The evolution of the Internet has been full of surprises – surprises that have sometimes resulted in radical changes in the commercial landscape, such as the arrival of Amazon, eBay Inc. (Nasdaq: EBAY), Google (Nasdaq: GOOG), YouTube Inc. , and Skype Ltd.
Could one of the next big surprises turn out to be linked to developing countries?
At first glance, the idea seems implausible (laughable, even) because of the low penetration of PCs and Internet infrastructure in developing countries. And what would people in desperately poor conditions do with the Internet anyway?
Data courtesy of Internet World Stats
However, the picture is changing fast. The key is to look at the rollout of mobile telephone infrastructure which is already widespread and growing rapidly in developing countries. "For the developing world, the Internet experience is going to be a wireless experience," says Susan Schorr, the head of the International Telecommunication Union (ITU) 's Regulatory and Market Environment Division, noting that 61 percent of the world's 2.7 billion mobile phone users are in developing countries, compared to 10 percent of the world’s 1 billion Internet users.
It's worth understanding how costs have been driven down to affordable levels for people on very low incomes in India (see Sidebar 1). It's also worth looking at how online markets are emerging in Africa, albeit with people using low-cost cellphones rather than PCs as "user appliances" (see Sidebar 2).
There’s also another perspective to consider – how the Internet is changing fundraising at home for projects in developing countries. It's "personalizing" giving, by appearing to link donors directly to individuals looking for help, and it's harnessing social networking developments to reach out to many more potential givers.
The Internet is also spawning Websites that analyze charities – something that's sorely needed, bearing in mind that Americans gave away nearly $300 billion last year, according to The Giving USA Foundation. Getting a better idea of how effectively that money was spent promises to encourage more giving and also spur charities to do a better job (see Sidebar 3).
Next Page: Telemedicine: No Panacea
First off, however, it's worth resetting expectations by looking at a few frequently cited examples of how the Internet could transform conditions in developing countries.
Chief among those is telemedicine and its potential for tackling HIV/AIDS, malaria, and other epidemics blighting Africa. However, the advice provided by remote experts in telemedicine projects is often unworkable in African circumstances, according to Philippa Saunders, a consultant specializing in health and pharmaceutical services in Africa, who works for a number of charities and sits on some World Health Organization panels.
"Giving advice without a thorough understanding of local conditions and weak health infrastructure can be dangerous," says Saunders. "African doctors often have limited equipment and few supplies of health commodities such as essential medicines. Keeping up to date with training and the latest health information is difficult; textbooks are prohibitively expensive."
An example of an inappropriate application of telemedicine is given by Maria Musoke, an information specialist who worked on trials of different technologies in a pilot health project in Uganda "It's impractical to supply Internet facilities to traditional birth attendants who can’t read or write," she says. Radios and walkie-talkies, on the other hand, "worked wonders."
Saunders says successful telemedicine projects in Africa are down-to-earth and usually don’t rely on the Internet. She gives an example of a small team in the Poisons and Toxicology Unit of a Zimbabwe university, which gives emergency advice over the phone on accidental poisonings. A common cause of death among African children is the ingestion of kerosene, which is often stored in drink bottles, says Saunders.
Costs can rule out telemedicine services in many cases. "While governments of countries like Canada and America spend $1,500 - $2,000 per capita per annum on health, most African countries can allocate less than $10," writes Professor M. Mars of the Department of TeleHealth in the University of KwaZulu-Natal in South Africa, in a conference paper. "Africa is not in a position to buy telemedicine services from the developed world."
Next Page: People Power
The Internet also holds out the promise of bypassing government control of the media and unleashing “people power” that could lead to the overthrow of despots and the exposure of corruption, another huge problem for developing countries.
However, this really depends on Internet developments like blogs finding their way into mobile phone environments, as the following example demonstrates. This is an edited entry from http://whiteafrica.com, a blog written by Erik Hersman, who grew up in Kenya and Sudan but now lives in the U.S. It’s dated December 31, 2007, shortly after elections in Kenya that were widely considered to be rigged:
As of yesterday there was a media blackout. The only way to get any up-to-date news for the past 24-48 hours has been through the blogosphere (like Kenyan Pundit, Thinker’s Room, Mentalacrobatics), Skype and Kenyan populated forums (like Mashada). The traditional media has been shut out and shut down for all intents and purposes.
Two thoughts were racing through my head last night as I was trying to sleep.
First, though the internet is good for us in the diaspora and a few in Kenya, it just doesn’t have the reach to the wananchi (average citizen) in Kenya. The government knows that shutting down radio, TV and print is still the most effective way to squash news.
However there is still the mobile phone, specifically SMS messaging. The problem with mobile phones is that they’re so disbursed [sic] - there’s no central core for users to all tune in to. Of course, that’s the strength in mobiles too. The trick is to leverage the strength without destroying the medium.
I went to bed trying to think of what I could do. Situations like this are where technology can really shine. The government can squash traditional media, but not technology that it barely knows exists.
Anyone can see that the problems in Kenya right now (both news blackout and general communication) also represent a real opportunity. There is a great need for a service that can’t be easily controlled by the government. How about a platform that serves as a centralized repository for on the ground reports from any Kenyan via SMS? The ability for people to upload videos and images with some text to a web-based and mobile phone accessible site.
Finally, it’s worth mentioning another program that’s been much in the news recently, the One Laptop per Child association that aims to boost education in developing countries by the mass-production of $100 laptops.
It’s early days for this project, but the first versions of the laptop have had a mixed reception, largely because of software stability problems. Also, a number of vendors are now planning low-priced children’s laptops. The India government has gone as far as rejecting an offer of millions of One Laptop per Child appliances in favor of its own developments, which aim to deliver laptops costing a mere $10 apiece. Researchers in Bangalore say they’ve already designed a laptop that could be produced in small quantities for $47 each. For more, check out this Wikipedia entry: One Laptop per Child.
Next Page: Donation Developments
While issues of poverty and repression make the evolution of the Internet unclear in developing countries, Web innovations closer to home are already revolutionizing the way money is being raised to help the developing world.
Perhaps the most interesting development concerns microloans, lending small amounts of money to people setting up businesses. In developing countries, the initial loans are often no more than $100 and are repaid in a matter of a few months. After that, borrowers might be lent larger sums, and, in the end, they might get a good enough credit history to get a regular loan from a bank.
Microloans have existed for more than 30 years, and scores of commercial and charitable microfinance institutions now work with groups of impoverished people all over the world. However, a relatively new development has been spawned by the Internet in the form of Kiva.org, a Website that enables individuals to lend money to specific people and projects.
“Kiva partners with microfinance institutions around the world, [encompassing] 60 partners in 36 countries,” says Fiona Ramsey, Kiva's public relations director. "We give them access to the Kiva site, they post funding needs, and individuals can browse loan apps, check out using PayPal, and when funds are repaid, they get money back.
"Microfinance really targets the vulnerable poor – not so much the starving, but more those that have enough to eat that day but not for the next day," says Ramsey. The aim is to enable people to help themselves out of poverty traps.
Kiva implements social networking capabilities such as the option for lenders and business entrepreneurs to post photographs and detailed profiles. It also generates code for some lender pages that can be transported to an Internet user’s Website, social networking site, or blog, thus utilizing Web 2.0 features to virally spread a message across platforms. It has a presence on two of the largest social networking sites, Facebook and MySpace , and recently partnered with Flip Video to incorporate videos on its Website in 2008.
These facilities turn loans into a person-to-person experience. "There is a feeling with a lot of people in Africa of isolation, and the clients on Kiva feel like for the first time they have this international online ID," says Ramsey.
"In Afghanistan, we can't put a picture of a woman, just her husband, or her brother, usually, and we write a note saying this is due to cultural reasons." In Iraq, on the other hand, keeping entrepreneurs' identities hidden online can be a matter of life or death. "You’ll see every Iraqi entrepreneur name is ID protected, and every face is PhotoShopped out," says Ramsey. "You can barely lend to Iraqis on Kiva’s Website because they get snatched up so quickly.
"Lots of time we'll hear: 'Oh we don't have electricity now.' We've enabled our partners to be able to post an update from a camera phone... Power goes out in East Africa all the time, but cellphones never go down."
More than 99 percent of loans are repaid, and Kiva has loaned nearly $20 million to date, according to statistics on its Website.
Next Page: Enter eBay
In October 2007, eBay Inc. (Nasdaq: EBAY) entered the microfinance market by acquiring MicroPlace, a Website founded by social entrepreneur Tracey Pettengill Turner in 2005. Turner says MicroPlace is different from Kiva because “we’re a Web-based investment service, we’re a brokerage firm regulated by the SEC. That took a huge amount of time and effort to put the infrastructure in place.” The bottom line is that loans made through MicroPlace earn interest and can be traded.
Turner couldn’t cite specifically how much has been collected in loans thus far, as MicroPlace is very new. “Hundreds of thousands of dollars are flowing in,” she says. “We’re on track to hopefully be a new source of capital for microfinance world. Today microfinance organizations access capital to help them grow from institutions and big multilateral organizations, like World Bank, but the power of the everyday investor is so huge because there’s so many of us.”
Turner points out that microfinance repayments average above 97 percent worldwide, much higher than American consumer lending repayment rates of around 85 percent. “The assumption [is] that [it’s] poor people and it’s extremely risky. In reality, it’s much safer than natural assumption might lead to think.”
At least one observer is leery of statistics such as this. “We believe that microfinance may have great potential to improve people's lives, but we've also found that empirical data on its effects is hard to come by,” says Tim Ogden, board member at GiveWell, a charity evaluation Website (see Sidebar 3). “Most studies of microfinance's effects have major methodological problems, and those with fewer problems show encouraging (but smaller) effects.”
Ogden suggests that donors and nonprofits work together to determine if and when microfinance works. “Outside of Innovations for Poverty Action and MIT's Abdul Latif Jameel Poverty Action Lab, we have seen few attempts to do this.”
Next Page: Cutting Out the Middlemen
As it happens, another organization in the area of Internet-based fundraising, RealityCharity, likes to style itself as "the eBay of giving" because it aims to disrupt the status quo by supporting both organizational and individual fundraising in an automated, transparent, and collaborative Web 2.0 format, whereby funds are instantly disbursed electronically directly to the fundraiser, without a middleman.
RealityCharity invites organizations and individuals to raise funds by posting appeals and using its Website's numerous social networking tools, including Facebook , Twitter, StumbleUpon, and Slashdot, to spread the word to potential donors. "It's a really easy and automated way for fundraising to be conducted through the Internet, where people cannot just support a cause emotionally but respond to a direct call of action to pitch in," says Alexander Blass, RealityCharity's founder and CEO.
Individuals post to "donor walls" on the RealityCharity Website, comprising photographs, bios, and visitor-contributed messages of hope, and potential donors search for causes that pull at their heart-strings by using a menu of needs and regions. Organizational fundraisers get a Website branded exclusively to them that’s hosted on the RealityCharity platform, so that visitors can make use of all of its social networking tools and other facilities.
Each fundraising site has a bar graph that shows how much money still needs to be collected. "This allows people to really feel they’re part of a community of givers that support a particular cause," says Blass, "whether it's an individual in need or an organization such as a church or a hospital. They can really see the immediate impact of their contributions. That gets people excited."
Blass gives a recent example of a young mother in Wisconsin faced with a $20,000 bill for cancer treatment and loss of pay while she couldn't work. "She initiated a fundraiser on our site, spread word to friends and family – they pitched in and spread word, and it initiated a domino effect. Within 18 days she raised $25,000 from over 180 donors in eight countries."
RealityCharity was only launched in 2007, so it's perhaps not surprising that most of its 487 current fundraisers are in the U.S. and it’s had little or no impact in developing countries. However, that should change this year now that it's clinched a deal to host a global fundraising campaign to fight HIV/AIDS with the Woyome Foundation for Africa (WOFA), based in Ghana.
"There’s a sense that, although money may be raised on a global basis, by the time it trickles down to Africa – if ever – it's pennies on the dollar," says Blass. The way projects are funded in developing countries frequently involves a string of charities, each taking a cut for administration charges. It's been necessary up until now because the charity collecting money needs a local presence in, say, the U.S., while the one spending it needs to have workers on the ground in, say, Africa, and there are often "grant-giving" charities in between.
The thought of multiple admin charges taking a big bite out of every donated dollar deters potential donors, according to Blass. RealityCharity's deal with WOFA aims to cut through this, linking donors directly with local African charities. "It makes people feel good knowing their money is going where it was intended with a far more efficient process and collaborative process." Blass thinks the WOFA deal will mark the beginning of many other fundraising campaigns in developing countries.
There's a big downside to cutting out the middlemen, according to Philippa Saunders, the consultant with down-to-earth views about telemedicine. "How do you get the quality assurance without spending the money?" she asks. It's tough to measure the effectiveness of any charity, even ones that are tightly regulated. "Without personal knowledge of the work of unregulated ones, donors are exposing themselves to some risk that their money will be lost or used in poorly run schemes," says Saunders. Losing a fraction of a dollar on costs – providing there is transparency about overhead – may be a reasonable price to pay to avoid these pitfalls.
Next Page: Match Funding
While RealityCharity aims to make sure to maximize the impact of every dollar, other Internet initiatives are aiming to multiply the amount given – or raise money almost out of thin air.
The multiplication idea is being pursued by David Pitchford, founder of a U.K. charity evaluation Website called Intelligent Giving (see Sidebar 3). “We are developing a simple, challenge-funding mechanism called ‘Double Your Donation’ that will do something which only the Internet allows: list – eBay-style – all match-funding offers of all U.K. charities in real-time on a central Website,” says Pitchford. The concept will embrace corporate match-funding as well as pledges made by individual wealthy donors.
Pitchford compares this process to an offline example of going to a restaurant or another establishment where, if you donate to a cause they are promoting, the establishment will match your donation. Double Your Donation will disrupt what Pitchford says are the “two negative aspects” of standard fundraising: “One, the size of a charity’s marketing budget normally determines the profile it gets. On this Website, the time-based listing is a great democratizer, so tiny charities like the Norwich Puppet Theatre Trust will get exactly the same eyeballs as, say, Oxfam. Two, it offers a free and easy jump for charities (especially smaller ones) from analog to digital fundraising.
“The Internet has immense potential, allowing easy, fast, inventive donations, which simply weren’t an option in the past. As far as impact is concerned, however, only a handful of savvy charities have picked up on it. However it is early days yet, and the graveyard of failed online donation projects – many of them affiliate shopping sites – continues to grow. I suspect that the real action is going to be around combined giving in online communities.”
At least two other Websites – goodsearch.com and goodtree.com – are aiming to raise money almost out of thin air. They’re search engines that have undertaken to donate half of their advertising revenues to the charity of your choice. So the more you search, the more you give, albeit in tiny amounts.
Next Page: Mass Collaboration
Taking a similar approach to RealityCharity is Firstgiving, the U.S. counterpart of Justgiving in the U.K. Mark Sutton, CEO of Firstgiving, describes the site as "a Website that enables anyone to raise money for a charity/NPO of their choice around whatever inspires them."
Firstgiving generates funding from a service fee attached to donations and a subscription fee of $300 for non-profit organizations wanting to use the premium version of the Firstgiving platform. "Our business is geared for volume and the long tail of charities and individual users," says Sutton. “Worldwide, we have over 5,000 charities using the platform and have collected over $300 million in donations for these organizations.
"Corporations can work with Firstgiving to enable their employees to create their own fundraising pages," Sutton adds. For example, John Hancock Financial Services employs Firstgiving as a platform to raise funds for the Boston Marathon through its John Hancock Boston Marathon Employee Program. Participating employees are required to raise at least $1,000 and use Firstgiving to do so online.
Similar to RealityCharity, Firstgiving relies on a viral approach whereby fundraisers reach out to friends and family who are then expected to reach out to their extended groups. Sutton cites Facebook, MySpace, and the Firstgiving widget, a portable item that can be embedded into a Web page, as drivers of the site’s Web traffic. “Many charities don’t know a lot about the social networks. It’s about the fundraiser. If the fundraiser runs a blog or has a lot of MySpace friends, that’s really the thing that matters.”
One example of this viral method specific to Firstgiving is Menu for Hope, a fundraiser started by food writer Pim Techamuanvivit, who writes a food blog called Chez Pim. Techamuanvivit started Menu for Hope using Firstgiving as a way to raise funds for the UN World Food Program, which works with more than 1,000 other organizations in over 75 countries. “Using a service like Firstgiving means that no money passes through my hands and everything is completely transparent,” she says.
Techamuanvivit uses her own blog to promote Menu for Hope, but since her fundraiser's commencement four years ago many other viral techniques have caught on, particularly among food bloggers from across the world. "There is a natural synergy between an organization that's helping to alleviate world hunger and a social network of people who care so much about food... I think of it as our responsibility to do our part to help." This year Techamuanvivit says Menu for Hope is reaching out through blogs, Feedburner subscribers (of which she has over 60,000), her personal email mailing list of over 5,000, and a Facebook group. Last year Menu for Hope raised $62,925.12.
Dane Bodien Low uses the Firstgiving platform to raise funds for "Room to Read," a charity aiming to raise $17,000 to build a school in Vietnam. The fundraiser is available at www.firstgiving.com/danelow. Thus far, he’s raised $5,530.00.
Low says the Facebook Group, Facebook for Education in Developing Nations, has played a big role in getting his project widely known. YouTube has also been critical. "A lot of people would rather watch a promotional video for something rather than read about it." Low says Web 2.0 makes it easy for people "to make a massive difference through mass collaboration," but this has yet to be recognized by many charities targeting the developing world.
Unlike RealityCharity, Firstgiving only allows U.S.-based charities to host fundraisers. Thus, the developing world can only benefit from Firstgiving through a middleman, but as noted, this can have advantages.
— Nicole Ferraro, Site Editor, Internet Evolution, and Peter Heywood, Founder and Editor Emeritus, Light Reading
Next Page: Sidebar 1: Lessons From India
In developing countries, the mobile phone has become the key to rolling out low-cost Internet access. Up to 7 million people a month are subscribing to mobile services there. So it’s worth taking a closer look at how the technology has been made affordable for poor people in India, the world’s fastest growing mobile market:
1) Unbundle services from equipment
This allows Indian carriers to charge less for the service plans, since they are not subsidizing the costs of handset devices as many U.S. carriers like Verizon and AT&T do.
The open market has also led to big reductions in the cost of handsets. "If you look at what's happened in the past two years, Nokia, Motorola, LG, and others have decided to capitalize on this market by putting in manufacturing sites in India," says Sridhar Pai, founder and CEO of Tonse Telecom , an advisory and consulting firm based in India. This localization of component manufacture to India, where costs are much cheaper, has resulted in lower handset prices. Nokia currently offers a number of basic mobile phones in the $20 to $30 range.
One India tariff plans are available for Idea Cellular's pre- and post-paid customers.
2) Share infrastructure among operators
At the current growth rates, India's mobile phone subscriber population will grow from 226 million today to 450-500 million in 2010. Pai estimates that to meet this demand, India needs to add another 210,000 cell towers to the 75,000-80,000 it already has. That's 200 cell towers per day at a cost of about $70,000 each.
No Indian operator can afford to roll out this infrastructure on its own, so many of the carriers have begun to employ a clever strategy of spinning off their tower businesses into standalone companies that will in turn share the new infrastructure with all operators. Pia says that with the massive demand for towers, some of these companies have had IPOs with valuations in the hundreds of millions of dollars, which has in turn attracted lots of foreign investment.
3) Promote prepaid tariffs
About 85 percent of all Indian cellphone contacts are prepaid, which makes it easier for the customer to pay for service and also brings more cash up front for the operator. As an added bonus, prepaid contracts make it easy to introduce more Internet services via mobile devices.
— Raymond McConville, Reporter, Light Reading
Next Page: Sidebar 2: The Internet, African Style
Here are some examples of the Internet coming to Africa, often via the cellphone:
Agricultural eBays in the making
Source
A former dotcom entrepreneur, Mark Davies, has set up a Website, Tradenet, in Accra, Ghana, which enables people in several West African countries to trade a variety of agricultural products. Traders use SMS messaging on their cellphones to communicate.
Cellphone in, Internet out in Kenya
Source
This project aims to encourage Kenyan farmers to grow crops for export by providing loans and marketing information. The initial goal of providing a Web-based portal proved impractical because too slow, unreliable, and expensive. A second phase, now under way, is developing a cellphone-based system.
Example of a local village phone station.
It takes a village
Source
In some African countries, thousands of tiny carriers are emerging, piggy-backing the major mobile carriers. Known as the Village Phone Model, individual people are becoming standalone mobile phone operators through the aid of microloans. With the loans, they purchase a single mobile phone and a rooftop antenna that picks up cellphone signals from 25 kilometers away. They then set up shop with this equipment in their own home and sell phone calls to fellow villagers. The BBC reports that at least 13,000 of these businesses exist today in Uganda and earn an average of $23 per month – a good living by that country's standards. The overall result for the rest of the population has been cheaper and more convenient phone service for villagers who once had to travel miles just to use a single payphone.
Grameen Foundation's Application Lab initiative is
working to give poor, rural communities
A cybercafe on the cheap
Source
"Harry" was challenged to set up a cybercafe in a remote Kenyan town on a budget of a mere $4,285. Conventional Internet access (dialup, DSL, leased line) was far too expensive, but mobile EDGE technology, shared among multiple PCs (costing $178.50 apiece), enabled him to deliver decent speeds "almost as good as my 256-kbit/s broadband connection in Nairobi."
No government? No regulations? No problem!
Source
The lawlessness of some countries like Somalia has, ironically, aided in the development of telecom services. Without any stable government to enforce any regulatory barriers to entry, mobile and fixed-line service providers have emerged with relative ease. And since without a formal government there are no taxes, service prices are among the lowest in Africa. An hour in an Internet cafe costs only 50 cents. On the mobile front, some operators are even planning to roll out higher-speed 3G networks this year.
Wireless activists bypass Benin's import tariffs
Source
A bunch of activists in Benin has built a community network based on mesh WiFi technology using wireless routers and open-source Linux software, having discovered that DSL was far too expensive. They bought equipment in France to sidestep Benin’s eye-watering import tariffs.
Mozambique healthcare uses cellphone net
Source
This project aims to support frontline health workers with the collection and dissemination of information. Low-cost, hand-held computers will be used in conjunction with the existing cellphone network.
Expert advice on low-cost wireless Internet
Source 1, Source 2
A group of experts has written a book entitled Wireless Networking in the Developing World that can be downloaded for free from http://wndw.net or viewed in more readable HTML format on http://www.vias.org/wirelessnetw. It gives practical guidance on building low-cost Internet infrastructure using wireless mesh technology and contains a number of case studies.
— Raymond McConville and Peter Heywood
Next Page: Sidebar 3. Which Charities?
One of the biggest challenges facing those wanting to help people in developing countries is picking the most appropriate charity. It’s particularly tough because charities tend to work together on such projects, so it’s difficult to see who’s doing the good work and who’s causing problems. On top of that, the benefits are often intangible. In other words, they can’t be measured.
All the same, some small steps towards helping donors evaluate charities have been made recently, much of which has been made possible by the Internet. Some examples:
Charity Navigator
Founded in 2001, Charity Navigator assesses the financial health of more than 5,000 of America’s best-known charities, using a rating system to evaluate annual reports. It lists 176 charities involved in development and relief services.
GiveWell
Recently launched by ex-hedge-fund veterans, GiveWell aims to help donors find the best charities in their areas of interest. It notes that small donors matter – GiveWell claims it gives more than 100 times as much in total as the Gates Foundation.
Guidestar
Guidestar lists 1.7 million non-profit organizations in the U.S. Good for identifying charities in different sectors, it's not so good for judging their effectiveness and efficiency. It has a sister site in the U.K. – www.guidestar.org.uk.
Intelligent Giving
Launched in November 2006, Intelligent Giving helps smaller donors by rating the U.K.’s biggest charities, using a scoring system to evaluate the transparency of their annual reports. It will be linked to a match-funding Website under development.
Philanthropy Capital
Funded by former Goldman Sachs staff, it targets wealthy donors with research, reports, and case studies to help them pick worthy causes. Its main focus is on U.K. charities.
— Nicole Ferraro
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