Low cost of ownership making mobile phones a poverty alleviator

By Deepal V. Perera

Low cost of ownership has made mobile phones a powerful poverty alleviator in Sri Lanka and rest of the world, reveals the latest UNCTAD Information Economy Report 2010 released in Colombo yesterday.

Titled “ICTs, Enterprises and Poverty Alleviation” the report has said that  mobile phones are leading the way  in  poverty alleviation  in global  level thus people of  Sri Lanka from grassroot levels also  now using  the mobile phones to  increase their business and reduce costs.

“Four countries in the South Asian region namely Pakistan, India, Sri Lanka and Bangladesh lead the world with the lowest cost of ownership of mobile phones and the Brazil in South America ranks highest in the world in terms of cost of ownership of mobile phones. The main reason for this trend is that governments of the respective countries adopted an open policy towards  mobile phone companies and the resultant competition spearheaded the industry showing off good growth,” Chairman and CEO LIRNEasia Rohan Samarajiva told journalists at the launch of UNCTAD report yesterday.

Commenting on the recent decision made by the government that one person can hold only five sims Dr. Samarajiva said that a person should  be responsible  for the sims  under his name.

“It is like your having 10 cars registered under your name and that comes with a lot of responsibilities. In Pakistan they had found one person using about 92 sims  and when investigated it was found that the person concerned actually had bought only two sims and the rest of the sims were issued by the dealer to third parties. On the other hand why people use more than one sim is due to lack of coverage, affiliated groups, city use and rural usage. By using more than one sim they can save or rather keep their cost at minimum,” he added.

The Information Economy Report 2010 urges governments and other policymakers to take full advantage of these opportunities provided by ICTs to combat poverty. It says that this requires keeping a close eye on the innovative uses that develop spontaneously among the poor by using mobile phones and other information and communication devices, and by also using well-designed policies to boost and widen these trends.

Over the past few years, the penetration rate of mobile phones in the world’s least developed countries (LDCs) has surged from 2 to 25 subscriptions per 100 inhabitants. In Sri Lanka, it has been estimated that more than 75 percent of households have some kind of phone in them, GSM mobile, CDMA “fixed” and fixed wireline.  The technology involved is now simple and affordable enough to be purchased and used by the poor. They become “connected”, although often in ways that are different than in developed countries.

This report shows that in more and more low-income countries, farmers, fishermen and entrepreneurs are using ICT to assist their livelihoods, as the technology is now simple and affordable enough. In Sri Lanka for example, mobile phone technology has even assisted poor vegetable farmers to minimise costs in the value chain. A recent study by LIRNEasia of some farmers near Dambulla found that they were able to obtain a premium of 23.4% on the average daily market prices at the Dambulla Dedicated Economic Centre (DDEC) by having access to timely and accurate market price information via their mobile phones.

Access to cheaper and faster ICTs has enabled farmers from emerging economies to reduce operational costs by being able to find information on inputs, best practices as well as financial information such as loans and insurance, all through the mobile phone. The Information Economy Report urges governments and policy makers to monitor the developments in the industry, design policies to boost ICT use among these segments and take advantage of these opportunities to combat poverty.

Poor people often lack information that is critical for their work, for example market-prices, income earning opportunities, weather forecasts, agricultural best-practices, health, finance and even information on disaster risk reduction. The lack of access to such information increases their vulnerability. However, the rapid diffusion of mobile phone technology is making it possible for poor people to have access to this information as well as engage in interactive communication. According to the report, the penetration rate of mobile phones is significantly higher than that of other ICTs.

In the countries that LIRNEasia has studied, only TV is ahead of mobiles at the Bottom of the Pyramid (BOP).  Furthermore, new applications and services that can be used with mobile phones such as voice communications, text messaging, internet and even access to bank accounts are emerging in low-income countries. All this allows access to necessary information, lower transaction costs and possibilities to transfer money to remote locations all of which greatly benefit those with a low income.

The UNCTAD report shows that micro-enterprises in low-income countries are rapidly adopting mobile phones as key tools for advancing their commercial activities.

In Niger, grain traders are benefiting from lower transaction information-search costs. In Ghana and India, mobile phones have become a critical equipment for fishermen and fishmongers, resulting in more efficient markets and improved livelihoods. In addition, producers are saving time and money by eliminating travel that used to be necessary in order to locate buyers and negotiate the best prices.

 Furthermore, new jobs have arisen catering to local demand for mobile phones and the associated applications and services.

Many low-income people are selling airtime or mobile money services on the street or in shops as this work can be done by people with few formal skills.