Dec 03, 2008

Cell-Phone-Assisted Development Gets a Real Boost

by Laura Starita

In the past eighteen months the cell phone has been increasingly embraced as a development tool for the poor. In Kenya, telecom provider Safaricom’s offers the M-Pesa service for in-country funds transfers enabled by cell text messages. In a recent interview with Philanthropy Action, Jameel Poverty Action Lab economist Abhijit Banerjee referenced an effort to encourage tuberculosis regimen compliance by having participants text their urinalysis results in exchange for free cell minutes. And more efforts are taking a cue from the Robert Jensen study we wrote about last year which showed that fishermen in Kerala, India who used cell phones to check market prices before deciding where to bring their daily catch saw profits increase by eight percent.

The role of the cell phone as a tool for obtaining market information is of particular interest in developing countries, where the dearth of information often makes markets function poorly to the detriment of the poorest. In a study available through the Center for Global Development, post-doctoral fellow Jenny Aker writes about her efforts to assess the impact of cell phone penetration on grain prices in Niger. Aker tracked the penetration of cell phones in the country from 2001 to 2006 to assess whether cell phone access had any correlative market impact. She concludes that the introduction of cell phone towers in Niger reduced price discrepancies across grain markets by 20 percent. Grain traders reduced their search costs (the amount they spent to investigate market prices) by 50 percent, and increased the number of markets and sellers with which they did business. Buyers experienced a three-and-a-half percent reduction in grain prices, and traders saw increased profits. Aker’s research also shows that regions with cell access had relatively lower consumer grain prices during the 2006 drought than those that did not, suggesting disaster aversion potential for cell phones as well. In all, her work shows a net benefit of cell phone use in one of the world’s poorest countries.

Phone manufacturer Nokia may or may not have had Jensen and Aker’s work in mind when they recently announced the launch of an inexpensive cell phone in India equipped with built-in Internet access. In conjunction with the phones, Nokia is also planning to offer a subscription-based service which will give subscribers relevant weather, crop and market information. We hope to see a study in a few years which provides a three-way comparison between Indian farmers who don’t have cell phones, those who do and those who do and use Nokia’s information service (or some other comparable information source). Until then, efforts like these which bring practical applications of commercial technology to the poor hold a lot of promise, and show positive ways in which profit-oriented initiatives can have strong social impact.