The Role of Mobile Phone in Sustainable Rural Poverty Reduction

Editor's note: The following summary was produced by The Communication Initiative, not by the authors of the paper.

This paper, produced by the World Bank Group's Global ICT (GICT) department, examines the role of mobile telephones in sustainable poverty reduction among the rural economically poor. It discusses the role of information in rural poverty, explores whether mobile phones are the appropriate delivery mechanism, and examines growth of the mobile phone sector, availability of service, private sector growth, benefits to the rural economically poor, and emerging trends.


The document states that the barriers - educational, economic, and infrastructure-related (lack of electricity, in particular) - once thought by economists to limit information and communication technology (ICT) uptake, seem to be outstripped by the benefits. "This is not to say that these barriers no longer exist, but rather that developing economies have found ingenious ways around them, given the obvious benefits that the use of mobile telephony can bring, e.g., the lack of electricity in rural areas was believed to be an insurmountable barrier to mobile take-up. However, rural communities developed various ways to adapt to this obstacle: (a) collecting several mobiles from one community and heading to another village to charge them, as at an Issuana mission in Tanzania; (b) using car batteries to charge mobile phones."

As stated here, direct benefits of mobile usage to rural economies include:

1. Economic growth: "Vodafone (2005) reported that, in a typical developing country, an increase of 10 mobile phones per 100 people boosts [gross domestic product] GDP growth by 6%."
2. Job creation: "Ovum (2006) found that the mobile telephony industry created about 3.6 million jobs in India, directly and indirectly."
3. Productivity:
   
   • Business expansion: "...in the import/export and small trade business at Odessa Seaport, Ukraine, mobiles were a powerful tool to estimate demand and seek out new customers."
   • Employment search: "This is particularly important in countries such as Serbia, which has high unemployment (20%) or Thailand, with its high level of temporary employment."
   • Entrepreneurialism: "Mobile phones reduce the cost of operating and starting up businesses. For example, beauticians in Pakistan, prostitutes in Serbia and taxi drivers in Thailand..."
   • Mobile banking: "Mobile phones reduce the need to meet face-to-face to conduct business. For example, Wizzit in South Africa offers the option of total substitution of banking."
   • Transaction costs: "Improvements in the information flows between buyers and sellers, allow for the exchange of information without traveling."
4. Tax revenue
5. Value added from mobile operator: "...direct economic benefits from the mobile operator themselves in terms of contract costs, dividends, employee benefits, and wages."

Indirect benefits include:

1. Entrepreneurship and job search: "Chipchase and other researchers provided anecdotal evidence to support the theory that the use of a mobile phone is an invaluable enabler of entrepreneurship and job search – not to mention the social benefits on the side."
2. Information asymmetry: "...mobile phones may reduce information asymmetries, enabling users to access arbitrage, market or trade opportunities that they otherwise would have missed out on."
3. Market inefficiencies: "...mobile phones can also correct other market inefficiencies or rather supply market efficiencies to redress the balance."
4. Transport substitution: "One ...side-effect of the use of mobiles is the reduction of transportation costs: household expenditure drops and consumer surplus increases.

Intangible benefits include: Disaster relief; education and health; and social capital and social cohesion.


Trends include:

1. Converged applications and converged devices: "... the idea of a single converged mobile device, which can perform multiple functions."
2. Pricing strategies and revenue streams: "Whilst it may be true that rural communities can find innovative ways to apply technology not previously available to them (e.g., Indian fisherman finding out where to land their catch), none of this would be possible without a new pricing model that has re-valued [short message service] SMS from a mere 10% side player in revenue streams to a main staple. Similarly, if multimedia functions could also be price-dropped from an elitist, overpriced niche product for tech geeks to a commoditized mass market necessity, these functions could drive rural economic and social transformation."
3. Social mobility and virtual communities, e.g. blogging, user-generated content, and Wikis: "...real-time access to relevant content, created among the community and by the community to address pressing issues, perhaps initially education and health, but increasingly other social functions...[and] decreasingly isolation, flattening the learning curve and removing the need to reinvent the wheel for every type of community initiative: from education, finance, health, microfinance, private sector development, and many other arenas."