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Pasha Project Handbook

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Table of Contents Table of Contents .............................................................................................. 2

Acronyms ........................................................................................................ 4

Executive Summary ........................................................................................... 6

1.0. The Pasha Handbook: Scope of Work ............................................................ 9

1.1. Background: An Overview of the ICT Industry in Kenya .................................... 9

1.2. Vision 2030 and ICT ....................................................................................... 12

1.3. KTCIP and Digital Inclusion ............................................................................ 13

2.0. The Pasha Project Highlights ...................................................................... 15

2.1. Why the Government Supports Pasha Centres ............................................... 15

2.2. The Objectives of Pasha Centres ................................................................... 16

2.3. How ICT Authority Manages the Project ........................................................ 16

2.4. Bandwidth Capacity Support.......................................................................... 17

2.5. Implementation of the Pasha Bandwidth Capacity Support ............................ 17

3.0. The Pasha Project Story ............................................................................ 18

3.1. Government Funded Digital Villages .............................................................. 19

3.2. The Evolution of the Pasha Centres ............................................................... 22

3.3. The Pasha Process ......................................................................................... 24

3.4. Access to Financial Support ........................................................................... 26

3.5. The running of a Pasha Centre ...................................................................... 27

3.6. The Range of Services Offered ...................................................................... 28

3.7. Capacity Building and Training for Pasha Managers ....................................... 28

4.0. 4.0 Project Performance ........................................................................... 30

4.1. Project Status So Far – Deloitte’s Project Monitoring & Evaluation ................ 30

4.2. Project Success and Challenges ..................................................................... 31

5.0. 5.0 Case Studies ...................................................................................... 36

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5.1. A Success Story from the Foot of Mount Kenya .............................................. 36

5.2. The Struggling Entrepreneur .......................................................................... 36

5.3. The Centre That May Close Down .................................................................. 38

6.0. Lessons Learnt and Recommendtions ........................................................... 40

6.1. Implementing Pasha: Learning the Hard Way ................................................ 40

6.2. Mitigating Against the Challenges: The New Pasha Framework ...................... 40

6.3. Viability of Other Government Financing Options .......................................... 43

6.4. Recommendations ......................................................................................... 43

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Acronyms

AMFI Association of Micro-Finance Institutions

CAK Communications Authority of Kenya

CLIC Community Learning Information Centres

CBO Community Based Organization

DSTV Digital Satellite Television

DV Digital Village

GITS Government Information Technology Services (GITS)

GoK Government of Kenya

IBSG Internet Business Solutions Group

ICDL International Computer Driving Licence

ICT Information and Communications Technology

ICTA Information and Communications Technology Authority

IEBC Independent Electoral and Boundaries Commission

ISP Internet Service Provider

IT Information Technology

ITES Information Technology Enabled Services

KCPE Kenya Certificate of Primary Education

KCSE Kenya Certificate of Secondary Education

KENET Kenya Education Network Trust

KICTB Kenya Information & Communications Technology Board

KRA Kenya Revenue Authority

KTCIP Kenya Transparency Communication Infrastructure Project (KTCIP)

M&E Monitoring and Evaluation

MFI Micro Finance Institution

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MoIC Ministry of Information and Communications

MTP Medium Term Plan

NGO Non Governmental Organization

PIN Personal Identification Number

PPC Pilot Pasha Centres

PPP Public Private Partnership

RFP Request for Proposal (RFP)

SLA Service Level Agreement

TYB The Youth Banner

TOEFL Test of English as a Foreign Language

USAID United States Agency for International Development

VSAT Very Small Aperture Terminal

WEF Women Enterprise Fund

YEDF Youth Enterprise Development Fund

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Executive Summary

The Internet continues to be the key driver in the pursuit of a knowledge-based economy. This is

because Kenya’s Vision 2030 blueprint has identified ICT under its economic pillar, as a primary driver.

However, it has also been recognized that there is a big disparity in Internet access between the urban

dwellers and their rural counterparts. The ICT Authority is addressing this gap through the “digital

villages” project dubbed “Pasha” which seeks to - through rural access - increase online information

and therefore, facilitate job creation.

The objective of this handbook, apart from creating a narrative of the project, is to provide various

stakeholders with the necessary information on how and why the Pasha project was initiated, its vision,

implementation and expected impact. In other words, this is a handbook that gives a factual

presentation of the project initiation, planning, implementation, monitoring and evaluation.

There is evidence of improved ICT literacy and capacity for consumption, deployment and local

production of ICTs across all sectors. For instance, according to the statistics from the

Communications Authority of Kenya (CAK), the total number of Internet users in the country more than

tripled between 2009 and 2014.

The Pasha project complements other similar initiatives that have or are also impacting and creating a

demand for the ICT infrastructure. These include Huduma Centres, the USAID-supported CLIC Project

and the VSAT-based Internet connectivity project that was operated by the Postal Corporations of

Kenya. Post offices are located in all parts of the country and have been identified as ideal facilities

for developing digital villages.

Pasha Centres access financial support through a revolving fund sourced from the Government through

the ICT Authority. Entrepreneurs are invited to compete for the funds through a call for proposals that

is broadcast in a variety of media. The funds are released through the Family Bank. The revolving fund

component of the project kicked off in January 2011 after the bank was recruited through competitive

bidding.

As with any new initiative, the Pasha project has had its share of successes and challenges.

Among the challenges faced by some entrepreneurs are: lack of business and entrepreneurial acumen,

quality and cost of the Internet bandwidth, lack of technical support, suitable premises, marketing,

lack of Pasha branding, non-uniform bouquet of services and service delivery and stiff competition

from other operators.

Others challenges include poverty, low literacy levels, increased mobile phone and WiFi penetration,

unreasonable licensing demands by local authorities and the rural-urban migration where young

potential Internet users leave for towns and cities behind older less educated relatives in the rural

areas.

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The effect of all these challenges is reflected in the low levels of business seen so far and the high

default rates in loan repayments to the financial intermediary, Family Bank. For example, as at the

end of the financial year ending on June 30, 2014, half of the KSh. 75,844,647 disbursed in both Rounds

One and Two are considered to be at risk.

The ICT Authority recognized quite early that these challenges needed to be addressed if the program

was to meet its original objective of bridging the rural-urban digital divide. A business development

company, The Youth Banner, was brought on board in 2013 to assist in providing solutions to these

challenges. Based on ICTA’s input and that of Deloitte and Touche, the Monitoring and Evaluation

consultants, a New Pasha Framework has been developed.

The highlights of the new framework are greater business and financial discipline, and the

standardization of the Pasha Brand. The vision driving the new approach is also to standardize business

operations in all Pasha Centres across the country with the aim of:

Helping Pasha Centre managers reduce the expense and the time-consuming effort of starting a

Pasha Centre from scratch;

Improving, increasing and marketing the bouquet of services currently provided by Pasha

Centres,

Providing a long-term sustainability framework for the centres.

Due to its past performance, the Pasha project, at the moment, appears vulnerable. It has not

disbursed any loans since 2011 and has a portfolio of risky debts in because of a changed environment

brought about by increased mobile connectivity and stiff business competition from other ICT-related

businesses.

Recommendations

The Pasha project has been partially successful in fulfilling its mandate and objectives. Stakeholders,

at information gathering sessions, recommended that in order to move the project forward, there was

need to revise the current approach. The following recommendations were proposed:

The recruitment process of Pasha Managers should be reviewed so that emphasis is placed

equally on face to face interviews rather than just on how well a business plan is written. It

was also proposed that the business location be inspected for suitability before a candidate is

declared successful;

The New Pasha Framework be introduced to all stakeholders and the rural communities and the

bouquet and quality of services be standardized and procedures and facilities put in place;

Negotiations with the Ministry of Devolution & Planning be initiated to request that Huduma

Centre services be provided at a fee in the Pasha Centres after the training, branding and

standardization of services have been completed;

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The review of the grace period between financing and loan recovery be done so that it is

extended to at least 6 months to allow businesses to settle down;

There is need to lobby the government for the implementation of the Universal Service Fund so

that each major telecommunication company contributes one per cent of its revenue to

finance Digital Inclusion projects such as Pasha;

Aggressive marketing, branding and awareness creation of the Pasha Centres as government-

supported projects to the local authorities and communities;

Development of a standard curriculum that is recognized by the Ministry of Higher Education

for the Pasha Centres and that will be used in training entrepreneurs.

Closer monitoring of individual Pasha Centres to ensure the similar levels of service delivery

and standards are maintained throughout the country;

Continuous training of operators and the introduction of new business ideas so as to keep up

with the times and;

Consideration of extension of the bandwidth support program.

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1.0. The Pasha Handbook: Scope of Work

The aim of producing this handbook was so to document the facts of the Pasha project initiation,

planning, implementation, monitoring and evaluation. During the month of June, 2014, ICTA hired a

consultant who under the guidance of the Pasha team and the communications writer, gathered

material on tele-centres and Pasha Centres specifically to:

Collate information on tele-centres.

Collate project information on Pasha Centres.

Produce a project story with specific reference to project planning and implementation.

Outline how the Pasha Project has impacted the lives of communities around the centres and

the challenges the centres are facing and a vision of the way forward.

In order to fulfil the above mandate, information was gathered from around the country. The stories

were told by Pasha managers at their respective business centres. The following towns were visited:

Kamukunji in Nairobi, Masalani (near Garissa), Nanyuki, Athi River, Machakos, Nakuru, Kapsabet,

Kisumu, Pap Onditi (near Kisumu) and Narok.

From these visits, a number of observations were made and are noted in the handbook. They comprise

three case studies – each with a story to tell. The first one demonstrates that Pasha is can be success

story; the second is that of a struggling entrepreneur; and the third is that of a centre that may soon

close down.

It is hoped that the case studies will be reference points for stakeholders who need to understand the

successes and the challenges of running a Pasha Centre. The stories should provoke thinking on how the

Pasha project could be improved or reengineered.

1.1. Background: An Overview of the ICT Industry in Kenya

ICT is one of the fastest growing sectors in the country. It is one of the catalysts of the government’s

goals and objectives of the creation of wealth and employment towards the realization of national

development goals as well as the achievement of an information-based society.

Already, an Information and Communication Technology (ICT) revolution is taking place in Kenya - in

schools, in the transport and banking industry and many other areas in rapidly developing urban areas.

The ICT industry is transforming Kenya and the lives of its citizens.

There is evidence that ICT literacy and capacity for consumption has improved as seen in the way many

sectors including the music industry have been impacted around us. According to the statistics from

the Communications Authority of Kenya (CAK), the total number of Internet users in the country more

than tripled between 2009 and 2014, increasing from 6,385, 302 in Quarter 3 (2009/2010) to

21,679,309 in Quarter 3 (2013/2014). This represents a growth of 240% within a 5-year period.

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The deployment of the fibre-optic cable infrastructure by the government and the private sector has

gone a long way in laying the foundation for the government and companies to take advantage of e-

banking, e-commerce, e-learning, e-health and other e-based processes and transactions. This has

made Kenya a prime destination for ICT investment and business process outsourcing.

The industry, the academia and ordinary citizens are now able to aggressively leverage business

innovations in partnership with hardware and software manufacturers in driving economic and social

growth. All this is fuelled by a growing middle class and a talented pool of very imaginative youth who

make up over 60% of the local population.

The Kenya ICT Board, the precursor of the ICT Authority (ICTA), was established in 2007 as a state

corporation under the State Corporations Act Cap. 446. Its vision was to establish Kenya as a Top 10

ICT hub while its mission, on the other hand, was to champion and actively enable Kenyans to adopt

and exploit ICT. This objective was going to be achieved through the promotion of partnerships,

investments, and infrastructure growth - all for socio economic enrichment.

About the ICT Authority

The Information and Communication Technology Authority is a State Corporation under the Ministry of

Information Communication and Technology. The parastatal was established in August 2013 with 3

broad objectives:

The development of ICT infrastructure

ICT promotion and marketing

Capacity building in government, industry and in society

The government, through a Presidential Executive Order, transferred the Government Information

Technology Services (GITS) and the Department of e-Government (DeG) from the Treasury and Cabinet

Affairs ministries respectively to the Ministry of Information, Communications and Technology (MoICT).

Soon thereafter, the Kenya ICT Authority was established as a parastatal under the ministry. It then

took over the functions previously performed by the Kenya ICT Board (KICTB).

There is no doubt, however, that the establishment of the three former agencies has led to the

tremendous development now being seen in the ICT landscape in Kenya. In the last ten years, ICT has

become a key agent in transforming the way the government delivers services to the public, and there

is a lot of expectation that the ICT Authority will continue to play a crucial role in achieving the

Government’s ICT agenda.

An excerpt of the ruling coalition, Jubilee’s manifesto underscores the progress as follows:

“A lot of progress in the ICT Industry has taken place since the introduction of the ICT Policy Paper in

2006. Key accomplishments such us building of the relevant ICT infrastructure and legislation of

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comprehensive policy, legal and regulatory frameworks are already bearing fruit to the industry. A lot

of the listed challenges then are impressive works in progress such as local content development,

universal access and e-Government.”

The Functions of the ICT Authority

The following are the functions of the ICT Authority:

a) Set and enforce ICT standards and guidelines in the areas of human resource, infrastructure,

processes, systems and technology in public offices and in delivering public services;

b) Deploy and manage all ICT staff in the public service;

c) Facilitate and regulate the design, implementation and use of ICTs in the public service;

d) Promote ICT literacy and capacity;

e) Promote e-Government services;

f) Facilitate optimal electronic forms, electronic record and equipment use in delivering public

service;

g) Promote ICT innovation and enterprise;

h) Establish, develop and maintain secure ICT infrastructure and systems;

i) Supervise the design, development and implementation of critical ICT projects across the

public service; and

j) Implement and manage the Kenya National Spatial Data initiative

The Authority aims to rationalize and streamline the management of all Government of Kenya ICT

functions. It also aims to advise the Government on sectoral development and ICT project

implementation and investment. The Authority shall enforce ICT standards in the Government and

enhance the supervision of its electronic communications under the National Messaging theme: “One

Government, One Voice.”

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1.2. Vision 2030 and ICT

Vision 2030 is the national long-term development blue-print that aims to transform the country into a

modern, globally competitive, middle income country that will offer a high quality of life for all

citizens by the year 2030. The Vision is being implemented through a succession of five year Medium

Term Plans (MTPs). The first MTP (2008-2012) implemented the first five years of the Vision. The Vision

comprises of three key Pillars: Economic, Social, and Political.

The economic pillar aims to achieve an average economic growth rate of 10 per cent per annum. The

pillar’s aim is to sustain this rate until 2030. The social pillar seeks to engender a just, cohesive and

equitable social development in a clean and secure environment. The political pillar aims to realise an

issue-based, people-centred, result-oriented and accountable democratic system.

The theme of the second MTP (2013-2017), which coincided with the coming into power of the new

Government after the 2013 elections, is, “Transforming Kenya: Pathway to Devolution, Socio-Economic

Development, Equity and National Unity.” The MTP gives priority to devolution as spelt out in the

Kenya 2010 constitution and to more rapid socio-economic development with equity as a tool for

building national unity.

The second MTP also aims on building on the successes of the first MTP, particularly in increasing the

scale and pace of economic transformation through infrastructure development, and strategic emphasis

on priority sectors under the economic and social pillars of Vision 2030. ICT is one of the foundations

for economic development in the second MTP of Vision 2030, with the theme, “strengthening the

foundation for a knowledge economy”.

ICT is a critical tool in Kenya’s vision of a knowledge-based economy. The aim of this is to shift the

current industrial development path towards innovation where creation, adoption, adaptation and use

of knowledge will be the key to economic growth.

In the second MTP, ICT will be concerned with:

Upgrading the national ICT infrastructure;

Improving public service delivery;

Developing the ICT industry; and,

Upgrading ICT capacity.

Notably, ICT is a secondary driver in the Vision’s social and political pillars; whose goals are to create a

just cohesive and equitable society and to realize - as stated before at the beginning of this section -

an issue-based, people-centred, result oriented and accountable democratic system.

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Consistent with these efforts, the Kenya ICT Authority has developed a Strategic Plan where its vision is

“to make Kenya a world-class centre of excellence in ICT”. Coupled with this, IT Enabled Services –

ITES- (previously known as Business Process Outsourcing) is one of the flagship projects of Vision 2030.

1.3. KTCIP and Digital Inclusion

The Kenya Transparency Communication and Infrastructure program (KTCIP) Program is a national

program that was initially implemented by the former Kenya Information, Communication and

Technology Board (KICT Board) which has now been absorbed by the ICT Authority. The KTCIP Program

is funded through an International Development Association (IDA) credit given to the Government of

Kenya.

Kenya TCIP Program Goals and Objectives

The goal of the program is to boost ICT connectivity in the country, to improve service delivery to

Kenyans, to increase type and quality of information from and to the citizens, and to increase the

government’s ability to ensure transparency by December, 2016.

In order to meet the KTCIP program goals, over the years, emphasis has been placed on the following

two development objectives:

To contribute to the lowering of prices for international capacity and to extend the geographical

reach of broadband networks;

To contribute to the improved efficiency and transparency of selected government functions

through e-Government applications.

The Main KTCIP Program Interventions

The KTCIP program operates under the thematic areas of:

Digital Inclusion;

Local Content and,

e-Government applications;

Shared Services; and,

Business Process Outsourcing (BPO) and IT Enabled Services (ITES)

This handbook specifically addresses Pasha or Digital Villages, a project under Digital Inclusion and

therefore, does not cover in detail Local Content and e-Government Applications projects.

Digital Inclusion

This Digital Inclusion component of KTCIP refers to all the efforts and activities that are aimed at

improving and increasing ICT access to the rural communities, local universities and research

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institutions. In essence, it seeks to support the various segments of the society in order to facilitate

the increased use of local Internet bandwidths to access information and to take advantage of the

various services offered online

Through the government-supported “digital villages” program, Pasha, the idea is to increase rural

access to information and to facilitate job creation by providing funding to individual entrepreneurs to

help them set up information centres. Another goal of the Digital Inclusion component is to support

local universities and research facilities by providing affordable Internet bandwidths and related

equipment under the umbrella of Kenya Education Network Trust (KENET). The ultimate objective of

KENET is to enable participating universities and research institutions to share information with both

their local and international counterparts.

Over the period of its existence, the Digital Inclusion component has recorded achievements which are

summarized below under each key result area.

Pasha Centres (Digital Villages)

The name “Pasha” has its origins in the Kiswahili word “KuPasha” that means “to inform”. The Pasha

Centres initiative came about as a result of the realization that most of the ICT facilities in Kenya are

in the urban areas, the result of which was a glaring disparity between urban and rural areas in the

distribution of ICT facilities.

The Pasha project is an integral part of an innovative initiative that takes ICTs to the rural communities

in Kenya. The services provided by the Pasha Centres include government and community based

services as well as a number of commercial services.

The initial plan was to have a Pasha Centre in each of the 290 constituencies but currently, due to

various setbacks, only 39 centres were operational as at the end of June, 2014. The Pasha story is,

therefore, a catalogue of both success and, largely, challenges which are covered later in this

handbook.

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2.0. The Pasha Project Highlights

2.1. Why the Government Supports Pasha Centres

Pasha Centres or Digital Villages, as explained before, are ICT hubs of access to online information and

are operated under a Public Private Partnership (PPP) model. They are run by entrepreneurs who,

initially, through KICTB and now ICT Authority, obtained training in a business and information

technology based certified training program. Initially dubbed “tele-centres”, digital villages are outlets

that provide a range of services to the public through computers connected to the Internet.

The Government of Kenya (GoK) aims to achieve an information-based society as one of its main

priorities towards the realization of national development goals whose objectives are wealth and

employment creation. The provision of ICT in the rural areas plays an important role in enabling

economic and social development and is one of the fastest growing sectors in the country. The

harnessing of ICT will enable the Government to realize a number of its key public policy objectives.

Broadband networks have profoundly changed the social environment in which we live, work and

interact. “The rapid spread of access to information and communications services is changing the way

society and business work in Africa,” states Mohsen A. Khalil, the Director of the Global Information

and Communication Technologies department at the World Bank. He adds that by “allowing families to

stay in touch with each other, governments to deliver services more effectively, and businesses to

operate more efficiently”- Broadband for Africa: Developing Backbone Communications Networks, M J

Williams, 2010, The World Bank, (http://www.infodev.org/en/Publication.526.html)

ICT programs in the rural areas operate in traditional community gathering venues such as markets and

shopping centres, using a common portal that links multimedia personal computers by satellite or a

mobile network.

The computers enable better access to information such as local weather forecasts, crop price lists in

nearby markets, and the latest farming techniques.

Some of the centres also maintain web sites that offer its members timely information about

agricultural events and where they can promote or sell their products.

Remarkable increases in online purchases have been achieved such as through the local mobile phone

application, Mpesa. It is within this context that the Pasha project aims to empower rural communities

in creating employment and wealth. This, in turn, would lead to socio-economic enrichment.

However, because ICT facilities in Kenya have traditionally been located in urban areas, this “digital

divide” has resulted in glaring disparities between urban and rural areas in the availability of ICT

facilities. To address this gap, the Kenya ICT Board, embarked on a Digital Villages Project (DVP) in

2011 under the Kenya Transparency Communications Infrastructure Program.

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2.2. The Objectives of Pasha Centres

In order to address the disparity in access to the Internet between the urban Kenyans and their rural

counterparts, the KICTB, in 2011, started to roll out Pasha Centres. Its successor, the ICT Authority,

continues to be the implementing agency for the project.

The establishment of Pasha Centres has been achieved through providing funding to entrepreneurs who

operate the businesses in the rural areas and a few semi-urban centres. These centres offer Internet

connectivity to the rural population, bridge the digital divide, and provide training and online access to

government services.

When Kenyans in rural areas access online information, this enables them to:

Enhance business skills and knowledge as well as to expose them to world news, information

and trends that may positively improve their lives;

Provide direct employment to Kenyans through economic activity that the centres generate

and, indirectly, through economic opportunities that the information gained will generate;

and,

Bring government activities and other online information and services closer to rural

communities.

Besides providing access to email, social media and online information and bureau services –

photocopying, document printing and binding and so on - innovative operators have introduced other

services such as taking digital photographs, video and video editing, selling stationery and mobile

phone airtime. At the same time, others are offering ICT skills training.

2.3. How ICT Authority Manages the Project

The ICT Authority manages the Pasha project through a team comprising of:

The Project Manager, Digital Inclusion, who is responsible for the overall Pasha project;

Project Assistant (assists with the implementation of the Pasha Project); and,

The Monitoring and Evaluation (M&E) Manager who monitors and evaluates projects.

The team members listed above report to the CEO. The team is also in constant touch with Pasha

Managers through the phone and regular physical visits. It liaises with Deloitte for its M&E activities as

well as Family Bank on loan disbursements and the financial performance of the project

2.3.1 Governance and Conflict Resolution

The project has a Governance Officer who addresses all project risks, receives all complaints and

responds to them. The officer is also available to assist in resolving conflicts that may arise.

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The Board of Directors and its Chairman provides the overall oversight over all activities and report to

the Principal Secretary in the Ministry of Information, Communications and Technology, who is also a

member of the Board.

The Revolving Fund

Pasha Centres access financial support through a revolving fund provided by the Government through

the ICT Authority. The government secured the funds from the World Bank in form of a loan.

Entrepreneurs are invited to compete for the funds through various media and the funds are released

through a financial institution, the Family Bank to successful applicants. The fund is supposed to be

self-sustaining - as the entrepreneurs repay their loans with interest, the funds will lend to new

beneficiaries.

2.4. Bandwidth Capacity Support

The cost of Internet bandwidths is still higher in the rural areas than in the urban centres. Based on

this, the project implementation team identified the bandwidth as a possible constraint to Internet

access in the rural areas. It decided to support the Pasha Centres by providing centres with a subsidy

that would make it possible for centres to pass on savings made on the cost of Internet access, to their

customers.

The 90% subsidy which was launched in November, 2013 was to be provided for a period of 18 months

after which it was envisaged that the Pasha businesses would have stabilized enough to pay the full

cost of the bandwidth. The programme is still running.

The objective of this initiative was to make it possible for Pasha Centres to purchase quality Internet

access and affordable connectivity for Pasha Centres, which in turn, would enable information sharing

and facilitate affordable access to information in the rural areas.

2.5. Implementation of the Pasha Bandwidth Capacity Support

During the course of the project implementation, The ICT Authority appraised all Pasha Centre

operators on how the bandwidth support would be implemented and this included details of the

eligibility criteria. The Authority negotiated prices and signed contracts with a number of Internet

Service Providers (ISPs) that included Liquid Telecom, Orange, SimbaNet and Extranet. The selected

ISPs had to register with the Communications Authority of Kenya (CAK) as a pre-condition to participate

in the programme.

Pasha Centre operators, who opt for bandwidth subsidy, are required to choose from the list of eligible

ISPs and to enter into individual contracts with the respective ISPs. At the end of each quarter, the

Pasha operator/manager and their individual ISP make out invoices at the agreed Internet bandwidth

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price. The Authority then settles 90% of the invoice while the Pasha operator pays for the remaining

10%. The subsidy does not include the cost of equipment.

Roles and Responsibilities of Bandwidth Support Stakeholders

Stakeholder

Responsibilities

ICT Authority Dissemination of information on how the bandwidth support is

implemented

Management and coordination of stakeholders

Payments to qualified ISP’s

Monitoring and evaluation.

Pasha Centre Managers Meeting application qualification criteria

Sourcing eligible ISPs

Securing of contract with eligible ISPs

Signing off on payment requests

Promptly meeting the cost of bandwidth not covered by the ICT

Authority.

Internet Service Provider

Provide bandwidth as per contractual obligation

Provide reports on bandwidth usage

Bill the Pasha Centre and ensure that both a copy of the invoice and

bandwidth usage report are sent simultaneously to the ICT Authority

Observation:

The general consensus of most Pasha Operators is that the subsidy support program has reduced

operational costs and made connectivity faster and more reliable despite a few intermittent service

interruptions. Where persistent complaints arise, the ICTA is alerted for remedial action.

3.0. The Pasha Project Story

The Ministry of Information and Communications (MoIC) conceived the “Digital Village” idea in 2006. It

wanted to exploit ICT in rural development. This was going to be done by providing ICT access to

government information, potential outsourcing of government services, and a host of other

applications. It was determined that Pasha Centres were to be the Flagship Centres or Centres of

Excellence for other Digital Villages (DVs) to emulate and that they would play a distinct and

influential role in the overall DV strategy.

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In October, 2007, Alcatel-Lucent, an international telecommunications company, was awarded a US$

79 million contract by the government to lay the first undersea fibre optic cable in Kenya. Construction

began in January 2008 on the United Arab Emirates' side and on 12th June, 2009, the cable arrived at

the Kenyan port city of Mombasa and was officially launched by the former President, Hon. Mwai

Kibaki.

As the plans for the implementation of the submarine fibre optic cables that would deliver broadband

connectivity to Kenya firmed up, several initiatives were started to drum up the benefits of having

Digital Villages with good Internet access. Both the public and the private sectors were enthusiastic but

there was a problem – the efforts and measures taken, although well-intentioned, were largely

uncoordinated.

The result was that the excitement led to the mushrooming of cyber-cafés whose uneven distribution

(they were mostly concentrated in urban areas), did not benefit or help to bridge the social, economic

or digital divide. Coupled with this were unsustainable business models that resulted in no real Internet

penetration. The result was that the population largely remained untouched by the benefits of digital

connectivity.

The Digital Village ecosystem in the country includes various other players such as CBOs, NGOs, Telcos,

churches, co-operatives, development partners and cyber-cafés. Pasha Centres are, in effect, an

essential subset of this ecosystem. However, its Public Private Partnership (PPP) model clearly

distinguishes it from these other initiatives.

3.1. Government Funded Digital Villages

The Kenya ICT Board was established In February, 2007. The activities of the Board were focused on

positioning and promoting Kenya as an ICT destination locally and internationally. The KITCB reported

directly to the MoIC. In August, 2013, the newly established ICT Authority took over all the functions

of the KICTB, Department of e-Government and the Government Information Technology Services

(GITS).

The ‘Pasha’ Project was launched by the KICT Board using a US$ 4m World Bank grant. It was set up

under its Digital Inclusion initiative whose aim was to assist entrepreneurs to set up digital village

centres all over the country.

3.1.1 Parallels Against USAID’s Community Learning Information Centres

As mentioned earlier, the Digital Village ecosystem in the country includes various other players

besides the Pasha project. One of these is the USAID-sponsored Community Learning Information

Centres (CLIC) project.

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Between 2007 and 2008, the Directorate of e-Government in the Presidency and Cabinet Affairs Office,

in collaboration with USAID Kenya, identified the need to promote access to online services in remote

areas of the country in order to address the digital divide. This was, at the time, aligned to other

initiatives by USAID in other countries under the Last Mile Initiatives. A programme dubbed Community

Learning Information Centres (CLIC) was then started with the aim of exploiting opportunities provided

by ICTs to support government initiatives to provide services to Kenyans.

CLIC was also seen as one way of providing entrepreneurship opportunities that would generate wealth

through leveraging on technology, infrastructure, micro-financing and entrepreneurial experience to

provide affordable technology to communities especially in the rural areas.

As part of this program, as mentioned earlier, 14 sites at the constituency level were identified across

the country. The selection of the sites was based on national poverty indices and the need for national

distribution. The sites identified were Bonchari, Ganze, Ikolomani, Imenti Central, Oloitokitok (Kajiado

South), Kinango, Kitui South, Kuria, Mandera East, Mbita, Mukurweni, Nambale , Sabatia and Ugenya.

The project was launched in Ugenya, Siaya County, in March 2011. Progressive youth groups and

community based organizations were thereafter identified with the assistance of the then Ministry of

Gender and Social Services and the Ministry of Youth Affairs. It was decided that the identified youth

groups were to host and solely run the sites with minimal support and innovatively sustain the sites at

the community level. Each of these sites was to receive 5 computers, a printer as well as an Internet

link using low cost networks.

The selection criteria were based on: i) Well established youth groups that were registered by the

Ministry of Gender and Social Services ii) Proof of operation for an acceptable period iii) Availability of

a secure own or rented premises with electricity iv) Not situated in a urban centre with cyber cafes.

The CBO was to:

Solely run the sites with minimal support and to come up with innovative programs that would

sustain the sites as well as oversee their growth;

Provide business services, computer training, e-mail services, Internet surfing as well as

distance learning to the local education institutions and the community at large;

Provide a wide range of information including government information and eventually slowly

scale up to provide advanced online services and opportunities e.g. interactive e-government,

e-commerce, business process outsourcing, distance learning etc.;

Provide secure premises with electricity supply; and,

Meet all the running costs including rent payments of the facility on a day to day basis.

In order to reduce risk, the Directorate involved the Ministry of Youth Affairs who had officers in the

field, in the monitoring of projects on its behalf. Towards this end, a tripartite Memorandum of

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Understanding (MOU) was drawn between the Directorate of e-Government, Ministry of Youth Affairs

and the beneficiaries of the project (identified CBO’s or Youth Groups).

CLIC Project Status

Updates regarding the current status of the CLIC Project have not been regular. Their website has been

down and getting up to date information has not been easy. The last report dates back to around 2012

and it indicated that most of the sites were still operational at the time and that they continued to

offer services although some of the computers had broken down and had not been repaired. Most sites

were providing IT training, photocopying services and access to online services such as examination

registration, KRA PIN applications and so on.

Some sites had not been installed due to lack of funding despite the fact that the equipment meant for

the sites was available. Support for the groups had equally been hampered by budget constraints.

Challenges encountered include:

Lack of an efficient reporting mechanism from the field;

Lack of budget provision to ensure regular monitoring of the sites as was planned. There had

been no visits to some sites as part of monitoring since the time equipment was distributed

and,

Unstable Internet connectivity and at times there is no connectivity at all.

CLIC Project Evaluation

It has been recommended that there was a need to assess all project implementation challenges with a

view to coming up with strategies that would address the challenges and enhance the performance of

the sites as online delivery channels of government services to rural areas. The lessons learnt during

the assessment would provide important information that can be referred to when implementing

similar projects in the future.

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Similarities in Challenges Facing Two Projects

From CLIC’s experience, it would appear that projects which have implemented digital villages in the

rural areas in Kenya face similar challenges. These problems include but are not limited to:

Lack of entrepreneurial and innovative business skills that can enable managers to spot and act

on market opportunities;

Limited IT knowledge and lack of technical support among the operators;

IT literacy and lack of appreciation of the benefits of using the Internet among local people;

Lack of content that appeals to the local audience;

Reliable connectivity;

Lack of a strong awareness drive and marketing of Digital Villages and,

Poverty levels that limit spending of money on basic needs as opposed to DVs.

3.2. The Evolution of the Pasha Centres

When the Kenya ICT Board (KICTB) engaged with Cisco Internet Business Solutions Group (IBSG), they

recognized the need for a government-compliant model that would be scalable, sustainable and

deployable throughout the country. One that would provide a framework for all models once the

anticipated World Bank funds for the Digital Village component of their Transparency and Regional

Communications Infrastructure Programme became available.

Before the launch of the Pasha project, a pilot study was conducted by Cisco. Six cyber-cafes were

identified by the KICTB across peri-urban and rural communities as having potential for the Pilot Pasha

Centres (PPCs). They were to become an integral test-bed for research and monitoring of services and

user behaviour that would eventually contribute towards a sustainable business model.

The first PPC opened in Kangundo in Eastern province in August, 2009. The plan was to roll out five

other pilot Pasha Centres in: Malindi in the Coast province; South Imenti in the Eastern province;

Garissa in the North-Eastern province; Siaya in Nyanza province; and Mukuru wa Kayaba in Nairobi.

The sites were selected on the basis of their geographic distribution and the fact that they covered

semi-rural and rural populations. This was seen as an important step towards extending coverage and

promoting digital inclusion in rural communities. Once established, the six centres were to run for a

four-month period to enable stakeholders to perform a baseline study to monitor community usage and

services.

This baseline survey was going to be used to determine the most appropriate business and operating

models for Pasha entrepreneurs and their potential business partners as well as to test the portfolio of

solutions were provided in each centre.

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By April 2010, five PPCs equipped with 512k connectivity, WebEx, power surge protectors, projectors,

printer, scanner and fax machines were up and running. PPC entrepreneurs and managers were

trained, they exchanged information and connected on a regular basis to the Pasha portal.

The PPCs also became centres for gathering and collating baseline findings that would lend further

insights into the Service Level Agreement (SLA) models, usage frequency and content, pricing, training

needs, connectivity and infrastructure issues, client profiles, revenues and profits, impact on

businesses in the area, scalability, services sought specifically by communities, and the capacity to

meet challenges.

The baseline study, conducted by Synovate, helped KICTB to identify six core factors essential for the

success of a Pasha Centre:

Physical infrastructure such as reliable power supply and Internet connectivity;

Support services;

Marketing for awareness and education;

Entrepreneurial initiative in customer service and experience;

Broadening and innovating Internet use for business collaboration, edutainment; and,

Training accreditation for the various vocational e-learning courses.

To get the Pasha project off the ground, the KICTB put in place the Pasha Capacity Development

Program (PCDP) and structured it to ensure that prospective entrepreneurs would acquire the skills

needed for their business success. In 2009, the Board launched the program and trained 1061 potential

entrepreneurs who were drawn from every constituency in the country. A key focus of the training was

entrepreneurship to enable trainees to develop bankable business plans.

A financial intermediary, the Family Bank, was then contracted to offer loans to successful prospective

entrepreneurs in order to assist them in setting up the Pasha Centres. When loans were repaid with

interest within 36 months, the funds would be used to finance future Pasha entrepreneurs – creating a

revolving fund.

In January, 2011, the Board made the first call for proposals (Round One) and a second one (Round

Two) in November, 2011. The outcomes of these calls for proposals are discussed in Section 4.4.2.

Depending on a Pasha manager’s eligibility, there are three categories of centres that have been

funded. These are Basic, Standard and Advanced centres which are classified as follows:

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Pasha Model Description

Description Number of Computers Estimated Setup Cost

Basic 5 Ksh. 820,000/-

Standard 10 Ksh. 2,553,000/-

Advanced 20 Ksh. 3,342,000/-

As the project got off the ground, ICTA contracted Deloitte consultants in 2012 in order to get

feedback and to ensure that the project remains on track.

Acknowledging the challenges faced by some of the managers who lack adequate business skills, a

business development company, the Youth Banner was brought on board by the Authority in 2013

through competitive bidding. The company has held training sessions and provided one-on-one site

visits to a number of Pasha Centres so as to provide them with business counselling. They have also

developed a Pasha business portal through which the various Pasha entrepreneurs can communicate.

3.3. The Pasha Process

The Selection of Pasha Managers

Prior to the recruitment process, KICTB had trained 1,060 potential Pasha managers who represented

every constituency countrywide. A key focus of the training was entrepreneurship to enable the

trainees to develop bankable business plans. The target audience for the training were individuals,

youth groups, self help groups, public and private institutions, businesses enterprises comprising sole

proprietorships, partnerships and companies.

In January, 2011 the Board made the first call for proposals (Round One), attracting 689 applicants out

of whom 37 were selected for funding. A second call for proposals (Round Two) was made later in

November, 2011 and it closed the following month, in December, 2011. This round attracted 456

applicants. Only 26 were found to be eligible for funding. This information is summarised below:

Summary of Calls for Proposals

Round of

Applications

Total Number of

Applicants

Number of Successful

Applicants

Total Money

Disbursed(Ksh)

Round One 689 37 53,035,091

Round Two 456 26 27,955,500

Total 1145 63 75,844,647

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The number of centres operational as at June 30, 2014: 39

Observations:

From these figures, it is clear that not all the successful applicants took up the offer to for funding.

From interactions with the current Pasha operators, it would appear that some of the successful

applicants later realized that although they had submitted bankable proposals, they did not feel

confident enough to venture into a technology-oriented business. This could raise the question as to

whether all the managers had, in the first place, written the business plans themselves or whether

someone else had done so on their behalf.

This is an aspect of the project that any future recruitment process will have to address. As stated

before, it has been recommended that besides the written proposal, a face to face interview will be

mandatory to enable recruiters to assess the candidate’s readiness and their motivation for wanting to

venture into a business such the Pasha Centre.

Selection of the Bank

Family Bank, the financial intermediary that was appointed to disburse the Pasha project funds, was

sourced through a competitive bidding process. The request for Expression of Interest for the project

appeared online in the United Nations Development Business in November, 2007 under the heading:

“Management Services for Implementation of Digital Villages Revolving Fund”. Eligible Banks/MFI

(Micro Finance Institutions) were required to indicate their interest in providing the following services:

Supply loans to the Pasha Digital Village Managers from the Revolving Fund in line with TCIP

project policy and procedures and the Bank's/MFI's administrative procedures;

Carry out operations related to the lending process in respect of applicants for the loans to

start new Digital Village Centres or scale up the existing ones; and

Follow-up and recovery loans.

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Interested Banks/MFIs were required to provide evidence of the following:

Proven experience in the Management of Revolving Funds;

Having been in operation for more than 10 years;

Having accountants with five (5) years of experience and be Certified Public Accountants of

Kenya (CPAK) certified;

A customer base of at least 30,000 customers;

A national coverage (preferably a presence in all constituencies);

The ability to offer Sharia compliant products;

Rate of loans repayment of more than 90% on average during the last three years;

A minimum average annual turnover of KShs.100,000,000 for the previous 3 years and to

provide the annual reports for the period

Be a registered member of the Kenya Bankers Association in the case of a bank;

Be a registered member of the Association of Micro-Finance Institutions (AMFI) in the case of

MFI;

ICT enabled accounting system capable of producing monthly reconciliation reports;

Good internal and budgetary control systems; and,

Sound banking arrangements.

Banks/MFIs were allowed to team up with other institutions to enhance their qualifications.

Following the Expression of Interest, Kenya ICT Board issued Request for Proposal (RFP) to the

shortlisted Banks/MFIs only. After the evaluation of all the RFPs received, Family Bank was awarded

the contract based on merit in accordance with the procedures set out in the World Bank’s Guidelines:

Selection and Employment of Consultants by World Bank Borrowers (Published May 2004, revised

October 1, 2006 & May 1, 2010).

3.4. Access to Financial Support

Family Bank has given loans to successful applicants at an annual interest rate of 10.5%. This is well

below the prevailing market interest rates (15% and 26%) being offered by commercial banks in the

country. Upon being selected, Pasha managers are required to submit to the bank quotations and

invoices for the equipment and services which they wish to procure. These are then matched and

evaluated against the business plan submitted to the bank.

In some cases, the bank has made recommendations for amendments to the proposed purchases while

in others, the proposals have been approved immediately. Upon approval by the bank, the funding is

not released directly to the managers, but to the vendors whose quotations for the equipment and

services have been successful.

Observation

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The approval process, due to its scrutiny, has worked well in most cases but has, in some cases, led to

delays in starting the business, something that had not been factored in the business plan.

3.5. The running of a Pasha Centre

The format of the Pasha Centres may vary from one location to another but the theme remains the

same. The focal point is the provision of computer-based Internet connectivity. Although ICTA has

provided guidelines on equipment, and technical specifications to the managers, there are variations

from one centre to another depending on individual managers’ business needs and preferences.

While some managers had purchased new equipment others went for a mixture of new and second-

hand equipment. One thing that is common, though, is that only recognized computer brand names

have been purchased. The number and type of equipment purchased depends on the individual

managers’ business needs based on the submitted business plan.

While the Pasha basic business model remains the same for all operators, the business approach varies

from one centre to another. For example, the very successful Pasha Centre in Nanyuki focuses more on

providing IT training services than on cyber and bureau services. This, too, is the case for Kamukunji

Pasha Centre in Nairobi. On the other hand, in most of the centres such as Nakuru, Malindi, Kisumu and

Narok, the business focus is on providing cyber and bureau services.

The marketing and awareness drives also vary from centre to centre. While many centres wait for

walk-in customers, others have clear marketing campaigns and plans in place. Some of the aggressive

business owners reach out to the local communities through the local administration - taking advantage

of the village chief’s barazas (these are informal meetings that are held regularly by local government

officials at the village level to create public awareness of government initiatives and other relevant

information such as disease breakouts, new security changes and so on).

Observations:

In most cases, the Pasha managers run the business themselves with the support of an assistant

or two who may have either the technical expertise or customer service skills required or both.

In other cases, the assistants and the manager may not have the technical skills and when

there is a problem, the business comes to a standstill until technical support is available.

In some centres, business is solely run on a day to day basis by the employed staff. In such

cases, it is evident that the Pasha managers run these centres as secondary businesses and

their main focus is elsewhere. This is one factor that may have contributed to the poor

performance of some of the centres. This is another challenge that can only be reversed

through thorough vetting and frequent monitoring of the Pasha Centres.

There are also cases where the business owner lives in a different town and only visits the

business from time to time. During the information gathering sessions, it was observed that

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some Pasha managers are full-time employees elsewhere and are, therefore, unable to give the

business their undivided attention. In the project review, it was recommended that the way

the centres are run and the different management styles will need to be given more attention

and close monitoring was recommended.

Many centres market their services using different strategies while others have no strategy at

all. The consequence of not putting in place effective marketing plans is reduced to pedestrian

traffic. This arises from the centres not making their presence known or advertising the

comparative advantages that a Pasha Centre can provide. This, in turn, has the negative effect

of reduced sales revenue and consequently, the inability to break even or repay the loan.

3.6. The Range of Services Offered

The main focus of a Pasha Centre is the provision of access to online information and the ability to

reach the outside world through the Web. This is complemented by a bouquet of services that is only

limited by the business imagination of the Pasha manager and the local market requirements. Most

centres offer bureau services which include document scanning, printing, photocopying, binding and

lamination while others additionally offer typing and typesetting services at a fee.

To complement these basic services, some centres also offer a bouquet of services that include:

ICT Training – basic computer packages, ICDL;

Agency banking – banking services on behalf of financial institutions such as Kenya Commercial

Bank, Cooperative Bank and Equity Bank;

Agency services for bill payments for organizations and companies such as Nairobi Water and

Sewerage Services, Kenya Power, Zuku (TV and Internet), DSTV (Digital Satellite Television – a

continental service provider) and so on;

Mobile money transfer services for mobile phone companies - Safaricom, Airtel and Orange as

well financial institutions

Assisting clients with online registration for local and overseas examinations such as KCPE

(Kenya Certificate for Primary Education) and KCSE (Kenya Certificate for Secondary

Education) and foreign ones such as TOEFL (Test of English as a Foreign Language);

Providing assistance with access to e-government services such as acquiring a PIN from the KRA

and access to online payslips for government employees;

Digital photography (still), video photography and editing; and,

More recently, during the last General Elections, voters used the centres to confirm that they

were registered as voters by the Independent Electoral and Boundaries Commission (IEBC).

3.7. Capacity Building and Training for Pasha Managers

The following training workshops have been held so far to equip Pasha operators with the skills to help

them to run their centres more effectively.

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Prior to Round One, a nation-wide Digital Village training was held for 1060 participants from

2009 to 2010;

Pasha Training on the Franchise model-13-18 July 2014- Ruiru

Training on the Introduction to Franchising, Web portal, Entrepreneurial mindset was held for

The Youth Banner- Oct 2013 at AFRALTI;

Bandwidth Support training with ISPs, M&E with Deloitte held on 28-30 April, 2013;

An entrepreneurs’ workshop with SME CEOs held on 22-24 Oct, 2012;

Intel Easy Steps held on 5-7 March, 2012;

Round 2 Training was held in May, 2012;

Community Knowledge Centres - Master Trainers- with Cisco was held on 18-20 Jan, 2012 (a

few selected Pasha managers were part of this training); and,

Sustainability of Pasha Centres with Cisco and Appleseeds Inc. was held on Nov 2011.

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4.0. Project Performance

4.1. Project Status So Far – Deloitte’s Project Monitoring & Evaluation

Deloitte, a locally-based international consulting firm, has been providing monitoring and evaluating

the performance of the Pasha project on a quarterly basis since 2012. They acknowledge that the

Pasha project has had its share of successes and challenges.

The initial plan envisaged a situation where all the 210 (now 290) constituencies in the country would

each have a Pasha Centre established. However, this has not been realized due to a number of

challenges. At the moment, only 39 centres are operational.

Among the challenges faced by entrepreneurs are: A lack of business and entrepreneurial acumen in

some, low quality and high cost of the Internet bandwidth. Also mentioned was the lack of technical

support, suitable premises, marketing of the product, Pasha branding, non-uniform bouquet of services

and service delivery, and stiff market competition.

Other problems cited are poverty, low literacy levels, increased use of internet enabled mobile phones

and WiFi penetration, unreasonable licensing demands by local authorities and the rural-urban

migration by young potential Internet users so that only the older, less educated relatives are left in

villages.

The effect of all these challenges is low levels of business and the resultant high default rates in loan

repayments to Family Bank. For example, at the end of the financial year ending on June 30, 2014, half

of the KSh. 75,844,647 disbursed in Rounds One and Two, was considered to be at risk.

The Monitoring and Evaluation reports indicate that there has been a low uptake of services offered

and that if the objective of connecting all the constituencies through Pasha Centres is to be achieved,

a new approach will have to be introduced to bridge the current gaps.

Another worrying trend is the bank loan repayment default rate. About half of the loans advanced are

considered to be at risk as indicated below in section 5.1.1. This trend defeats the purpose of creating

a revolving fund that would finance new Pasha entrepreneurs.

These concerns have prompted the ICT Authority to re-evaluate the original project model and its

sustainability. As a result of this, no new Pasha Centres have been funded since the Round Two call for

proposals in November, 2011.

31

Pasha Project Financial Performance as at June, 2014

DIGITAL VILLAGE REVOLVING FUND

PERIOD: 9th May 2011 to 30th June 2014

Funds Summary Ksh.

Funds Received from ICTA 108,495,790

Amount Approved for Disbursal by the Grants Committee in Phase I 47,889,147

Amount Approved for Disbursal by the Grants Committee in Phase II 27,955,500

Total Amount Approved for Disbursal by the Grants Committee 75,844,647

Loan Portfolio

Total Funds Disbursed as at 30th June 2014 53,035,091

Amount Recovered up to 30th June May 2014 40,978,728

Outstanding Loans as at 30th June 2014 41,892,093

Portfolio at Risk

Doubtful Debts 37,075,477

4.2. Project Success and Challenges

The ICTA perspective:

Despite various challenges, the Pasha project is meeting its objective of promoting digital inclusion in

the country. Even with only 39 operational centres, the ICT hubs are providing various ICT-focused

services in rural and marginalized areas. Additionally, they offer a number of other services depending

on local market requirements.

Some of the centres offer ICT training courses as the main revenue generator, deviating slightly from

the original Pasha model. Others offer bureau services as well as a bouquet of other services.

Encouragingly, a number of the businesses are breaking even which demonstrates that the Pasha

venture, with the right focus and entrepreneurial skills, can be profitable and self-sustaining.

Success stories of rural farmers accessing the Internet to get information on the weather, where to

market their agricultural produce and the prevailing market prices in different parts of the country,

have been reported. Other successes include students and the general populace using the centres not

only to access email, the social media, news and information but also to study, do research and get

entertained, especially through social media such as Facebook and YouTube.

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The Pasha Association Perspective

This association was formed by Pasha managers in 2012, immediately after the disbursement of Round

One funding. The association’s objectives include:

Providing leadership to Pasha Managers;

Developing linkages with business partners and the government; and

Inculcating the best industry practices among Pasha Managers.

In order to achieve these aims, the association applied for and received official registration in the same

year, 2012, so that it could legally coordinate membership activities.

The governance of the association consists of a rather top-heavy structure with the following officials:

Patron, Chair-person, Assistant Chair-person, Secretary, Treasurer, Co-ordinator and four Committee

members.

Initially, the leadership was only composed of Round One managers. However, this has now changed.

The association took advantage of the training sessions, in July, 2014, held in Ruiru, to elect new

interim officials. The training, conducted by The Youth Banner, was on the proposed Franchise Model.

This time around, the leadership included both the Pasha Round One and Round Two managers. The

association reports that this has brought a lot of cohesion among its members.

The interim office seeks to:

Energise its members so that they can deliver quality service through prudent use of resources

and improved business practices.

Expose members and exchange ideas with successful Pasha Centres

Train members on emerging business trends.

Develop strategies to maximize profits and to make Pasha the recognised digital village model

that is charged with enhancing rural Internet connectivity

Develop tools for business growth

In the association’s opinion, the performance of the Pasha Centres has generally been below

expectation. They attribute this to the challenges they face. These include:

Lack of public awareness about the project as well as lack of coordination with local

authorities and other relevant ministries such as Ministry of Higher Education that accredits

Pasha Centres before they can be allowed to provide IT training;

Lack of Pasha branding and countrywide marketing;

Lack of or little feedback after the performance assessments by Deloitte;

They claim emphasis is on business skills yet the lack of current ICT skills among managers has

not been addressed; and.

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Delay in the provision of resources. They cite the delay in providing the Internet bandwidth

support as a case in point.

The association attributes other challenges they face to Family Bank, the financial intermediary, which

they blame for being inflexible on late loan repayments, threatening to auction their assets and

reporting them to credit reference bureaus without listening to their side of the story. They also think

that the grace period of three months for business incubation, before one has to start repaying the

loans is too short.

The association’s recommendations for the project’s viability include:

Closer and regular engagement with the ICTA management to discuss their challenges;

The Pasha operators need to take advantage of opportunities and resources availed to them

and to upgrade their ICT skills regularly;

The criteria used to recruit Pasha managers be revised to include only those who run or have

run other ICT related business;

The grace period before loan repayment starts should be extended;

Continuous monitoring of business performance and feedback after each Deloitte evaluation be

given to individual managers;

Regular upgrading of ICT and business skills for managers;

Branding and marketing campaign to create awareness and involvement of the various

stakeholders such as local authorities, Ministry of Higher Education and so on; and

The need to clarify the role of the Youth Banner whose impact, they say, they have not felt.

The Pasha Manager’s Perspective

The consensus among Pasha managers is that the project would succeed if the challenges they

encounter were addressed. They believe that with the right government support, the centres can be a

hub of activities that the government can take advantage of to provide services in rural areas. They

believe this will not only create employment but will also, to a certain extent, stem the rural-urban

migration.

The managers gave the examples of the recently launched Huduma Centres program - the Kenya

government’s one-stop shops for accessing a variety of government services such as renewal of various

statutory licences and application for passports and other documents. They state that the services

offered at these centres, if handed over to the Pasha Centres would greatly increase customer traffic

and with the right pricing, generate enough revenue to sustain the Pasha project.

The Youth Banner Experience

34

To address the challenges faced by the Pasha managers, the ICT Authority, in July 2013, brought on

board, through competitive bidding, The Youth Banner (TYB), a not-for-profit organization whose focus

is development and the empowerment of the youth through entrepreneurship. It also offers

consultancy in business development and business franchising. Its range of services includes business

plan development, coaching, mentorship, linkages to finance and markets, and peer-to-peer support.

The vision of The Youth Banner is to create “Developed and Economically Empowered Youth” while its

mission is: “To Create an Enabling Environment for the Youth to Earn Sustainable Incomes”.

The organization’s role in the Pasha project is to offer the consultancy services which also include the

evaluation of the current Pasha business model with the aim of:

Offering more support to the Pasha managers in their day-to-day operations in the accounting,

human resources, procurement, advertising, marketing and sales areas.

Developing a long term a plan that will contribute towards the sustainability of the Pasha

project.

Since TYB was contracted, it has, for example, held a Pasha training workshop where successful Kenyan

SME CEOs were invited to share their business experiences. The workshop covered among other topics:

an introduction to franchising, the Pasha web portal and how to develop an entrepreneurial mindset.

They have also held other training sessions including one on Training of Trainers (TOT) with the aim of

enhancing the internal capacity within the Pasha fraternity.

TYB has also conducted one-on-one mentoring sessions across the country with Pasha managers at their

respective business centres. Besides this, they have developed an online portal to facilitate

communication between operators, to provide business development and marketing information, as

well as tools for online interaction.

In order to address some of the challenges experienced in implementing the Pasha project, TYB has

worked closely with the ICT Authority to come up with a new project framework that will ensure the

long-term sustainability of the project. Until the framework is ready, the recruitment of new Pasha

managers has been put on hold.

Looking forward, the organization’s vision is to support franchising so that new Pasha businesses

throughout the country will have the same business features and service delivery model.

The organization, however, recognizes that for the franchise model to succeed, there is a need to

focus on a mutual benefit approach, rather than on a one-way traffic that only favours the franchise

holder or the Pasha Centre manager as this would end up creating an entitlement (by franchise holder)

or dependency syndrome by the Pasha manager.

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The organization also notes that the current financing model requires a more critical look if its impact

is to be felt. This is because its current approach leaves a lot of room for misuse of the funding facility

notwithstanding their observation that the financial literacy of some of the current operators is

inadequate. Also, the attitude some of the managers towards the Pasha financial facility is that it is

government-backed and, therefore, the normal market rules and regulations should not strictly apply

to them. This mindset needs to be changed through regular interaction and capacity building.

Observation:

TYB has acknowledged that franchising is not for everyone. From their observation, the Pasha

recruitment process for managers focused more on the presentation of a good business plan and much

less on the managers’ entrepreneurial qualities. The result is that each manager came into the project

with his or her own motivation, aspirations and goals.

It appears that what attracted many of them in the first place was the financing facility that came with

a low interest rate and fewer qualifying conditions than what is generally available in the open market

for businesses. This perception was made worse by the misplaced belief that the government was

going to hand over to them a business on a silver platter and would do everything to ensure the

businesses succeeded.

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5.0. Case Studies

5.1. A Success Story from the Foot of Mount Kenya

Ms. Rebecca Kariuki runs Laikipia East Pasha Centre in Nanyuki, a small town situated near Mount

Kenya. The town is inhabited mainly by a farming community. Many people who frequent Rebecca’s

Pasha Centre work on the large-scale farms that grow wheat. Rebecca’s success can be pinned on the

unique approach she used to establish a Pasha Centre.

When the second call for proposals was made, Rebecca was working in Nairobi for an ICT training

institution, in the position of Business Development Manager. However, she was a member of a ‘chama’

(round robin) in Laikipia where she also has relatives. She applied to be a Pasha manager in Nanyuki in

April 2012 and she learnt in July 2012 that her application had been accepted. Although she had

applied for a Ksh.1.7 m loan, she was given Ksh. 1.0 m because her business was a start-up. She got

quotations and invoices from suppliers and spent one month partitioning and renovating a first floor

rental facility.

She also installed an IT network to facilitate communication within the business. Her equipment,

comprising ten computers and a printer arrived in September 2012 and she immediately went on a

marketing campaign. She used Chiefs’ barazas, ‘chamas’, churches and even got an Imam from a local

mosque to create awareness about her business. To gain a competitive advantage, she decided to

charge for Internet access at a reduced rate of 50 cents per minute as opposed to the prevailing rate in

town of Ksh 2/- per minute. This made her business quite popular.

After two months, she realized that the business was not breaking even and that she had to change her

approach to the cyber café business. She bought a larger photo-copier and started doing printing for

businesses and schools. She, additionally, embarked on a door-to-door delivery campaign of the printed

jobs and photo-copies. Luckily, too, for her, the Kenya Institute of Management (KIM) had its training

school on the same premises and the students became her regular clients.

Her unique approach to marketing the centre has worked well for Rebecca and her business breaks

even. She is, therefore, able to service her loan facility. Her current business focus is ICT training in

which she offers basic computer applications package training as well as other courses such as A+,

CISCO, SPSS and Graphic Design. The business has trained over 400 students since January 2013 and is

having a positive impact in the community. Rebecca believes in the Pasha concept and is now looking

for bigger premises for expansion.

5.2. The Struggling Entrepreneur

Ematech Pasha Centre is in Masalani, a sleepy rural town in Ijara Constituency, a four-hour drive

journey south of Garissa town. To get to Masalani from Garissa one has to use a 4-wheel drive vehicle

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along a dusty, bumpy road. A two-hour drive to east from the town, takes one to the border with

Somalia. Further down to the south and, again, two hours away is the Kenyan coastal town of Malindi.

The owner and manager of the centre is Mr. Elijah Mwaniki who has been in the IT business in the town

since 2005 doing typesetting, printing and photography. He learned about Pasha in 2010 and was among

the potential managers who were initially trained by the KICT Board. He later responded to the call for

proposals for funding and applied for Ksh.1.0 million to start a Pasha Centre. His proposal request, was

however, scaled down to Ksh.600,000.

With the money from the loan, he added to his existing business 5 desktop computers for the cyber

cafe and 3 printers - two of them colour and one black and white. The colour printers are used mainly

to produce digital photograph prints. He also used part of the money to renovate the premises so as to

improve its ambience. He also added one video camera and two still digital cameras besides installing

an IT network infrastructure. It took him six months to get the Pasha project up and running. But he

had to start repaying the loan after three months, something that put him under a lot of financial

stress. This forced him to look for money from other external sources to repay the loan.

With high expectations for the project, Mwaniki subscribed for 3G Internet access using a mobile phone

service modem. However, he could only get the 2G reception which was slow and often not reliable.

He ended up changing from one mobile service provider to another without much success. This

situation prevailed until August 2013 when with the ICTA bandwidth support, he entered into a

contract with SimbaNet, a satellite-based (VSAT) Internet service provider. Since then, the Internet

bandwidth and connectivity have been more reliable with only an occasional breakdown. With this

development, the customer traffic sharply increased but not enough for the business to break even.

Prior to the implementation of Kenya’s new constitution and the new administrative boundary changes,

the business was generating substantial revenue from government and NGO staff members who were

based in the town. This has now changed and the business traffic has drastically gone down because

the government administrative headquarters which used to be in Masalani moved to Garissa, 200km

away in line with the new changes in County governance.

In addition to this, fear of insecurity from Somalia militia has made the NGO personnel vacate the town

and move to Garissa. This has resulted in a 45% drop in the centre’s revenue. The consequence has

been late loan repayments and several requests to reschedule repayment. The majority of the current

customers are the local community and college students on vacation. They do not have the required

purchasing power nor are they particularly interested in using the Internet facilities. This reduced

revenue base has put a strain in the effective running of the Pasha Centre and its profitability.

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5.3. The Centre That May Close Down

Kapsabet, in Nandi County, borders the towns of Eldoret, Nandi Hills and Kakamega. At the time of our

visit, the town was fairly chilly with a little rain falling. While the neighbouring town of Nandi Hills is

surrounded by lush green tea plantations, Kapsabet’s main economic activities revolve around food

crop production and dairy farming.

On arrival, we make a quick phone call to our host at Kapsabet Pasha Centre. He tells us that we

cannot drive down to the centre since a neighbour had, earlier in the year, blocked the only motor

access to the business. We give him our location’s nearest landmark and he offers to come and collect

us.

We walk with him through a fenced compound in which cows graze as we walk down the slightly muddy

path leading to a small rumbling house. It is obvious to us that if it rains heavily, no customer is going

to wade down the slippery muddy path to go to the Kapsabet Pasha Centre! As we proceed, we start to

have misgivings as to whether this is a true Pasha Centre and if there is any activity going on inside.

Our doubts are soon confirmed as we enter the three-roomed building.

Our host is an employee while the Pasha manager is away on business. One begins to wonder whether

this centre makes any money, leave alone attracting a clientele with an aspiration to visit the cyber-

space. He explains that he trains clients on basic computer packages. For Internet access, they use a

modem and a router. Connectivity is not reliable and the speeds are generally so slow that surfing the

web is not a pleasurable experience.

Besides, offering training and assistance to a potential cyber-café client, it becomes clear that our host

does not have any background information as to how the Pasha Centre started and its business journey

to date. We look around, ask a few questions and leave for our next destination. The owner and Pasha

manager could not keep our appointment as he was on some urgent business to attend to in Nairobi.

We call him, to tell him we have been to his centre but would want to catch up with him for an

interview in Nairobi on our return.

Back in Nairobi, we schedule an appointment at the ICTA offices with the Kapsabet Pasha manager, Mr.

David Tuikong, who narrates his Pasha experience. Up to the end of 2011, he was an ICT officer with

one of the professional examinations bodies. His responsibilities included maintenance and support of

the corporate ICT facilities as well as maintaining its website. On the side, he was also running his own

company, in Nairobi, offering training and software solutions as well as website design services to

companies.

In the first quarter of 2012, he was offered financing facility for the Pasha Project in Kapsabet. He

renovated the building and started operations in mid 2012 having secured a Ksh.600,000 loan from

Family Bank. After spending Ksh 100,000 on renovation, he bought 5 desktop computers, Internet

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connectivity equipment, furniture and 2 LCD projectors for hiring out. He started by offering training

and business bureau facilities and has so far trained 50 clients. A few of the clients trained are young

but the majority are older – teachers, civil servants and so on.

David readily admits that the business is not as successful as he had envisioned. The location is not

conducive to the business as it is far removed from town activities and the target clientele. The

location also does not project a business image and there is no signage to show the activities going on

inside. At the moment the business is on family property so he does not pay for space. But he is

planning to find a more suitable location where he would have to pay rent.

The expected rent expense coupled with the cost of electricity, Internet access, the trainer’s salary

and other expenses, would make the business unsustainable in the long run unless he drastically

changes the business management style and make himself available because it is obvious that his

business needs his personal attention. Previously, his father used to be the manager when he started

the centre but passed away in 2013. So, effectively, there is a management vacuum. He has not

serviced his Ksh. 19,000/= monthly loan repayment for 3 months.

Given this scenario, this is a business that could close down any time. The manager is not readily

available as he splits his time between Nairobi and Kapsabet. He has not applied for bandwidth subsidy

but when he does, he says he will go for Wimax from Safaricom. During our visit, we did not see a

single customer. This is an example of how not to run a Pasha Centre.

To get the business back on track, the manager would have to make a decision on whether he wants to

run the business himself or to close it down altogether. If he decides to give it his full attention he

would have to:

Inject his own capital;

Find a more suitable business location;

Identify a bouquet of services that will address his customers’ needs;

Employ innovative and aggressive marketing strategies;

Carry out a survey and provide the relevant ICT training that the local clientele requires;

Apply for Wimax or satellite-based Internet bandwidth subsidy for more reliable connectivity

than the modem/router combination; and

Do a survey on the competition around his town and offer superior customer experience.

If the manager decides to go this route, he stands a chance of igniting his business on a firm

foundation. Otherwise, the centre will soon close down unless he, perpetually, subsidises it from his

own pocket!

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6.0. Lessons Learnt and Recommendations

6.1. Implementing Pasha: Learning the Hard Way

As with any start-up project, the Pasha initiative has faced a number of challenges during its

implementation. The first challenge was coming up with a working model that had not passed through

a pilot stage. The next was identifying suitable entrepreneurs with the right business acumen and

passion to ensure the project’s success.

The other challenge was the raising of the 10% equity required by Family Bank, the financing agency.

This knocked out a number of potential managers with the necessary business skills who could,

probably, have developed successful businesses.

Having secured the funding, some managers realized that their businesses were not well located – they

needed premises that could attract the required level of human traffic. This negatively affected the

number of customers that visited or patronized their centres. The other challenges have been the

reliability and the high cost of Internet access, the technical skills needed to operate the equipment

and to maintain Internet connectivity.

Most Pasha Centres have been struggling to keep their businesses afloat due to various other factors

such as poor record keeping, lack of business diversification (package of various services offered) and

the relevant marketing - branding and awareness creation among potential users of the ICT services.

Other challenges faced and which are outside the control of the managers include:

Stiff competition from private businesses;

Unreliable Internet connectivity and speeds particularly with mobile phone modems;

Poverty levels in the rural areas that limit spending on Pasha services in order to meet basic

needs;

Low literacy level among the communities leading to lack of appreciation for online resources;

Local authorities’ lack of awareness about the role of Pasha Centres – they often require

multiple licences to authorize a Pasha Centre to operate;

Widespread use of mobile phones to access the Internet and free WiFi (in some towns and

businesses) making visiting a cyber-cafe unnecessary unless downloading large files or printing

documents which is not often; and

Age profile – where the old, illiterate or semi-literate people are left in the village while the

agile and literate young people move to urban centres to eke a living.

6.2. Mitigating Against the Challenges: The New Pasha Framework

Pasha Centres are far from being established nationally in each of the 290 constituencies. Based on

Deloitte’s monitoring & evaluation reports and on its own experience, the ICT Authority has

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determined that the project needs a modified operating and business framework. This will impose

greater business and financial discipline and increase uniformity of the Pasha brand.

The vision driving the new approach is to standardize business operations in all Pasha Centres across

the country with the aim of:

Enabling Pasha Centre managers to reduce the expense and time-consuming effort of starting a

Pasha Centre from scratch;

Improving, increasing and marketing the package and range of services currently provided by

Pasha Centres; and

Providing a long term sustainability framework for the centres.

Standardization includes taking into consideration customer and market needs throughout the

development of the range or bouquet of services for the centres. This includes site selection, training,

product knowledge and marketing. Standardization is expected to improve the quality of service in

Pasha Centres and to increase its acceptance in the marketplace leading to an increase in the

profitability of the centres

The advantages of introducing standards in the Pasha business model include:

Improvement of the Pasha corporate image and brand awareness; customers tend to be more

comfortable patronizing outlets they are familiar with or businesses with name recognition - a

name that is known to be credible;

Focus on the business: with an established business model in place the entrepreneur can focus

on running a successful business and not reinventing the wheel by experimenting;

Improving the chances of the sustainability of digital inclusion. By commercializing the

initiative, existing entrepreneurs in the ICT sector can invest in Pasha franchising as a way of

diversifying their offering or investing in a new business.

Setting and applying standards within Pasha Centres is meant to streamline internal and external

operations and to make business processes more consistent and reliable across the country. Benefits

can be gained through:

Eliminating wasteful investments of time and resources;

Increased internal productivity and quality of communication;

Reduced duplication of effort and improved risk management;

Standardization promotes profitability and sustainable growth;

Knowledge sharing and peer mentoring.

When applied effectively, standardization can be a true catalyst for business growth and strategic

development.

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The knock-on effect of this could result in improved service delivery, new users and more customers

whose business will to improve revenues and profitability.

Value proposition of the New Pasha Framework

Non-commercially, Pasha Centres are expected to play the role of a centre for social economic

empowerment through access to information.

Piloting the New Pasha Framework

Currently, Pasha Centres do not have standardized operations or sufficient services to create adequate

traffic to generate sustainable income. The new Pasha Framework proposes the standardization of

business operations across Pasha Centres with the aim of:

Helping to increase the business success rate and acceptability of Pasha services;

Introducing a Franchisor - a company or organization – that will have the right to negotiate for

licences, goods and services with those applying for franchises and to ensure that all facilities

and services are standardized through continuous training and monitoring.

Scope of the Pilot

Develop a licensing model of operating procedures under which a Pasha Centre will be a

branded outlet with suitably qualified staff and run in accordance with set rules and

procedures;

Ensure that Pasha Centres fulfil their mandate of providing customers with access to

information by bringing ICT services closer to rural communities;

Ensure that Pasha Centre managers and staff are committed to maintaining a high level of

professionalism and the highest possible standards of products and services.

The pilot will be carried out in ten (10) sites and will address how the model will support business

development goals and assist in determining how it will ultimately be delivered to Pasha Managers with

the least amount of flaws. It is expected to have the following benefits:

Introduce the Franchisor Model from the onset to negotiate for goods and services on behalf of

Pasha Centres. Short term benefit: Reduced cost of purchase due to economies of scale and the

standardized bouquet of services

Enabling Pasha Managers to reduce the expenses and time-consuming process of starting a

Pasha Centre from scratch through the offering of the “Business in a Box” concept associated

with franchising.

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6.3. Viability of Other Government Financing Options

The World Bank extended to the Government of Kenya (GoK) a US $ 4million loan to provide seed

money for the Pasha project. The objective was that the funds loaned to Pasha managers, when

repaid, would become a revolving fund that would finance new Pasha ventures. However, with the

current high loan default rate, this remains a distant dream. Many Pasha managers have raised the

question of alternative sources of financing since they feel the current arrangement is too rigid. They

have proposed that ICTA considers other government-supported funding.

A quick look at the Kenyan market, however, reveals that this may not necessarily be practical. The

current Pasha loan at an interest rate of 10% per annum is one of the lowest in the market. The three

other government-backed financing sources which could be considered are: the Women Enterprise Fund

(WEF), the Youth Enterprise Development Fund (YEDF) and the Uwezo Fund.

Each of the funds mentioned above have their own lending restrictions. The WEF exclusively targets

women entrepreneurs while the other two funds, Uwezo and YEDF focus on the youth aged 35 years

and below. Furthermore, in the case of Uwezo, any funding of up to Ksh 500,000 is given to youth

groups and not to individuals. These restrictions essentially make only a section of would be Pasha

managers eligible and the amount of funding may not necessarily provide adequate capital.

The other financing alternative that has been suggested before is that established telecommunication

companies (Safaricom, Airtel and Orange, etc.) pay a 1% levy of their revenues into a Universal Service

Fund which in turn would finance future Pasha entrepreneurs. This requires government commitment

to make it work and MoIC would have to lobby the relevant stakeholders for support.

6.4. Recommendations

The Pasha project has been partially successful in fulfilling its mandate and objectives. In order to

move the project forward, a revised approach is needed and the following recommendations have been

proposed by various stakeholders:

The recruitment of Pasha managers to be reviewed to include face to face interviews and an

inspection of the proposed business site before a candidate is declared successful

The New Pasha Framework to be introduced and services, and quality of service, procedures

and facilities standardized.

The franchise model be urgently considered

Negotiation with Ministry of Devolution & Planning to allow Huduma Centre services be carried

out in Pasha Centres after the branding and standardization of services

Review of the grace period between financing and loan recovery to at least 6 months to allow

the business to settle down

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Consider lobbying the government for the implementation of the Universal Service Fund so that

1% of revenues the major telecommunication companies is used to finance the Digital Inclusion

project and hence the Pasha business

Launch an aggressive marketing campaign supported by branding and awareness creation of the

Pasha Centres as a government project as well as sensitizing the local authorities and the

general public on the project.

Developing a standard curriculum that is recognized by the Ministry of Higher Education for the

Pasha Centres involved in providing training services

Closer monitoring of individual Pasha Centres

Continuous training of the managers and imparting of new business ideas.

Consider extending the bandwidth support program