Kenya ICT Board Learns Tough Lessons from Digital Villages Project

A conversation with Victor Kyalo, deputy CEO at the Kenya ICT board and the head of the Pasha project

Six years ago, the World Bank teamed up with the Kenyan government to launch an ambitious digital villages project, commonly known as "Pasha."

The project was met with a lot of optimism mainly because the government had just unveiled the Kenya ICT board, comprised of private sector executives earning Word Bank-level salaries, and expectations were high. The idea was to set up a digital center in each of the 210 constituencies in the country. The centers would provide digital services, mainly government services, allowing people to reduce the distance they needed to travel in search of government services.

The centers were also supposed to spur innovation and provide employment in rural areas, hopefully allowing more people to move from Nairobi, the capital, to the rural areas, decongesting the capital.

Today, only 63 centers have been set up; some of the people who received the money thought that it was general government aid, not to be repaid, others thought the ICT board would help them run their businesses. Some invested the money in other existing but financially ailing businesses while others took the loan and bought cars.

The board says it has no intention to continue with the project until a monitoring and evaluation exercise conducted by Deloitte is implemented. The project is also being handed to a private sector consortium to administer the loans and the recommendations made by Deloitte.

Computerworld spoke to Victor Kyalo, Deputy CEO at the Kenya ICT board and the head of the Pasha project.

CW: What was the original idea for Pasha?

VK: The Pasha fund was created to provide seed capital to entrepreneurs interested in setting up businesses in the 210 constituencies. The people would receive funds ranging from Ksh. 850,000 to 2 million (US$10,000 to $25,000). They would then set up the business, provide value addition and allow the business to sustain itself with time and repay the loan. There was a rigorous application exercise but we assumed several things; that the people applying had studied their areas and found the kind of services that would work, that the people had entrepreneurship skills, that business mentorship was easily available and that government services would be digitized fast enough to allow the businesses to thrive.

There is no doubt that government services provide the highest (level) content online, but some services are available online while others are not; for example, in the police service, you can download forms that allow you to report cases but other equally important forms are not online. Therefore even if you came to the Pasha to download the form, you will still have to go to the police station and fulfill other manual processes.

CW: What is going to be different next time the funds are available?

VK: The new digital villages model we want to adopt is not the generic model but the entrepreneurial model; whereby you actually borrow money and put it in business. We have entered into an arrangement with Family Bank as the financial intermediary to provide the loans at 10 percent interest rate, which is lower than current market rates of 18 percent. Then the entrepreneur is expected to come up with a bouquet of services depending on the area of operation and its uniqueness.

Previously, the model was generic and assumed what works in one area will work in another. This time we will be offering training in entrepreneurship, marketing, book keeping and a bit of technology. We are going to work with partners to facilitate this. In the digital villages we need two things; a consultant to run it, and a tender and a financial Institution to administer the funds, in the normal way that you go to the bank, get a loan and you have to repay.

CW: For the Pashas that seem to be working, what are they doing different?

VK: The entrepreneurs who provide IT services combined with non-IT services seem to be doing very well. For instance, there is a Pasha in Ruiru town (30 kilometers out of Nairobi) that provides IT services as well as agency banking services, where they provide services on behalf of Equity bank. This brings in foot traffic that can also take advantage of other services provided. The variety of services has allowed the business owner to make more money; instead of someone spending ten shillings, they can spend 20 or 30 shillings depending on services provided and the efficiency. For the businesses that provide tech support and maintenance, they are able to make more money because they can stay in business longer hours and can serve more clients. For instance, the last time I visited a cyber cafe in Kangudo in Eastern Province, I found that out of eight machines only three were working and upon further scrutiny, we found that part of the problem is simple things like dust, viruses, routine support and maintenance.

CW: What are some of the lessons that the board has learned?

VK: One of the positive lessons we learned was that businesses led by women were more sustainable because women were more conscious of commitments and expectations. For instance, the women-ran businesses in Kitengela (40 km from Nairobi) and Laikipia (in the Rift Valley province) are some of the best-performing and they have given the right information compared to other cases, mainly male-led businesses, where we have received misleading information and the commitment to repay isn't there.

Another lesson is the entrepreneurship spirit -- is it trained or innate? We assumed that when people come with a nice presentation of how they will run and sustain (a business), that will be the case. We learned that we have to keep training and giving tips on how to run the business. The new contract with the private sector consultant will include this training for every recipient.

Bandwidth is still a major problem for businesses outside Nairobi; they do not have many options like those in the city do. We need to find a way to provide affordable connectivity to these businesses the way the Kenya Education Network (KENET) has done with colleges and universities. When I was building KENET, many people didn't get the concept and thought that the connectivity would only help the colleges and universities in cities and towns. Today, Maseno University, which is in a far flung area, is connected via KENET, but the businesses around Maseno still suffer from high bandwidth costs, meaning if we left it to the market, Maseno would still be without affordable connectivity.

CW: Are grants and funds the best way for the government to contribute to ICT growth?

VK: No. From the projects that I have witnessed in the ICT sector in Kenya and the Sub-Saharan Africa region, government play a better role ensuring policies and regulations that favor business growth. Our culture of "haki yetu" (our right) means that people have a feeling of entitlement just because the funds are from the government. There has been several projects in Africa that have failed; the biggest is the NEPAD ICT-in-education project that failed despite being backed by global technology giants and satellite providers. It shows that we need a change in our business and entrepreneurship culture and our work ethic for government funds to help and make an impact in the industry.

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