Sri Lanka

Kithu Sevana Village Phone Executive Summary

Executive Summary:

Sri Lanka, located just off the SE coast of India, has an area of 65,610 sq km, just slightly larger than West Virginia. Sri Lanka has a population of approximately 20 million people, with about 74% of the population living in the SW region near Colombo, the capital. Approximately 3 million people live in 10 urban centers, with the balance of the population (85%) living in the surrounding rural areas. Buddhist and Hindu's make up a vast majority of the religious activity in Sri Lanka, with a large practicing minority of Christians. Sri Lanka's most dynamic sectors now are food processing, textiles and apparel, food and beverages, port construction, telecommunications, and insurance and banking. The Constitution of Sri Lanka establishes a democratic, socialist republic in Sri Lanka, which is also a unitary state.

The following data represents key indicators for determining the feasibility to launch a Sri Lankan Village Phone Pilot Program in conjunction with the Kithu Sevana Community-Based Micro-Credit Program:

1. Teledensity: 30% - 30 phones/100 people, or about 6 million (cell) phones
2. Mobile Operators: 5 - Dialog, Hutch, Tigo, Suntel, Airtel (coming end of 2007 - from Bharti Airtel, India)
3. Microfinance Sector: Over 40 active MFI's - 5 largest: ABD, JBIC, The World Bank (pg 79- ), USAID, BMZ
4. Existing Village Phone program: Unknown. There is limited program data available.

Business Model:

Catalyze and/or augment the Village Phone movement in Sri Lanka by supporting the Kithu Sevana Community-Based Micro-Credit Pilot Program with the Welisara Church first, then working out from there on the additional Kithu Sevan church projects. It is the intension of villageTell to integrate Salt & Light into the initial Village Phone Operator training curriculum and ongoing Village Phone Operator "Forums".

Goals:

1. Offer assistance to the Kithu Sevana Community-Based Micro-Credit Program.
2. Provide affordable and sustainable communications to the micro-credit program participants.

Benefits to the Kithu Sevana Community-Based Micro-Credit Program:

1. Increased revenue: Revenues generated from an additional loan vehicle to qualified participants. Revenues generated from "airtime commissions" as a result of becoming an "airtime distributor" for the local community.
2. Reduced operating cost: Offering a Village Phone program means lowering operating costs via communications, being able to call clients when needed on occasions when physically meeting them doesn't work.
3. New clients: Attracting new clients with a new Village Phone loan product, introducing the benefits of information and communication technology (ICT) into rural areas, and differentiate your micro-credit project form other MFI programs.
4. Airtime distributor: As a micro-credit institution, you also have the opportunity to become an airtime distributor - reselling prepaid airtime in a partnership with the local telecommunications operator. This commission will generate revenue on every airtime second sold throughout you network of the Village Phone Operators, or on any airtime sold if the dealer agreement extends more broadly.   

Next Steps:

• Determine the distance of the nearest Telecom base station (cell tower) to the Welisara Church
• Assess the teledensity of the area within 35km of the Welisara Church
• Determine if any Village Phone programs exist within the target area
• Assess the retail cost of any "shared access" mobile communications programs already in operation
• Field test the villageTell "phone kit" - reception and signal strength

Download and Print Report here:

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Executive Summary:

Sri Lanka, located just off the SE coast of India, has an area of 65,610 sq km, just slightly larger than West Virginia. Sri Lanka has a population of approximately 20 million people, with about 74% of the population living in the SW region near Colombo, the capital. Approximately 3 million people live in 10 urban centers, with the balance of the population (85%) living in the surrounding rural areas. Buddhist and Hindu's make up a vast majority of the religious activity in Sri Lanka, with a large practicing minority of Christians. Sri Lanka's most dynamic sectors now are food processing, textiles and apparel, food and beverages, port construction, telecommunications, and insurance and banking. The Constitution of Sri Lanka establishes a democratic, socialist republic in Sri Lanka, which is also a unitary state.

The following data represents key indicators for determining the feasibility to launch a Sri Lankan Village Phone Pilot Program in conjunction with the Kithu Sevana Community-Based Micro-Credit Program:

1. Teledensity: 30% - 30 phones/100 people, or about 6 million (cell) phones
2. Mobile Operators: 5 - Dialog, Hutch, Tigo, Suntel, Airtel (coming end of 2007 - from Bharti Airtel, India)
3. Microfinance Sector: Over 40 active MFI's - 5 largest: ABD, JBIC, The World Bank (pg 79- ), USAID, BMZ
4. Existing Village Phone program: Unknown. There is limited program data available.

Sri Lanka Telecom Sector Summary

Sri Lanka has over 6,000,000 mobile subscribers and a teledensity of 30 (Q1 07). Over 30% of the population own, or have access to mobile phones. There are 5 active mobile operators serving the country:

1. Dialog
2. Hutch
3. Tigo
4. Suntel
5. Airtel (coming end of 2007 - from Bharti Airtel, India)

"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 Sri Lanka 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 mobile teledensity number to from 30 to 40.

• (20,000,000 people/100) = 200,000 people X 10 (additional phones) = 2,000,000 new people  using cell phones. Is that possible? Can rolling out VP programs accomplish that mission?

There is very little data available to determine if any Village Phone programs currently exist in Sri Lanka.

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 Village Phone operation. So let's look at our goal from that angle:

• 2,000,000 new people using a phone / 350 (avg # of people connected per VPO) = 5,714 VPO's.

Hmmm, that's interesting! 5,714 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.

Kithu Sevana Community-Based Micro Credit Program

Kithu Sevana (Rev. Adrian De Vissir) has developed a community-based micro-credit program as an avenue of opportunity and upliftment for the poor in Sri Lanka. Kithu Sevana has developed this program as a result of seeing first hand the urgent need for a small amount of seed capital, and the tremendous benefit such capital can bring to a budding enterprise.

A credit group will be formed in each church (listed below), based on the levels of interest in the program. The group will be made up of those who want to participate in the program, and if the majority are women they can even form it as part of the church's women's ministry activities.

Kithu Sevana aims to begin the program initially in the Kithu Sevana Welisara Church, and after a pilot period of 6 months, they will introduce it to other Kithu Sevana and Distributed churches. A full time staff person will be recruited to introduce, administer and coordinate the program.

Kithu Sevana Community-Based Micro Credit Program Target Churches:

1. Welisara Church (sinhala & tamil churches) - Pilot church (first 6 months)
2. Chilaw Church
3. Dummalasuriya church
4. Galgamuwa church
5. Polonnaruwa church
6. Deraniyagala church

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Sri Lanka Microfinance Sector Summary

Central Bank of Sri Lanka (CBSL) is in charge of supervising the formal banking sector, which includes the providers of microfinance services. Other institutions involved in supervising microfinance are; Ministry of Cooperatives which manages the all the Cooperative Rural Banks (CRBs). There is a plan to consolidate responsibilities for the microfinance sector under a new agency - the Rural Financial Sector Development Agency (RFSDA) (and here) for all MFI's with a deposit base greater then LKR 2 million, and will be located at the Ministry of Rural Economy. More than 3,400 unregulated cooperative operating in Sri Lanka, 250 provide financial services.

More than 40 organizations are active in microfinance. The 5 largest are:

1. ABD
2. JBIC
3. The World Bank (pg 79- )
4. USAID
5. BMZ

Complete list of Microfinance Providers in Sri Lanka (Annex 5)

Notably, World Vision is involved in the MFI sector with its "WILFund" and featured by Grameen Foundation USA for its Rwanda project called "The Vision Finance Company".

Financial Services Geographic Coverage (see Map - Annex 6):

• Every district in Sri Lanka has access to financial services (pg 9)
• 14,000 points of service (see map in Annex 6)
• One point of service per 1,300 inhabitants (compared to 1/10,000 in other developing countries)

Invest in Technologies (pg 24) - Introduce mobile phone technologies such as G-Cash in the Philippines

Sri Lanka Country Overview

Demographic Summary:

Sri Lanka is an island nation 28km off the southeastern coast of Indian with an area of 65,610 sq km (slightly larger than West Virginia), has a population of approximately 20 million people with an estimated 74% living in the densely populated southwest region surrounding the capital, Colombo, where it's main port and industrial center is located. Only about 15%, or 3 million people, live in the urban centers. The balance of the population (85%) lives in adjacent rural areas.

Primary urban centers/populations:

• Colombo - 647,100
• Dehiwala-Mount Livinia - 210,546
• Moratuwa - 177,563
• Jaffna - 145,600
• Negombo - 121,701
• Sri Jayawardenepura - 116,366
• Kandy - 109,343
• Kalmunai - 94,579
• Galle - 90,270
• Batticaloa - 80,313

Sri Lanka is composed of 4 primary ethnic groups; Sinhalease, Native Tamils, Tamils of Indian origin, and Moor's, with the Sinhalease accounting for the largest segment at 74%. Most of the Sinhalease are Buddhist, while most of the Tamils are Hindu, with a sizable minority of both being Christian (Roman Catholic). The two official languages are Sinhala and Tamil, with English on a decline since independence. The government is trying to reverse the decline of English, mainly for economic and political reasons.

Economic Summary:

Sri Lanka's most dynamic sectors now are food processing, textiles and apparel, food and beverages, port construction, telecommunications, and insurance and banking. In 2005, plantation crops made up only about 15% of exports (compared with more than 90% in 1970), while textiles and garments accounted for more than 60%. About 800,000 Sri Lankans work abroad, 90% in the Middle East. They send home more than $1 billion a year.

Political Summary:

The Constitution of Sri Lanka establishes a democratic, socialist republic in Sri Lanka, which is also a unitary state. The government is a mixture of the presidential system and the parliamentary systems. The President of Sri Lanka is the head of state, the commander in chief of the armed forces, as well as head of government, and is popularly elected for a six-year term. In the exercise of duties, the President is responsible to the Parliament of Sri Lanka, which is a unicameral 225-member legislature.

Sri Lanka is an island nation 28km off the southeastern coast of Indian with an area of 65,610 sq km (slightly larger than West Virginia), has a population of approximately 20 million people with an estimated 74% living in the densely populated southwest region surrounding the capital, Colombo, where it's main port and industrial center is located. Only about 15%, or 3 million people, live in the urban centers. The balance of the population (85%) lives in adjacent rural areas.

Primary urban centers/populations:

• Colombo - 647,100
• Dehiwala-Mount Livinia - 210,546
• Moratuwa - 177,563
• Jaffna - 145,600
• Negombo - 121,701
• Sri Jayawardenepura - 116,366
• Kandy - 109,343
• Kalmunai - 94,579
• Galle - 90,270
• Batticaloa - 80,313

Kithu Sevana Village Phone Program Analysis

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