Mobile Phones and 21st Century Poverty Alleviation

Blog Post
Nov. 15, 2010

The first place winner of the State Department’s Apps 4 Africa Competition – a calling for technologists in East Africa to build the best digital tools to address community challenges – was awarded to a mobile application called iCow.  The voice-based App helps farmers maximize the value of their cows by tracking breeding periods and monitoring nutrition levels leading up to a calf’s birth. Another winner was an SMS service called Mamakiba, a mobile platform designed to help low-income women cope with the financial burdens of maternal health such as antenatal care and clinical delivery. The App maintains savings targets for user’s healthcare costs and establishes prepayments through a mobile money platform (M-PESA).

If there could be a competition for the technology device with the fastest adoption in the developing world, mobile phones far and away would take first place. From 2003 to 2009, in Least Developed Countries, average penetration of mobile subscriptions rose from 2 per 100 inhabitants to 25 per 100 inhabitants (with this penetration likely being higher due to numerous mobile users and multiple SIM cards per single phone). To put this into perspective, a report from the United Nations University concluded that more people in India have access to mobile phones than bathrooms. Globally, by the end of this year, there will be an estimated 5.3 billion mobile cellular subscriptions; more astoundingly, the developing world will account for more than two-thirds of these subscriptions. No such technology has ever seen such a rapid rate of adoption according to the International Telecommunication Union, and the developing world is leading the way.

So how is this ubiquitous device being leveraged as a tool for poverty reduction?

Just as the winners of the Apps 4 Africa Competition demonstrated, mobile phones can be utilized by those living in poverty in a number of different ways. One of the most revolutionary methods is mobile banking. A CGAP Paper published last month examined the question: does branchless banking live up to the hype and actually lead to increased and more effective financial services for the poor? After studying 18 branchless banking providers (only four of which were completely non-mobile[1]), with more than 50 million customers in 10 different countries around the world, their conclusion was quite simply yes. 37% of the active users examined had previously been unbanked, and transaction values were almost 20% cheaper than traditional banks.

Just as mobiles are spreading so are mobile banking services beginning to take off and expand. For example, M-PESA, a mobile banking platform that has processed more transactions domestically in Kenya than Western Union has globally, had reached 44% of households in 2008, and only a year later, seven out of every ten households were using the platform. The GSMA provides a live deployment tracking of mobile banking around the world; currently, 96 services are underway, and nearly the same amount (91) are in planning.

Mobile phones have the ability to be amazingly entrepreneurial –as proven by the winners of the Apps 4 Africa competition – while also never losing touch with their users, which sadly can be the story of many humanitarian technology employments. Take for example the 40,000 sugar cane farmers in the Warana District in western India. Fluctuating supply and demand and difficulties coordinating with sugar mills that process and then sell the sugar often leads to farmers travelling long distances (up to 15 miles) only to find their crops out of demand. To bridge this gap, a computer-based information exchange system was constructed, but due to high costs and poor infrastructure, the website fell to disuse. Soon after, a mobile-based system using text messaging was piloted, connecting the farmers to market information. The wireless system was less costly, easier to maintain, more accessible and provided immediate price information. Over eight months, the unwired system has had widespread usage and success, resulting in savings of more than 1 million rupees for the farmers.

It is clear that communities in the developing world have chosen their own tool for poverty reduction. In many rural and poor communities where schools and hospitals struggle to get the resources they need and intermittent electricity and inadequate roads remain, mobile phones and the infrastructure to support them are booming. A report examining income expenditures of 17 African countries found that on average the poorest individuals in over half the countries were spending more than 16 percent of their income on mobile services. And where non-financial barriers present themselves, users have adapted solutions to remain engaged with their mobile phones; car batteries have become phone chargers, and even illiteracy has not stopped users.

Mobile phones provide those living in poverty with an opportunity to be their own problem solvers, business entrepreneurs and aid workers. Connectivity and creativity have transformed mobile phones from a technology device into a tool of economic empowerment, and their rapid spread in recent years have established it as a powerful tool of 21st century poverty alleviation.

[1] The four non-mobile branchless banking providers are Banco Postal (Brazil), Bradesco (Brazil), Caixa  Economica (Brazil) and Fino (India), which are the larger branchless banking institutions studied, and additional four services use both mobiles and smartcards.