An example of how private corporations can help end poverty in China: Alibaba and the “Internet + Poverty Reduction”

This blog is part of a series produced to commemorate End Poverty Day (October 17), focusing on China – which has contributed more than any other country to global poverty reduction – and its efforts to end extreme poverty by 2020.  Read the blog series  here. 

Following a 2009 earthquake in Qingchuan County, Sichuan Province, Alibaba introduced the “Internet + Poverty Reduction” model, with the core concept to boost economic development in the affected areas with a business model that empowers people to move out of poverty using the Internet.

Alibaba announced its rural e-commerce strategy in October 2014, with a plan to invest RMB100 million (about $14.8 million) over the next three to five years in the development of local e-commerce service systems for 1,000 counties with 100,000 villages.

The program provides valuable services in three areas:

1. Easy and affordable access to goods and services in poor areas including: delivery of consumer goods to rural areas and farm produce to cities, mobile phone recharge, utility bills payment, booking airline and train tickets, making hotel reservations, as well as microfinance, online medical consultation, and online learning;
2. Provision of ecosystem support for sustainable rural development, including raising awareness about the Internet among local officials, building the capacity of local firms to use the Internet for business, Internet skills training for young people and farmers; and
3. Infrastructure development for the new economy, including logistics infrastructure, payment systems, financial services, cloud computing and data collection. 

By mid-2016, Alibaba’s Rural Taobao Program established “Internet+” service systems in 18,000 villages in 400 counties (including about 200 poorest counties) in 29 provinces, and recruited more than 20,000 Taobao partners and helpers. In July, Rural Taobao launched its service-based 3.0 model, upgrading partners to rural service providers and village service stations to local service centers, business incubators and public-benefit cultural centers.
Alibaba’s “Internet + Poverty Reduction” features a number of innovations including e-commerce, job creation, access to finance, tourism development, education and healthcare.

Reducing costs and increasing incomes for the poor via e-commerce

The company’s massive online shopping retail platform has also increased incomes for poor areas. Through e-commerce, some poor areas have transformed their traditional industries to gain new vitality, some have expanded sales of their local and traditional products, and some have found new market needs and developed production with local resources to meet these needs.

Figure 1:  Online Purchases and Sales on Alibaba’s Retail Platform by 832 Poor Counties, 2013-2015 Attracting young migrant workers to return to their villages and start their own businesses

Rapid development of rural e-commerce also provides a stage for young migrant workers to return to their villages and start their own businesses. Alibaba’s platform has created two types of jobs: as farmer-online shop owners, and Rural Taobao partners (Taobao is a Chinese website, www.taobao.com, for online shopping similar to eBay and Amazon that is operated in China by Alibaba Group).

Farmer-online shop owners sell industrial or handmade products via e-commerce platforms. A typical example is “Taobao village” (A Taobao village refers to a community of rural online entrepreneurs who have opened shops on Taobao Marketplace). By the end of 2015, there were 780 Taobao villages in China with over 200,000 active online shop owners and total employment of about 1 million people.

Taobao partners and helpers are the key service providers in the Rural Taobao Program. Taobao partners help farmers buy and sell online and earn a service fee, while Taobao helpers are assistants to Taobao partners. By mid-2016, Rural Taobao enlisted 18,000 partners and 8,000 helpers across the country. Expanding access to financial services

The Ant Financial Services Group (Ant Financial), an affiliate of Alibaba, offers online lending to farmer-online shop owners or micro and small enterprises. It has also developed a microcredit and insurance-based “Internet + Finance + Poverty Reduction” approach.

It created an agricultural microcredit business model of “online + offline data”. For farmers or micro and small enterprises without online data (credit history), rural Taobao partners help identify their financial needs and assess their creditworthiness. Lending decisions are made based on analysis of such online and offline data. By mid-2016, Ant Financial’s microcredit program covered 234 counties with 4,852 villages, with average loan size at RMB44,000 ($6,533).

Ant Financial is also working with insurance companies and local governments and jointly launched an insurance scheme called “Poverty Reduction 100”. By tapping into poverty reduction funds and crowdfunding insurance to expand coverage, commercial insurance coverage has expanded, helping poor people to avoid falling into poverty due to illness, disability, natural disaster and education-related costs. By August this year, a pilot scheme in Sihong County in Jiangsu Province settled 284 claims and paid RMB750,000 ($111,350) in total insurance compensation.

Developing tourism to help people escape poverty

Rural Taobao and AliTravel work with local governments and travel agencies to develop countryside tourism based on local conditions. Along with the creation of a range of tours–countryside leisure tour, fruit-picking tour, parent-child tour and folk culture tour–is the marketing of agricultural and handmade products by Rural Taobao. The innovative “Internet + Tourism + Poverty Reduction” approach creates additional sources of incomes for the poor and opens a new and sustainable way out of poverty. Take Yankenglingtou Village in Songyang County, Zheijang Province as an example. Per capita income in the village increased to RMB7,444 ($1,105) and RMB8,337 ($1,237) in 2013 and 2014, respectively, from RMB6,530 ($969) in 2012, due to e-commerce, and reached RMB9,171 in 2015 due to tourism development. By mid-2016, tourist operations are in service in 16 poor counties. 
  Using education to stop intergenerational poverty

Through Rural Taobao, village libraries have been set up, and left-behind children are provided with free school supplies as well as hotlines to talk to their parents who work in cities as migrant workers. In August 2016, Rural Taobo launched the “Super Classroom” Project to offer a variety of online courses to rural children including English language, art, sports, music and science. By mid-2016, Rural Taobao’s rural education pilots covered 257 counties.  
  Improving healthcare to root out the cause of poverty

The “Internet + Health + Poverty Reduction” approach jointly developed by Rural Taobao and AliHealth provides accessible and affordable quality healthcare services to rural residents. Among its mandates are: 1. The provision of online medical consultation and online hospital registration and appointment  system in rural areas; 2. The establishment of a chronic disease management system; 3. The provision of quality and affordable health check-up services to rural residents in poor areas, and the establishment of an electronic health record system; and 4. Health promotion and education by Rural Taobao partners and the dissemination of information on disease prevention among rural residents. By mid-2016, these health programs have been implemented in six provinces in China.

Alibaba also has a global vision for its practice of “Internet + Poverty Reduction” in China’s poor areas. By promoting this in the context of a new economy to other countries through training and “eco-system” development, it will contribute to the eventual elimination of global poverty and common development.