Creative business models to bridge the digital divide

May 2019

Blog

We know that digital technology is transforming the world around us. And the statistics are staggering. By 2025, the number of smartphone connections in Sub-Saharan Africa will more than double. And 1.4 billion more people will access the mobile internet.

These advances are sparking a new generation of (social) entrepreneurs and investors that see business opportunities amongst the millions of people who were previously inaccessible or too expensive to reach. Jumia, Africa’s biggest e-commerce platform, is a prime example of the excitement for digital innovations in emerging markets. After just 2 days on the New York Stock Exchange they are valued at US$2.4 billion.   

The Innovations Against Poverty (IAP) project (funded by the Swedish International Development Agency) is investing in visionary entrepreneurs who are developing digital solutions that will improve the lives of low-income people living in places like rural Cambodia, Uganda, Ethiopia and Zambia.

While the rapid growth in digital connectivity has motivated these entrepreneurs to start their businesses in the first place, they are still confronted with the reality of the digital divide in their daily work. We interviewed four entrepreneurs, who were selected by the project to receive funding and advisory support, to learn more about the challenges and opportunities they face while developing their digital innovations for low-income markets. While the technologies and impacts are different, a common theme was shared by all four – creative approaches are needed to bridge the digital divide that still exists today.

It takes a lot of smartphones to reach a farmer

AMK Microfinance Institution in Cambodia is developing a mobile app so rural farmers can access financial services, market and farming information. While 100% of Cambodian’s reportedly have mobile phone connections, only 24% of rural farmers own a smartphone, according to a study funded by the Cambodia Agricultural Value Chain Program. This obviously limits farmers’ ability to access the AMK app.

Fortunately, farmers interact with many different people on a regular basis who do have smartphones and can provide access to the AMK app, such as government staff and NGO workers, input suppliers, credit officers and of course, well-connected young people – 80% of smartphone owners are under the age of 35. While this strategy may limit app usage in the short-term, it will help bridge the gap for the next few years until smartphone prices and data usage are accessible for all rural farmers.

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Rural farmers in Cambodia accessing financial services, market and farming info

Use a blended approach to reach low-skilled job seekers

Ahadootec in Ethiopia connects low-skilled job seekers with employers through a digital platform called Hahujobs. “Despite high unemployment rates in Ethiopia, we had difficulty recruiting talent for our own business and realised that those issues were shared by many companies across different sectors,” says Eskinder Mamo, co-founder of Ahadootec. 

Hahujobs is connecting low-skilled workers with manufacturing jobs, a booming sector that is central to Ethiopia’s strategic plan to become a middle-income country by 2025. Because mobile phone penetration is so low amongst low-skilled workers – in 2017 it was just 34% - Eskinder and his team had to develop a strategy to both reach and uniquely identify low-literacy job seekers. Ahadootec strategy is blended – they partner with SMEs to serve as physical hubs where they can onboard low-skilled job seekers to their digital platform. Job seekers create an online CV at the hub and then get matched with an employer. This usually happens immediately because of the oversupply in vacancies. Their CV is then linked to their fingerprint, eliminating the need for job seekers to have a mobile phone for unique identification.

Encourage smartphone adoption by turning it into a productive asset

Emmanuel Emodek, co-founder and Managing Director of ChapChap in Uganda, sees the potential of digital connectivity to transform the informal economy in Uganda. He and his team have developed a point-of-sale mobile app for Small and Medium Enterprises (SMEs) to track their inventory, sales and expenses. Low-income customers can also pay their electricity and water bills via the app at affordable rates, saving them precious time. “Digitising SMEs gives them an opportunity to understand their business better and shorten their journey to success,” says Emmanuel.

However, smartphone penetration in Uganda in 2017 was 41%, which is still relatively low when you are selling a product that requires a smartphone. How does Emmanuel convince informal entrepreneurs to invest in a smartphone and his app? The math is simple. When retailers sign up to be a ChapChap agent, they can earn roughly 150 USD per month in commissions for selling financial services. With a smartphone costing about US$50, the payback period is less than a month. “Over the past 2 years we have tripled our customer base and sales because our value proposition makes financial sense to SMEs,” shared Emmanuel. Turning the smartphone into a productive asset clearly makes adoption an easy sell.

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Customer in Uganda paying electricity bill via the ChapChap app

Leverage technology to increase digital connectivity

Okra Solar, was founded by Afnan Hannan and Damian Veling in 2016, with the aim of developing an energy solution that would be more reliable than a solar home system and more affordable than the dominant alternating current (AC) microgrids. Over the course of 2 years, they developed a fully plug and play IoT device that provides rural energy access 24 hours a day, at 1/3 of the cost of existing options.

Developing this solution has required high upfront R&D costs, but now that the product has been validated, Okra is levering it to deliver additional services. In collaboration with their distribution partner in Indonesia, Okra is testing attaching Wi-Fi boards to their technology, which means that Okra distributors will not only sell energy-as-a-service to communities but also internet-as-a-service. In the Philippines, Okra is trialing using their energy service as collateral for communities who receive financing for productive appliances, such as smartphones. If successful it will be an interesting model for how access to energy can be a catalyst for digital connectivity and financial inclusion.

Digital connectivity is indeed transforming the world, especially in low-income markets, where millions will buy smartphones and access the internet for the first time over the coming decade. New technologies, such as those developed by entrepreneurs supported by IAP, are transforming the production and distribution of critical goods and services. In turn, productivity, incomes and access to life-enhancing products and services are on the rise. However, digital solutions alone will not be a silver bullet, at least for the coming years. Creative, entrepreneurial approaches are needed to bridge the digital divide so that low-income users can access and benefit from these digital solutions.

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Okra prototype, powering a freezer in rural Cambodia

​​​​​​​Banner image by rawpixel/Pixabay. 

Expert

Geertje Otten

Senior Advisor - Inclusive Business


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