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MIT MAS 965 - Study on the Financial Sustainability of Village Internet Centers

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MIT OpenCourseWare http://ocw.mit.edu MAS.965 / 6.976 / SP.716 NextLab I: Designing Mobile Technologies for the Next Billion Users Fall 2008 For information about citing these materials or our Terms of Use, visit: http://ocw.mit.edu/terms.eCHOUPALS KUMARScience, Technology & Society Program MIT Cambridge, MA 02139 eChoupals: A Study on the Financial Sustainability of Village Internet Centers in Rural Madhya Pradesh Over the past few years, the long-term sustainability of ICT initiatives has increasingly come under question. Despite persistent doubts, governments, international agencies, NGOs, and private companies are pressing ahead to set up more such projects. This paper studies the ªnancial sustainability of India’s largest rural ICT initiative known as eChoupal. The eChoupals are distinct from other telecenter projects in that the value added is not in providing ICT infrastructure alone, but rather, in enabling efªciencies in the agricultural sector through greater information exchange and creation of an alternative market structure. An analysis of available data indicates that this project has a potential payback period of 3.9 years. Although several assumptions have been used in these calculations, a sensitivity analysis has been performed to provide a range of possible scenarios that show the proªtability of the project. Through this analysis it seems that ICT projects can be ªnancially sustainable when they are viewed not as an end in themselves but as tools to facilitate information exchange whereby, use of the technology enables higher efªciencies in another existing or new business setting, which provides the source of revenue to recover the initial investment. The last decade has seen exponential growth in information and commu-nication technologies (ICTs) with computers, digital organizers, mobile phones, Internet, and wireless computing spreading all across the globe. These technologies have unleashed a “cultural revolution in the way indi-viduals and organizations interact, in terms of time, cost and distance” (Munyua, 2000). Apart from changing business and government activities, the potential of these technologies to act as a catalyst to promote socio-economic development in Third World countries has become a popular topic of discussion among development agencies, NGOs, governments, academicians, and experts. The Food and Agricultural Organization of the United Nations noted in one of the earliest books on the topic of ICTs and development that being a “ºexible, decentralized, information-sharing tool,” the Internet offer[ed] the possibility of initiating economic development for agricul-tural producers, expanding the effectiveness of community develop-ment programmes, increasing the amount of participatory research conducted, promoting small business enterprises, and improving news © 2005 The Massachusetts Institute of Technology Information Technologies and International Development Volume 2, Number 1, Fall 2004, 45–73 45eCHOUPALS media networks. If used as a tool for encouraging two-way communication processes and creating links between people, then it may open up new opportunities for rural people to participate in the global society (Paisley and Richardson, 1998). In the 1980s, community access points (CAPs) emerged in Scandinavia whereby entire communities accessed computer technology through a shared center known as a telecottage. Since the mid-1990s, there has been an explosion of such centers—now called telecenters—that deploy Internet technology supported by international and national donor agen-cies, governments, and even private-sector compa-nies in developing countries. Roman and Colle (2002) from Cornell University characterize this “telecenter movement” as an eclectic process, largely devoid of systematic research and planning. Billions of dollars have been allocated by ªrst-world development organizations, such as the G8, World Bank, UNDP, and bilateral grant agencies, in addition to developing country governments and nonproªt organizations, to set up and sustain these projects. Little careful empirical study, however, has been con-ducted to evaluate the impact of ICTs on poverty re-duction or socioeconomic development. In fact, according to Heeks and Davies (1999), failure has been downplayed. . . . estimates sug-gest that the majority of ICT based initiatives end in total failure of a system that never works; par-tial failure in which major goals are unattained or in which there are signiªcant undesirable out-comes; sustainability failure that succeeds initially but then fails after a year or so; or replication fail-ure of a pilot scheme that cannot be reproduced (authors’ emphasis). In the context of ªnite and time-bound donor funding, sustainability in the long run and replica-tion (or scalability) of the project are crucial factors. Typically, donor agencies do not expect to fund these projects beyond an initial incubation period, and evaluation of community telecenters focuses carefully on returns on ªnancial and other invest-ments apart from the achievement of initial social objectives (Whyte, 2001). The International Develop-ment and Research Centre (IDRC) of Canada de-mands a strong business plan at the end of a 3-year period, according to Richard Fuchs, director of the Information and Communication Technologies for Development Program Area (Cisler, 2002). The World Bank Development Gateway, the ACACIA ini-tiative of IDRC, the InfoDev program, and the World Summit on Information Society all have sustainability as a vital question on their agenda. The term sustainability seems to have come into common usage as the phrase sustainable develop-ment emerged in 1987 with the publication of Our Common Future, the report of the World Commis-sion on Environment and Development. The com-mission deªned sustainable development as a form of progress that ensures human development and that “meets the needs of the present without com-promising the ability of future generations to meet their own needs” (Brundtland, 1987). In the realm of development projects, sustainability most often refers to ªnancing of the project in the long run, either from commercial revenue or from continuing donor support. Some development experts such as Björn Wellenius (2003) of the World Bank argue that telecenters may not be able to achieve commercial sustainability beyond initial public support in poor and rural localities. In


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