As new technological and market innovations take hold in the developing world, the demand for secure and affordable power is increasing. Here, Nancy Wimmer reports on how a quiet revolution is providing opportunities for renewable energy.Rural electrification is a rapidly developing field. True, electric grids in poor countries grow so slowly that they will not reach many young villagers in their lifetime, but wind turbines and photovoltaic systems already generate electricity in thousands of remote places. These systems are likely to become more common as oil and gas prices soar and the next generation of renewable energy systems rolls out.
All this is well known and the course of rural electrification seems predictable. Yet, innovation will change the scene. Already, new information and communication technologies, as well as new services for finance and insurance, health and education are impacting rural markets. Many of these seem unrelated to rural electrification – but will push it forward nonetheless.
Rural electrification is in transition, spurred on by a variety of innovations which interact and reinforce each other. Greater things lie ahead because innovation is about much more than technology and products. It is about applications, business models and entirely new markets – far different from those in the industrialized urban world. The combined force of these innovations can speed-up rural ‘evolution’ and help meet the untapped energy needs of two billion rural customers.Technical innovation
Soon the demands for electricity will go far beyond those for light, TV, water pumps or appliances. A groundbreaking initiative by the Massachusetts Institute of Technology (MIT) Media Lab highlights this trend. If it succeeds, millions of children in poor countries will receive cheap laptop computers in the next several years. This US$100 laptop is specifically designed for young students living in harsh environments, featuring advanced technologies like wireless communication, sunlight readability, open-source software, and a user interface adapted to local languages.
As an educational tool it could have a significant impact in rural areas, where schools are known to be poor and where most of the young people in the world live. Half of Bangladesh’s 110 million villagers are under 18 years of age. 80% of all school-age children in China live in rural areas. Developing countries have young populations and children are known to take to computers readily, even in slums and remote villages.
A child in Bangladesh makes a call on a phone financed by the Grameen Bank
The idea of the One Laptop per Child initiative is that governments provide the laptops free of charge to children in much the same way they provide text books. Brazil, Nigeria, India and China are candidates to receive the first wave of laptops and each has pledged to buy one million units.
But what will power computers in areas where few people have access to an electric grid? Car batteries and diesel generators? The laptops can be ‘human powered’ by cranking, whereby one minute of cranking allows for 15 minutes of use. Clearly, it is an interim solution where batteries and generators are expensive to fuel, charge, maintain and replace, or where the electric grid is notoriously unreliable.Wireless networks
More than laptops, it is communication networks that will drive rural development – and they are booming. Wireless communication for mobile telephony has spread throughout the developing world more quickly and deeply than any previous technology. In less than a decade, mobile phones are being used in each of the 70,000 villages of Bangladesh. Africa, so often left behind, has seen the world’s most rapid growth in mobile phone penetration. An estimated 80% of Tanzanians – from the fishermen of the Clove Islands to the communities on Lake Tanganyika – can now access a mobile phone. The rural poor in much of Southern Asia readily devote 5%-7% of their income to communication access.
Underestimated in the beginning, wireless communication meets a basic demand. Farmers and fishermen use it to find out the day’s prices for their products or to save them unnecessary travel. They make more profit. Mobile phones are used to keep up family ties to workers abroad and to cut the cost of money transfers from overseas. International remittances are huge a business, that according to the World Bank is worth $225 billion a year and growing strongly. The African economy is increasingly being supported by its people abroad and communication technology is spurring the process. Celpay in Zambia has developed a mobile phone payment system, which enables money transfers via phone and without a bank account. Similar services exist in South Africa and in the Philippines.
Information and communication technology (ICT) is being applied to solve a myriad of local problems and its spread and growth will increase in developing countries via innovative applications. The Village Phone programme in rural Bangladesh, for example, pioneered giving loans to poor women to buy a mobile phone and earn an income by selling telephone services to the surrounding villages. Within a decade, there are now over 200,000 village telephone ladies, many of whom have already diversified their business, providing telephony, telefax and IT based services.Information for villagers
Information technology is taking root in rural areas and enabling entirely new applications, which will grow as they meet the needs of rural customers. Already, the rural way of life seems to be changing rapidly, caused by innovative applications for education, health, farming, trading, financing and connecting dispersed family members. Will it help me to generate income? This is the key question villagers ask. If the answer is positive, even poor villagers are ready to invest. Centres of innovation have emerged, notably in Southern Asia
Consider the e-Choupal phenomenon in India, where millions of farmers gather not at their village meeting place (a Choupal in Hindi), but at places where a PC is linked to the internet. A small-scale soya farmer can visit his village e-Choupal, check the website of the Chicago Board of Trade and local markets on prices for his crop, the weather forecast, and tips on increasing his yield – all in the local language. If he chooses, he can sell his crop online and even buy seeds and fertilizer. In only six years, 6000 e-Choupals have been installed, covering 36,000 villages and serving 3.5 million farmers.
Microcredit has been one of the great success stories of economic development, encouraging innovation
e-Choupals were launched in 2000 by the Indian agricultural trading company, ITC Limited (ITC), as an e-commerce platform to capture more of the soybean crop and to lower transaction costs. e-Choupals were an immediate success, because they solved a local problem. Both ITC and the soya farmers have long been dependent on the same archaic system. Farmers sold to village traders, settling for whatever price was offered. ITC then had to buy from the traders, with little quality control and high transaction costs. e-Choupals allow the company to buy directly from farmers and let farmers check prices to decide whether they want to sell – all of which increases farmer incomes and excludes the village soybean traders.
If information technology is designed to meet business needs and give easy access, even poor populations can benefit. Illiterate farmers can use e-Choupals easily for a small fee, because each e-Choupal is run by a local, trusted farmer, who is trained by ITC, and obligated by oath to serve the entire community.
e-Choupals – like telecenters, village internet kiosks and cabinas publicas elsewhere – combine conventional technology with a useful local application.Rapid digital evolution
Rural India is witnessing an information revolution, because technology can deliver reliable information the rural poor desperately need. Take for example, the Bhoomi land records programme. Karnataka state has digitized 20 million deeds that farmers can get for just 30 cents in the local language from any of 200 computer kiosks. Until the records were computerized, the deeds were used and controlled by powerful village accountants, who charged farmers as much as $22 for documents needed to sell property or get bank loans for fertilizer and seeds.
Computerizing land records is even promoting social change. No longer can accountants and landlords trick farmers into signing away their property. Deed fraud, which according to World Bank estimates once cost poor farmers in Karnataka $20 million a year, has been virtually wiped out.
Rural India, where 72% of the population lives, is gearing up to be part of the information society. Telecenters offer services ranging from e-government, education and finance to telemedicine. A cheap wireless handheld computer may soon be available for the Bhoomi land records programme. And ITC plans to install 20,000 more e-Choupals to cover 100,000 villages in the next ten years. Experts predict that within a few years the internet will reach 100 million rural Indian farmers.Village banking
Still, millions of villagers in developing countries have yet to benefit from ICT. Jobs are scarce, and cash is scarcer. But necessity is the mother of invention. Decades before the advent of village internet kiosks, a local experiment in Bangladesh pioneered ways to improve small scale rural business: village banking. This bold new form of banking succeeded in serving even poor villagers without collateral, who need micro-credit and want to save, but are traditionally exploited by moneylenders. Today, institutions providing microfinance, MFIs, have spread to all corners of the developing world, and evolved into a billion dollar industry.
But what is now generating so much interest is less the discovery of some entirely new way to deliver financial services to the poor – than the effect of the rapid innovation that has taken place in the past three decades.
The Grameen, or Village, Bank in Bangladesh, which began by loaning $27 to 42 villagers, has since loaned $5.72 billion to more than 6 million micro entrepreneurs. 1869 of Grameen’s 2226 branch offices are now computerized and networked.
Muhammad Yunus, founder and Managing Director of the Grameen Bank, and 2006 Nobel Peace Prize Laureate
To increase income for its borrowers, the bank created Grameen Telecom, a provider of rural communication services, and the ‘Village Phone’ programme mentioned above – now so successful that it is being replicated by micro finance institutions (MFIs) in Uganda and Rwanda.
Microenterprise loans spawned new businesses, housing loans afforded families their own homes, but couldn’t bring reliable power to rural Bangladesh where a mere 10% have access to electricity. In 1996 Grameen Shakti (Village Energy), started business as the first rural energy service company (RESCO) in Bangladesh. By 2007 Shakti will have installed 100,000 solar home systems to power lights, motors, pumps, TV, mobile phones and computers.Village technologies
Demand, and potential markets, for services like village banking are enormous. But equally enormous is the challenge of reaching out to rural populations. For example, 85% of the Ugandan population lives in rural areas, of which only 10% have access to microfinance. The World Bank estimates that of the 500 million potential clients worldwide, only 100 million are MFI borrowers. MFIs are now looking to ICT to facilitate rural business and expand their outreach to remote areas.
A solar panel in a market in Bangladesh
In India, paper-based, manual bookkeeping is being replaced by entering records into a handheld computer fitted with smartcards to keep a record of all transactions. In Bolivia MFIs are using automatic teller machines, wireless communication, chipcards and user interfaces in several local languages. Similar systems are being tested in India and Uganda to lower the cost of expansion. Other MFIs are working through merchants in small towns, who use mobile phones for MFI clients to pay loans, make deposits and get cash. Vodafone is testing such services in Kenya, and Hewlett Packard has just finished a pilot project with MFIs in Uganda using a point-of-sale machine with mobile-phone technology.
And still the problem of electric power remains. SKS, for example, a fast-growing MFI in India, has had to build back-office systems that can work on two hours of power a day to compensate for India’s unreliable power supply. It must closely monitor voltage when its computers are running and keeps a diesel generator on hand in case of power failure. Be it the backoffice server, laptop, base station or internet kiosk, the demands for rural electricity to power them will grow.Technical trends
There is little doubt that we will soon see even more electronic devices designed for rural populations. Intel is building PCs for rural markets: cheap, rugged, resistant to power failure and tailored to community use. Other approaches favour individual use. AMD’s Personal Internet Communicator (PIC), for example, is a low-cost internet access device engineered for low-income markets. They may soon have to compete with an unconventional low-cost computer consisting of a smart cellular phone, TV set and keyboard.
Many such systems will implement advanced user interface technology, which masters a variety of languages, and can both recognize and generate voice and script. All of these innovations will melt down the barriers to village computer access and spawn new applications.
One of the $100 dollar laptops which will be sold in the developing world, in this case Nigeria one laptop per child
But the benefits of information technology can be widespread only if information technology can reach a large percentage of the population, the reason why wireless communication is and continues to be the most important part of rural ICT.
Wireless telephony led the way and more powerful technologies will roll out this year. A WiMax (Worldwide Interoperability for Microwave Access) station may bring broadband connections to several hundred villagers living as far as 20 kilometres away. WiMax will render internet telephony, email and information services fast and cheap. Experts expect that breakthroughs in communication technology will bridge today’s digital divide between urban and rural areas, allowing villagers to access needed services, education and jobs. But how can this brave new world of rural ICT be powered reliably?Education in rural areas
The Massachusetts Institute of Technology is pioneering the Opencourseware approach and making its course material public. 1400 courses from business and engineering to physics are downloadable free of cost by any user of the internet. More than 100 higher education institutions in the USA, France, China and Japan have joined the Opencourseware movement, offering access to high quality educational materials in a variety of different languages to educators and students everywhere. From the start, Opencourseware has been well received and is even being used in rural areas, where access to academic institutions is problematic.
Opencourseware seems to have been inspired by the Open Source Software movement, which has enabled millions of programmers around the world to create free software. The aim of this popular form of self-organized collaboration is to have as many people as possible writing, improving and distributing software for public use. Its amazing success has empowered enthusiastic programmers everywhere. Schools in Brazil, Malaysia and Namibia are using free software to teach young people how to use computers and support their learning. User groups from all over the world collaborate to evolve the programs. So there is a good chance that the user interface of the $100 educational laptop will be adapted to the languages and the educational needs of children in developing countries.The art of doing rural business
Microcredit for the rural poor is an innovation made in Bangladesh. When Grameen began village banking thirty years ago, it was not about adapting commerical banking to some new, still unserved clientele. Rather it was about doing business in a radical new way – a change of paradigm. Before, banking simply could not be done profitably in a poor rural environment. The Grameen Bank could – thanks to an ingenious business model. The Grameen model has been researched in depth, and absorbed by areas other than banking. It has also inspired researchers to find strategies on how to do business at the bottom of the social pyramid. That the rural poor should have a business and make a profit is one of the basic principles.
Grameen Telecom followed this rule while promoting mobile telephony: Here, a villager buys a mobile phone and bulk airtime, and lets other villagers use the phone for a fee. The Grameen Bank finances the purchase of phone equipment from Grameen Telecom, and trains the village phone operators how to run a viable business. Many of these microentrepreneurs make a profit averaging $100 per month, and over 100 million villagers benefit from shared access to affordable phone services in their own village.
Carrying a solar panel through a tea plantation. Organizations like Grameen Shakti have allowed PV to become part of everyday life
Grameen Shakti also trains entrepreneurs to go into business: a small scale entrepreneur can buy a solar home system on easy credit terms, install it in a village market, and rent solar powered lights to neighbouring shops for a fee. Ownership and increased income have made renewables so attractive to rural entrepreneurs that they now number over 1000 and serve even more rural customers too poor to buy a solar home systems.
The art of doing rural business is a bottom up approach. It’s as much about enabling the poor to gain leverage with new technology to raise their income and social status as it is about trust. Grameen has learned not to underestimate the poor. They pay their loans back reliably – the Bank’s recovery rate is 98 % – far above the banking industry’s average. They easily embrace new technologies. Even illiterate Village Telephone ladies had no problem operating a cell phone, despite having no prior experience with phones of any kind. They memorize the area codes as they connect their customers to all parts of the world.
‘If you can conceptualize the world’s 4 billion poor as a market, rather than a burden, they must be considered the biggest source of growth left in the world’, says C.K. Prahalad – assuming that if this market is well understood, it can be served profitably.
Several corporations seem to have understood the message and have responded. Intel engages ethnographers to study rural markets in Brazil, Egypt, China and India, where as many middle class consumers live in rural as in urban areas.
Manufacturers of cars, appliances, food and ICT-gear have ‘gone local’ to design products tailored to a poor and rural clientele: detergents in small quantities, low-cost insurance, ‘ruggedized’ community computers, or washing machines which cope with power outages.
New partnerships are being formed to extend rural services. ITC, for instance, has partnered with 28 companies to extend its e-Choupal services. ICICI, India’s second largest private bank, has gained 1.5 million poor customers by cooperating with 53 MFIs. HSBC bank teamed-up with MFIs to allow wireless transfer of money in the Philippines. To provide life-insurance policies, Citigroup works with MFIs in 20 countries.A chance for Renewables
When Thomas Edison remarked, ‘I shall make electricity so cheap, that only the rich can afford to burn candles’, he probably didn’t have in mind those rural areas where electricity is still so scarce that the poor still spend much of their income on candles, kerosene and batteries. Innovations in renewable energy systems, however, are changing the scene.
Hybrid systems, for instance, can use solar, hydro, wind, biomass and diesel energy in clever combination both off and on-grid. Already, they supply power day and night, summer and winter in even widely dispersed villages, because they can be installed where needed, allowing for a distributed and decentralized infrastructure of power supply. This matches the decentralized architecture of wireless networks and information services, which in turn creates new synergies: wireless communication systems can use renewable energy for power, while RE systems use wireless communication to control remote components. All in all, Renewable Energy seems fit to empower the many innovations described above and to in turn be empowered by them.
Rural markets, last not least, offer a unique advantage. As a newcomer, renewables often must fight an uphill battle against established power suppliers, lobbies and subsidies – the legacy of generations of power supply. Many rural areas, however, are still void of such legacy systems. Here, renewables can find a level playing field – the rural advantage.
Nancy Wimmer is Managing Director of microSOLAR and Director of Microfinance and Renewable energy for the World Council for Renewable Energy (WCRE)