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The Role of SMMEs in ICT innovation and the knowledge economy, Presentation at CODIST in Addis Ababa April 30, 2009. Dr. Meoli Kashorda, MIEEE MIET Professor of Information Systems, USIU & Executive Director, KENET. TOTAL PROJECT 4200 Km. ZTE. HW. SAGEM.

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slide1

The Role of SMMEs in ICT innovation and the knowledge economy, Presentation at CODIST in Addis Ababa April 30, 2009

Dr. Meoli Kashorda, MIEEE MIET

Professor of Information Systems, USIU

&

Executive Director, KENET

slide2

TOTAL PROJECT 4200 Km

ZTE

HW

SAGEM

1342 + 1112 + 1750 Km

STM16

WM

STM4

WDM

STM16

STM4

WDM

STM16

1342 + 1112 + 1750 Km

STM16

slide3

Some facts about Kenya

  • Over 50% of population lives on more than $1 per day
  • ICT indicators
    • Mobile customers = 15 million (close to 40% teledensity)
    • Internet users =3 million
  • Population 37 million; GNI per capita = $530;
  • Over 150,000 university students
  • Kenyans dominate London, New York, Boston etc. Marathons
  • We are the official Athletics representatives of Africa!
    • Highest number of medals at the Beijing Olympics!
    • Innovative runners!
slide4

Agenda

  • ICTs and Innovation
    • Pillars of the Knowledge Economy
    • Global Competitiveness Index and Knowledge Economy Index
  • Growth of Mobile ICTs in Kenya
    • Trends in mobile teledensity
    • ICT industry in Kenya
  • How is the SMME sector using ICTs?
    • Based on ICTs Trade and development Kenya case studies case study 2007
    • Status of Mobile Commerce in Kenya – 2008
  • ICT innovations to support SMMEs
    • M-PESA and ZAP money transfer innovations
    • Microfinance sector innovations
  • Conclusions
slide5

Consumer - Enterprise

LANs, ERPs

Internet, Phones

PC, Internet

Software, Phones

Enterprise - Enterprise

Consumer - Consumer

PC, Internet

Software, Phones

LANs, ERPs

Internet, Phones

Department - Department

Firm-level assessment of ICT infrastructure for businesses

slide6

What is the firm-level motivation for adopting ICT innovations?

  • Business or organizational strategy
  • Leadership believes IT matters!
    • Business value
  • Presentation has a special focus on firm-level ICT diffusion and usage
slide7

Why the focus on ICT at the national level?

  • Knowledge economy – basis for competitiveness is knowledge and innovations
    • Four pillars: Institutional, educational, innovation, and informational infrastructure
  • Knowledge Economy Index (KEI) and the Knowledge Assessment Methodology (KAM)
  • Networked readiness index (NRI)
  • What happens if trading partner has higher KEI or NRI?
slide8

Some empirical evidence of ICT-Growth-Trade

  • Benefits of ICT cut across Developed and Developing Countries;
  • Developing Country benefits are HIGHER
  • Example of mobile phone: For an increase of 10 units per 100 people:
    • GDP growth up 0.6 percent per year in Developing countries (twice as high as in Developed Countries (Prof. Fuss, London Business School)
    • (Over 70 billion Ksh for Kenya)
what ict sectors growth
What ICT sectors growth?

Mobile telecoms

Very profitable and attract local and foreign investments!

Optical fiber backbones

Government investment in national and undersea cables

Emerging infrastructure companies in Kenya (KDN, TKL, KPLC)

Software development industry still small and in the SMME sectors – it is harder!

CODIST - SMME Driven ICT Innovations

ict regulatory regime
ICT regulatory regime

Kenya Communications Act 1998

No duopoly in fixed or mobile services

Unified Licensing Framework (ULF)

Communications  ICT Act limitations

Kenya Communications Regulations 2001

Dominant operator has not yet been announced

Safaricom has over 80% market share – problem?

Kenya ICT (Amendment) Act 2008

Assented on December 30, 2009

Recognition of e-transactions – important for M-commerce

Introduces broadcasting & content regulation

CODIST - SMME Driven ICT Innovations

growth of fixed and mobile telephony
Growth of fixed and mobile telephony

CODIST - SMME Driven ICT Innovations

slide13

Market environment

Environment

Pol. & Regulatory env

Infrastructure env.

Individual readiness

NRI

Readiness

Business readiness

Govt readiness

Individual usage

Usage

Business usage

Govt. usage

Source: GIT report 2003-2004

What does Network Readiness Index measure?

no significant change in networked readiness index
No significant change in networked readiness index?

CODIST - SMME Driven ICT Innovations

no significant change in nri for kenya or other ea countries
No significant change in NRI for Kenya or other EA countries!

Internet penetration is low

Low adoption of ICT by the dominant SMME sector?

CODIST - SMME Driven ICT Innovations

slide16

Networked Readiness Index (2004-2007)

Source: World Economic Forum Global IT Reports

slide17

Growth in Internet Infrastructure in Kenya

  • KENIC and KIXP examples of successful Public Private Partnerships
    • Time Server and F-root name servers installed in Kenya
  • KENET a national research and education network
    • Building a national optical-fiber based network
  • Estimated 2.7 million users in 2007
    • Mobile Internet must have added 1 million users!
  • Undersea cables will be landing in Kenya in starting June 2009!
    • SEACOM, TEAMS, EASSY etc.
  • But – national leased line network still underdeveloped!
innovations and the smme sector
Innovations and the SMME sector

How is it measured?

12 pillars in Global Competitiveness Report!

Does the SMME sector have a role?

Yes!

How should Africa measure ICT innovations?

Scientific innovations are not the full story!

CODIST - SMME Driven ICT Innovations

global competitiveness and innovation rankings out of 134
Global competitiveness and innovation rankings (out of 134)

CODIST - SMME Driven ICT Innovations

Source: Global Competitiveness Report 2008

slide22
CODIST - SMME Driven ICT Innovations

Source: World Bank KAM 2008 website

what is the knowledge economy
What is the Knowledge Economy?

One of the four Pillars measures Innovation

But using developed country metrics!

World Bank has developed the Knowledge Economy Index used to rank economies!

Is it appropriate for Africa?

Tanzania has been assessed using the Knowledge Assessment Methodology

No idea if that has helped!

CODIST - SMME Driven ICT Innovations

slide24
CODIST - SMME Driven ICT Innovations

The “4 Pillars” of a Knowledge Economy (KE)

  • A supportive economic and institutional regime to provide incentives for the efficient use of existing and new knowledge, and the flourishing of entrepreneurship.
  • An educated and skilled population to create, share, and use knowledge well.
  • A dynamic information infrastructure to facilitate the effective communication, dissemination, and processing of information.
  • An efficient innovation system of research centers, SME’s, universities, consultants, bigger businesses and organizations

Source: World Bank Institute

knowledge economy index 2008 comparisons
Knowledge Economy Index 2008 comparisons

CODIST - SMME Driven ICT Innovations

how are they measuring innovation
How are they measuring Innovation?

Royalty payments and receipts, US$ per person

• Technical journal articles per million people

• Patents granted to nationals by the U.S. Patent and Trademark Office per million people

This puts African countries at a distance – the Global Competitive Index could be a better measure of innovation!

CODIST - SMME Driven ICT Innovations

are these measures appropriate
Are these measures appropriate?

SMMEs cannot drive innovation if we use these measures

We must develop appropriate measures of innovation that are contextually relevant

Michael Porter and WEF include business innovations (sophistications)

CODIST - SMME Driven ICT Innovations

ict innovations for smmes
ICT innovations for SMMEs

Information infrastructure necessary for innovations

Business needs of SMMEs and low-income groups drives ICT innovations

How do SMMEs use ICT?

Some empirical studies

CODIST - SMME Driven ICT Innovations

purpose for use of ict by smme
Purpose for use of ICT by SMME

CODIST - SMME Driven ICT Innovations

slide33

Why is Internet usage low in SMME sector?

  • Roundtable and focus group agreed on following factor in order:
    • Management mindset is the most significant barrier
    • Business culture that does not promote transparency especially on pricing
    • ICT diffusion and affordability
  • Low uptake of E-commerce not directly related to laws but limited internal readiness and usage of ICT
  • Baseline survey recommended
slide34

These sector has specific needs that are driving innovations!

Firm-level ICT strategies

  • Companies listed in NSE are effective users of ICT
  • Large and Medium-sized also effective users of ICT
    • It is stronger leadership
  • Business and management education for small and micro-enterprises very important
    • Analysis of affordability issues necessary
    • It is NOT just the PC – the applications are more important for diffusion

34

CODIST - SMME Driven ICT Innovations

Meoli Kashorda

mobile innovations for smme sector
Mobile innovations for SMME sector

These sector has specific needs that are driving innovations!

CODIST - SMME Driven ICT Innovations

m banking and m commerce case studies
M-banking and M-commerce case studies

CODIST - SMME Driven ICT Innovations

mobile money transfer growth in kenya
Mobile money transfer growth in Kenya

Launched by two main mobile operators

Zain (17%) and Safaricom (80%)

Safaricom M-Pesa money transfer

It is a business proposition – Increase the data ARPU!

P2P transactions – Ksh 20 billion in September from about Ksh 1 billion in September 2007

4.14 million registered users (September 2008) and 4,230 agents

Zain launched ZAP on 16/02/2009

Sokotele service introduced before M-PESA failed

CODIST - SMME Driven ICT Innovations

other innovations
Other innovations

ICT applications for the sectors

Web-based accounting applications services businesses

New businesses with a focus on mobile applications for the SMME

Challenge

Lack of data on trends at the national level

CODIST - SMME Driven ICT Innovations

conclusions
Conclusions

Mobile commerce innovations developed to serve the needs of SMME sector

The PC is no longer a limitation for banking and money transfer

New measures of innovation required

The KEI does not measure business and applications innovations!

There is a need to collect data on the innovations that meet the needs of SMME sector

CODIST - SMME Driven ICT Innovations

thank you
Thank You

Meoli Kashorda, Ph.D., MIEEE, MIET

Executive Director, Kenya Education Network (http://www.kenet.or.ke)

and

Professor of Information Systems, USIU School of Business, Kenya (http://www.usiu.ac.ke)

E-mail: [email protected] or [email protected]

CODIST - SMME Driven ICT Innovations

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