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An Internet for rural India
One intrepid entrepreneur battles brigands and bureaucrats to bring
e-governance to India's 700 million rural poor.
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By Malika Zouhali-Worrall
Last Updated: July 9, 2009: 11:33 AM ET
Cyber-bureaucracy in India
An intrepid entrepreneur looks to make millions bringing e-governance to
India's remote villages.
BANGALORE (Fortune Small Business) -- It's a sweltering day in May, the hottest
time of year in the South Indian town of Sathanur. In the shade of a
whitewashed storefront, a rugged, mustached man named Nagabhushana Achalu is
filing his first application for a certificate that will help his children go
to school. Within minutes the kiosk operator behind the counter has logged on
to the state government's intranet and sent Nagabhushana's application to a
server in the state capital, 40 miles away.
That may not sound remarkable, but in rural India it's a revolutionary act.
As a member of the Adi Karnataka, one of India's "scheduled castes," formerly
called untouchables, Nagabhushana has limited employment options. He earns a
meager 5,000 rupees ($100) a year from rice and millet farming. But there is
one ray of hope in his life: Private schools in his state, Karnataka, have
abolished fees for members of scheduled castes. His two children can go to a
good school for free -- so long as their father has the official "caste and
income" certificate to prove his poverty.
The process of getting one -- and the bribery involved -- was too costly until
the man with the kiosk came along.
India, famous for its bureaucracy, is where entrepreneur Sriram Raghavan
intends to prove that the world's billion-plus rural poor can be a lucrative
market for online services.
Raghavan, 36, once built software for U.S. corporate clients. Now, backed by
U.S. venture capital and undeterred by acts of violence against his outlets, he
is succeeding where others failed: providing Internet services that villagers
actually need and making a profit from their micropayments.
"We're democratizing information services," he says.
Cutting costs
Raghavan's company, Comat Technologies, runs 800 kiosks (called Nemmadi, "peace
of mind" in Kannada, the state's official language) out of Bangalore, in
southeast Karnataka.
Though customers like Nagabhushana rarely pay more than 15 rupees (31 cents) at
a time for Comat's services, its revenue has grown from less than $1 million to
$15 million in the past five years. Raghavan says the company turned a modest
profit in 2008.
Similar "telecenters" -- international development-speak for public spaces
where people can get online -- exist in poor countries all around the world.
What matters is how they are used.
"If a center is there to provide access to e-mail and the Internet, there is no
future for it," says Florencio Ceballos, program manager at Telecentre.org, a
research group sponsored by Microsoft (MSFT, Fortune 500) and the Canadian and
Swiss development agencies. "If
the center is able to offer public and private services and sell products --
that's a completely different story."
For Indian small farmers, obtaining vital documents is a laborious and pricey
ordeal -- in Nagabhushana's case, merely getting to the nearest government
office, a 14-mile bus ride away, costs 30 rupees, or 63 cents. Those who are
illiterate must spend around 100 rupees ($2) to hire one of the form-filling
brokers who loiter outside government buildings all over India. They might
spend an additional 200 rupees greasing the palm of an official to speed up the
process, then return to the government office up to three more times before the
certificate is ready.
None of that is necessary at the Nemmadi center, a five-rupee (10 cent) bus
ride from Nagabhushana's home. The line is short, the operator is helpful, and
no bribes are required. Nagabhushana can always check the status of his
application with a simple visit or phone call to the Nemmadi. Once the
certificate is issued, the operator will be able to access it online and print
a copy within minutes -- all for 15 rupees.
Multiply that by 700 million, the size of India's rural population, and you
start to see Comat's dizzying opportunity.
For years development pundits pushed Internet connectivity as a cure-all for
poverty. But numerous entrepreneurs have learned, to their cost, that what we
think of as core Internet services -- e-mail and the Web -- are of little use
to illiterate farmers living below the poverty line.
Take Amir Alexander Hasson, a Cambridge, Mass.-based technology entrepreneur.
In 2003 his startup, First Mile Solutions, developed technology that allowed
hardware attached to a bus to upload data wirelessly from village computers and
then connect to the Internet when the bus got to the nearest town. When the bus
returned to the village, it connected to the local computer again and dropped
off the data, like a virtual post office.
The problem? Not enough demand. "Villagers don't care whether you have a
computer with Wi-Fi," says Hasson. "They want to know if this thing can find
them a job or help them get fertilizer."
Hasson soon discovered that he couldn't generate enough revenue to cover the
cost of the equipment. His new business, United Villages, provides e-commerce
services to Indian villagers via cell phones.
The native companies haven't fared much better. At its peak, Indian telecenter
pioneer nLogue had 3,500 franchised centers that offered villagers everything
from passport photos to health-care services. Today only a few hundred centers
remain.
"With telecenters a single service does not earn sufficient revenue, but
multiple services can become too complicated for a single kiosk operator to
manage," says Ashok Jhunjhunwala, a technology professor and founder of nLogue.
When Raghavan co-founded Comat in 1996, selling to the rural poor was far from
his mind. The company started out as an international software outsourcing firm
specializing in network support. In the 1990s Raghavan set up a branch of the
company in Dallas that brought in $3.5 million a year at its peak. (He later
sold the Indian outsourcing business to Atlanta-based Software Paradigms
International.)
Then came a 1999 contract from the Karnataka state government in South India.
The project, called Bhoomi ("land" in Hindi), was to computerize the state's
land-record system. Previously, records had been held by village accountants,
who often took bribes to make favorable adjustments to farm boundaries. Bhoomi
was designed to create a digital trail of any alterations, making fraud easier
to spot.
Comat employees spent four years digitizing more than 20 million paper land
records in some 20,000 villages. By 2004 the state's land records were online
and accessible in 177 local government offices. But the project wasn't
particularly profitable for Comat, and getting paid by the state took as long
as 12 months.
So in 2006 Raghavan made Karnataka an offer it couldn't refuse. Through a
public-private partnership Comat would open hundreds of centers in the state's
rural areas and digitize other records -- everything from birth certificates to
pension documents -- at no charge. Comat would pay the government a share of
the 15-rupee fee it charged citizens for each certificate: nine rupees for land
records already digitized, one rupee for certificates that it was in the
process of putting online.
The government didn't need much convincing. By 2008 Comat had rolled out 800
centers, positioned so that most rural Karnatakans wouldn't have to travel more
than seven miles to reach one. Each center was equipped with a computer,
printer, backup power and satellite hookup. Together they now process more than
50,000 government transactions a day.
This has provided relief for officials as well as citizens. The annual school
admission season used to be a nightmare for Ravi Tirlapur, head of a government
office in southern Karnataka. Thousands of applications for different kinds of
certificates would pour in, forcing Tirlapur to spend long nights signing every
one.
"I used to get a pain in my hand," he says. These days he simply inserts a card
into a reader to place a bar code on each document.
