I heard this week a vehement-as-always speech delivered by the Head of our government before members of parliament. He gave a set of measures to develop rural areas. Classic public policy schemes: the state will create a fund, an agency, set up a ministerial delegation etc. I was very happy though. It is the first time that we are thinking of having a real “rural strategy.”
I heard this week a vehement-as-always speech delivered by the Head of our government before members of parliament. He gave a set of measures to develop rural areas. Classic public policy schemes: the state will create a fund, an agency, set up a ministerial delegation etc. I was very happy though. It is the first time that we are thinking of having a real “rural strategy.”
I was happier when I heard M.Benkirane pointing out the real conundrum facing the development of rural and remote areas. He nailed it right at the button when he talked about the still-unsolved problem of the relationship between infrastructure and social development. What should come first, infrastructure building or socio-economic development? The chicken and egg story seems to be everywhere.
Let’s analyze this point further. A populated area indicates the presence of a socio-economic activity, which is a strong sign of development; therefore the state and private actors are willing to invest in infrastructure projects as demography and market rules justify it. At the same time, to create from scratch a socio-economic activity, we need a reliable basic infrastructure. To build this basis, it is either the role of state or private sector. The private sector doesn’t have the courage to invest in remote areas where risks of losing money are high. So the state has to do it.
Well, it seems also according to this week’s speech that crocodiles (aka corrupted politicians) have for long time occupied the area of rural development. In 2012, a budget close to $2bn from tax payers’ money has been allocated but no major changes were reported. The money is there but doesn’t reach the beneficiaries. Yes, it is a problem of governance which will take years to solve.
So let’s step back and look at things from the perspective of innovation and see how some aspects of this issue can be solved if we dare to break the status quo.
Today I will give you a small example of new methods of building infrastructure without the help of the state or the begging of corporate giants. I will take the example of electricity.
Electricity was discovered more than 150 years ago and yet we failed to connect all citizens to the grid. We are only 32 million people and when we connect a village to the grid, it is broadcasted on TV as a national achievement. I think we should start setting higher standards …
The structure of electricity market is very simple. Somewhere someone generates this energy (using coal, gas etc.), someone else build transmission lines and another entity distributes it to the end user (Redal, Veolia and Co). The most challenging part is related to building transmission lines: this cannot occur if you don’t have roads to transport the materials etc. (again, it is the chicken and egg story).
In India, small companies and a bunch of social entrepreneurs have been deploying a new idea which enables access to the grid in remote areas. The objective is to have all the three components of electricity market within the same area (generation, transmission and distribution). One way to do this is to use solar power.
Solar power has been used for the last two decades in our country. The technology is known, proven and deployed in many locations. But only the rich have access to it as installation of photovoltaic panels is costly. Still, in India they managed to sell these products to poor people.
The way they did it is very simple, yet innovative.
Basics of economics tell us that if you sell a standardized product in huge quantities, the price decreases significantly. Following this logic, our entrepreneurs were able to have a product within the reach of poor. Yet, it did not mean that the cash was available at every household.
Being connected to the grid is like buying a car, it is a product which requires significant financing capacity even if the relative price is low. As microfinance is developed in India, entrepreneurs tied up partnerships with local Microfinance Institutions (MFIs) to deliver credits to cover the costs of the panels and their installation. The MFI managed the loans repayment later as it is used to do it.
Very simple idea which requires two things: sun and MFIs. The first we have it and are proud of it, the second is still to be developed.
The state is not involved, crocodiles are out of scope and people are having electricity in their houses.
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