November 24, 2023

SBA's Surety Bond Program

Investopedia defines surety as "a promise or agreement made by one party that debts and financial obligations will be paid. In effect, a surety acts as a guarantee that a person or an organization assumes responsibility for fulfilling financial obligations in the event that the debtor defaults and is unable to make payments." Moreover, "The party that guarantees the debt is referred to as the surety or the guarantor. Sureties can be made by issuing surety bonds, which are legal contracts obligating one party to pay if the other fails to live up to the agreement."

Benefits of having a surety bond include:
  • Protection against financial loss since a surety bond can protect your business from financial losses in the event that someone sues you or if you break a contract;
  • Shows that you are a responsible business;
  • Getting help in obtaining financing as banks and other lending institutions may be more likely to lend money to businesses that have a surety bond;
  • Helps you comply with regulations as certain regulations may require businesses to have a surety bond in order to operate; and
  • Helps you get government contracts as many government organizations require businesses to have a surety bond before they will award them a contract.

In conversation with a friend who owns a small business that is trying to win contracts, I introduced him to a program within the U.S. Small Business Administration Bond Guaranty Program that issues surety bonds which provides the customer with a guarantee that the work will be completed.

According to the SBA, "Many public and private contracts require surety bonds, which are offered by surety companies. The SBA guarantees surety bonds for certain surety companies, which allows the companies to offer surety bonds to small businesses that might not meet the criteria for other sureties."

The SBA Surety Bond Program is segmented into four steps:
  1. Surety bonds are requested: Some contracts require that the business doing the work be properly bonded.
  2. Surety partners with business: Authorized surety companies provide surety bonds to businesses that meet their qualifications.
  3. SBA guarantees: SBA guarantees surety bonds for private surety companies, so more small businesses can qualify.
  4. Small businesses benefit: Small businesses get SBA-guaranteed surety bonds so they can get to work.
The U.S. government agency importantly explains that it "guarantees contract bonds, but doesn’t guarantee commercial bonds. Contract bonds ensure the terms of a specific contract are fulfilled. Commercial bonds ensure all applicable laws and regulations are followed. Government agencies require certain companies or individuals to obtain commercial bonds, which protect the general public against things like fraud."

What is more, "Some contracts require surety bonds that cover specific situations. SBA guarantees surety bonds that cover several major categories of work":
  • Bid: Ensures full payment and performance bonding from the contract bidder.
  • Payment: Ensures full payment to the suppliers and subcontractors.
  • Performance: Ensures full completion of a contract by small business.
  • Ancillary: Ensures completion of requirements outside of performance or payment, such as maintenance.

With respect to the bond guarantee fee, the SBA notes that "all performance and payment bond guarantees require small businesses to pay SBA a fee of 0.6% of the contract price. If for some reason the bond is cancelled or not issued, SBA will return the guarantee fee. SBA does not charge a fee for bid bond guarantees."

Eligibility criteria in obtaining a surety bond include qualifying as a small business according to the SBA's size standards, have up to $6.5 million for non-federal contracts and up to $10 million for federal contracts, and meet the surety company’s credit, capacity, and character requirements.

What has been your experience with surety bonds?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

November 5, 2023

While Mobile Internet Adoption Continues to Increase, the Growth Rate Slowed in 2022

The previous posts in the forum addressed the economic benefit 5G will bring to the Sub-Saharan Africa economy in the near future and the challenges and opportunities for scaling e-commerce adoption by small businesses in Africa. While 5G is expanding rapidly in low- and middle-income countries and smartphone adoption is projected to increase in the coming years, which will allow people to connect to critical services such as education, healthcare, and financial services, and provide income-generating opportunities, significant digital divides exists. Not only do these digital divides inhibit entrepreneurs from developing innovative localized technology solutions, but they prevent investors from providing essential financial capital and advisory support.

Therefore, it was with great interest to read GSMA's State of Mobile Internet Connectivity 2023 that "considers the importance of not just mobile broadband coverage but 'meaningful connectivity' – users having a safe, satisfying, enriching and productive online experience that is affordable. This requires an understanding of the key barriers and enablers for meaningful connectivity, including infrastructure, affordability, skills, safety and security, and relevant content and services. Each of these is considered in this report."

Below are the report's key findings (copied in verbatim):
  • Mobile internet adoption continues to increase, with 57% of the global population (4.6 billion people) now using mobile internet – but the growth rate at which people are adopting mobile internet slowed in 2022. Only 200 million people started using mobile internet in 2022, compared to 300 million in 2021 and in 2020. Just over three quarters of the growth in mobile internet adoption in 2022 came from low- and middle-income countries (LMICs), where 95% of the unconnected population live. In least developed countries (LDCs), almost 30 million additional people started using mobile internet in 2022, meaning one in four people in LDCs are using mobile internet.
  • Mobile broadband coverage has remained relatively unchanged, with 95% of the global population living within the footprint of a mobile broadband network. With only marginal growth in coverage in 2022, the coverage gap – those living in areas without mobile broadband coverage – stands at almost 400 million people (5% of the global population). The remaining uncovered communities, which are predominantly rural, poor and sparsely populated, are the most challenging to reach.
  • Most of those not using mobile internet live in areas covered by mobile broadband. In 2022, 3 billion people (38% of the global population) lived in areas covered by mobile internet but did not use it. With mobile internet adoption outpacing network expansion, this usage gap has been shrinking slowly in recent years, from 40% in 2021 to 38% in 2022. However, the usage gap remains almost eight times the size of the coverage gap. Considering only adults aged 18 and above, 23% are still not using mobile internet despite being covered by a mobile broadband network. The majority of those living within mobile broadband coverage but not using it do not yet own a mobile phone.
  • Connectivity varies significantly between and within regions and countries, with 95% of the unconnected living in LMICs. Sub-Saharan Africa remains the region with the largest coverage and usage gaps. In LMICs, adults in rural areas are still 29% less likely to use mobile internet than those in urban areas, while women are 19% less likely to use mobile internet than men. In LDCs, only 25% of the population use mobile internet, compared to 52% across LMICs overall and 85% in high-income countries (HICs).
  • The majority of the global population now own a smartphone, which is how most people are accessing mobile internet. At the end of 2022, 54% of the global population (4.3 billion people) owned a smartphone. Of the 4.6 billion people using mobile internet, almost 4 billion do so using a smartphone (49% of the global population) and around 600 million people do so using a feature phone (8% of the global population). There are also 350 million people who own a smartphone but do not use mobile internet.
  • 4G and 5G continue to expand, but 2G and 3G remain important sources of coverage in LMICs. While the overall broadband coverage gap has remained broadly unchanged since 2021, the deployment of 4G and 5G continues to expand. Globally, 90% of the population is now covered by 4G, and 32% by 5G (up from 25% in 2021). Almost three quarters of the 5G network expansion in 2022 was in Asia-Pacific, and there was particularly strong growth in 4G network expansion in Sub-Saharan Africa. However, most mobile operators will continue to maintain 2G and 3G networks for the foreseeable future, with a significant portion of users continuing to use these networks, particularly in LMICs.
  • Data usage and network quality continue to increase but significant differences remain between HICs and LMICs. Monthly global mobile data traffic per user increased from 8.4 GB in 2021 to 11.3 GB in 2022 – the largest absolute increase since it was first tracked in 2015. Network quality improved across all regions, driven by improved networks and consumers migrating to 4G or 5G. For the first time, all regions now have average download speeds of at least 10 Mbps, while the global average download speed increased from 27 Mbps to 34 Mbps. HICs record download speeds four times greater than those in LMICs.
  • Awareness of mobile internet continues to grow but has slowed significantly since 2019. In nine of the 12 countries surveyed, more than 80% of the population was aware of mobile internet in 2022. However, women and those living in rural areas remain less likely to be aware of mobile internet, and lack of awareness remains a critical initial barrier to mobile internet adoption in some countries.
  • Affordability and skills remain the two greatest barriers to mobile internet adoption and use. Across the countries surveyed, for mobile users who are aware of mobile internet but don’t use it, the top reported barriers to adopting it remain affordability (particularly of handsets) and literacy/digital skills. Safety & security concerns and lack of perceived relevance were reported less often but are also important barriers. For example, among smartphone owners, lack of perceived relevance is often cited as a top barrier to mobile internet adoption in several countries.
  • Affordability of devices and data continues to disproportionately impact the underserved. Across LMICs, affordability of an entry-level, internet-enabled handset remained relatively unchanged, while affordability of data continues to improve across most regions. However, while the affordability of an entry-level device across all LMICs is equivalent to 16% of average monthly income, this increases to 40% for the poorest 40% of the population and 55% for the poorest 20%. Across LMICs, it is equivalent to 24% of average monthly income for women, compared to 13% for men.


GSMA's report also points out that barriers to digital inclusion are complex and interconnected:
  • Knowledge and skills: "Improving digital skills and literacy, as well as driving awareness and understanding of mobile internet and its benefits, is critical to increasing digital inclusion. Digital skills initiatives should focus on users' needs and circumstances."
  • Affordability of handsets and data: "Approaches to improve affordability should include efforts to lower the cost of internet-enabled handsets and data through innovative data pricing strategies and handset-financing options, in addition to adopting tax policies and providing targeted subsidies that promote the uptake of internet-enabled devices and data services."
  • Safety and security: "Concerns about safety and security, including online harassment or cyberbullying, misinformation, disinformation and fraud, are preventing people going online and having a positive internet experience. Appropriate mechanisms and frameworks that recognize these online risks should be put in place to help build consumer trust. Stakeholders should provide users, especially women, with the tools to increase their knowledge and skills to mitigate online risks."
  • Relevance: "Local digital ecosystems in many LMICs remain underdeveloped and under-resourced. Investment in local digital ecosystems and an enabling policy environment can accelerate growth in local content, services and applications that meet the needs of people and in their own language."
  • Access: "Using the internet depends on enablers such as electricity, formal identification, sales agents and accessibility features. Stakeholders can increase mobile internet adoption by focusing on, for example, facilitating inclusive and transparent registration processes for mobile, and making services, sales channels and training facilities accessible to underserved groups, such as women and persons with disabilities, alongside improving accessibility features."

I appreciate how the report addresses the importance of having reliable mobile connectivity for people to access essential services. As the GSMA points out, "In recent years, mobile operators and governments worldwide have been working on advancing digital inclusion, recognizing its transformative potential for societies. While there have been notable achievements and mobile internet adoption continues to grow, this report shows that progress has slowed. Furthermore, with an ongoing cost-of-living crisis, many are now further at risk of remaining unconnected."

What are your recommendations on how to bridge the digital divide?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

November 1, 2023

5G to Benefit the Sub-Saharan Africa Economy by $11 Billion in 2030

In its annual report on the state of the mobile economy in sub-Saharan Africa, the GSMA says the mobile connectivity on the continent "continues to drive digital transformation and socioeconomic advancements. This underlines the need for continued efforts to address the persisting barriers that impact mobile internet adoption in the region, particularly the affordability of devices, online safety concerns and the lack of digital skills." The UK-based organization that represents the interests of mobile operators worldwide adds: "Meanwhile, authorities and enterprises see an opportunity to leverage growing 4G and 5G networks, alongside emerging technologies such as AI and IoT, to enhance productivity and efficiency in service delivery."

Findings of the report, which is available in English and Fran├žais, include:

Growing 5G momentum

"In 2022, there was a marked uptick in 5G-related activities in Sub-Saharan Africa, including 5G commercial launches in 15 countries and a growing number of spectrum allocations. This comes at a time when 3G is the most dominant technology in the region (accounting for 55% of total connections in 2022) while 4G is already dominant in other regions, implying network and customer readiness for the transition to 4G. The approach to 5G in the region will need to consider the current connectivity landscape and unique market features that could affect the rollout and adoption of the technology. 5G network ecosystem players in the region must also find ways to deliver cost-effective and efficient 5G networks, balancing investment and value creation."

Steering growth with AI

"The emergence of new AI tools and use cases is accelerating the implementation of AI across various verticals and business processes. Most AI developments are occurring in advanced markets. However, the technology can be utilized in any scenario where there is sufficient data to draw insights. As a result, several industry players are already taking steps to apply AI across a variety of use cases in Sub-Saharan Africa. The potential benefit of AI in the region is significant, given that it can help offset the impact of limited resources and poor infrastructure in the delivery of many life-enhancing services, such as healthcare and education. Mobile operators in the region have employed AI at different levels, from improving network operations and customer services to achieving efficiencies and cost savings."

Climate-related risks spur circular economy principles

"The concept of circularity has risen to the top of the agenda for policymakers and industry players in light of growing concerns around the generation of e-waste and unsustainable levels of consumption of natural resources. Although the technical lifespan of a mobile device is now between four and seven years, the average use period of mobile devices is only around three years. Governments and industry players have a role to play in incentivizing consumers. This includes building new channels and suppliers to collect, refurbish and resell devices and implementing awareness campaigns on sustainability. Some operators in Sub-Saharan Africa are already taking a lead in this regard, with initiatives to drive circularity in mobile phones and other digital devices."

Infographic: GSMA

Improving smartphone access

"Smartphone affordability is a key barrier to using mobile internet. The average selling price of smartphones in Africa has reduced significantly in recent years, with an influx of devices priced at below $100 – but the cost remains unaffordable for many. The challenge for manufacturers is to produce devices at low enough price points that align with local earning capacities and allow them to gain market share. To ease the current cost burden, operators offer a range of initiatives, including device financing plans, instalment payments and entry-level smartphones through partnerships with manufacturers."

Collaboration and innovation in fintech is on the rise

"Fintech has become increasingly prominent in Sub-Saharan Africa, driven by the need to improve regional financial and digital inclusion. The industry has seen a rise in partnerships and innovation, leading to the diversification of products on offer, particularly in the payments segments. Operators have partnered with ecosystem players to expand products and offer options such as buy now, pay later (BNPL). At the same time, the growing fintech startup industry continues to attract investors, allowing them to improve access to a variety of financial products for both individuals and small businesses, such as microlending and B2B payments."

Policies for safe and inclusive development

"As cyberattacks continue to grow in scale and scope, governments face increasing pressure to protect their citizens and infrastructure and establish a framework for the mobile industry. Sub-Saharan Africa's rapid technological evolution makes the region an attractive target for fraud and cyberattacks."

Infographic: GSMA

According to the GSMA, "5G is expected to benefit the Sub-Saharan Africa economy by $11 billion in 2030, accounting for more than 6% of the overall economic impact of mobile." While it is encouraging to learn that mobile connectivity in Sub-Saharan Africa continues to drive digital transformation and socioeconomic advances, I have concerns about the mobile internet usage gap, which refers to individuals who are not using mobile internet despite living in an area covered by mobile broadband networks. of 59%. Nevertheless, the continent holds significant opportunities for entrepreneurs to develop innovative solutions in AI, IoT, cybersecurity, EdTech, fintech, digital health, e-commerce, and enterprise services.

What opportunities are you seeing the Sub-Saharan Africa's mobile economy?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.