Tuesday, April 15, 2008

BOP, Cellphones, and Poverty Reduction

The NYT has a special report (Can the Cellphone Help End Global Poverty?) about how businesses are reaching out the bottom billions and how cellphones can help reduce poverty in the developing countries. Sounds something like the Bottom of the Pyramid (BOP) concept of CK Parhalad! Cellphones are increasingly being used by rural farmers to check market prices in real time. More symmetric information flow leads to market clearance, which obviously is far from perfect in this imperfect world. Technology that is customized to the needs, capacity, and ability of the bottom billion helps to bridge the gap between perfection and imperfection.

I found one study particularly amazing: A study by London Business School in 2005 concluded that for every additional 10 mobile phones per 100 people, a country’s G.D.P. rises 0.5 percent. This is quite an extrapolative finding because though I do believe that cellphones help to speed up the rate of transmission of information (see Greg Clarks book 'A Farewell to Alms' to know how faster was the rate of transmission of information after the discovery of telephone- an aiding factor for the industrial revolution in England), it does not directly help raise GDP by 0.5%. Contradictory example: look at the increase in rate of cellphone owners in Nepal and the sluggish GDP growth rate). But no doubt, people can do wonders by using cellphones! More on the use of wireless communication from The Economist: Mobility: Nomads at last. Watch a related video here.

...This sort of on-the-ground intelligence-gathering is central to what’s known as human-centered design, a business-world niche that has become especially important to ultracompetitive high-tech companies trying to figure out how to write software, design laptops or build cellphones that people find useful and unintimidating and will thus spend money on. Several companies, including Intel, Motorola and Microsoft, employ trained anthropologists to study potential customers, while Nokia’s researchers, including Chipchase, more often have degrees in design. Rather than sending someone like Chipchase to Vietnam or India as an emissary for the company — loaded with products and pitch lines, as a marketer might be — the idea is to reverse it, to have Chipchase, a patently good listener, act as an emissary for people like the barber or the shoe-shop owner’s wife, enlightening the company through written reports and PowerPoint presentations on how they live and what they’re likely to need from a cellphone, allowing that to inform its design.

...To get a sense of how rapidly cellphones are penetrating the global marketplace, you need only to look at the sales figures. According to statistics from the market database Wireless Intelligence, it took about 20 years for the first billion mobile phones to sell worldwide. The second billion sold in four years, and the third billion sold in two. Eighty percent of the world’s population now lives within range of a cellular network, which is double the level in 2000. And figures from the International Telecommunications Union show that by the end of 2006, 68 percent of the world’s mobile subscriptions were in developing countries.

...“You don’t even need to own a cellphone to benefit from one,” says Paul Polak, author of “Out of Poverty: What Works When Traditional Approaches Fail” and former president of International Development Enterprises, a nonprofit company specializing in training and technology for small-plot farmers in developing countries. Part of I.D.E.’s work included setting up farm cooperatives in Nepal, where farmers would bring their vegetables to a local person with a mobile phone, who then acted as a commissioned sales agent, using the phone to check market prices and arranging for the most profitable sale. “People making a dollar a day can’t afford a cellphone, but if they start making more profit in their farming, you can bet they’ll buy a phone as a next step,” Polak says.

...Robert Jensen, an economics professor at Harvard University, tracked fishermen off the coast of Kerala in southern India, finding that when they invested in cellphones and started using them to call around to prospective buyers before they’d even got their catch to shore, their profits went up by an average of 8 percent while consumer prices in the local marketplace went down by 4 percent.

...Public health workers in South Africa now send text messages to tuberculosis patients with reminders to take their medication. In Kenya, people can use S.M.S. to ask anonymous questions about culturally taboo subjects like AIDS, breast cancer and sexually transmitted diseases, receiving prompt answers from health experts for no charge.

...A cellphone in the hands of an Indian fisherman who uses it to grow his business — which presumably gives him more resources to feed, clothe, educate and safeguard his family — represents a textbook case of bottom-up economic development, a way of empowering individuals by encouraging entrepreneurship as opposed to more traditional top-down approaches in which aid money must filter through a bureaucratic chain before reaching its beneficiaries, who by virtue of the process are rendered passive recipients.

...Ugandans are using prepaid airtime as a way of transferring money from place to place, something that’s especially important to those who do not use banks. Someone working in Kampala, for instance, who wishes to send the equivalent of $5 back to his mother in a village will buy a $5 prepaid airtime card, but rather than entering the code into his own phone, he will call the village phone operator (“phone ladies” often run their businesses from small kiosks) and read the code to her. She then uses the airtime for her phone and completes the transaction by giving the man’s mother the money, minus a small commission. It’s a rather ingenious practice...an example of grass-roots innovation, in which people create new uses for technology based on need...