Wednesday, November 17, 2010

A Nice Ring: Cell Phones in the Developing World

"What!? You had cell phones on your mission?" My incredulous (insert brother, friend, acquintence, etc. here) asks.

"Yes, we did," I reply.

"Why? We just used landlines," he responds.

"Well...there weren't any landlines, it was a cellphone or nothing."

I have had this conversation a dozen times with various people who either had or were currently serving a mission for the The Church of Jesus Christ of Latter-day Saints. It is interesting to note the incredibly profound social and economic insights about one of the most influential product phenomenons in history that can be extrapolated from this conversation.

As a new comer (JC as some jokingly call it) to Sierra Leone,  it certainly struck me as a bit odd that the first time I walked into a business that there was no business phone line, simply people behind the counter talking on personal cell phones. I even found this fact more strange/really inconvenient the time that I needed emergency medical attention at a hospital. The nurse did not have "credit" in her phone and was therefore unable to contact the doctor as I stood bleeding. But that is a different story. What I am getting at here is the interesting fact that in most developing nations, mobile phones are ubiquitous and traditional land lines are nowhere to be found. So why is this the case?

The answer is pretty simple: It is far less expensive to erect a cell phone towers than it is to lay the traditional infrastructure for telecommunications. However, the demand for people to connect via phones in developing nations is the same as it is here in the USA. This led to the entrance of many mobile service providers to developing countries.

While there are certainly drawbacks to not having a traditional telecommunications infrastructure, I tend to have a slightly different perspective on the matter than the one expressed by Professor John Weeks in his post, Mobile Phones Outnumber Toilets in Developing Countries. In this post, Professor John Weeks writes, "Mobile phones get around some of the infrastructure requirements of land lines, just as bottled or other packaged water gets clean drinking water into the hands of people without a huge water piping project. But that should not lull us into believing that all infrastructure problems are readily solved in this way." Though I will not refute that mobile phones do not get around some of the problems of not having traditional infrastructure, I argue that the penetration of mobile phones into developing nations has had and will continue to have far-reaching, beneficial effects on societies, economies, and institutions in developing countries--and where societies, economies, and institutions improve, infrastructural improvements are sure to follow.

But first, just how far have mobile phones penetrated developing nations? Consider a few examples--you may be surprised:

Country                           Mobile Penetration per 100 Inhabitants (2008)
Ghana                                                              49.55
Congo                                                              49.98
Bangladesh                                                       27.9
Botswana                                                         77.34

*Statistics according to Mobile Phones in Developing Countries by Jerry Hausman, MIT
Here are some of the ways that mobile phones have and will continue to improve the lives of those in developing nations:

1) Mobile phones have greatly reduced and in some cases almost entirely reduced inefficiany due to transaction costs vie mobile banking and mobile money transfers. A great example of this is the M-PESA SMS money transfer program in Kenya.

2) Most business people are familiar with the term "just-in-time" production. If you are not, it is simply the concept of providing inventory and component parts of production as they are needed rather than keeping them on hand. Similarly, cell phones have increased efficiency due to reducing co-ordination costs.

3) Mobile phones offer incredible potential to provide unprecedented access to literature and internet to those in developing countries. I disagree with this obviously biased post, mobile phones are the digital reading devices of the future--especially for developing nations. I also think that the One Lattop per Child program is well intentioned but misguided. The real future of digital literacy and the internet access is in cell phones, not laptops (I am not alone in this position, Dr. Hausman thinks so too).

4) As Chad Hyett points out in his post, Mobile Health in Developing Countries, mobile phones are being used in developing countries as a way to provide easier access to innovative medical and health services

Finally, 5) Mobile phones are the future of microcredit loan servicing and other branches of microfinance. Historically, Microfinacne Institutions have had to charge high interest rates to cover the high costs of servicing dispersed, low principle loans. We are just beginning to tap into the potential of using mobile phones to help lower the cost of servicing microcredit loans as well as scaling clientele. Please read my post on microfinance to learn more about it and its potential to help lift others out of poverty.

These are only a few of the many positive effects that the penetration of cell phones into developing countries, perhaps you and I will help to innovate more...

*If you are interested in gaining more insight into this topic, please read Kristen's (a fellow student) post.