Connectivity, the ability to connect to and use digital platforms, technologies, and services, is vital for economic growth. Today, the internet is no longer seen as a luxury but a key pathway for opportunity for people across the globe.
Digital connectivity unlocks opportunities in healthcare, finance, education and more – improving lives, communities, and even ecosystems at large.
Despite the growing importance of internet accessibility, more than 2.5 billion people still lack internet access. This gap is the result of a variety of factors including lack of infrastructure in remote areas, affordability issues, low digital literacy, gender inequality, socioeconomic disparities, and geographical limitations. Additionally, the investment gap for internet connectivity is over $428 billion globally, with a large portion of this investment needed for low-income and emerging market economies.
This gap in internet access, often referred to as “the digital divide,” is particularly prominent among low-income individuals and users, and in lesser developed countries. A study by the United Nations Educational, Scientific, and Cultural Organization (UNESCO), highlights that 93% of people in high-income countries use the internet, while internet usage is at 27% in low-income countries and 35% in the world's least developed countries.
However, bridging the divide will require more than just increasing internet infrastructure in places that are lacking. It also demands a greater understanding and adoption of the internet to create inclusive, sustainable, and meaningful connectivity. In fact, the United Nations International Telecommunication Union (ITU) organizes its goals for bridging the digital divide into two buckets: universal connectivity and meaningful connectivity. According to the ITU, Universal connectivity is the ambition to bring the remaining one-third of humanity online while meaningful connectivity is when people not only have access to the Internet but are able to use it regularly and effectively.
The Role of Internet Connectivity in Global Development
Increased internet accessibility and literacy can help to achieve development outcomes aligned with the UN’s Sustainable Development Goals, with benefits to both people and planet.
On a social level, expanding internet access empowers underserved communities by improving access to education, healthcare, and economic opportunities. A report by the Economist Intelligence Unit (EIU) found that in the least developed countries, a 10% increase in school connectivity can improve children's effective years of schooling by 0.6% and increase GDP per capita by 1.1%.
Similarly, telemedicine services allow individuals in rural regions to consult with healthcare professionals without the need for long-distance travel, improving health outcomes while reducing transportation barriers. Enhanced connectivity also supports small businesses and entrepreneurs, particularly in developing regions, by providing tools to reach global markets, access financial services, and participate in the digital economy.
Environmentally, increased internet access can contribute to more sustainable practices and resource conservation. For example, smart technologies, powered by connectivity, help optimize energy use in homes and industries, reducing waste and improving efficiency. In agriculture, a cornerstone sector in emerging markets, connected devices can allow farmers to monitor soil health, water usage, and crop conditions in real-time, minimizing resource consumption and enhancing yields.
Innovative Finance – The Missing Link
Innovative financial solutions that incentivize impact achievement can be used to support local Internet Service Providers (ISPs) expand last mile connectivity to underserved areas. While local ISPs typically leverage existing infrastructure, most are operating with tight margins, making expansion a cost prohibitive endeavor without fresh capital. Incentive-based financial structures, such as results-based financing (RBF), can offer a pathway to closing funding gap for ISPs aiming to reach rural customers. In such a structure, financing is contingent on impact achieved, thereby allowing financial providers to ensure quality internet connection is deployed to underserved areas.
Over the last two years, Resonance designed and implemented a collaboration between USAID and Microsoft, which established results-based financing fund to support ISPs in Nigeria and South Africa. The pilot program aimed to understand how incentive-based funding can be implemented to address the gap in last-mile connectivity between ISPs and consumers. To qualify for the funding, our ISP partners were required to expand their reach to community anchor institutions in underserved areas and as a result made 348 new connections. By connecting to community anchors such as libraries and clinics, the ISPs were able to tap into trusted institutions and bring internet connectivity to previously underserved customers. Further, our third-party partners verified connection speed and only thereafter was the funding deployed to ISPs.
Based on our experience from this pilot program, Resonance believes that further expanding rural connectivity requires (1) flexible finance options, (2) an expanded set of impact targets and (3) technical assistance support. While results-based financing is one approach to incentivize last-mile connectivity, other financing options including working capital or concessional loans with flexible payment terms should also be considered. Expanded impact targets that assess not only connectivity speed but also usage levels and impact on vulnerable groups will deepen understanding of internet adoption by underserved populations and commercial viability of ISP network expansion. And lastly, offering technical assistance support is critical to support local ISPs innovate and adapt their business model and adequately navigate the regulatory and operational obstacles that will emerge with rural expansion.
Resonance’s Role in a Connected Future
Achieving sustainable last-mile connectivity requires intentional, coordinated support from multiple sources. Often ISPs need capital, both concessional and commercial, alongside technical assistance support to manage the costs and operational challenges of expanding their network to new areas. Moving forward, Resonance seeks to take lessons learned from our pilot program and bring together a diverse group of partners who can leverage their financial and technical resources to close the gap on rural internet connectivity.
To learn more, reach out to Kristin Beyard , Managing Director of the Partnership Accelerator or Helina Teklehaimanot, Senior Associate, Climate and Entrepreneurial Finance
