Role of Information Technology

in Poverty Reduction
Role of Information Technology in
Poverty Reduction

Introduction
The aim of this paper is to contribute some ideas to the discussion about what
Information Technology (IT) can do to alleviate poverty. This is a complex matter, and
despite the enormous enthusiasm among donors, governments and stakeholders in the
development field, the tangible benefits of using IT to fight poverty are still being
assessed The interventions made using Information Technology can be direct where the
poor deal directly with IT or can have an indirect impact where it is expected that the
benefits 'trickle down' to the poor. These interventions can target any level, be it village,
district, nation or even the entire globe.
In fact, the discussion about the benefits of IT for poverty alleviation is really about the
benefits of the information that is made available via IT.
How Information Technology is used
It is important to define the scope of the interventions, which, with few exceptions,
happen at three levels: local, national and global.
At the local level (the village district or in some cases the urban level), IT
provides citizens with information about, for instance, market prices and social
services, such as health and knowledge and education.
At the national level one finds more complex IT systems that carry information
about jobs, investment opportunities or goods and services.
Finally, at the broadest level, there are systems that connect to the global
information infrastructure. Each higher level usually includes elements of the
proceeding levels.

As for the types of intervention, first are those where the poor benefit directly. This
usually happens at the local level. The clearest example is the farmer who benefits from
technology to get daily market prices and can subsequently buy seeds at 20% less and
sell produce for 20% more by eliminating the middleman.


Although the technology may actually only reach a center in the district nearby and the
data be carried to village level on paper or by word of mouth, the farmer is still the
direct beneficiary of the information itself.
If we employ a broader definition of poverty however, where poverty is also defined as
being deprived of the information needed to participate in the 'wider' society (be that at
the local, national or global level), there are other examples where the poor benefit
directly from IT. Some have been implemented by, among others, UNDP-APDIP
programme. These include: the child who learns how to use technology on Malaysia's
Mobile Internet Unit (then hopefully gets regular access later) and the citizen who
accesses job opportunities through a Citizen Information Service Center (CISC) in
Mongolia.

Indirect intervention is where the benefits of IT are felt upstream from the poor, but
may trickle down through the social-economic fabric. An example would be the child
who comes from a very poor family but managed to go to school. He or she now works
in the capital city, at a job that uses technology, and with the money supports the family
in the village. These examples are common today in South Asia, and may be the majority
of all cases.
The third type of intervention is using IT in support of poverty reduction
mechanisms and development projects. Cross-cutting areas in poverty management
can be greatly aided by introducing technology. Here we are describing, for example, a
database that organises and monitors the progress of a number of poverty alleviation
projects implemented by a development organization. This may include direct polling of
information from the field, email, informative websites, monitoring and evaluation data,
etc.

Setting the context
It is important to outline the prerequisites to implementing IT in a country. These apply
to any country, and are especially relevant when the technologies are used in
conjunction with new market opportunities and the provision of goods and services.
Prerequisites to using IT are:

An open and pro-active government.
This is critical. Governments in developing
countries could greatly benefit from
having a "champion" of public information,
who will support consumers' and citizens'
rights to information.
For instance, the champion could work to
make citizens' access to information a
right as opposite to a privilege for the
elites, recognizing that knowledge is
wealth in the global economy.
Governments may also consider adopting
electronic tools to support processes such
as providing education, health services
information and streamlining public
procurement;



A dynamic private sector - in all of its
forms, including co-operatives at all
levels, from local to national.
In this respect incentives are important,
and we now see small and medium grants
(the precursor of venture capital) being
given out to foster creativity and
imagination in the field of innovative uses
of IT at local and national level;




Appropriate and forward-
looking IT and
telecommunication public
policies, legislation and an
understanding of their
overall impact on a
country's welfare. Trends
in globalisation should
also be considered.
Without appropriate
policies players in the
global information
economy have no
protection and the scale of
their operations remains
limited. High Internet
tariffs, for instance, have
historically being
considered the most
important obstacle to the
development of a vibrant
IT sector.

E-commerce which, in the developing country context, cannot exist without a
very specific set of public policies, an effective and e-enabled banking system and
compliance with international practices. It is also important to note that with the
recent flood of business-method patents, the cost of international-grade e-
commerce is skyrocketing and could be already out of the reach of some
developing countries.

Infrastructure. Without infrastructure, IT can do very little and rarely at the local
level. But with an investment in infrastructure, simple applications can have big
impacts at all levels. Infrastructure costs decrease while effectiveness is
enhanced when developing countries learn from what has being done elsewhere,
and adopt the most current approaches to using IT, thus 'leapfrogging' less
effective, even counterproductive, technologies.


Trends


The graph above is an attempt to illustrate the trends in locale versus time of various
applications of IT for poverty alleviation. For instance, information provided directly to
citizens at the local level, such as the price of market goods to farmers, may be valid for
only a day, and the relative system maybe take less to implement. Larger e-commerce
projects may need more efforts to be implemented and their information valid for a
much longer period. If an entrepreneur creates a web site with information about a
tourist spot, that information will certainly be useful more than one day, probably
longer than one month and possibly beyond even one year. What the graph also shows
is the absence of short duration activities for poverty reduction at the global level, such
as "day trading" of stocks.
In other words, working for poverty reduction at the global level requires considerable
time, knowledge and money. Developing countries may have the time, but they do not
have sufficient knowledge about IT or financing. Just because these countries cannot
operate at the global level, does not mean they cannot effectively implement IT for
poverty alleviation, as the farmer example below illustrates. But it does mean that
developing countries, without support, are usually unable to participate in an important
aspect of the new global economy, which represents an important opening for
development organisations.
What the graph also illustrates is that scaling activities makes them more suitable for
larger-scale IT interventions. For example, the local farmer can use IT to more
effectively do business at his local market, but if he continues to grow the same amount
of produce, his business will not expand beyond the local scale. However, if he teams up
with other local farmers and they create a co-operative, they will be able to work on a
larger scale and the cost to each farmer of using IT to access larger markets will
decrease. The impact on poverty alleviation, theoretically, can be greater because the
farmers have aggregated their activities.
The graph makes a distinction between service jobs and e-jobs. Services are offered to
any buyer at any time, for example, a translation service. Basically, once the business is
established the work doesn't change, only the customer does. After the particular task
contracted for is finished, the relationship ends. E-jobs, on the other hand, are when a
more permanent structure is created to fulfil a longer-term contract. The important
consideration about e-jobs is that they may reverse the historical trend of migration in
search of work, as we will see in the Examples section. This could strongly influence the
way that donors approach developing countries: instead of providing them with funds,
they might provide them with jobs.
Language
This issue has been raised by several people, especially those in least developed
countries that have specific language constraints (particularly the written form). The
graph tries to describe language requirements at different levels.
Examples
This section describes in more detail the impact of implementing IT at different levels of
society. At the local level, as previously noted, IT is used to alleviate poverty both
directly and indirectly. Here, IT often follows existing opportunities. For instance, the
farmer who uses IT to get information about prices is already buying and selling from
the market; the technology simply allows to diversify his or her activities - the farmer
can now choose to sell to one or another market instead of being forced to accept the
middle-man's offer, for example. Local opportunities may be aggregated to create scale
to "feed" a larger national market. At the local level, initiatives are not usually proposed
by residents; the concept and funding usually comes from elsewhere. Again, this is
where the development community can play an important role.
Other examples of interventions at the local level include information about citizens'
rights - having access to knowledge of how a country's social system operates, for
example. If a wife is abandoned by her husband, she might be eligible for alimony
payments. But without knowing how the system works, without being 'plugged in', the
woman cannot access her rights. Technology-enabled NGOs can play a role here by
acting as efficient providers of that information and a link between the system and the
citizen.
Another sort of intervention that could be leveraged at the local level is IT paired to
micro lending. With few exceptions, the development community still hasn't fully taken
advantage of the opportunity to provide both money to foster activities and the
channels, via IT, to market goods and services produced from those activities. Crafts and
tourism, especially the growing area of eco-tourism, are two types of activities that can
benefit.
Interventions at the national level are both direct and indirect. They tend to get
implemented in urban centres, because of lower costs and are often initiated by
companies or organisations. An important characteristic of working at the national level
is that activities here can become leverage points for larger-scale projects. Examples
include business to business (B2B) e-commerce in the most advanced developing
countries, for goods, mainly agricultural and textiles aggregated from local enterprises
and sometimes exported to international markets. IT-related industries, such as the
software industry remain the stronghold of few countries following the India and
Singapore example. The provision of news through informative websites, website
advertisements, etc are sectors that are becoming stronger daily.
The step between implementing IT at the national level and the global level is very
large. Consider just the complications involved in sending goods overseas: physical
goods require a strong shipping infrastructure; financial transactions involve, as we said
before, a banking sector that has been adapted to operate at the international level.
Hence these activities are slower to catch up. E-commerce projects may take up to a
year to be set-up and require a considerable investment.
We see these jobs as an opportunity to reverse 'brain drain' and historic migration
trends where people move to where jobs are. With today's technology, jobs could
instead be made available where people live. An example of e-jobs would be a donor
country 'contracting' a developing country to digitise its older legal archives, an
operation that may be too costly in the donor country but more affordable in the
developing country thanks to its lower costs of doing business. Development
organisation could work with bi-lateral donors to make some of these opportunities
available to their recipient countries, alongside the normal financial interventions. The
advantage of e-jobs is that they have the potential to create an entire service industry
that may eventually serve other clients, while making the investment in infrastructure
worthwhile. Finally e-jobs may not necessarily require the knowledge of a specific
language: drafting and digitising are examples of non-language oriented activities. Other
examples of interventions at the global level are web sites supported by advertising and
back-office services providing routine administrative labour.
Other considerations
What are the developments to come? How will they affect the global economy and our
lives? Take the example of amazon.com. Somebody woke up one day with an idea of
one-click shopping and changed the retail industry basically overnight. If an individual
anywhere in the world has a marketable idea, it should be possible for he or she to sell
that idea through the Internet. That innovation is exactly what is changing the economy
today. Again, creativity and imagination are primary requirements to make this happen.
The global economy is increasingly a market economy and our systems must operate
under market constraints. That means, for example, that infrastructure is expanding
where it is most convenient - usually where it is profitable and there is a large enough
market for private-sector investment. Conversely, it is not infiltrating areas below the
minimum revenue threshold, sparsely populated regions for example. In other words,
scale is also of utmost importance. Even the Grameen Bank can operate its cell-phone
project in Bangladesh partly because the population density in that country makes it
feasible. One way that developing countries can address that market constraint is to be
more strategic about infrastructure investments. Instead of investing in land-based
telecom infrastructure that is used only part of the time and often not for any
productive effort (in economic terms), a country could invest in satellite links to beam
down Internet connectivity to rural areas. That connectivity may prove more productive
because it would be a catalyst to a number of other activities as we have seen in the
local level examples. Over the Internet, voice communication would also be possible,
and scale may be achieved over a multitude of communities in large rural areas, thus
decreasing costs even below the levels of the originally intended land-based systems.
One strategy for initiating that change to more productive investments would be to
identify leverage points, to do a cost-benefit analysis of making any IT infrastructure
investment. For example, three areas of a country need information. One area produces
silk, another okra and the third fish. Because the global market for silk is far larger than
for the other products, it would make more sense to initially concentrate the IT
infrastructure to serve the silk-producing areas. That analysis is often missing and may
represent another role for development organisations to play.
It might not be an exaggeration to argue that in a global economy, IT is a material
necessity. Many people say 'Isn't it more important in rural areas to have electricity
than it is to have IT access'? Common wisdom might say yes, but if an investment in IT
can spark greater growth in the long term, wouldn't that justify the initial costs for IT? If
the silk-producing community can use IT to generate economic activity that is greater
than what would be produced if the community invested in electricity to power a
factory, should they not make the IT investment?
An investment in IT can also be measured in different terms, as a social good. Perhaps
having the technology to contact a hospital and describe the symptoms of a very sick
person and receive a written procedure back, would be more important to the
community than electricity to light village homes at night. Of course the decision is to be
taken by the local community, but in the information age, for the first time, the question
of what comes first among electricity, telephone, and information does not have to be a
foregone conclusion.
Conclusion
There are already a number of other examples, at all levels, of implementing IT for
poverty reduction. We now need to step back, so we can separate the hype surrounding
IT projects from the reality. Although this paper does not encourage lengthy, old-
fashioned and expensive assessment studies, the entire international community -
donors, governments, NGOs - should be motivated to seriously monitor and evaluate
these experiences and opportunities to discover which approaches work best under
different circumstances. Developing evaluation guidelines would be an important first
step. After this important monitoring and evaluation phase, we should move on to
implement further initiatives in many different areas, with full confidence that they will
reap the largest possible impact in the reduction of poverty for the investments made.