Sierra Leone

villageTell Sierra Leone

Sierra Leone Village Phone Executive Summary

Executive Summary:

Sierra Leone, about the size of South Carolina, has a population of 6.1 million people, with 5 urban centers. 65%, or 4 million people live in rural areas. 60% Muslim, 30% Christian, and 10% indigenous beliefs. The democratic republic government puts a high emphasis on sustainable provision of financial service to the poor and low income people, and is open to support the development of the microfinance sector.

The following data represents key indicators for determining the feasibility to launch a Village Phone Program in Sierra Leone:

1. Teledensity: <10% - 8.7 phones/100 people, or less than 500,000 phones
2. Mobile Operators: 5 - Celtel, Comium, Africell, Millicom and Datatel
3. Microfinance Sector: 9 MFI's serving 44,000 clients with growth capacity of 90,000-160,000. MITAF goal to establish 100,000 MFI clients by 2009.
4. Existing Village Phone program: Nascent. Celtel supported, but limited program data

Business Model:

Catalyze and/or augment the Village Phone movement in Sierra Leone by forging relationships with the local Microfinance Institutions (MFI's), Telecommunication companies, churches and individual business leaders. Integrate Salt & Light into the initial training curriculum and ongoing Village Phone Operator "Forums". The "Catalyst" organization may need to start as a nonprofit platform (similar to the Grameen Foundations Grameen Technology Center as structured for the Uganda and Rwanda Village Phone projects).

In Uganda, the Grameen Technology Center partnered with local MFI's and MTN (local Telecom) to form the for-profit "Village Phone Company" called "MTNvillagePhone". MTN and Grameen each own 50% of MTNvillagePhone. It would be our intensions to create the same for-profit company and model, and to do this in multiple countries.

Goals (First 3 Years):

1. Increase Sierra Leone GDP 1% while reducing poverty 2%
2. Launch 5,000 Village Phone Operators that will connect at least 125,000 people to the global economy

Next Steps:

• Determine rural population density within 35km of existing Telecom base stations (cell towers)
• Determine MFI rural client percentages
• Confirm the reach and magnitude of the existing Celtel Village Phone program.
• Estimate revenue projections

Download and Print Report here:

Download sierra_leone_village_phone_business_analysis_logo_120107.doc

Sierra Leone Telecom Sector Summary

Sierra Leone has just over 500,000 mobile subscribers and a teledensity of 8.7 (2006). Less than 10% of the population own, or have access to phones. There are 5 active mobile operators serving the country list below in rank of subscribers:

1. Celtel - 243,000
2. Comium - 165,000
3. Africell - 55,000
4. Millicom - 42,055
5. Datatel - 17,156

"Cell phones are causing a social and economic impact much more dramatic and disruptive than ever expected. GDP's have risen while poverty levels are decreasing. Studies indicate that adding 10 phones per 100 people adds 0.6% to the GPD of a developing country. Extrapolating from the UN figures on poverty reduction (1% of GPD growth results in 2% poverty reduction) that 0.6% growth would cut poverty by roughly 1.2%. Given 4 billion people in poverty, that means that with every 10 new phones per 100 people, 48 million "graduate" from poverty!"

If we want to add phones to help raise the GDP of Sierra Leone by 1%, thus, reducing poverty by 2%, then we'd need to raise the teledensity number by 10 people per 100. Or, we'd need to move the teledensity number to from 8.7 to 18.7.

• (6,100,000 people/1,000) = 6,100 people X 18.7 (new teledensity goal = 114,070 new people  using cell phones. Or, 71% of the total number (160,000) of potential microfinance customers in Sierra Leone. Is that possible? Can rolling out VP programs accomplish that mission?

Celtel appears to already have a Sierra Leone Village Phone Program in play, by there is very little data available to determine program magnitude or capacity.

In Bangladesh, the 290,000 Village Phone Ladies help connect 100,000,000 people! Each VPO then  connects an average of 350 people through their little VP operation. So let's look at our goal from that angle:

• 114,070 new people using a phone / 350 (avg # of people connected per VPO) = 325 VPO's.

Hmmm, that's interesting! 325 new Village Phone Operators doesn't seem like such a big deal, however, it's not just about launching the VPO opportunity to reach the poverty reduction goal. It's about the fact that as phone use in rural area begins to increase, along with the increase growth of the MFI sector, and the access to funds leads to increased phone ownership, which in turn drives demand and justification for additional base stations, which increases network coverage, which attracts more subscribers... You get the picture.

Sierra Leone Microfinance Sector Summary

According to the Sierra Leone Microfinance Investment and Technical Assistance Facility (MITAF), there approximately 9 MFI's serving over 44,000 local clients. MITAF's goal is to assist existing and new MFI's in Sierra Leone to grow their client base to 100,000 by 2009.

The estimated demand for MFI services ranges between 90,000 and 160,000 customers.

Two of the largest registered international NGO microfinance operators in Sierra Leone are:

1. World Hope International (Springfield, VA) - 15,000 active clients with 96% repayment rate. Hope Micro is World Hope's is largest and most successful microfinace institution with 17,755 clients (Dec 31, 2007). Richard Schroeder is the Director of Microfinance & Economic Development
2. American Refugee Committee (ARC) (Minneapolis, MN) - 2,440 (2003) - 15,000 by 2007 (Projected)

 

Sierra Leone Economic Summary

Economic development has always been hampered by an overdependence on mineral exploitation.

• GDP: purchasing power parity - $5.012 billion (2005 est.), $2.5 billion (1999 est.)
• GDP - real growth rate: 5.5% (2005 est.), -10% (1999 est.)
• GDP - per capita: purchasing power parity - $800 (2005 est.), $500 (1999 est.)
• (Source: Wikipedia)
• Population below poverty line: 68% (1989 est.)Industries: mining (diamonds); small-scale manufacturing (beverages, textiles, cigarettes, footwear); petroleum refining Agriculture - products: rice, coffee, cocoa, palm kernels, palm oil, peanuts; poultry, cattle, sheep, pigs; fish, ginger
• Economic aid - recipient: $103 million (2001 est.), $203.7 million (1995)
• Currency: 1 leone (Le) = 100 cents
• Exchange rates: leones (Le) per US$1 - 2,099.03 (2002), 1,986.15 (2001), 2,092.12 (2000), 1,804.20 (1999), 1,563.62 (1998), 981.48 (1997), 920.73 (1996), 755.22 (1995)

(Source: Wikipedia)

Sierra Leone Demographic Summary

Sierra Leone has a population of 6.1 million people (midyear '07), with an estimated 935,800 households in an area 71,740 sq km (338 km X 304 km), just slightly smaller than the state of South Carolina. More than half the population is under 20 years of age. Approximately 65% of the population or about 4 million people live in rural areas.

Primary urban centers/populations (2004):

• Freetown - 772,873
• Bo - 149,957
• Kenema - 128,402
• Makeni - 82,840
• Koidu - 80,025

Sierra Leone is composed of 20 ethnic groups. The predominant religions are Muslim (60%), Christian (30%), and indigenous beliefs (10%). English is the official language, but Krio is the lingua franca understood by 95% of the population.

Two thirds of the population engages in subsistence agriculture, although agriculture only accounts for 42% of the national income. Sierra Leone has a large mining industry rich in diamonds and rutile. The GDP is comprised of the following sectors:

• Agriculture - 52%
• Industry - 31%
• Services - 21%

The Village Phone Business Planning Process

The next step after selecting a Village Phone country is to validate that a Village Phone program can create a 'win' scenario for all constituents over the course of multiple years.

It would be ideal to establish a poverty reduction goal through the introduction of mobile phones, which in this case is a disruptive technology that is used as a productivity tool by people without electricity, land line phones, or bank accounts.

Experts say that for every 10 people out of 100 people that use mobile phones in developing countries, the GDP rises 0.6%, and the UN states that for every 1% the GDP goes up, poverty is reduced by 2%. So, we'll use the country's rural population figure to set the goal of the number of Village Phone Operators that are needed to raise the GDP by 1%, while reducing poverty 2%.

First, on a macro level, we need to assess the following:

• Demographics (Rural population, density and distance from Urban centers)
• Political Climate
• Economic Climate
• Microfinance Institution (MFI) Sector
• Telecommunications Sector & Teledensity
• Existing Village Phone Program Activity and Density
• Social Network (Friends in Country)

Additional Recommendations from Grameen Technology Center:

Tim Wood, Technical Project Manager and Village Phone Replication Manual co-author:

"...here are a number of key factors we look at when evaluating the potential for Village Phone in a specific market:

1. Rural telecommunications coverage: does telecommunications coverage extend out into rural areas – or is it concentrated in urban settings?  While the external antenna we use can extend the reach up to 35km from a base station, if there is no base station within 35km of a potential village phone operator, there is no way they can get a signal for their phone.
2. Strength of Microfinance sector: how many microfinance institutions are in the country?  What is their outreach (i.e. how many clients do they have)?  Are those clients in urban or rural settings? 
3. Rural Demand: Are there any alternatives for making public access calls?  How far do people travel to make a phone call?  What percentage of people own their own mobile phone now?

A market well suited for Village Phone is one where there is coverage in rural areas, a strong microfinance presence in rural areas (to act as your channel to market), and high (unmet) demand for public access telecommunication services"

David Keogh, Director Village Technology and Village Phone Replication Manual co-auhtor:

Dear Dan,

Thank you so much for your email and your kind words about the Village Phone Replication Manual. I am excited to hear that you and your colleagues are interested in becoming Village Phone champions. Sam Daley-Harris of the Microcredit Summit Campaign has often talked about how important it is to have champions in this world who work to catalyze innovative ideas to help lift people out of poverty. I would love to hear more about this consortium that you are putting together and see how Grameen Foundation may be able to support your efforts.

A good resource to start with would be our Village Phone Direct Assistance Center website (www.villagephonedirect.org). This new initiative takes a toolkit approach to Village Phone and enables MFIs to directly drive the process of constructing their own Village Phone program. We’ve written a Village Phone Direct Manual (which is on the website) and the assistance center was created to serve as a central hub for the exchange of information and knowledge and to provide the necessary tools and resources that organizations need to create a program that meets the needs of their clients and the markets where they operate. This approach allows almost anyone to start and/or support a Village Phone initiative and would be a good resource for your consortium.

The Village Phone Replication and Direct Manuals both lay out recommended steps that can be taken to assess the country, MFI, and telecom landscape before embarking on the creation of a Village Phone program. The most fundamental elements must be present: an enabling regulatory environment, willing and enthusiastic partners, and market potential. In addition, there are particular drivers which can facilitate the success and growth of a Village Phone initiative. A few of those factors include: the telecom coverage in rural areas, MFI commitment and outreach capacity, population density, rural demand, poverty demographics, the cost of a phone call, telecom policy, etc. One of the most crucial stages in creating a viable Village Phone program is the initial assessment and research phase; future success is dependent upon this step.  There are some tools on the Village Phone Direct Web site that assist with the research phase:  http://www.villagephonedirect.com/contents/index.php?option=com_content&task=view&id=34&Itemid=45