A Model To Close The Digital Divide
What is it?What were the formative events?
Why do this?
How does it work?
How is this different from other approaches to closing Digital Divide?
So how does the Thai model work?
Who is organizing the Financial Solutions to the Digital Divide project?
What is the model for closing the Digital Divide? This model is a process in which a country's IT and telecom stakeholders join together to gather information and to design strategic alliances needed to attract ICT (information and communications technology) investments on an economically sustainable basis. The approach to alliance-building, which was formulated by IT professors at Harvard and MIT, departs from normal models of business-to-business partnerships and supply-chain management common because of the important role of noncommercial partners. Influenced by the formation of dynamic public/private partnerships in Latin America and Asia, this new approach is emerging as marketers and government ministers seek the financial innovation needed to extend wireless devices and personal computers deeply into the countryside. What were the formative events? In November 2003, the ICT Minister of Thailand hosted a "Financial Solutions" workshop for some of the leading Thai stakeholders in IT, telecom, banking, national government and the intergovernmental sector. A similar event was held for Indonesian stakeholders at the Harvard Club in Jakarta in 2004. In January, 2004, a "Financial Solutions to the Digital Divide" was presented by Craig Warren Smith as a keynote address to the Asia-Pacific ICT Ministers' Summit in Hyderabad, India, hosted by the Indian ICT Ministry. The Summit resulted in invitations from several Asian countries to bring the Financial Solution to the Digital Divide process to their countries. Why do this? It was clear that both business and government have compelling reasons to form alliances that extend digital networks to the poorest four billion citizens. Yet no model exists for mobilizing the investments to do this. One reason is that, until now, the incentives had not emerged to draw financial institutions to this issue. Now, thanks to the wireless revolution, this circumstance has changed. In Asia, ICT can create the distribution channels for incorporating at least 1.3 billion new consumers into markets by the end of the decade. These consumers cannot be reached through existing methods. New alliances are needed, backed up by research. That is why the "Financial Solutions" project came into being. How does the model work? In each country, the project works as a process: The first step consists of day-long seminars for no more than 25 of the leading ICT financial stakeholders in each country, hosted by the country's ICT minister or similarly empowered person. Next, the project's researchers formulate business models, policies, and "best practices" needed to achieve two goals: a) a dramatic reduction of preexisting pricing structures and b) the commercialization of a new line of products and services specifically geared to the realities of low-income consumers in emerging markets. Then, researchers create "scenarios" that show how investors can gain returns on their investments supporting ICT projects that serve the poor. The final step is for researchers to actually design alliances that align the poverty-alleviation agenda of governments and NGOs with the market-development agendas of investors. How is this different from other approaches to closing Digital Divide? Until recently, two approaches have emerged for closing the digital divide in developing countries. The first emphasizes public policy reforms by national governments, an approach referred to as "e-readiness." The second approach promotes local entrepreneurship in the ICT sector. "Financial Solutions" is a third way, complementing the other two approaches. Rather than work exclusively with government or with business, the Financial Solutions model emphases the need for strategic alliances in which a cluster of stakeholders -- government agencies, corporations, entrepreneurs and in some cases foreign aid agencies -- work together to launch a cluster of complementary ICT-based products and services needed by the poor. Each alliance could be called an "enterprise ecosystem" that not only serves the poor directly but also by serving the governments and businesses that serve the poor. This ecosystem co-exists with the established ICT industries that serve the affluent in the same countries. If properly designed, these alliances can attract sizable investments from banks and venture capital institutions. What was the Thai model and what did it lead to? Under Prime Minister Thaksin's regime, Thailand created an extraordinary market-savvy environment for shaping ICT alliances that many other countries learned from in shaping their policies in this regard. In 2003, the Thai ICT Minister and a national computer manufacturers' association took the lead in formulating a model for a low-cost PC to be offered to Thais on credit terms favorable to the poor. Drawing on lessons learned from microcredit, lenders in Thailand did not seek collateral from those borrowers. A cluster of banks, multinational corporations, local entrepreneurs, and even state enterprises such as the postal service all became integrated into the alliance. The project led to later projects, including the One Laptop Per Child (OTOP) announced in 2005 by MIT Media Lab founder Nicholas Negroponte that would cut prices of PCs. Microsoft also used the Thai market as a vehicle for innovation. It initiated its Windows Starter operating system in that market, which it later extended to dozens of emerging markets. Policymakers in Thailand believe that the low-cost PCs may become the basis for a menu of ICT products and services specifically targeted to low-income consumers, including those in remote villages, all delivered in the Thai language. This notion became the basis of the "two tiered approach" to ICT strategy that is now common in many countries. The wisdom of the Thai model is that it did not destroy pre-existing markets that serve affluent customers in these same countries. Having worked together successfully to "crack the code" on serving the poor with PCs, these same Thai stakeholders began work on a similar formula for offering wireless devices and "value-added services" for Asia's poor.
