Because these aid organizations are often small, and their resources are limited, we wanted to see how we could align needs across them and pool spend (or demand) for these technology services in order to increase negotiating power with MNOs.
Many global international development organizations are using technology and mobile channels to better understand and reach their target populations. A substantial portion of their budgets for these interventions go directly to a digital service provider or the Mobile Network Operator (MNO).
However, these organizations typically have relatively small contracts with service providers and therefore do not receive volume discounts or economics of scale, potentially overpaying for services. Because these aid organizations are often small, and their resources are limited, The Digital Impact Alliance (DIAL) wanted to see how we could align needs across them and pool spend (or demand) for these technology services in order to increase negotiating power with MNOs.
DIAL recently explored the scale and possibility of aggregating demand across multiple implementing and donor entities for a digital asset such as mobile channels. We initially had the goal of leveraging this aggregated demand to increase negotiation power and secure better pricing or improved services for humanitarian activities. By doing so, we could help foster the increased use of mobile channels in the delivery of services to beneficiaries when and where it makes sense.
Understanding the Demand Aggregation Opportunity
We conducted research with Altai Consulting that estimated how much aid and development organizations currently spend on core communication channels in five countries – the Democratic Republic of the Congo (DRC), Ghana, Malawi, Tanzania, and Uganda. Our report Pooling Aid Sector Demand for Digital Public Goods: Lessons from Sizing Mobile Channel Demand in Sub-Saharan Africa, found that in those five countries, the 2018 market value of all mobile channels generated by NGOs and multilateral organizations was estimated to be between $500,000 and $1 million USD.
Using these numbers and insights from over 116 on-the-ground interviews we conducted for the report, we built a forecasting model which projected the current market and potential total market value across all of sub-Saharan Africa (SSA). Our model estimates:
- The total 2018 market of all 48 countries in SSA to be $15.7 million.
- A potential 2022 market value of between $31.6 million and $61.6 million.
The key drivers of growth identified are the massive transition from in-kind to cash aid distribution, and strong macro trends contributing to a larger market base of users.
Demand aggregation is a useful concept and an idea that is gaining interest and momentum in the sector. I recently had the chance to present early findings of our research at a 50-minute ICT4D session this spring in Kampala with Rashmi Pillai, Director of Programmes of Financial Sector Deepening Uganda (FSDU), and Forrest Wilhoit, Africa Broadband Coordinator at NetHope. FSDU is a practical in-country private sector voice and NetHope has a long history of leveraging demand aggregation for broadband connectivity.
Many NGOs I heard from and met with through the session, and throughout the conference, expressed eagerness in increasing their negotiating leverage with MNOs. In another session focused on emergency response, many expressed frustrations on how expensive it is to use SMS and work with MNOs. Practically, many asked how exactly demand aggregation could work and how it could benefit them.
Three Precursors to Starting Demand Aggregation
We found that before demand aggregation becomes relevant to humanitarian and multilateral organizations, more can and should be done to increase volumes on mobile channels such as:
(1) building local knowledge and capacity by supporting aid and development actors to develop knowledge and understanding of the various mobile channels (for more on this, please see our Mobile Capacity Model)
(2) connecting supply and demand actors by making it easier for supply actors (MNOs, mobile aggregators, technology providers) and demand actors (implementers, NGOs) to locate each other and create opportunities (for more on this, please see our country workshop reports for Malawi and Sierra Leone)
(3) gathering and packaging evidence around the use of mobile channels given that a basic understanding the pros and cons of each channel is a prerequisite to effective usage
Two Caveats to Understand this Research
There are two caveats to keep in mind in looking at this report: the reality of fragmentation and government spending.
Our focus was on sub-Saharan Africa, but realistically there isn’t one provider who operates in all 48 countries, so the $15.6 million would be impossible to reach by a single entity. In reality, we would need to work with multiple MNOs and mobile service providers. Our research reiterates the importance of partnering with aggregators when thinking about scale given the relatively fewer players covering more countries. Our recent report on using mobile aggregators identifies four types: content aggregators, API platform providers, mobile money providers, and NGO aggregators.
We also made the decision to exclude government spend in our market estimation as government procurement and financing would be a separate demand aggregation exercise. However, we do recognize that this could vastly increase the total spend on mobile services for humanitarian services. Coordinating that demand with development organizations could prove to be impossible so it may not be relevant, even if quantifying government demand were possible.
What does this mean for you?
This research examined the ICT4D sector in way that has never been done before. We took one rapidly growing market within ICT4D – mobile communication channels – and gathered real market data across multiple implementing and donor entities to understand how much they are paying as a sector to MNOs and aggregators. Even though the market size is lower than our expectations and remains inconsequential MNO revenues in Africa (e.g. according to GSMA the total operator revenues were $40 billion in 2017), it is still a thoroughly developed number that shows the sector’s weight and provides a foundation to negotiate.
As a ICT4D specialists, we hear a lot of positive affirmation about technology through various ICT4D success stories like MomConnect (DIAL Case Study) and Wazazi Nipendeni, programs that use SMS messages to share vital information about pregnancy and labor with expectant mothers or send appointment reminders. But the data we’ve been able to gather shows that DIAL, like others in the ICT4D community, must be careful to not overestimate the impact and success of technology at scale. Doing so could prevent key structural barriers from being addressed.
Looking Ahead for More Innovative Financing Options
Demand aggregation for mobile channels may be limited in the scale of its effectiveness given the issues at the country level; however, there is growing interest to leverage demand aggregation for other digital assets. Innovative financing models like those that leverage aggregate demand are necessary to scale technology products developed and used by the international development sector. These products that can be equated to global digital public goods.
Nonetheless, I’ve always believed that finance should play a supportive, not primary role and that its more important to fall in love with the problem and not the solution. While we are exploring ways to invest in technology at scale and our learnings can inform what these investment structures could look like, we will need the international development community to collaborate in order to agree, define, and set standards for the technologies they want to promote.
If you are interested in the concept of using innovative financing mechanisms or leveraging demand aggregation for scaling the use of technology in international development, then please join the conversation on our thread on the Digital Principles Forum, an online community connected to the Principles for Digital Development currently stewarded by DIAL.
