Investing in technology can help lift people out of poverty, and investments that use technology for development are good for business, creating millions of new customers. But the development landscape is littered with projects that never got past the pilot stage. When the seed funding from philanthropies or governments runs out, if projects haven’t signed up enough paying users, there’s nothing to fuel growth.
As simple as it sounds, development projects need revenue. Many organizations aim to narrow the “digital divide”: the socioeconomic gap between people with Internet access and the skills to make use of it and people who lack those resources. Using information and communications technology (ICT) for development is fairly common, but surprisingly, most digital divide projects don’t generate revenue. Some projects seem never to have been designed as anything other than pilots: they remain limited and local, delivering only marginal benefits.
To determine the best approach to using ICT for development (or ICT4D, as it’s sometimes called), Huawei recently interviewed 150 telecom operators, government bodies, regulators, NGOs, and social enterprises in 11 countries. Many people we spoke with said there were simply too many projects that were based on good ideas but lacked adequate funding. Some countries have grown so frustrated with small, unsustainable pilot projects that they have actually banned them: Uganda, for example, which has only one doctor for every 25,000 people, has issued a moratorium on new mobile health initiatives.
The most common response we received, however, was that successful ICT4D efforts start by providing something that users value enough to pay for. Value, of course, resides in the mind of the customer, and many potential beneficiaries simply don’t understand the value of being online. An Economist Intelligence Unit report commissioned by Huawei in 2013 found that “a lack of perceived value” is one of the main things that keeps a lid on digital adoption and usage rates. Another recent survey found that half of rural Brazilians would not be interested in internet access, even if it were free.
NGOs and philanthropic organizations often give away their digital products and services, as if being free could compensate for a lack of value. In fact, for-profit tech companies often do the same thing, reasoning that if they build a huge user base now, they can figure out how to monetize it later. This approach consigns many ICT4D projects and tech startups alike to failure. Hystra Consulting, which works with businesses and social entrepreneurs, studied 280 ICT4D projects and found that 136 relied completely on donor funding to cover their operating costs, while 35 were partly subsidized.
Supplying something that customers will pay for has another virtue: it provides feedback, which many digital inclusion projects lack. By charging even a small amount, ICT initiatives get a clear signal about how to adapt their offerings in response to changing conditions. Without this feedback, they operate in a vacuum of good intentions, insulated from the market and ultimately cut off from the very communities they are trying to serve. Nothing provides clearer evidence of a project’s viability than a base of paying customers, and this proof of success makes scaling up vastly easier.
For example, take Bridge International Academies, which runs over 400 for-profit schools for approximately 100,000 students in Uganda and Kenya whose families earn less than $2 a day. Its ICT systems have standardized the life cycle of education delivery: the way schools are built, how teachers are selected and trained, and how lessons are delivered and monitored for improvement. Costs are low because each school has just one manager, who uses a smart phone with tailored content. Non-classroom activities, such as billing and admissions, are processed automatically through a smartphone application connected to the school’s back-office software. Everything – tuition, school lunches, staff salaries – is paid for with mobile money. In fact, the school doesn’t accept cash at all. Bridge provides an excellent example of using technology to solve social needs in a profitable and scalable way, achieving proven social impact at a reasonable cost. It opens a new school every 2.5 days, and aims to teach 10 million children over the next decade.
Another example is M-KOPA, a revenue-generating social enterprise that sells lighting systems to the rural poor in Uganda and Kenya. Villages in those areas often lie off the electricity grid, which means the only available form of lighting comes from kerosene lanterns that emit harmful fumes and pose a fire hazard. M-KOPA sells a home solar energy system for about US $200, too much for any of its customers to pay at one time, but the same as what a household could expect to spend on kerosene in a year. The company charges customers a small payment up front, followed by micropayments of about 46 cents made daily by cell phone over the course of a year. After 12 months, customers own their systems outright—or can continue paying and get an upgraded version. M-KOPA’s strategy of providing a valuable product and charging small fees that generate revenue has allowed the company to grow: as of January 2015, it employed about 500 full-time staff and sold its products through a network of about 1,000 direct sales representatives.
Finally, Vodafone Farmer’s Club provides agricultural information that helps farmers improve their livelihoods. Launched six years ago in Turkey, where roughly a quarter of the population are farmers, the service provides early warnings of storms and extreme weather, tips on the best times to harvest, updated commodity prices, and expert techniques on how to control pests, maximize crop yields, and manage agricultural resources. Customers can pay monthly, or choose an annual billing option that lets them pay at harvest time, when their income is highest. Currently 1.2 million Turkish farmers subscribe to the service, which Vodafone will expand to India, Ghana, Kenya, and Tanzania this year. From 2012–2013 alone, the service improved Turkish farmers’ productivity by an estimated €190 million.
These success stories cannot remain the exception. The widespread failure of ICT4D pilot projects demonstrates that making digital services free is not enough—the goal should be to make them valuable. Technologies that don’t meet this goal are exacerbating the digital divide, not helping to close it.
It’s easy to envision a technological future where those with wearables enjoy better health, where cities using “Internet of Vehicles” technology have lighter traffic and fewer accidents, and where countries that use agricultural sensors have a more abundant food supply. Without sustainable, scalable ICT4D efforts, non-adopters will continue falling further and further behind, and people everywhere will miss out on how technology can improve their lives, make economies more vibrant, and foster global development.
This article has also been published in ‘Harvard Business review’.