The Impact of Mobile Phones on Poverty and Inequality in Developing Countries

The purpose of this chapter is to state the main goals and findings of the book and to show how the chapters fit together. It is made clear at the outset, for example, that dealing with the impact of mobile phones on poverty cannot be done without first examining the extent to which the poor actually engage with this technology. For, if the engagement is minimal so too will be the direct impact on this group. It is with this recognition in mind that the first three chapters are devoted to the spread or diffusion of mobile telephones. These show, amongst other things, that with some exceptions there is quite a significant engagement of the poor with the new technology. Yet, despite this, and given the obvious importance of the issue, the literature on the impact of mobile phones on the poor is surprisingly scant. What of it there is, however, suggests the existence of a possible pro-poor bias at the level of individuals as well as countries.

This first chapter on diffusion is a broad introduction to the topic in the historical context of innovations from the developed countries. The analytical framework comprises the well-known s-shaped curve associated with Rogers, which posits that the diffusion process goes through a number of different phases, ending up with ‘late adopters’ (i.e. the lowest deciles of the population). But whereas this curve well approximates what occurs in the developed countries, it is not an adequate representation of diffusion in the developing world. For there, typically, the process is aborted much earlier and innovations rarely penetrate beyond a quarter of the population (a narrow group in the urban, formal sector of the economy). It is against this background that the near diametrically opposite experience of mobile phones needs to be viewed. Even in the poorest countries, for example, the subscription rate for this technology is on average more than 50 %. This unusual experience is attributed here mainly to leapfrogging—that is, the bypassing of older generations of technology and moving straight to the new. This proposition is examined further in Chap. 4.

The question posed by the title of this chapter is a fundamental one because of the need to establish that the poor are actually engaged with mobile phones to more than merely a minor extent. Most of the evidence on this question is available for Africa and Asia and is drawn mostly from surveys of the BoP in these regions (the African survey data are especially helpful in this regard). It turns out that with some notable exceptions, mobile phones are adopted quite widely at the BoP even in notably low-income countries and even among some of those at or near the very bottom of the pyramid. Thus, there is good reason to examine not just the association between mobile phones and the poor but also the impact of the former on the latter. Country differences are ascribed, tentatively, to deviations in income levels and government policies towards prices and taxes on handsets. There is also some African evidence in this chapter that the mobile penetration rate is significant in a regression with the Gini coefficient as the dependent variable.

The previous chapter suggested that the mobile phone has spread quite widely at the B of P even in relatively poor developing countries. I argued there that the popularity of this technology had to do partly with its affordability. In this chapter I seek to further explain the popularity of the mobile among those living at the BoP and to discuss how they benefit from it. My contention is that these issues have partly to do with the nature of the technology itself and partly with the context in which it is introduced in relatively backward areas of developing countries. In both cases, I contend that there is evidence of a pro-poor bias in the way benefits accrue to the various income groups.

This chapter covers much of the work that has been done on the economic impact of mobile phones in developing countries. It covers micro, macro and the transition that is sometimes made from the former to the latter level (that is, scaling-up). Research at the micro level is relatively plentiful and is concerned mainly with the improved communication and information in various markets, that mobile technology can help to bring about. Unfortunately, however, few of the studies at this level specifically refer to the poor and there is consequently a rather glaring research gap to be filled. There are, of course, exceptions to this general pattern and these tend, encouragingly, to reveal something of a bias in favour of the poor (such as for example the greater benefits that accrue to this group in the case of Village Pay Phones (VPPs) in Bangladesh. Similarly, at the macro level, three out of the four studies that were identified find a greater effect of mobile phones on growth, the lower is the presence of fixed-lines in a country. This favours the poorer countries, where the older technology tends to be at least in evidence. But here, as at the micro level, there is too little evidence to reach any firm conclusions. The final part of the chapter deals with three cases of successful scaling up of projects that began on a small scale. Yet, in this area too, scant attention is paid to the impact of the process on the poor, suggesting still another area for further research.

The distinctive features of this chapter are that it is conducted from an inter-country perspective; that it takes use rather than adoption as the measure of welfare; and that it deals with numerous impact mechanisms other than the purely economic (such as health and safety). Yet, the chapter retains a close affinity with Chaps. 5 and 7; the former because of its main hypothesis that mobile technology will be most widely used in countries lacking a viable alternative to the new technology. The latter chapter because it also challenges the conventional measure of the digital divide which is based on adoption rather than use. Particular attention is paid to the relatively poor East African countries in the sample, which tend to make the most intensive use of mobile phones in the areas of economics, health, social capital and safety. Because it turns out to be the most important of these use mechanisms and since it is not widely discussed in the literature, safety is studied more intensively in the Appendix to this chapter. A key question in this regard is why safety constitutes such a popular mechanism for mobile phone use in the countries concerned. My tentative answer is that it has much to do with the interactions between crime, poverty and inequality.

There is growing recognition that the welfare effects of mobile phones—as with other products—need to be based not only on the adoption but also the use of the technology (Sen 1985). What is increasingly being acknowledged is that adoption provides only a part of the true welfare effect because information about the purchase of goods in themselves tells us nothing about how they are actually used (In the extreme case for instance technologies may not be used at all, as when, for example, a bicycle is given to a crippled person) (Sen 1985). The bicycle thus has a positive effect on the GDP but confers no actual utility. In theoretical terms what is being proposed here is a movement away from traditional theory where welfare occurs at the point of purchase to a theory (such as Sen’s functionings approach) which explicitly examines the process after a good is purchased. Methodologically, this transition is effected by means of a detailed data-set for 11 African countries, which describes how mobile phones are used for a variety of mechanisms involving economics, health, social capital and safety (The survey is conducted by the same institution that is indicated in the previous chapter.). These data were also employed in Chap. 6 to analyze use patterns among those countries.