Is it OK to make a profit serving the extreme poor?

De-regulated Britain has a nasty reputation for taxing poverty – the poor pay much more for electricity, get charged crippling interest rates, and get ripped off when they buy things (*see example below); it’s been called a ‘poverty premium’. It seems repellent but it makes commercial sense and it’s all quite legal. The argument for allowing this predatory behaviour is that this is the only way for companies to serve this demographic profitably; the problems stem from the way companies market to people whose maths isn’t good enough to work out they’re being fleeced, or who feel they have no choices.

Those of us working in the mobile for development (M4D) sector in poorer parts of the world realise we have to grapple with the same basic issue: serving poor people is risky and if it doesn’t cover its costs it won’t happen once donor support is withdrawn. But if companies are allowed to profit unsupervised from providing services to quite naive consumers then you risk questionable business practices. But can the economics ever support such services in the long run?

I’m working on an innovative Ethiopian mobile voucher scheme, and it seems perfectly logical to us to hope that lending money to farmers will allow them to buy fertiliser to grow a bigger crop to sell for more money to reinvest in a better future. This virtuous cycle depends however on a few things working out: it needs to rain, the fertiliser needs to make a bigger harvest, the price of corn needs to stay up despite there being more of it, the money farmers earn needs to support a loan interest rate that is more than the lender’s wholesale borrowing rate, and the farmer needs to repay the loan.

But what if I imagine adding another service on top, that might make the farmer an extra $20 on top of all this – if I charge less than $20 for this imaginary new service but still make a profit, then surely everyone’s a winner? This is a poverty premium question: what if I have something that I am pretty sure farmers will benefit financially from, but which I need to provide on a commercial basis – what are the limits to the economics of a service that targets poor farmers in Africa and Asia with a useful value-add which needs to make a profit?

In Ethiopia, where farmers can get agricultural advice for free on their phones, the Agricultural Transformation Agency (ATA) [note: I advise them but not about this agri advice service] has had an amazing take-up, getting over half a million registered users in less than 6 months and over 3.5 million calls. But nobody can run a free service forever unless there’s some profitable model underlying it. In this article I’m going to ask when it’s fair to make a profit, and see if there are price points at which it’s possible to improve lives and make money, and how to charge those prices.

Let’s look again at a previous blog post where I compared this successful Ethiopian agri info service with a similar one in Mali. Orange Sènèkèla is a value added mobile telecom agricultural service (agri VAS) priced at a discounted $0.10 a minute whose call centre had reached ‘few users’ and whose USSD service ‘had not acquired any customers at the time’ of GSMA’s own baseline survey. Yet Sènèkèla provides accurate market pricing data that is known to be a pain point for farmers in Mali, so it seems strange that people aren’t calling it. Although 95% of focus group respondents found Sènèkèla to be too expensive, surely a farmer selling $500 of produce should want to spend $0.30 on a three minute call that might make an extra few $; but apparently not.

Clearly price is part of the problem given that the free service in Ethiopia has a massive call volume. Let’s make a very unscientific guess at a fair price: just 5% of the focus group in Mali presumably didn’t think Sènèkèla was too expensive, meaning that the price is way out right now; if we flipped these numbers and asked what price you’d have to drop to until just 5% of farmers said it was too expensive, then perhaps $0.03 would work. The interesting thing about the Ethiopian service is that the 500k registered users is about 5% of the total farmers in the target area – having worked in mobile services for over 20 years I regard 5% as being close to saturation of a target mobile consumer base. My gut feel therefore is that a price between zero and $0.03 would probably work for this demographic, whose income let’s not forget is typically less than $1 a day if earning an agricultural wage, i.e. employed and paid regularly, rather than the even more precarious income of a small holder farmer who gets nothing if the rains fail. In Ethiopia, there were 1.63 million calls to the service 16 Sep – 2 Dec 2014, an average of 21,158 a day. If ATA had charged $0.03 for this service the income would have been $230,000 annualised.

What does it cost to build one of these services? GSMA granted $400k to each of its four mFarmer Initiative winners to ‘develop and scale commercially viable’ Agri VAS ‘for an implementation period of 2 years’, so let’s call it $200k a year. Round numbers it seems that the economics might support a profitable Agri VAS so long as farmers call it in huge numbers and it’s $0.01 a minute to call and calls last just 3 minutes.

This analysis is very superficial – a much bigger problem about pricing this kind of service is that as a poor consumer you need to try before you buy. If the service I call doesn’t tell me anything I don’t know, it’s a waste of my time and money, but I don’t know this before I call. Sènèkèla costs me $0.10 a minute even if I hear exactly what my neighbour told me just the day before. This implies that the Ethiopian service is a success because farmers lose just a few minutes of their time but no money to call it up;  they call it back again because they find it useful. This leads me to the conclusion that offering free services and then adding paid value added services on top is a viable approach.

But how much can I charge for this secondary value-added service? If the farmers trust the service, and know it’s valuable, what’s the right price point? Can I genuinely make a decent profit out of it, once the farmers trust the service I provide? If so, then we can develop economic models that overcome the ‘poverty premium’.

Let’s calibrate this by looking at farmer incomes. In Ethiopia, a farmer with 1 hectare of land may spend $100-150 on inputs (seeds, fertiliser and chemicals). This might yield a harvest of 25 quintals of teff which he can sell for 1,600 Birr per quintal, or $2,000 for the whole crop. Sure, some of this crop is for the family’s own consumption, but a 1% increase in the yield is “worth” $20. If the farmer was also an economist, he’d be willing to spend $19 on value added services so long as he could be sure it would boost his yield by 1%. Even if we discount this by 90%, he should still be willing to spend $2 for every 1% increase in yield. That’s three hours of phone calls to the agricultural advice line (at our presumed $0.03/three minute call rate).

What I learned from this exercise is the following:

  1. There’s a chicken-and-egg problem with value added services: if you don’t know it’s worth calling, you wont call it if it costs money. Free services overcome this problem
  2. A free service plus a paid value-added service looks like it ought to be sustainable if together they genuinely add value to people’s lives
  3. Even at this subsistence end of the food chain, you can provide services at a profit to the poorest people. There is a win-win to be found in providing basic mobile phone value added services to the poorest


* Poverty premium example: UK, weekly payment plan for washing machine, Dec 2014

Brightpoint total payable Hoover washing machineBHS Direct prive for Hoover washing machine

Total payable to Brightpoint if I pay £11 per week for the Hoover DYN 10166P8 washing machine is £1,716. If I buy today from BHS it’s £444. I pay more to Brightpoint in each of three whole years than I pay to BHS just once by buying now.

Are mobile operators irredeemably incapable of offering services that are meant to support the poor?

The other day in Addis Ababa I saw some astonishing numbers: since 1st July 2014 there have been over 3 million calls to agricultural value-added service Semanya Haya Simint in Ethiopia. Big numbers for sure, but for how long have Ethiopian smallholder farmers been using this service? It would take years to build a service volume like that, right?

Wrong; the service launched on 1st July this year. in just 150 days from service launch there have been three million calls to a hotline that gives information about on cereal, horticulture, and pulse/oil seed crops, as well as a wide range of agriculture-related activities. 20141028 – IVR-SMS Fact Sheet

If you’ve been to Ethiopia recently, you’ll have grappled with a monopoly called Ethio Telecom that provides one of the most frustrating mobile phone services on Earth. Coverage is patchy; a “3G SIM”, whatever that is, was unobtainable for much of Feb-June this year. To get mobile data these days you need to manually create an Access Point, which is buried deep in your Android settings; I’m not even sure I could find them on an iPhone. Even with your Access Point set up (your APN is, and the MCC is 636, in case you’re wondering), data is fitful. The SIM I bought at the official Ethio Telecom store belonged to a number range that hadn’t been provisioned on the network yet. When will my SIM work?, I asked. Maybe in a fortnight, came the unconcerned reply.

Farmers have phones

Even if the mobile phone network is a bit patchy, farmers really do have phones

Of course, the farmers in Ethiopia aren’t using smartphones to call 8028 (which is what Semanya Haya Simint means), they’re using basic phones whose selling point is they’re dustproof and go a week without recharging. But despite the shortcomings of Ethio Telecom, they’re calling 8028 in droves. There are over 530,000 registered users. That’s a customer acquisition rate of 3,500 farmers per day, on average. There are more registered users of the 8028 service than there are people in any city in Ethiopia apart from Addis.

One of the reasons I was struck by the sheer size of this Ethiopian service is that I’d recently looked at the four mAgri value added services (VAS) that each received of $400,000 grants through GSMA’s mAgri mFarmer initiative. The one that had caught my eye was Sènèkèla in Mali, because the GSMA’s report showed that Sènèkèla has done a great job of gathering a source of farmer information that addressed a specific problem: farm gate prices are volatile and so farmers can benefit greatly from knowing that the price at a particular place is higher than somewhere else. You can read the full report on GSMA’s website and at their partner RONGEAD’s site, but in brief the International Institute for Communication and Development (IICD) and RONGEAD created a network of agents to collect market price information from within 5km of markets in the main towns and the surrounding areas then develop market price advisories using some local analysis and some forecasting done in France.

Here is another way farmers can get information about best practice

Here is another way farmers can get information about best practice

When farmers in Mali use the service they either get to speak to a call centre staffed by experts, or get market prices by USSD. And how has this service fared? The GSMA is coy about the results, but their own data states that the potential market is 1.1 million farmers, with 86,000 as the target for the funding period. Although the data isn’t clearly presented, GSMA states that the “% of target market reached” is 0.01%. If this refers to the 86,000 figure, then that’s 8.6 farmers – let’s round it up to nine. And if it’s the 1.1 million farmers, it’s still only 110 farmers. This data was at March 2014, and Mali is a poor country and is suffering from political instability. But it’s hard to dress these numbers up as anything other than disappointing.

We should look for systemic problems that may explain the difference between the results in Mali and those in Ethiopia. Ethiopia is politically stable, and has a bigger population – something like 75% of Ethiopia’s 94 million people live on the land, while Mali’s population is just 15 million. Wealth and literacy indicators are similar: Mali’s population hovers around 16% female and 33% male literacy (2003 UN data), while Ethiopia is slightly ahead at 25% female, 40% male literacy (2011 data from Save the Children); GDP per capita seems to be $715 Mali vs $500 for Ethiopia. We can also state that Mali’s phone network would have to be truly awful to be worse than that of Ethiopia.

Perhaps the quality of the data being provided makes a difference? Perhaps it is because the people in Mali place greater reliance on personal connections and trust oral information from their peers more than some remote call centre of experts who perhaps only speak French, while Mali has 20 common languages? These aspects are hard to measure, and may be valid reasons, but Ethiopia too has a plethora of incompatible languages and scripts – my office colleagues who speak Amharic can’t read what the Tigrayans write, even though it’s in the same script; and the Oromffiya have transliterated their language into the Latin script, although the words are similar to Amharic.

What we need is some hard data to unpick what’s going on. Fortunately the GSMA has run a market study in Mali to try to figure out the reasons for the low take-up, and the results are both profoundly sad and utterly predictable: “95% found the service too expensive at 10 cents/ minute“. OK, so now we know that the service depended on Orange Mali making some money out of it. And you need to know that the Ethiopian service is free to call.

Shall we spend our last 30 cents on a phone call just now?

Shall we spend our last 30 cents on a phone call just now?

How expensive is Sènèkèla? Or to put it another way, what is a rational price that would justify a farmer calling Sènèkèla, so he could decide which way to point his cart when he heads to market after the harvest? Farm workers in Ethiopia may get 19 Birr per day, which is just under 1 USD. Let’s look again at the per capita GDP: average yearly income per person in West Africa is $309, so allowing for days off and to keep the maths simple, a farmer in Mali might think 1 USD is the value of a day’s work. For a household living off the land, 3 USD is a significant amount of money. And how long is a call to the service – three minutes? We know that the service costs 50 FCFA (0.10 USD) per minute to access in the Koulikoro region of Mali, which is less than half the usual network rate (108 FCFA/0.21 USD per minute). So to call the service might cost 0.3 USD for a three minute call, or in the Sikasso region it’s XOF 75 (USD 0.16) per message over the USSD channel. For a household for which $3 is a lot, then 0.3 USD is a hell of a lot to pay to get information that might not tell you anything you didn’t already know from your neighbour – that prices are down, and that it’s going to be a struggle to feed the family over the planting season.

Given these price points, why would Orange Mali want to charge farmers to call the service? Using GSMA’s own data, I calculated that if 10,000 farmers called Sènèkèla, then 1,800 of them would be “repeat users” and the call volume would be 55,000 calls, yielding about $16,500 in VAS revenue to Orange Mali. Quite by coincidence, the $400k grant over two years is $16.5k a month.

Surf the net Surf the BT CellnetWhat does this tell us? Let me tell you a story from 2000-1, the early years of the boom. My company had developed the first mobile train information service in the UK, and we’d done it by raising venture capital and buying hardware and building a WAP service, that people could call (dial-up mobile internet access!) and get their train times on a basic black-and-white WAP browser. It was very cool; not terribly valuable, but interesting, and one of the few genuinely useful services on a clunky mobile internet phone. I remember taking this to O2, and suggesting they link up to it on their WAP portal (it was called “Genie” and had been part of the infamous Surf the Net. Surf the BT Cellnet advert that almost ruined the early market for mobile internet services in the UK.) Genie’s response to me was astonishing. They said, “Yes, we’ll connect to your service – for £20,000 a month”. They wanted me to give them £20k a month, and they’d charge their customers for accessing a service that was mildly useful. I was giving them something for nothing, that had cost us a fortune to develop, that nobody had paid us to build, that the rail companies weren’t going to promote, and instead of thanking us for helping to drive up their ARPU and give some credibility back to their internet services, they wanted me to pay £20k – a month.

Perhaps Orange Mali needs to show an income stream in order to satisfy the terms of their grant; perhaps they thought it would scale and make them some proper money. Perhaps they don’t care; perhaps they didn’t do the maths; maybe Mali is different. However, the facts are there: over half a million Ethiopian farmers have called 8028 more than once, many have called multiple times. It’s free today, it may not be free tomorrow; and it’s 100% dependent on Ethio Telecom. But Sènèkèla in Mali has a long way to go before it deserves the name “Value-Added Service”, and 95% of its users say it’s too expensive to call. Still, 95% of Sènèkèla’s users was less than 100 farmers … I really hope this changes, that Orange Mali has found a way since March 2014 to drive farmers to use and value the service, to exploit the data that Orange has spent so much energy gathering, and to use it to increase the income they get from farming in a really tough climate.

Why do mobile operators think like this? ‘Bill the customer’, ‘Information is valuable’, ‘Callers must pay’. Why not offer the service free for a year while you iron out the kinks, while you figure out what is the info that farmers really want to hear, and what can be dropped. Sènèkèla has invested in a great rural farming outputs price data bank whose analysis can be used for decades to help stabilise the rural economy, helping to drive up household incomes, which in turn will mobilise savings, which provides a platform on which to develop financial literacy, financial inclusion, tax revenues and the rest. Why would you risk killing all this off by charging people 10% of a days wages to call it?

Is mobile access a human right – and at what price?

How one mobile operator in Jordan is trying to bring mobile access to Asian women domestic workers denied a phone
If the conservatively-minded patriarch of a household in the Middle East will not let his own daughters use a mobile phone, then why would he let the foreign domestic servant use one?

There are tens of thousands of young Asian women living in households across the Middle East doing domestic work. Many suffer labour rights abuses, from having their passports confiscated to non-payment of wages, 20+ hour a day working & lack of time off. One constant, that every domestic worker wants, is access to a mobile phone – but I interviewed a woman who was taken to the desert in a mock execution just because she had hidden a mobile phone against the wishes of her employer.

African domestic workers call across balconies to talk to each other in Lebanon, Beirut

African domestic workers call across balconies to talk to each other in Lebanon, Beirut

One day we may see access to a mobile phone and the internet as a human right. Young women generally aspire to be connected to social networks, and to be free to chat and text with their friends and family. For domestic workers, far from home in a land of which they may understand little, being excluded from contacting anyone outside the house in which they work is likely to damage their well-being.

One mobile phone operator in the Middle East is trying to reconcile these two contrasting
needs. On the one hand the desire of conservative households that their domestic worker should be kept away from inappropriate social contact, and on the other hand the desire of these same workers to maintain links with home and seek the comfort online of other women from their homeland who use social networks to build a community in their adopted place of work, or to seek help.

Technology has played an important role in the recent upheavals the Middle East has witnessed. Mobile phones are credited with empowering people and of changing the established order. Even the most traditional minds will understand that mobile phones are an irrevocable part of society, and that teen and young adult lifestyles are deeply influenced by online mobile access.

Young women in Bangladesh receive training on electrical goods found in Middle Eastern households

Young women in Bangladesh receive training on electrical goods found in Middle Eastern households

What Zain Jordan has done is to build a product that combines very cheap international calls with a restriction on the number of local calls that can be made. For domestic use mobile subscribers can only call five Zain Jordan numbers. Internet access can be enabled – or disabled – at the time of subscription, by USSD.

Why is this call package significant? We need to look at it from both sides, that of the employer and that of the domestic. From the employer’s perspective it ensures that the domestic worker has a very limited range of local contacts restricted to a whitelist. In conservative households, this is important – they may believe that women under their roofs should not be associating with strangers, and most particularly with strange men. Without passing judgement on these beliefs, it is not inconsistent that the same conservative household may see the benefit of their domestic worker being able to call home, perhaps believing that this is the ‘right thing to do’, or that it may reduce tension in the house, or encourage better work.

The domestic worker’s perspective is very different. For them the 2.5 piaster per minute call charge (just 3.5 US$ cents) is very cheap compared to the normal discounted international tariff of 37 piasters (about 52 cents per minute). But much more significantly is the impact of being able to use a phone at all. If the restrictions placed on their domestic calling are what makes the difference between having access to a mobile phone and none at all, then this is a step-change for the domestic worker. Unpalatable as the restrictions sound, the net effect is possibly an infinite increase in access.

The way Zain Jordan has dealt with internet access is also interesting. During activation of the package, which is done using USSD, the subscriber can opt in or out of internet access. What this business logic enables is that whoever sets up the subscription sets the rules – this means that a Sri Lankan domestic worker who gets the subscription from a Zain salesperson at the Friday market, or a Filipino at church on Sunday, may opt in to internet access, but if the employer decides to get the subscription on behalf of the worker they can decide to turn internet access off.

The questions this tariff raises are intriguing; there’s clearly a trade-off here in order to balance conservative attitudes with the legitimate expectations and needs of overseas domestic worker, but what is an acceptable balance between restriction and permission? One way to look at this is to consider the following question: would the domestic worker who previously was not allowed a phone but under this tariff can now call home for 2.5 piasters a minute exchange this tariff for another one that charged 37 piasters to call home but had no restrictions on domestic calling? In other words, what price human rights?

Could training young women how to stay safe on their mobiles have helped us find the kidnapped Nigerian girls?

It's easy to take a wrong turn in Beirut

It’s easy to take a wrong turn in Beirut

After a couple of beers in the tourist district of Hamra in Beirut last November, I felt like taking a walk across town to Gemaizeh, a vibrant street lined with cozy bars and good music. Detoured by a checkpoint in the dark, I lost my sense of direction and found myself in an area that felt just ‘different’. Instead of people chatting in the street there were men, only men,  smoking shisha pipes in silence and eyeing me critically. I’d not noticed the black flags surrounding this little enclave and had walked into a very dangerous part of town, and it felt like it.

But what can we actually DO?

But what can we actually DO?

Unexpectedly stepping into danger zones can happen anywhere, and the sudden sense of vulnerability can rapidly induce panic. In Beirut there’s an under-current of tension because you know it’s not safe, and it must have been the same for the girls in Northern Nigeria who ended up being kidnapped by Boko Haram and tagged #BringBackOurGirls. They will have known that the sound of vehicles arriving in the night was always possible, and will have prepared a little, even if just to shudder at the very thought of it.

Almaza beer in Beirut

Not everywhere in Beirut approves of drinking Almaza beers on the street

I wasn’t at all prepared – I was just looking for another beer. Acting insouciant  I took to the centre line of the street and breezily popped open my ‘Sports Tracker’ app, studying  my phone like I’d just got a random text message. Sports Tracker is what I use on bike rides to record my route and speed, and I reasoned that if I got into trouble I’d be able to quickly sync the data so my journey and its end, perhaps bludgeoned in the boot of a car and manacled with cable ties, could be read from the cloud. Beirut’s mobile network is great, so I thought this would be pretty straightforward so long as I could keep my phone long enough to hit ‘sync’.

This wasn’t the most elegant solution to my predicament, but I thought it worth my while. But then I’m an expert at this sort of thing, and am comfortable fiddling with my phone while cycling round London in light rain and poor light.

The girls in Nigeria will not, in all likelihood, have considered whether they could leave an electronic breadcrumb  trail with their phones for investigators to follow. Besides, was it even possible? Did any of the girls have a phone with GPS, is there a data connection in that part of Nigeria, are girls even allowed to have phones at school, let alone in the dormitory? Did they have any airtime credit? Were they stripped of every possession before being bundled into trucks and off into the darkness?

Given that over 200 girls were taken I’m willing to guess that some of these conditions were met. Half of the girls will have had a phone, a quarter of these a smartphone, a fifth will have got a data plan – which makes five. It just would have taken one of them to send out a Viber message with the location fix enabled to indicate where they had headed.

I don’t expect they got a chance, and we may never find out – I expect their capture was a violent, terrifying ordeal designed to stamp out any thought of dissent. But that’s not the point – from the specific, let’s look at the general and figure out if we should be actively teaching safe mobile practice to young women at risk.

Training in electrical goods

Young women in Dhaka being taught how to use domestic appliances before migrating to the Middle East

Let’s take the ideal situation and work back from there. Women who find themselves in danger, or enslaved, deprived of their rights, or simply frightened and needing support, would be better off if they knew their mobile phone could help liberate them. When an Indian politician last year demanded that all mobile phone makers design in a Big Red Button for women to press in emergency, I laughed at the cynical naivety of such a stunt – until I realised that he was onto something. Of course, manufacturers wouldn’t put an ugly red button on the phone, but app makers have been doing just that for years. An app that is quick to access, with a super-simple, stripped down interface, which with a click will do something useful. Think of the Flashlight app, or Google Now – one swipe or two and they’re active.

So building the app part is easy, but what about the education? Who is going to teach young women how to use their mobile phone to keep them safe? How can we get to a stage where  women, faced with a situation like I myself faced in Beirut, know instinctively how to shift electronically to a ‘start tracking me’ mode. How can they be sensitised to the idea that a smartphone is an amazing platform for helping women keep safe and get out of danger? Who is going to teach them how to use the tools?

Dhaka girls with phones

Girls do have phones

We need to build resources that help women to help themselves. Training materials they can buy in the market, download onto an SD card and run on their phones, browse through on YouTube, and ‘Like’ on Facebook. The demand, we know, is  there. On the supply side, smartphones with GPS and twin cameras running Android Jelly Bean are down at US$45 street price in Asia, new, and a Gigabyte of data is under US$10 even from the mobile operator. There’s even a few apps, like HarassMap and Safetipin. What’s missing is the training materials, optimised for delivery to the devices women have – a CD player, a cheap mobile, a community centre with a trainer. It’s a small gap to close.

Manikganj training

Training in the village (Bangladesh)

So what’s the answer to the title of this blog post: could training these girls have helped them? We can only guess. But the lessons women need to learn are generally simple – get connected, hook up to social networks before you find yourself in need, know how to share your location using Viber or WeChat, seek out help and support. This isn’t hard to teach.


Training the trainers (Kathmandu)



How cell phones can break migrant workers’ enforced isolation

Work In Progress

Rahel was confined for more than two years in her employer’s home in Beirut, 13 years ago.

She explained that for six months her only contact with any person outside her employer’s immediate family was through hand signals across the roofs to another woman. After some time she realised she could converse with some Sudanese kitchen workers in a hotel that backed onto her employer’s house. Through a sealed window she established her first verbal contact beyond that of the “madam’s” family, but she never saw their faces.

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