Focus on Microbanking
[Article published in The Review (Autumn 2009)]
The World Bank, the largest international donor in the field of information and communication technologies for development, has launched a major new initiative to promote the spread of digital technology in developing countries. The Review finds out more from the initiative’s coordinator, Laurent Besançon
There
is a direct parallel between the introduction of information and communications
technology (ICT) and economic growth in the developing world. For example, the
World Bank’s most up-to-date research shows that for every 10% rise in the
number of high-speed Internet connections, there is a concomitant 1.3% increase
in per capita gross domestic product (GDP). This is because such technology
gives often low-income people access to information and business opportunities
that were previously unavailable to them.
Developing the broader IT and IT-enabled services (ITES) sector (which includes a range of services that are commonly outsourced, such as call centers, medical transcription and data processing) also holds out obvious prospects, given that less than 15% of the potential market is currently being exploited. According to management consultants McKinsey, IT services represented a US$325 billion potential revenue opportunity in 2007, while ITES represented US$150 billion. Encouragingly, market research firm Gartner also predicted that the global ITES segment will grow from US$170 billion in 2008 to US$240 billion in 2012.
This situation is particularly significant for developing countries, where the service sector in a more generic sense already accounts for 35% of employment and 50% of GDP. Therefore, by extension, the development of IT and ITES is likely to contribute directly to job creation, not least by boosting cross-border trade in an increasingly globalized world. Even more positively, experiences in both India and the Philippines show that each new job created in the IT and ITES space results in the creation of between two and four other positions elsewhere.
But these aren’t the only considerations. The creation of ICT infrastructure can also bring about a fundamental transformation of developing world economies, since it generally leads to the formation of new business models for the delivery of public services.
Mobile and wireless telephony is particularly valuable in this context. Of the 4 billion mobile devices in use globally, about 3 billion are now used by citizens in the developing world. The mobile platform is emerging as the most powerful and efficient way for people in developing countries to access services such as banking, education and healthcare - services from which many were previously excluded.
As a result, the mobile platform is extending the economic opportunities of the rural poor and is considered key to reducing poverty. In Kenya, for example, telecoms company Safaricom introduced a minute-sharing service for its pre-paid cellphone users. The aim was to provide people in rural areas, who found it difficult to purchase pre-paid phone cards, with a means of accessing the service. However, many Kenyans also started using it as a currency replacement - paying for taxi fares using their cellphone credits, for instance.
Another example of the transformative power of mobile payments also comes from Kenya. Some water companies there are now installing modern wells for free to provide rural communities with access to clean drinking water. An integrated cellphone payment system is introduced at the same time and customers are charged on a pay-as-you-go basis when they take the water.
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500
million rural poor in India are “underbanked”. But smart cards with
biometric authentication could speed deployment of microbanking. Gemalto’s
solution, being deployed by FINO, securely stores transaction records on the
smart card, which can hold up to 15 secure applications and store the last
150 transactions. “Microbanking normally entails a huge amount of paperwork
and human effort,” said Manish Khera, of FINO. “This one-card-does-all
solution resolves these barriers to growth.