Poor Markets Make Good Cents ? Phones, Finance and Innovation at the Base of the Pyramid
Friday, June 20, 2008
By David Lehr and Daniel Greenstadt
David Lehr is Senior Advisor, Social Innovations for Mercy Corps and has over fifteen years of experience in international business development focused on software, telecommunications and other technologies. He was a Fellow at Stanford University, holds a Masters from the University of California, San Diego, and a BA from the State University of New York at Albany. Lehr has lived and worked in several countries in Asia and currently consults for a number of non-profits, including Acumen Fund, Gates Foundation, and Mercy Corps, on issues around technology and poverty alleviation.
For this receiver contribution he teamed up with Daniel Greenstadt, an international trade, sustainability and economic development partner at Thomas Associates International, to take a look at the leveraging effects mobile technology can have on the base of the global economic pyramid.
Four billion of us live at the base of the global economic pyramid. We face staggering challenges related to health, housing, energy, the environment and access to appropriate and emerging technologies. Much of the economic development assistance in emerging economies comes from charity, grants or loans from organizations such as the United Nations, World Bank, the Bill and Melinda Gates Foundation, Asian Development Bank (ADB), United States Agency for International Development (USAID) and a variety of other multilateral, bilateral and NGO agencies. Despite their good work, the myriad problems of poverty continue to plague communities in the developing world.
Today, new models are appearing that recognize not merely the immense need but also the tremendous opportunity that may be waiting at the base of the economic pyramid. A new class of entrepreneurs are seeing the potential to make money for themselves from upcoming technologies while building wealth for their communities with market-based approaches. From local micro-businesses to global commercial giants, a range of profit-motivated enterprises are deploying innovative technologies, novel approaches and communication tools to solve some of the most pressing problems faced by the vast majority of the world’s population. Against such an entrepreneurial backdrop, the mobile phone is emerging as an unexpectedly effective and flexible tool. In many impoverished places, opportunity is calling, and those calls are being answered on a rapidly growing scale.
When mobile phone adoption first began to spread beyond just business customers in Europe and the US, it was easy to overlook the potential in other markets and assume that base of pyramid (BOP) residents could neither afford nor make effective use of mobile phones. After all, most of them had never made even a landline phone call, phone rates were extremely high relative to incomes; and without a critical mass of phone users, who were they going to call anyway? As the following examples show, conventional wisdom was wrong and the mobile phone is being adopted and used among these consumers in ways that were impossible to predict even a few years ago. In fact, today, Africa and India have the world’s fastest growing subscriber rates, with Latin America and the Middle East not far behind.
Making Markets Transparent
For thousands of years, rural farmers in India were in the hands of middlemen buyers who had exclusive knowledge of crop prices and trends in regional and global markets. With very limited market data, individual farmers were not only helpless to negotiate fair prices for their current crops, but had little basis for deciding which crops to plant to meet future needs.
Today, the mobile phone is changing the agricultural landscape, literally. Recognizing high mobile phone penetration rates in rural areas, and leveraging the power of SMS, Reuters Market Light is providing customized weather and market information to Indian farmers. “We can ask individual farmers what crops and locations they want to know about, and using their phone number to record their preferences we can deliver information anytime and anywhere directly to their phones,” noted Mans Olof-Ors, one of RML’s co-founders. Armed with such information, farmers can make pricing and crop planting decisions that meet current and emerging market demand. This is a fee-based service that provides a revenue stream to Reuters, raises farm incomes, reduces consumer prices and makes agricultural markets more efficient and sustainable.