plc covers the balance.

Rather than pay monthly installments, users buy cards that activate their computers until the balance, plus interest, is paid off. Meanwhile, the International Finance Corp. covers the commercial bank's risk from users' variable payments.

"What you're buying here is time. Time really is money here," said Xavier Jordan, financial specialist at the World Bank's IFC.

"You can have good or bad credit. It's for businesses and people who don't have $600 to buy a PC and for those who can't get financing because they don't have stable or steady income or have difficulty making regularly scheduled payments."

The next phase of the pilot project goes larger scale in September when 30,000 to 50,000 PCs equipped with technology that disables the computer after a time lapse are due to be sold in Brazil, he added.

Personal computer sales average about 5 million units a year in Brazil and preliminary marketing of prepaid PCs shows 31 percent of those buyers are users who would not have otherwise bought the equipment.

The IFC takes on the risk from variable cash flow and would be compensated accordingly in months of excess returns.

While the World Bank lender fine tunes the financial risk mechanism, Microsoft is already introducing the pay-as-you-go PCs in other emerging markets like China, India, Mexico and Russia.