Mobile phones and economic transformation

According to Informa (November 2008) there will be 4.81 billion mobile phone subscribers by 2012. Emerging markets will generate 60% of this total and the next billion users will be won by those companies who can offer services that will be relevant to the poor. Enhanced voice and data connectivity will generate huge opportunities in social networking and then, open up huge potential in business transactions and, will enable the transformation of the Logistics of sourcing, distribution and  waste management. This entry illustrates the point and hopes to stimulate Case Studies and research opportunities going forward.

Where the PC opened up e commerce in the developed world, the Mobile phone will do so in those markets with poor land line and PC penetration. For example, in Africa, all of the issues such as low bandwidth, poverty, functional literacy, technical learning curves, access to hardware and software are all solved in one device. And yet, despite this emerging trend, teledensity remains low. Beware of such statistics – multi use per phone is a fact of life in the emerging markets – it is estimated that 80% of African households already use a mobile phone regularily even if it tends to be for no more than keeping in touch. In Bangladesh, Grameen Bank – specialists in micro finance projects – clients account for 3.5% of subscribers but generate 15% of revenues. Grameen’s Village Phone Progamme – replicated in Uganda – enables micro entrepreneurs, mostly women, to set up businesses providing mobile communications in a village context thus aggregating the use of mobile units. It is estimated that this initiative generates business opportunities for over 200,000 people. In Uganda, 6,700 new mobile phone based businesses were set up within 3 years of the project starting. 

Much of the impact of the first wave of mobile phones has been in social networking. The second wave has been in the development of information. For example, information over the mobile helps farmers to make informed decisions on what crops to plant and when; which seeds to buy and which fertilisers best impact yields. This wave has had a huge impact on infrastructure – maximising the efficiency of markets, reducing risks through a sharing of information and, empowering more actors within a local economy. 

The next wave of use will generate a microfinance revolution as hardware availability gives rise to greater software sophistication. For example,

TradeNet, based in Accra, Ghana; have launched an eBay type service for agriproducts across 12 countries in West Africa. This service links buyers and sellers through information and, if a buyer likes what s/he sees an SMS exchange will open up direct communication leading to a transaction. ITCs eChoupal service in India operates a similar system. These types of initiative cretaed fresh economic activity as services such as real time weather reports or real time market prices mitigate risks or, increase return on investment. In Health terms, this facility has made huge inroads into tracking disease, the remote monitoring of medical conditions (the variation of levels of drug intake) and, facilitating the movement of necessary medicines.  

In Japan, the next generation of mobile phones must incorporate GPS technology. This development opens up numerous possibilities. For example, tracking systems can have an impact on the productivity of repair teams; the tracking of care workers and a whole raft of logistics applications.   

And yet, it is financial services enabled by mobile technology that could prove to be the killer application. In an environment where remitances from overseas play a major role in a local economy – at $93 billion in 2003 remitances are the second largest financial flow after FDI. For example, in Lesotho remitances account for 37% of GDP; in Kerala they are crucial to a sustainable economy. 

In Africa from Cape Town to Cairo, the remitance figure is $12 billion> However, whilst this is a massive figure, this will grow if costs are reduced. This is a key issue. Transaction costs are running at 12% of the total and these are targeted to fall to around 4%. This shift will open up all sorts of opportunities.

Against this backdrop of actual and potential mobile use in emerging economies, the possibilities in the Logistics arena are significant. In fact, this is an area where the ability to transform economic outcomes is likely to be biggest. 

And finally, all of these projects open up another vital agenda – the use of technology. And this skill factor is fast becoming one of the key areas for Transformational Logistics research. There have been many iniatitives by the OEMs such as Nokia or, by NGOs to open up a toolkit for mobile applications. We see this as being the direction Transformational Logistics can take. See other entries.

These notes are no more than a taster. If anybody reading this is aware of Case Studies that can help to explore this area – please submit an entry to help build momentum.

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7 Responses to Mobile phones and economic transformation

  1. Ben Dunn says:

    Have a look here:

    Article is entitled ‘The meek shall inherit the web, in future, most new internet users will be in developing countries and will use mobile phones. Expect a wave of innovation’

  2. robjbell says:

    Important insight. This opens uo a major area – the nature of innovation in emerging or fast growing economies. By this I mean improving current processes rather than pure blue sky thinking. More of this later.

  3. robjbell says:

    Considering Logistics and Mobile Applications – there is scope to develop a Tool Kit that includes elements such as: 1. Business Process Mapping (end to end physical flow); 2. Skills factors & productivity; 3. Flow: Physical; Cash; Legal (ownership can change through the process); Technologies etc. Maybe there could be some form of Readiness index for those businesses that have an interface with the informal economy. In an age of outsourcing this could be key. To be developed?

  4. ravishankar says:

    we in india are working very closely with the various mobile operators to offer services to the farmers, who are spread across the country. we will be providing prices, good agricutlure practices & weather advisory. In india, in the rural hinterland, the mobile is becoming more of an lively hood support rather then a mere communication devise.

  5. Clare Brennan says:

    In rural economies, such as Rwanda’s, mobile phones have transformed the lives of traditional herders and farmers. Now, they can check in advance whether there is water at a particular site – or a landslide in the rainy season – whether a vehicle will be passing to carry them and their crops to market. Small changes on a global scale, but transforming the local, and subsequently, national econpmy.

  6. robjbell says:

    Note from Ben Dunn.

    There are more than 3 illion mobile phoe users and the price of a phone has sunk to as low as $25. There are now more mobile phone subscribers in poor countries as rich ones.

  7. Pingback: Mobile phones and economic transformation « Transformational Logistics |

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