http://getit.orgGreen Energy Technology & Infocommunication Technology

Introduction of the concept

The social business model and the call for a Social Business Fund, enumerated by Nobel Peace Prize Winner Prof Muhamed Yunus in his book “Creating a World Without Poverty” offers a unique solution to bridging the communication/digital divide in regions dealing with digital divide, poverty and energy shortage. There have been many Social Development Funds, the “Universal Service Fund” or even the “Digital Solidarity Fund” to help bring communication access to the poor, but they all lack sustainability in their models and thus have failed. A “Green Digital Social Business Fund” based on sound entrepreneurial models is a better path to ensure sustainable growth of the communications industry.

Pain Point

Communications is a critical development tool for education, health, economic development, etc. According to the Organization for Economic Co-Operation and Development’s (OECD) Science, Technology and Industry Scoreboard 2005, investment in information and communications technology (ICT) accounted for about a fifth of growth in GDP among OECD countries between 1995 and 2003. Some estimates in the US go so far as to say that every dollar invested in broadband has a 10 dollar return in that investment (explains why so many stimulus packages include broadband networks).

Yet, emerging markets still have 4 times less fixed and mobile telephone lines than exist in the developed world. One of the reason for this is the lower density markets that exist in rural emerging markets leads to low average revenue per user (ARPU). The other reason for lack of access to rural areas is energy poverty. More than 1.6 billion people (one out of every four persons) in the world live without access to electricity. India alone houses more than 35% of the world’s population without electricity, approximately 579 million people. In countries such as Kenya, 85% of the population is off-grid.

To meet the growing demand for communications, these countries have to turn to diesel generators for energy. India alone is estimated to use 2.7 billion litres of diesel to power mobile base stations. Apart from the greenhouse gas emission issues, the diesel often needs to either be helicoptered into remote site and is prone to theft making the cost of diesel very high. This further impacts the already low average revenue per user (ARPU). Hence, they are usually reluctant to serve these regions or when they do, they turn to cheap fuels to power these stations. There is clear need for a different business model to bring access to underserved regions in order to ensure it is done in a sustainable and clean manner. The time to make a difference is now.

Opportunity

It is expected that the next 1 billion mobile phone users will be acquired over the next 3-5 years from emerging markets (it took 15 years to acquire the first 1 billion mobile users). Rolling out new networks remain a challenge for traditional capital investments as returns on investment are often long term and hence the digital divide remains a challenge and is widening in poor, rural areas. The opportunity is to map this pent up demand and ensure that communication access is rolled out in a green and sustainable manner.

Just as much as there is an interest to green the communications industry, the Global e-Sustainability Report had shown that communications can also be a key tool to reduce GHG emissions by as much as 15-20% in other sectors. Green ICT therefore is a great tool to enable key carbon emitters such as China, India, and Nigeria to continue their growth patterns with offered alternatives. The time is ripe for a new innovative and entrepreneurial endeavor that enables solutions to keep up with the pace of growth that is inevitable.

Solution and Implementation

PROPOSED SOLUTION USING THE SOCIAL BUSINESS MODEL

The success of the Grameen telephone ladies model in Bangladesh that a new social model of doing business to service their communications needs.

In his book Creating a World without Poverty – Social Business and the Future of Capitalism, Professor Dr. Muhammad Yunus defines what a social business is and what it is not. It boils down to the following requirements:

social objectives: it needs to have positive social objectives (help comes from the altruistic social services that the business provides to the poor): e.g. health, education, poverty, environment or climate urgency

non-profit distribution: investors may not, after having had their investments paid back, take profits out of the enterprise as dividends. A business may also be classed as a social business if is owned by the poor, and therefore the profits directly work to achieve the social objectives of the business, hence this third category.

community ownership: it needs to be owned by the poor or disadvantaged (dividends and financial growth return to the poor where their fiscal situations are helped bringing them out of poverty): e.g. women, young people or long-term unemployed

Two possible options for implementation here:

A)   package existing successful not-for-profit models and fund and “franchise” them as social businesses into other countries

There are currently some successful not for profit models to bring communications to rural areas through local entrepreneurship. Take for example the Grameen Bank telephone ladies. There are also some successful not for profit models of bringing alternative energy to rural areas such as done by the Grameen Shakti project. The success of both these projects is driven by the desire to have access to communications. The Grameen Shakti model adds empowerment to rural women, by training rural women to make solar invertors and mobile phone chargers in their homes, and to become solar installers. This has the added advantage of using the women as a marketing and distribution channel and offers them a living.

Currently the success of the Grameen Shakti model is confined to Bangladesh. There is an opportunity to take this model and franchise it to other developing countries in Asia and Africa to bring alternative energy to rural areas and bring communications to them through the setting up of social businesses using this model.

B) use the Grameen-Danone model of social business and create social business collaborations to bring communications using “clean tech” big or startup company solutions to rural areas (win-win as they get their technology tested and the country benefits technically and financially).

This can be with other social businesses such as SELF and Green Wi-fi, or with startup clean tech businesses such as VNL (solar base stations), who could use rural areas as pilot projects to test the viability of their solutions. It can also be with big service provider or vendors (BT, Telefonica, Cisco, Juniper) who are marketing their good corporate citizen status or interested in corporate social responsibility projects. Overall it is a win-win to meet the synergistic interests of both parties.

With both options, the goal of this solution is to bridge the communication/digital divides in regions dealing with poverty and energy shortage is the creation of a social business fund for green ICT. A “Green Digital Social Business Fund” based on sound entrepreneurial models is a path to ensure sustainable growth of the communications industry.  The underlining premise of such Fund is to enhance both the welfare of the recipient and the donors.  Ultimately, such focused Fund promotes the triple bottom line; taking into account human capital, natural capital, sustainable environmental practices to be economically beneficial for all.

The mission of the Fund is to enable corporations and communities in the developing countries to create a solution for pressing, everyday life issues in telecom with green and sustainable tools. The created projects will impact the national and the global economy by providing consistent and steady growth for the host and the benefactor nations.

The above mentioned approaches may be enhanced with; (1) Systematic client consultation and involving into the process other stakeholders such as the donor, government, non-governmental organizations, non-profit, local business leaders, academia, etc; and/or (2) Providing solution and partner with well-established poverty alleviation organizations for execution; and/or (3) Application of the “information, education, communication” model throughout the project in the communication with the community.

Overall, any of the aforementioned approaches are a win-win to meet the synergistic interests of all parties.

Fund

The total amount of capital committed by the investors is targeted to be $50 million.  In addition, sponsorship funds will be raised for marketing the Fund and its investors.

The Fund is result-oriented which can be measured by social impact and/or financial performance of the venture in the given time period. The investment size into projects is between $50,000 to $1 million. The Fund invests into both social “not-profit” business or pure profit business depending on whether we are dealing with people living below the poverty line or not. The length and life cycle of investment will defer up to 3 years. The type of return can vary or combine social, educational, and financial returns. The life cycle of the Fund is determined by satisfying the pent up demand for communication.

Investors and criteria to participate in the “for social benefit” Fund

The Fund is open for anyone to invest in and we are targeting those who meet the following criteria: 1) believe in bridging the digital divide, 2) understand energy poverty and 3) believe in social business. Funds could come from high net-worth individuals; corporate philanthropy funds; corporate social responsibility marketing funds; foundations; international and inter-governmental organization. Investors will be offered to play an active (minor or major) role in a way where they can benefit the company they have invested in. We have also considered having the “Fund” be one that is raised on a needs basis i.e more like a sponsorship fund.

Competitive Advantage

We view existing funds not as competitors but rather as role models in this new approach. Our Fund is one of the pioneers in innovation and affordability for sustainable communications in emerging markets. It funds in an area which otherwise will not get funded (this is not a market that traditional VCs or angels, banks are interested in and will be larger than what microlenders or philantrophic funds invest into community projects). The differences between our Fund and existing funds are that the others are either not for profit or micro finance or private equity, and they cater more to organically grown local solutions with no particular sector focus.  Our Fund focuses on bringing state-of-the-art innovation and solutions with a triple bottom line approach to the country of interest.

Team

The current team and informal board of advisors have multi disciplinary backgrounds consisting of experts in green telecom, general business, international policies experts in trade and development, venture capital, private equity and members of the academia.  The team has successfully established, managed, and sold start-ups in different disciplines globally. A more formal structure of pulling talent and goodwill together needs to be done for the Fund to kickoff.

This document has been prepared as a  brainstorming paper for the purpose of SISEP Fund/NGO creation and due credit given to GETIT for any ideas taken from here are shared.