Throughout the developed world, the rise of cellphones as a way to communicate and stay connected has been a potent force in economic and social change. New devices and more connectivity have changed not only the business landscape, but also the way we interact with our friends, families and relations. While many assume this change has been limited to those in more affluent countries who can afford the latest technologies, the truth is that a mobile revolution has been sweeping many developing regions of the world, especially Africa.
According to World Bank figures, in the year 2000, Africa had 16.5 million mobile phone subscribers. Since then, that number has grown at an astonishing rate. Today, Africa has more than 650 million mobile phone subscribers, more than both the United States and the European Union. This 40-fold growth rate, averaging a 41 percent increase per year, is second in the world, trailing only South Asia. Another study by the World Resources Institute discovered that household spending as a percentage on mobile devices increases the most as incomes rise, more than spending on water, energy or anything else.
What has led to this meteoric rise? Why are people living on less than $2.50 a day, the World Bank’s standard for poverty, willing to pay for mobile service? The answers to these questions are varied and specific to each individual, but there are two trends across the continent that play a major role in driving this huge growth. First, the way that cellphones and information have changed agriculture. Second, the rise and use of mobile money.
In any business transaction, there are costs associated with transportation of goods, the exchange of money and travel after selling or buying a product. For poor farmers in developing nations, these costs historically have forced them to make a single trip to the market, hoping that, when they arrive, buyers will be there and the price will be enough to support their family as well as future crops.
This often was not the case as several farmers would tend to show up on the same day, creating a large supply and driving down prices. With the lack of infrastructure and information providers, farmers were traveling long distances completely reliant on chance. However, as cellphones have spread across the continent, more people are able to gain access to market information that has helped them increase their quality of life. Through simple phone calls, or even SMS text messaging, farmers are able to learn what current prices are, as well as negotiate deals to receive the most money for their crops.
Some insurance companies have even begun providing information and policies via mobile phones and are sending payouts using mobile money to fulfill the guarantees offered by insurance policies to protect farmers against bad weather conditions.
Along with the benefits to the agriculture industry, cellphones have transformed financial services across Africa. One of the greatest successes is a company called M-PESA, m standing for mobile and pesa meaning money in Swahili.
M-PESA is based in Kenya. Its service, offered by Safaricom, enables money transfer regardless of location. Similar to a bank’s ATM service, M-PESA has agents across the country able to either receive deposits or handle withdrawals. Beyond that, the service also makes it possible to send and receive money over cellphones. It has been so successful, that an article in May in the Economist noted that it is easier to pay for a taxi ride using your mobile phone in Nairobi than it is in New York. Recent figures show that almost two-thirds of the adults in Kenya are users, and half of the country’s GNP flows through the service. M-PESA has also expanded into Tanzania, South Africa, Afghanistan and India.
The social impact of this financial mobility is remarkable. In sub-Saharan Africa, only one in five adults has a bank account. With M-PESA, individuals now have accounts they can use to fund purchases, pay for food and keep up on loan installments. The World Food Programme used a similar system in Malawi to send aid money directly to poor farmers, bypassing typical channels and guaranteeing the money reached those in need.
A key element about cellphones is that they are cheaper than PCs and have a much shallower learning curve, making it possible for practically everyone to use and benefit from the available programs. Significantly, accompanying the phenomenal growth of cellphone use in Africa has been production of tens of thousands of jobs. Employment has been created for M-PESA agents and local cellphone providers. Similarly, by providing better communications to millions, the cellphone has led to thousands of more jobs materializing as productivity has increased — improving the outlook for thousands of families.
Admittedly, there are still many barriers to overcome in Africa, even for the cellphone. Service outside of cities is spotty, and governments often cause more harm than good by trying to step in and regulate and over-tax services. Regardless, through the continued expansion and use of cellphones, a major avenue is being created to help benefit developing nations across the continent.
John Hoffmire teaches at SaÏd Business School at the University of Oxford. This article was significantly shaped by Ben Young.