Tech in Emerging countries
When it comes to tech, the industry giant GAFA is currently the target of public criticism for the way it handles personal information in the US. However, today, I would like to write about how technology can create social value in emerging countries. Have you heard of the word “leapfrogging”? The concept of leapfrogging is that due to the lack of social infrastructures, a new service or technology spreads very quickly in emerging countries without the steps that developed countries have taken in the past. The most prominent example of the leapfrogging technology would be M-Pesa in Kenya.
M-Pesa is a mobile phone-based peer-to-peer money transfer service launched by Safaricom, Kenya’s largest telecom provider, in 2007. Just five years after the launch, there were 19.5 million mobile money users in Kenya (83% of Kenya’s adult population), transferring USD 8billion per year (~24% of Kenyan GDP). Once you create an account, you can convert cash into electronic money through Safaricom’s agents (typically a kiosk), and that money is credited to your M-Pesa account. You can withdraw cash through the agents, and you can transfer the money to other users via the mobile phones. Mobile money is a form of electronic money that allows you to make financial transactions using your mobile phone. It will enable unbanked people to reach financial services at a significantly lower cost because physical infrastructure is not needed. This kind of service is helpful in a country where many workers in cities send money back home to their families in rural villages.
The social impact that M-Pesa created was the reduction of poverty. It is said that about 2% of Kenyan households lifted out of extreme poverty through access to mobile money service. First, M-Pesa offers flexibility in the usage of money. A mobile wallet is a secure place to save money as the cash is deposited virtually. Savings can be used when you have a hard time or when you make an investment for business expansion. Second, lower transaction cost enables users to make broader networks with others in a distant location, while high transaction costs mean that households were limited to form networks with others nearby. In areas where mobile money access increased significantly, more people work in business or sales rather than in subsistence farming. Besides, this result was especially noticeable for women. About 185,000 women have changed their occupation from subsistent farming to business or sales as a primary job.
Although technology like M-Pesa offers inspiration, it does not solve every problem in Africa. The mobile revolution appears to have had little impact on African innovation policy. Africa still lags behind in manufacturing, and actually, today’s African economies are in the middle of their worst downturns in two decades. Since service industries are closely linked to industrial sectors, it is necessary to invest in and develop infrastructures such as energy, transportation, telecommunication, water and sanitation, and irrigation to maximize African potential. It is suitable to set technological innovation as a driver of growth, but such innovation might depend on industrial development.
