Mobile phones: the silver bullet to bridge the digital divide?

Dear reader, you may also wish to read the sequel to this blogpost: Enough with pilots, lets’ get serious and start investing in m-development and m-applications

The International Telecommunication Union (ITU) estimates that there are 3.3 billion mobile subscribers. The vast majority of these mobile users never part from their ubiquitous mobile phone. For those living in developed countries, the mobile phone started off as a status symbol and a cool gadget to have. Today, however, the mobile phone is also our mobile office. It is our oxygen, our livelihoods, an object that is more than an object; it is an extension of ourselves. If we happen to "forget" our mobile phone, we feel completely lost and disoriented. This is because our little hand-held device has our daily appointments, our address book, our emails, photos of our children, our favourite music and allows us to access the internet.

The mobile phone is also the lifeline and an equally important source of livelihood for our brothers and sisters in developing countries. It has revolutionized the lives of millions of urban and rural poor by connecting and involving them in viable economic activities.

Mobile telephony is a success story because the handset is an affordable, scalable, self-sustaining and empowering tool which is paving the way for men and women to achieve socio-economic goals and provide food security to their family. It is a tool that provides a wide range of services at a reasonably low cost.

It is a success because it is providing timely, localized and relevant access to knowledge which in turn has led to reducing production and transaction costs. For example, poor rural people use mobile telephony to get commodity price information via Short Message Service (SMS), gather market intelligence and find out the market needs so that they can make “targetted” trips and save on travel and transportation costs.

As the predominant mode of communication in developing countries, it has contributed substantively to the reduction of the digital divide, something other ICTs such as computers did not manage to achieve. They are definitely more appealing a more viable tool than the $100 laptop. And they are the only ICT sector where developing countries are catching up with and in some cases overtaking developed countries.

Mobile phone revolution: The numbers speak for themselves
"Every generation needs a new revolution.” Thomas Jefferson



Mobile phone revolution is our generation's revolution and it has changed our culture, economy, social and political lives. As such it has a promising future to become the first universally accessible Information Communication Technology (ICTs).

It is a unique revolution because:

• first and foremost it is truly global and not limited to a specific country, region or sub-region
• secondly it has been a catalyst for unprecedented global economic and social benefits
• thirdly because it is global revolution, it is becoming more and more accessible to the marginalized and less advantaged segment of population
• last but not least, it is an early example of mash-up[1] when this term did not even exist, as it is a perfect marriage between telephone and radio. The third and fourth generation phones are a living example of mash-up as they are an integrated platform offering content and telecom services. Gone are the days of carrying a beeper, a phone, a camera and a walk-man.

Some argue that new ICTs such as mobile telephony contribute to increasing the gap between the "haves" and the "have nots". One could strongly argue that this is not the case.

Statistics show that 3.3 billion people, 50% of the world population, is a mobile subscriber against 1.3 billion internet users. Recent estimates show that while 6.5% of people in Africa are internet users, 280.7 million people or 30% of the population in Africa is a mobile subscriber. According to ITU between 2000 and 2006 the number of mobile subscribers increased more than 12 times. ITU estimates show that today approximately 72.1% of total global telephone subscribers are mobile subscribers.

In Africa, many countries have completely skipped the land line and have moved directly to mobile telephony. This makes mobile technology the first modern telecommunications infrastructure of any kind in this continent.

For example, a country like Eritrea with a GNI per capita of US$170 has 37,400 fixed line subscribers against 84,300 mobile subscribers. At the same time, certain regions of the country such as Gash Barka region which was adversely affected by the conflict between Ethiopia and Eritrea and is still struggling to provide its population with access to utilities such as electricity and water is benefitting from the mobile revolution.

Early November 2008 when I was in Eritrea I visited the Gash Barka region and its capital Barentu which is known to be the centre of mining and agriculture. During a field visit to a spate irrigation[2] site under the IFAD-funded Gash Barka Livestock and Agricultural Development in a remote and isolated area I stood in awe and in a state of shock when the mobile phone of the extension worker and a herder started ringing.

I did not recall seeing any towers on the way to the field, and surely there were no towers in sight. However, there was reception and the herder and extension worker were able to communicate. The extension worker imparted some technical information to his colleague and the herder inquired about the possibility of taking cattle on Monday to Asmara livestock market.
The above anecdotal example shows how those previously excluded because of lack of infrastructure can now take an active part in improving their livelihoods thanks to the affordable and different pricing schemes of mobile services.

The uptake of mobile phones is leading to the demise of telecentres
The mobile revolution has made telecentres a 20th century artefact and redundant. The telecentre movement in late 20th century aimed to provide a platform and a place for people to be exposed to, learn and use ICTs. A number of donors embarked on the telecentre movement with the vision of bridging the digital divide. Donor funded telecentres offered computing services and later moved on to provide internet services. In some countries such as India, the telecentres blended ICT services with agriculture and husbandry services. For example, farmers or herders would bring in their crop or sick livestock head to the telecentres. They would connect on-line with an expert and use webcam to show their sick animal or crop and get advice from the expert.

However, telecentres in developing countries faced a number of challenges. Since their objective was to provide ICT services to the marginalized segment of population, telecentres were located in isolated and remote areas. This meant that providing basic ICT in terms of infrastructure and connectivity was costly. Secondly given their remote locations servicing the equipment posed a challenge on its own. That is, when a computer broke down it took weeks before it was fixed as this required someone skilled from the closest town to make a visit to the remote telecentre. Thirdly, since the telecentres were to serve an entire village, they were located strategically to serve an entire village or community, this however meant that villagers had to walk for kilometres to reach the closest telecentre. More importantly the sustainability of telecentres posed the biggest challenge. As a result when the donor-funded project came to an end or funds started to dwindle, the telecentres gradually turned into shabby shacks with broken and/or obsolete equipment.

The emergence of new and more affordable forms of ICTs such as mobile telephony and the proliferation of new incarnations of telecentres such as internet cafes has led to the decline of telecentres. Secondly the telecentre model does not offer the same level of entrepreneurship growth that mobile telephony offers as it does not quite create the subsidiary employment opportunities such as selling pre-paid cards, renting out the handset, recharging battery services and other types of subsidiary services that mobile telephony is offering.

With a mobile handset in the vicinity poor rural women and men have little or no incentive to walk for kilometres to get to a telecentre. What has happened is that they have simultaneously bypassed the landline, the laptop and the need to connect to the internet.

Rural connectivity: a revolution within a revolution when mobile phone plays a catalytic role in development and eradicating rural poverty
Seventy-five per cent of the world's poorest people - 1.05 billion women, children and men - live in rural areas and depend on agriculture and related activities for their livelihoods. Conventional wisdom would lead us to believe that for them mobile phone is a luxury. And guess what? We are wrong!

A recent World Bank study states that "there is a myth that the rural poor are not able or not willing to pay for mobile telecommunication services". Mobile phone's accessibility has allowed previously marginalized groups such as women, landless workers, herders, fishers, small-scale farmers, indigenous peoples and illiterates with no access to basic services to take an active part in the economic and social spheres of their communities. This social and economic inclusion has led to the willingness of poor rural households to spend 4-8% of their income on mobile telephony.

The mobile telephony revolution is contributing substantially to achieving the targets of Millennium Development Goals (MDGs)[3], especially MDG1 "Eradicate extreme poverty and hunger" and more specifically to the target of "Halving, the proportion of people whose income is less than $1 a day by 2015". Africa may be lagging behind on a number of MDGs, however, if back in 2000 world leaders had established an MDG similar to "Achieving universal primary education" (MDG2) for mobile telephony called "Achieving universal access" Africa would have met the targets with flying marks.

Mobile phone growth drivers: A unique business model
A number of enabling socio-economic and political conditions such as ease of use, liberalization of the telecom sector and prepaid services have contributed to the expansion and popularity of mobile telephony in rural areas of developing countries.

Firstly compared to a computer, a mobile phone is much easier to use and requires little or no special skills. Add to this practical detail the low penetration rates[4]; shorter payback period on investment both for the private and/or public sector investor and the farmer and low installation costs gives you a win-win situation.

How new technology can strengthen rural
markets
An innovative new technology is radically improving trading opportunities for small and medium-sized businesses in Africa, and elsewhere. Tradenet is a privately-operated market information system based in West Africa. It links to cellular networks to provide up-to-the-minute market information via SMS. Increasingly, the private sector is moving in to manage providing market information to farmers. Tradenet is one such enterprise. Although still in its infancy, it already covers 15 countries and 500 markets, and is available to users anywhere in the world. It offers a range of information that is key to producers, processors and others working along the supply chain: from updates about prices, harvests, transport, trading offers, disease outbreaks, weather and more.
Tradenet.biz is using the market as a venue to raise awareness about its services. Tradenet agents set up kiosks in the markets and offer market information advice, register people for the service and configure alerts on people's phone.
Tradnet.biz also uses a new peer2peer technology which allows users to share their resources – in this case information – to create a service. And links the vast and growing database of market information to cellular networks.

Furthermore, the liberalization of the telecom sector supported by sound regulatory mechanisms have opened the market to competition and allured the private sector to invest in developing countries. This in turn has spearheaded an increased competition among different operators. In some African countries the consumers can choose between 2 or more mobile operators. As a result consumers are choosing the benefitting from the best services at the best possible rates.

The liberalization schemes hand-in-hand with relatively economical handsets and options such as pre-paid services have led to an exponential growth in the mobile sector making mobile telephony more accessible to the marginalized rural population.

Pre-paid services were embraced with open arms both in developed and developing countries. In Africa pre-paid subscriptions accounts for 95% of total mobile subscriptions.

The pre-paid or "pay as you use" business model is attractive for poor rural people because of the numerous advantages it offers. Unlike the fixed-line model, this model does not require any formal registration and there is no waiting list. Furthermore, the user does not need to submit financial and physical data and he/she can control costs, especially when savings and incomes are low. And most importantly there is no need to present a credit history, as the pre-paid service reaches out to the "unbankable".

The 2007 World Resource Institute (WRI) and International Finance Corporation (IFC) study - "The Next 4 Billion" – provides interesting insight on ICT expenditure as percentage of household expenditure. It shows that "low-income" does not mean "no income" and highlights how expenditure on ICTs and mobile telephony while varying from one country to another are consistently increasing.

Innovative use of mobile telephony brings economic prosperity and to poor rural people
A 2005 London Business School study found that “for every additional 10 mobile phones per 100 people, a country’s gross domestic product (GDP) rises 0.5 percent”.

For the 1.05 billion rural poor people living on US$1.25 or less, the mobile phone is far from being a flashy gadget but represents a viable way for improving their lives. For them mobile telephony has turned out to be a catalyst for economic growth by enabling small entrepreneurs to have direct access to market intelligence, by providing employment opportunities in the tertiary and service sectors, creating opportunities for public and private sector to invest and modernize infrastructure.

Mobile telephony is providing poor rural people with a point of contact allowing them to take part in the economic system and enter in the job market. It has allowed small businesses - previously excluded - to participate in the economic system. According to the 2005 Vodafone study:

• More than 85% of small businesses run by black people, surveyed in South Africa, rely solely on mobile phones for telecommunications. 15% of these businesses previously had no access to telephony. Over the last decade the number of businesses using mobile phone in South Africa as increased by nearly 125%
• In Egypt 90% of informal sector covering a wide range of small retail, small manufacturing and service activities relies exclusively on mobile telephony
  62% of businesses in South Africa, and 59% in Egypt, said mobile use was linked to an increase in profits
• 97% of people surveyed in Tanzania said they could access a mobile phone, while just 28% could access a land line phone.

For producers access to reliable market information is a key ingredient to increase incomes. In the past they relied on governments to provide market information. Today agricultural markets are far from being well organized and transaction chains are long, while the volumes of goods are often small and of varied quality, and prices are highly unstable.

For example, the fishers of the Tamarin community under the IFAD-funded Rural Diversification Programme on the island of Mauritius do not have direct access to the fish market and as a result are excluded from the market. However, they use their mobile phones to inform buyers of their daily catch and to take orders. This way they do not over fish and are sure that they will sell their daily catch. This has led not only to economic efficiencies but also to protecting the fish stock which in turn has a positive impact on the lagoon's ecosystem. At the same time, the fishers use their mobile phone to keep in touch with their families, something that previously they could not do, and to get weather updates.

Furthermore, small producers trading in rural areas in Africa, face enormous challenges such as lack access to reliable and up-to-date market information, lack of transportation infrastructure and competition.

Without market information, small producers are vulnerable to unscrupulous traders and middle-men giving them prices at below-market rates. This may lead the producers to be reluctant to diversify into different products for fear of not finding a profitable market for their output.

The relatively affordable air-time of mobile phones has made transfer and exchange of knowledge easy and affordable. For example, in many parts of the world, mobile phones are used to disseminate a wide variety of information ranging from market information to weather forecasts. This information dissemination happens either through structured services and subscriptions such as TradeNet.biz and Zambia SMS Market Information Service or through unstructured and informal use of mobile phone. Information dissemination is also happening by blending the formal and informal services as is the case of First Mile project in Tanzania (see examples below). These services provide a wide variety of SMS services ranging from commodity price to harvest tips, information on disease outbreaks, weather reports, transport and trading offers.

As a result poor rural people can use their mobile phone both to directly communicate with buyers and also to access commodity prices via SMS.

World economists may be busy understanding the full impact of the current financial crisis, but they are equally struggling to calculate the macroeconomic impact of mobile revolution.

New employment opportunities
Mobile phones have also spearheaded a host of new and innovative income generating activities, such as small businesses to recharge batteries, sellers of prepaid cards, renting out phones and/or air-time for 2 euro cents per call and other services such as reading and sending SMS message.

In Africa and other parts of the world, occasional labourers put up ads in a village centre with mobile number to offer services, or when they register at unemployment centre they provide their mobile number to get job alerts via SMS. The job alerts can be both through subscription or free of charge. Mobile phones have led to minimizing travel costs allowing people to move when there is a concrete economic opportunity.

Cellular banking: the bank of the "unbankables"
It did not take too long for poor rural people to figure out that the mobile phone could be used for a host of other things than just talking. Thanks to their ingenuity and inventiveness they are using mobile phone in the financial and health sector. For example, the mobile phone is used as a bank to provide financial services to millions of poor rural people who send money home and to deliver micro-credit loans to poor where there are no banking facilities. Mobile phones are now providing "cellular banking" to the "unbankable" clients. They are also being used to provide medical services such using SMS to remind patients of medical appointments, children's vaccination or to take their medication to remote villages. Mobile phone is also being used to disseminate information about sexually transmitted diseases and to monitor patients. For example, diabetic patients to record their blood sugar and send the information via SMS to the medical centre.

Social cohesiveness and sense of community
What we see in rural areas of developing countries is a sense of community. It is common for one person or a group of people within a community owning a handset to rent it to other community members along with reading and writing text message services.

From a social networking perspective mobile phones have had a positive psychological impact on families, as connectivity has allowed families and the diaspora to keep in touch. Anthropologists like Dr Mirjam de Bruijn are intrigued by the way mobile users in developing countries have invented mechanisms such as "beeping", "bipage" or "flashing" as codes to alert someone else to call them. Mobile providers are equally struggling to make money by working around the ingenuity and inventiveness of poor rural people.

How can ICTs help poor rural people?
ICTs can help poor rural people if the focus is on people and their needs and not on the technology. They can be vital for reducing rural poverty and can improve rural livelihoods only if they are appropriate, sensible and meet the requirements of poor rural people so that as a tool they can increase their bargaining and purchasing power.

ICTs and more specifically mobile telephony can continue to contribute to MDG1 targets if we use participatory approaches, as outlined in the examples below, to find out and understand the needs and challenges of poor rural people, if national poverty reduction strategies systematically include adoption of appropriate ICTs, if there is a commitment to build the capacity of communities and local organization to lead and own the process of appropriation and if there is blending of old and new technology to create a three-tier system of public, private and community.

The uptake of technology can only be successful if it is demand-driven and responds to the needs of beneficiaries. The following examples show how farmers participated in identifying and defining their needs and how together with donors and other stakeholders they developed mechanisms to exploit and unleash the power of mobile phones. This participatory approach allowed farmers to actively take part not only in the design but also take responsibility in implementing the various projects and activities.

Examples of mobile telephony in action
The small-scale farmers of the Boane association under the IFAD-funded Agricultural Markets Support Programme (PAMA) in Mozambique needed a market outlet to sell its products. Together with the PAMA programme they worked towards achieving this goal. Today they are in business with Shoprite, Africa's largest food retailer. They take orders from Shoprite and once they have harvested the crops ordered by Shoprite, they use their mobile phones to inform the fruit and vegetable manager of Shoprite, to send the truck to pick up the ordered tomatoes, potatoes, cabbages and lettuce.

The IFAD-supported Smallholder Enterprise and Marketing Programme (SHEMP) in Zambia and the Zambia National Farmers Union (ZNFU) identified the need to provide market intelligence to farmers. To respond to this need, they introduced an innovative, simple and cost-effective way to address accessing commodity prices. Under its agribusiness component (one of three components, alongside road access and group formation), it put in place an SMS Market Information Service in cooperation with ZNFU. To ensure good governance and provide equitable, fair and transparent services, the Farmers Union developed a code of conduct outlining the expectations and rules of engagements for farmers, traders, processors, buyers and ZNFU agents. It also provides detailed contact information to report irregularities.

The service provides weather information, business news, up-to-date market prices, listing buyers for 14 major commodities in a cost-effective, accessible and reliable manner.

The SMS system, which was launched in August 2006, is simple to use. To obtain the best prices for a commodity, farmers simply send an SMS message to 4455 containing the first four letters of the commodity name. Within seconds, they receive a text message with the best prices by buyer using abbreviated buyers’ codes.

If a farmer wishes to get best prices in a specific district or province, he or she simply includes the province/district code after the commodity code.

After selecting the buyer that best suits their needs, farmers can send a second SMS message with the abbreviated buyer’s code again to 4455. A text message is sent back with the contact name and phone number of the buyer, the full name and address of the company and simple directions for reaching both. Farmers are then able to phone the contact and start trading. The farmers pay US$0.15 for each text message.

While the system is easy to use, extension workers are also providing backstopping to farmers in terms of training and capacity building so that they can effectively use the system. The system is also supported by the http://www.farmprices.co.zm/ website, for those who have Internet access.

This market intelligence system is continuously gaining popularity and is empowering the farmers to negotiate their deals by offering time-sensitive knowledge and at the same time it is fostering transparency in pricing.

SHEM and ZNFU estimate that each training session results in approximately 15% increase in SMS exchanges. Over 100 traders and processors are now providing weekly price updates. The hits on the website and number of SMS messages are continuously increasing. For example in 2007 during the period February-June 520 weekly SMS were exchanged, while between July and August over 1220 weekly SMS message were exchanged. Smallholders today have the necessary knowledge to know what to grow, where to sell their products and at what price.

The better serve the Zambian farmers and to make this system the most reliable information source SHEMP and the Zambia National Farmers team continuously are ensuring that prices are updated on a daily and weekly basis. At the same time they are ensuring not to add too many secondary information services which can led to confusion and disorient the users.

To ensure sustainability they are anchoring the management of the system in local institutions and at the same time conducting public advocacy activities to attract corporate sponsorships.

The farmers' inventiveness has spearheaded another phenomenon, namely blending old and new technology. Poor farmers in Tanzania under the First Mile Project which is supported by the Government of Switzerland and implemented in collaboration with the Government of Tanzania’s and the IFAD-funded Agricultural Marketing Systems Development Programme (AMSDP) are using mobile phones to access market information in real time. Market 'spies', known locally as shu shu shus, investigate prices and the details of what is selling at local markets, and use their mobile phones to report back to their villages. The commodity prices are then transcribed on village billboards and also broadcast on radio. Thanks to a partnership with Tradenet.biz soon they will be able to use their phone to access more market information. The blending of old and new technology is helping the farmers build better and more collaborative market chains from producer to consumer.

The last big push to make mobile phones universally accessible
"A journey of a thousand miles begins with a single step. It does not matter how slowly you go, so long as you do not stop", Confucius

The world has embarked on the mobile journey and it can only go forward! By now policy makers should have enough evidence that of all ICTs, mobile phone has the best potential to stimulate growth in developing countries and that investing in mobile services brings about economic and social development.

By the same token phone manufacturers and service providers have enough evidence that the poorest people have turned out to be one of their biggest markets. Development agencies equally have acquired enough evidence that mobile telephony has not only helped bridge the digital divide but has been a catalyst to eradicate rural poverty, improve livelihoods of the marginalized and poor segment of the population.

According to the Consultative Group to Assist the Poor (CGAP), approximately 1.5 billion mobile users in developing countries have little or limited access to formal financial services. Furthermore, since there is limited formal banking infrastructure in developing countries, there are fewer options to transfer money and access banking services. CGAP argues that mobile phone has the potential to provide a low-cost alternative to banking via internet or ATM or point-of-sale. Their experiments show that setting up point-of-sale with cell phone can lead to cutting cost by 50%. Microcredit and microfinance institutions have enough evidence to unleashing the potential of cellular banking such and start creating "branchless banking channels using mobile phones".

To truly make mobile telephony the first universal access ICT there is a need to:

• put in place sound ICT policy in collaboration with government, civil society, private sector actors and the consumers
• invest more in mobile infrastructures and services in rural and disadvantaged areas
  strengthen the capacity of rural entrepreneurs and farmers' organizations to better exploit the potential of mobile phones
• deliver relevant and timely content and further develop peer-to-peer information systems
  reduce both airtime and handset price
• put in place better and enabling regulations to allow mobile services to thrive and expand

And last but not least to get the full picture and really appreciate the power and potential of this revolution, there is also a need for the mobile sector to capture what official statistics are unable to capture, namely the "informal use" of mobile phones – that is those sharing a subscription within a community.

Given the conducive environment, it should not take too long before private-public sector join forces and start producing the $10 handset with the vision of producing in the next couple of years the $1 handset and reduce airtime cost by using new technology such as voice over internet protocol (VoIP). And yes this can be done through a joint private-public and community partnership.

Useful links

• IFAD
• Rural Poverty Portal
• Small-scale farmers become entrepreneurs
• Trading commodities via SMS
• Casting the net beyond the lagoon
• Boosting farmers’ profits through better links to markets
• Investment in the livestock sector is helping poor Eritrean farmers cope with their many challenges
• Tradenet.biz
• Zambia Market Information System
• Africa Connect
• 
  
  
  Mobile star killed laptop star
  

  View more presentations from Ifad International fund for agricultural development. (tags: ifad mobile)

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[1] According to Wikipedia, mashup is a derivative work consisting of two pieces of media conjoined together.
[2] Spate irrigation is a type of water management, that is used in semi-arid environments. It is used in the Middle East, North and East Africa, West Asia, and parts of Latin America. In spate irrigation flood water from mountain catchments is diverted from river beds (wadi’s) and spread over large areas.
[3] In September 2000, world leaders came together at United Nations Headquarters in New York to adopt the United Nations Millennium Declaration, committing their nations to a new global partnership to reduce extreme poverty and setting out a series of time-bound targets - with a deadline of 2015 - that have become known as the Millennium Development Goals (MDGs). The 8 MDGs are: (1) MDG1: Eradicate extreme poverty and hunger, (2) MDG2: Achieve universal primary education; (3) MDG3: Promote gender equality and promote women; (4) MDG4: Reduce child mortality; (5) MDG5: Improve maternal health; (6) MDG6: Combat HIV/AIDS, malaria and other diseases; (7) MDG7: Ensure environmental sustainability and (8) MDG8: Develop a global partnership for development
[4] Mobile phone penetration rate is a term used to describe the number of active mobile phone numbers (usually as a percentage) within a specific population.