Innovative Financing for ICT4D The Case of TARAhaat

TARAhaat: A Social Enterprise OOOObjectives Sustainable Development Sustainable Business Using ICT

Making Development a Good Business  Creating Wealth  Generating Public Benefits

The Strategy  To evolve a commercially viable ICT-based enterprise  To deliver public benefits by satisfying private needs

Problem 1 High Costs  Costs set by the Global Economy Experts, staff, equipment, connectivity, power, services Experts, staff, equipment, connectivity, power, services  Costs increased by National Policies Tolls and Tariffs, Lack of Services to Rural Areas Tolls and Tariffs, Lack of Services to Rural Areas  Costs added by the Need to Localize Solutions Content, Applications, Language Content, Applications, Language  Costs multiplied by Lack of Infrastructure Connectivity, Power, Fulfilment Systems Connectivity, Power, Fulfilment Systems

Problem 2 Limited Revenues  Revenues Limited by the Local Economy Purchasing power of less than $1 per day income Purchasing power of less than $1 per day income  Revenues Limited by Size of Decentralized Markets Small, remote communities Small, remote communities

Problem 3 L imited Capacity of Rural Citizens  Lack of Familiarity with Technology  Lack of Management and Marketing Skills  Lack of Access to the National Economy

Problem 4 Perceived High Investment Risk  High Costs + Low Revenue Potential + Limited Capacity = High Expected Risk StageProblem Start-up No seed money available Early Sceptical, modest support Development and Pilot (Proof of Concept) Suboptimal support Deployment and Operation Restrained financing

Opportunities: I  Large Numbers Economies of Scale Economies of Scale  Franchised Networks Low Cost Replication Low Cost Replication

Opportunities: II  ICT Efficient Distribution Efficient Distribution Affordable Localisation Affordable Localisation Overcomes Communications Barriers Overcomes Communications Barriers

Result  All the market risks are compounded by the real reluctance to finance such operations by: Public Funds – Donors, Foundations Public Funds – Donors, Foundations Market Funds – VCs, Banks, Financial Institutions Market Funds – VCs, Banks, Financial Institutions ICT Corporations – Equipment, Software ICT Corporations – Equipment, Software Other Corporations – Potential Strategic Alliances Other Corporations – Potential Strategic Alliances  Opportunities are discounted

The Enterprise Life Cycle

TARAhaat’s Life Cycle

TARAhaat’s Funding Challenge

Lessons from TARAhaat’s Experience  Donors and Foundations Must recognize that scalability and financial viability involve the generation of profits, which are necessary to raise market-based financing Must recognize that scalability and financial viability involve the generation of profits, which are necessary to raise market-based financing Access Access Speed of response Speed of response

Lessons from TARAhaat’s Experience  International Institutions Improve outreach programmes Improve outreach programmes Must accelerate response times Must accelerate response times Develop new tools for risk assessment of ICT4D ventures Develop new tools for risk assessment of ICT4D ventures Support a commercial perspective Support a commercial perspective

Lessons from TARAhaat’s Experience  Governments Recognise need for partnerships Recognise need for partnerships Eliminate tolls and tariffs on movement and/or import of equipment, software, etc Eliminate tolls and tariffs on movement and/or import of equipment, software, etc Easier certification is needed for educational programs delivered by ICT- based providers Easier certification is needed for educational programs delivered by ICT- based providers ICT ventures should be used for the front end delivery e-governance services ICT ventures should be used for the front end delivery e-governance services

Lessons from TARAhaat’s Experience  Market Funds Venture Capital is not a player Venture Capital is not a player Third world risk (developing countries)Third world risk (developing countries) Complexity of due diligenceComplexity of due diligence High Investment thresholdHigh Investment threshold Ascribe little value to social returnsAscribe little value to social returns Banks and Financial Institutions Banks and Financial Institutions Do not participate in early stage fundingDo not participate in early stage funding

Lessons from TARAhaat’s Experience  Corporations Must develop innovative mechanisms for vendor financing Must develop innovative mechanisms for vendor financing Need to establish special pricing mechanisms for ICT4D Need to establish special pricing mechanisms for ICT4D Should provide mentoring and technical support Should provide mentoring and technical support Need to recognise the market potential Need to recognise the market potential

Lessons from TARAhaat’s Experience  Civil Society Must recognize the importance and legitimacy of financially viable strategies to scaling up and ensuring continuity Must recognize the importance and legitimacy of financially viable strategies to scaling up and ensuring continuity

TARAhaat’s Call for Action  Establish Two ICT4D Funds for Initiatives with Development Potential With clear long-term financial returns With clear long-term financial returns Without clear long-term returns Without clear long-term returns  Financial Packaging Public Public Private Private

Benefits from ICT4D Mother Funds  Consolidation of Efforts  Sustained Financial Support  Establish Best Practices  Accelerate Delivery  Metrics and Accountability

ICT4D Mother Fund 1  Create Fund Proactively finance viable initiatives Proactively finance viable initiatives Invest sufficiently to get to market financing Invest sufficiently to get to market financing Staff with Practitioners, not armchair experts Staff with Practitioners, not armchair experts Develop Best Practices and Systems to support them Develop Best Practices and Systems to support them

ICT4D Mother Fund 2  Create Fund Identify ventures with substantial social objectives and deliverables needing long- term support Identify ventures with substantial social objectives and deliverables needing long- term support Support them Support them Assist them to become financially viable Assist them to become financially viable

Final Lesson from TARAhaat’s Experience TTTThe International Community Less talk, More action