Computing Applications Emerging markets

Development 2.0: The IT-Enabled Transformation of International Development

The fundamental assumptions of international development are changing, increasingly putting the tools for a digital economy into the hands of the world's poor.
  1. Introduction
  2. New Relations
  3. New Roles
  4. New Models
  5. Conclusion
  6. References
  7. Author
  8. Footnotes
  9. Figures
M-PESA agent converting money
An M-PESA agent converting money it into e-value cash in Masai Mara, Kenya.

Where are the Amazon and eBay for international development? If we could find them, they might represent “Development 2.0”: new IT-enabled models that can transform the processes and structures of development. In this column, I will highlight some examples, and analyze how they are changing the way we “do development.”

The foundation for these changes has been the rapid diffusion of IT into the developing world. In 1998, less than one out of every 100 inhabitants in developing countries was an Internet user. By 2008, that figure was 22 out of every 100. In 1998, two of every 100 inhabitants in developing countries was a mobile phone subscriber. By 2008, that figure was 55 out of every 100.4 Shared usage takes this further: even in the world’s poorest continent—Africa—an estimated two-thirds of the population now has access to a mobile phone.2

What happens when you start to connect the world’s poor into the infrastructure for a digital economy? What happens is some of the basic assumptions about barriers to development might no longer apply. Some examples follow, divided into three categories.

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New Relations

Connecting the excluded: The world’s poor have historically been excluded and disconnected from information, and from potential suppliers and customers. Information technology can cut across these historical barriers and help connect the poor. For instance, as Mark Granovetter famously identified, if you want to get a job it is not the strong, close ties of your immediate family and friends that help (family and friends only know what you already know). Instead, it is the comparatively weaker ties of more distant social connections that are most advantageous. Yet the poor lack such connections.

What happens when you start to connect the world’s poor into the infrastructure for a digital economy?

IT can help by linking to a much wider social world through information exchanges. One such is Babajob (http://www.babajob.com), a networking site on which potential employers in urban India can post details of low-skilled jobs. To reach beyond those with Internet access, the system sends job alerts via SMS to those who might be looking for such a job, or who might know someone who is. At present, more than one million alerts are sent out every month, breaking through the traditional obstacles to information flow.

Disintermediating: Where the poor are not disconnected, they are often connected via gatekeepers of dubious quality. To access government services, they may have to go via a corrupt official. To access finance, they may have to rely on a usurer charging extortionate interest rates. To access agricultural assistance, they may require an extension officer who visits infrequently.

Many e-business models rely on “cutting out the middleman,” and IT offers the same facility for international development. The Bhoomi project has provided e-government services in India’s Karnataka state since 2001; for example issuing land ownership certificates to farmers who need these to obtain bank loans. An impact assessment shows it does what one would expect of an IT project: cutting error rates and improving service quality.1

What it also does is disintermediate. Previously, farmers had to apply for their certificate via a government official. In approximately half of the cases, that official would demand a bribe before they would issue the certificate (averaging around US$3; equivalent to a day’s income in rural India). After computerization, those officials have been significantly removed from the process, as farmers largely get their certificates issued online by visiting a local Internet kiosk. As a result, less than 1% report having to pay a bribe.

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New Roles

Digital production: The poor have always been producers, largely of agricultural produce for their own subsistence or for sale, often at low prices. But they have lacked access to resources and capabilities that would help them break out of the grip of poverty. The diffusion of IT is giving them access to the means of production for a digital economy, offering radically new ways of earning a living.

Txteagle (http://txteagle.com) is an example that brings crowdsourcing to the mobile phone base in Kenya. It takes simple tasks suitable for a voice- and-SMS phone and outsources them to those who have both a mobile phone and time available. Examples of such work include translation of text into local languages, transcription of audio clips, and input of survey data for development agencies working in a local area. Payment can be either airtime or cash using Kenya’s M-PESA mobile currency system, and there has been a specific focus on pushing work out to the rural poor.

Digital innovation: Having access to IT tools means some of those at the bottom of the pyramid have moved beyond production to innovation. They have appropriated the technology to such an extent that they start to do new things with it.

Many such innovative uses are digital memes: ideas that originated somewhere; perhaps simultaneously in the slum areas surrounding most third-world cities that are crucibles of both poverty and creativity. Beeping (or flashing) is one such innovative usage for mobile phones: hanging up a call before it is answered. This has developed into a free messaging system. Street hawkers allocate different mobile phone ringtones to different customers, enabling a free “come sell to me” message.

Use of airtime as currency is a similar innovative development. Family members in distant cities remit “money” back home as an airtime transfer. This can then be used in the village to pay for goods and services from those traders who themselves have a mobile phone.

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New Models

Collective Power: Many poor communities have a collective strength; for example, working together on farming tasks that no individual household alone could complete in time. Yet it can be difficult for them to express their collective power to outside bodies, such as government.

IT enables “crowdvoicing”: the capture of group knowledge and opinions within a community and its dissemination to a broader audience. Community radio has changed from a small-scale version of the one-way-broadcast approach of national radio stations. Through SMS, phone calls, mobile phone clip recordings, and PC-based audio, community members can contribute content and have their voice heard on such radio stations.

One step further, and information technology can be used to turn that voice into actual decision-making power. In Belo Horizonte, Brazil, the city government allocated a US$11 million decision to an online vote of ordinary citizens, who were given a choice between spending money on a new sports complex, a library, street renewal, or a commercial center regeneration project. This “e-participatory budgeting” initiative drew in more than 500,000 votes (the sports complex won); seven times more participants than seen with earlier non-IT-based participatory budgeting.5

Social Enterprise: Poor communities can be caught between the Scylla and Charybdis of business models. Commercial models may ignore them because they are seen to lack money and capabilities; where such models arrive they may bring dynamism and profits for the private sector, but not development. Developmental models—such as those brought by government—may lack dynamism, breed dependency, and be inefficient or even corrupt.

Social enterprise is seen to steer between the rock and the hard place, combining business drive with a concern for socioeconomic benefits within the community. IT has enabled the use of social enterprise; for example, allowing the growth of “social outsourcing,” which subcontracts IT work to the urban and rural poor in a deliberate attempt to create new livelihoods. The Kudumbashree initiative in India’s Kerala state has been a leader in this, diverting the state government’s data entry, digitization, IT training, and PC assembly and maintenance work to social enterprises created by groups of unemployed women from below-poverty-line families. The result to date has been the creation of approximately 2,500 new jobs that have pulled hundreds of households out of poverty, and created a base of enterprise that is now diversifying to find new clients.3

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So how is all this happening? At root, it stems from the power of IT. Some of those powers are generic. IT can cut costs so dramatically that new ways of doing things become possible. The digitization of data is part of that, allowing reproduction and communication of information at virtually zero cost. And the increasingly ubiquitous connectivity of IT allows new relations and network structures to exist.

As Mark Cleverley outlined in his September 2009 Communications Emerging Markets column, general technical innovations will continue to drive this process forward. There are also specific innovations for the bottom of the pyramid that are helping. Some of these are technical. Movirtu’s MXShare provides device-independent mobile services for users unable to afford a real phone. It gives them a virtual mobile phone number and account that can be accessed via a PIN from any borrowed or communal phone. The One-Laptop-Per-Child project, though often criticized, is putting digital processing and communication into the hands of millions of children for the first time; a vast social experiment that will no doubt catalyze many new Development 2.0 initiatives.

The increasingly ubiquitous connectivity of IT allows new relations and network structures to exist.

Development 2.0 is being enabled by business innovations, including simple ones like pre-paid mobile tariffs. These innovations broke the logjam of unaffordability, allowing the poor to buy airtime as and when money was available, and are now universal throughout the poorer parts of the developing world. Some innovations combine business and technology. For example, Kenya’s M-PESA system, mentioned earlier, provides a low-cost digital money platform for mobile phones, onto which all sorts of new financial applications previously denied to low-income users—saving, lending, insurance, and so forth—are being mounted.

In discussing Development 2.0, it is important we keep our feet on the ground. We have seen this in e-business. Talk of the “new economy” or “weightless economy” soon gave way to a realization that the old economy was still very much around. For every Amazon or eBay, there were hundreds more “clicks and bricks” operations representing a more incremental than transformative approach.

The same is true for international development. Dig behind the images of disintermediation, for example, and a rather different picture emerges. Farmers using the Bhoomi project still go through an intermediary, swapping the local government official for the local Internet kiosk owner. Kiva operates peer-to-peer micro-lending allowing individual lenders in the U.S. to invest in entrepreneurs in the global south. But to make the global financing chain work, first Kiva itself and then a series of local partner organizations must sit between lender and borrower.

For some examples, Development 2.0 may be too optimistic. Perhaps these are Development 1.5 examples at present, with a promise of greater change to come. But it is not yet known which will be the amazon.com success and which will be the beenz.com failure. Indeed, in a further echo of the dot-com boom and bust some of the initiatives cited in this column are long on media hype and public relations efforts but short on facts and figures about actual impacts—how many poor people actually involved; how much money saved; how much income generated. Hopefully we’ll see some solid and objective research emerging on these in the not too distant future.

In the meantime, we can celebrate the fact that the foundations and assumptions of international development are changing. The tools for a digital economy are now—and will increasingly be—in the hands of the world’s poor. Our view of them can start to migrate: from seeing them as victims to seeing them first as consumers, then producers, then innovators of a digital age. And, as we do so, changing our views on the processes and structures of socioeconomic development: from Development 1.0 to Development 2.0.

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UF1 Figure. An M-PESA agent converting money into e-value cash in Masai Mara, Kenya.

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