DIGITAL TECHNOLOGIES

DEVELOPMENT AND EMERGING MARKETS

MASTER OF SCIENCE ESSAY MANCHESTER BUSINESS SCHOOL MATTHEW SHAUN CRAVEN

ESSAY QUESTION Critically assess development approaches using development 2.0 in the agricultural sector. INTRODUCTION In this paper we shall seek to explore the important role that communication technologies such as mobile phones are playing in the process of social and economic development, within the context of underdeveloped nations around the world. Our primary focus is on how these technologies support the transformation and creation of new services that are supporting rural farmers to access information and other resources that can enable them to find and create new opportunities for themselves. We begin our discussion with a much broader overview of the effects these technologies are having in the developing world. This should help to illustrate just how transformative these technologies can be and the very powerful role they can play in pushing aside traditional, and often ineffectual approaches to development. We then move to address our central topic of development in the agricultural sector and begin a more detailed discussion of how these technologies have enabled farmers to escape the limitations of traditional approaches to agricultural development by supporting the creation and deployment of better more contextually relevant solutions to the problems affecting those in the developing world. MOBILE PHONES IN THE DEVELOPING WORLD In 2001 Rller and Wavermen completed and published a study on the effect of telecommunications infrastructure on economic development, in which the deployment of this infrastructure and its associated technologies are seen to deliver

Page 1 of 14

significant economic growth. Their study reveals that the deployment of fixed line telephone networks was the most significant factor in supporting a one-third growth in economic size, over the twenty-year period from 1970 to 1990, for all of the 21 OECD countries included in the study. Much of this success is attributed to the ability of these technologies to reduce the costs associated with interaction, to enable unprecedented levels of large-scale information exchange and to eliminate many of the traditional market boundaries (Rller and Wavermen, 2001). This makes telecommunications a powerful and appealing technology for those looking to duplicate this form of economic development and growth. Unfortunately, the deployment of fixed-line telecommunication infrastructure is an extremely expensive process that takes many years to reach critical mass - even within highly developed countries where money, materials and expertise are readily available. Attempts by developing nations to replicate the telecommunications deployment strategies of western nations have proven highly ineffective for most. Waverman et al (2005) draws a comparison between the successful deployment of these technologies in France and the far less successful attempts in Morocco. They show that in France, which in 1970 had 8 fixed lines per 100 (8%) of the population, was able to double this within six years, and reached 30 lines per 100 (30%) by 1980. By contrast, Marocco had 4 fixed lines per 100 (4%) of the population in 1995 and by 2003 there had been no growth at all, the penetration of fixed lines remained stagnant at 4% (Waverman et al, 2005). The difficulties in duplicating the deployment success of fixed-line

telecommunications in developing nations are many, often far too many for foreign private companies to consider attempting to overcome. This means that the responsibility for deploying these networks is typically vested in the national government and within a nationalised telecommunication companies. The effect of this is that overall investment levels are relatively low and the need to increase taxation and/or borrow money makes these long-term projects difficult to fund. The result is that many attempts to expand fixed-line telecoms infrastructure in the developing world, have focused on densely populated areas where some return on the investment can be guaranteed, whilst rural areas remain largely disconnected or receive low quality and often highly intermittent services. This inevitably leads to further inequalities, as those living in the cities where fixed-line infrastructure

Matthew Shaun Craven

Page 2 of 14

has been deployed, are typically the more affluent members of that society, whilst those living in the rural and largely unconnected areas of the country, are typically the least affluent and poorest within the society. This inability to reach critical mass means that rental and call charges on fixed-lines are extremely expensive and often prohibitively so, for those on very low incomes. It is only when developing countries move away from the traditional approach to development in which they seek to duplicate the strategies of the west, that a real change in this situation begins to emerge. Waverman et al show in their work, that by moving away from the notion of building up comprehensive fixed-line telecommunication networks, like those of the west, and moving instead towards developing a mobile telecommunication infrastructure, developing nations have been able to expand access to telecommunications services faster and far more cheaply than before. They reveal that although Marocco was unable to expand the penetration of its fixed-line network, within the period 1995-2003, the rates of mobile phone penetration rose rapidly from zero mobile phones per 100 people in 1994 to 24 phones per 100 people (24%) by 2003. This suggests that while mobile phones are supplementary to fixed-lines in developed countries, they are substitutes for these lines in developing nations (Waverman et al, 2005). The success of this technology in achieving such high levels of penetration in a relatively short period of time is a result of a number of important factors, of which the cost of ownership and relative ease of deployment are two of the most significant. The nature of wireless technology means that a network of telecommunication towers can deliver voice, text and even internet services to vast areas of the country, without every single home or business needing to be directly wired to the network. The cost of wireless infrastructure is high but not prohibitively so, and the relative ease of deployment means that foreign telecommunication companies are far more inclined to invest in these projects. The ability to add hundreds or even thousands of new connections with only a handful of cell towers has allowed deployment levels to grow rapidly. This has helped to generate much higher levels of revenue for telecommunications companies, which many are using to fund further expansion of the network. This increase in customer base and revenue means that operators are able to offer much cheaper and more flexible forms of connection. In particular, pre-paid connections are an important development in the telecoms sector, which
Matthew Shaun Craven Page 3 of 14

make mobile services accessible to a much wider range of people than was feasible with fixed-line services (Hamilton, 2003). These types of pay-as-you-go connectivity mean that lower income customers can transfer credit to their mobile phone (top-up) as and when they have money. This means that rather than postpaid services which rely on customers to pay for what they use after, these services only allow customers to spend as much as is on their account at the time of use. This removes the need for operators to issue monthly bills (which cost money), it also means that contracts are very informal. Individuals can buy a mobile from any retailer or private individual and the operator may have no means of identifying the individual beyond the phone number associated with the account. This makes the entire process of connecting and using the network far simpler for the customer and the operator - it also means that phones can be exchange between individuals with little difficulty. This can be a positive thing, but this level of informality does make it much easier for stolen phones to be sold on, which in tern makes these devices a particularly appealing target for thieves (Badaru, 2004). In addition to cost of ownership and ease of deployment, there are a number of additional factors that are central to the expanding availability and use of mobile technologies in developing nations. Of these, the deregulation of telecommunication sector is particularly significant and has made it possible for foreign operators to enter the market. While initial studies indicate that these new entrants are taking some time to draw customers away from national incumbents, their presence in the market place is seen as supporting the creation of a far more competitive market, which is forcing operators to devise more creative service offerings. This is helping to drive down the cost of ownership while simultaneously increasing access and affordability for the affluent and less affluent members of these societies. Such changes, together with the availability of low cost handsets make this technology something that is very different from the traditional fixed-line. Not only does it support voice and text communication, but does so at a price that is affordable to most and is available, not only in those areas that where already well served by fixed-line services (inner-cities) but in those areas and among those people once outside the reach of traditional telecommunication infrastructure. In short, the mobile phone has not simply replaced the fixed-line it has completely redefined what it is to have a telecommunication network in a developing country. Unlike the

Matthew Shaun Craven

Page 4 of 14

west with its combination of the old (fixed-line) and the new (mobile), the developing world has very little of the old, and is now attempting to bypass this limitation by embracing a technology which meets the communication needs of its people and promises the opportunity to leapfrog into the 21st century. DEVELOPMENT 2.0 IN THE AGRICULTURAL SECTOR By itself the mobile phone does not increase equality, provide more sustainable livelihoods, increase knowledge or improve healthcare nor increase democratic participation. The true value and power of the technology is to be seen in how it comes to play a part in the process of change and development, and so in this section of our discussion we will look at a number of examples of how mobile technologies have supported some meaningful transformation in the agricultural sectors of the developing world. In each case we will attempt to identify the status quo prior to the introduction of mobile technologies and then compare and contrast this against what emerges after these technologies arrive. Transforming Agricultural Extension Programmes:- These types of governmentbacked programmes are common in the developing world and are intended to educate farmers about the best crops to grow and about the most effective ways of crowing these crops on their land. The traditional way of operating such a scheme involves individual extension officers travelling out to rural areas and interacting on a face-to-face basis with local farmers. In theory this seems like an effective solution, after all, if farmers have the right information about what to grow and how to grow it, then the opportunities for the farmer to produce enough for himself and his family, and perhaps to generate surplus that he can sell to others, must be increased. Unfortunately the realities of these types of programmes are far less positive than one might expect or hope for. One of the reasons for the failure to deliver, is that as an occupation, agriculture is typically seen as a menial and largely undesirable career. With the result that it is often considered to be a last resort for those with a tertiary level education and is far more likely to attract the worst college graduates rather than the best. Schwass (1984) explains in his work on the problems of agricultural extension and development, that because of these cultural issues, extension officers typically lack the necessary skills to make any real difference. The relatively poor salaries associated with the role, mean that there is a

Matthew Shaun Craven

Page 5 of 14

very high level of turnover of junior extension personnel, which makes it difficult for farmers to develop a long-term relationship with their extension officer. It is perhaps interesting to note that although Schwass made these observations in 1984, they where no less prevalent a decade later in 2004 when Anderson & Feder conducted their research on agricultural extension for the World Bank and echoed many of these same problems. Despite these problems, agricultural extension programs do continued to operate and in an effort to address some of their traditional shortcomings, governments in the developing world have turned increasingly to technology. Communication technologies such as radio and television have become important mediums for delivering better quality guidance to larger groups of farmers simultaneously, and with the arrival and continuing expansion of mobile telecommunication networks in many of the worlds developing countries, mobile devices with their voice and text capabilities are fast becoming one of the most important vehicles for agricultural development. Unlike radio and television, that exist as predominantly one-way mediums of communication, the mobile phone offers a real opportunity for farmers to pull and push information to and from themselves in ways that allow them to go beyond a reliance on government funded broadcasts and to move towards a more sophisticated multi-way information sharing network. There are a number of interesting developments in this area, that represent a real change in the way challenges to agricultural development are being addressed. One such example is Farmers Friend which is a project operated by Google Inc in association with the Ugandan government. Farmers Friend allows farmers to make use of their mobile phones SMS function, by converting questions sent to it via SMS into queries that can then be run by Googles specialised search engine. The results of the search are then sent back to the farmer as a text message and can be stored on the device for as long as the farmer needs it. What is significant about this approach is that the farmer initiates the process, which means that the information is tailored to their specific needs in a way that radio or television broadcasts are not. It also means that the information is far more likely to be up-to-date and therefore of greater value and benefit to the farmer. Accessing Real-time Market Information:- The opportunity for farmers to get the

Matthew Shaun Craven

Page 6 of 14

best possible price for the crops they wish to sell is an important development, that becomes far more likely when farmers have access to real time market information. It means that rather than selling to the nearest possible buyer at a price largely determined by the buyer, as is the more traditional way, mobile technologies mean that farmers are better able to discover exactly how much their crop is worth and find alternative more profitable opportunities to sell their surplus. Whereas local buyers would traditionally have the upper hand in negotiating price because the farmer had few alternatives and a need to sell the surplus quickly once it was harvested. With the arrival of mobile technologies and the development of market information services the balance of power has shifted towards the farmer. The Zambia National Farmers Union is an example of new type of market information services, which is discussed in Jonathan Donners (2009) work on mobile-based livelihood services in Africa, and is an example of an SMS based system which does not only provide farmers with real-time pricing data, but goes one step further than this by attempting to link farmers with potential buyers. Other systems like Google Trader in Uganda offer a very similar service and all rely on a level of responsiveness that is only made possible because of mobile technologies. While it is true, that alternative forms of telecommunication access where available in rural areas prior to the expansion of mobile networks. Solutions such as telecentres are not well suited to supporting these types of time sensitive activities. Farmers need to respond quickly when they discover potential buyers or they are likely to loose out. Therefore visiting a telecentre is not a viable option as it takes valuable time away from doing the job of farming, in a way that the highly portable mobile phone does not. Given these contextual issues it is perhaps not altogether unsurprising that the emergence of these new services is linked so closely with the expansion of mobile telecommunication networks. For even if the farmer had the time to visit a telecentre to access these or similar types of services, there is no guarantee that the telecentre would be operational, or that the shared telephones and computers would be available for use. Intermittent power and power quality fixed line telephone services mean there is no guarantee that the farmer could access the resources he needed when and as often as they were needed. By contrast, the mobile phone is a permanently connected communication device, which can be re-charged using micro-generating technologies like small wind or solar devices. Where cell

Matthew Shaun Craven

Page 7 of 14

coverage exists it is typically of a better quality and more reliable than outdated fixed telephone lines (Bhavnani et al, 2008), and this means that farmers can tend to their crops and access information resources at the same time, and at any other time that they might wish. The device has the additional benefit of supporting the creation and strengthening of social ties and so the technology has both social and economic benefit (Rogers, 2003; Wei & Lo, 2006). At the present, these virtual markets are relatively small in size and have yet to evolve into a substantial entity. The need for a large number of active buyers and sellers means that these types of services will take some time to reach critical mass. For now it does raise the issue of how much this opening up of the agricultural market can actually benefit local communities. After all, if the traditional modes of monetizing surplus meant that farmers had little alternative but to sell to local buyers at a locally defined market price, then this price was inevitably determined by what local buyers could afford to pay. Now that this limitation is being removed and farmers are free to sell outside of their traditional communities, it is perhaps entirely conceivable that local buyers may have to pay much more for their food. This suggests that although these mobile technologies may well benefit the farmer, they may do nothing for alleviating overall poverty and might in fact increase inequality. Of course, these technologies may just as well have the opposite impact, for if access to mobile technologies is more consistent across those who produce and those who buy goods, then the same information that empowers farmers to sell to the most profitable buyers might also enabled local consumers to purchase goods from the most competitive sellers. This more balanced outcome should lead to a stabilisation of prices across the agricultural sector, which will ensure that farmers get the most competitive market price for their produce. This may result in some buyers paying slightly more while others pay less, but on the whole a much fairer and more consistent range of prices will be paid by all (Jensen, 2007; Eggleston et al. 2002).

Matthew Shaun Craven

Page 8 of 14

Figure 1 Prices of Fish and Mobile Phone Service [Fig IV in original work] (Jensen, 2007)

Robert Jensens (2007) work on the impact of mobile technologies on the South Indian fisheries sector, reveals just how effective equal access to mobile phones and information services can be in stabilising prices. Jensens study shows a powerful correlation between the deployment of mobile telecommunication technologies in the three regions of Kasaragod, Kannur and Kozhikod, and a significant stabalisation in the price of fish. This is well illustrated in figure 1, where the price of fish is shown to fluctuate enormously prior to the introduction of mobile phones (shown as a solid vertical bar), but then changes quite dramatically once these technologies arrive. In all three regions, Jensens research finds that the arrival of this technology has an immediate and very dramatic impact on prices and that this new reduced price stabilises over time. This is a clear illustration of how equal access to ICT can generate real and sustainable improvements for everyone within the community. Producers within the agricultural or fisheries sector benefit from more consistent pricing and more reliable incomes, while consumers gain access to a wider source of produce and have the information necessary to make informed decisions about what to buy and from whom to buy. Of course we should not wish to paint this as some type of eBay or Amazon for the developing world. Those wishing to buy or sell produce still need to physically exchange goods and this can be a problem in areas with poor transport infrastructure and among those with no form of long distance

Matthew Shaun Craven

Page 9 of 14

transportation. It is one thing to know that there are cheaper sources of food in a village 30 miles away. It is quite something else to physically access that market. So information is only part of the solution, like so many issues facing the developing world, basic infrastructure is an essential and all to often absent component in transforming the information these technologies deliver into something which actually generates real advantage. Nevertheless, Jensens work shows that despite these difficulties positive developments are underway. Access to Financial Services: In addition to the expansion of mobile information services that answer questions about how to farm crops or deal with pests, and those that provide real time market data or link produce sellers to possible buyers, an entirely new and potentially more transformational type of mobile service is emerging. Mobile money systems are an interesting example of how mobile technologies are allowing for the development of entirely new forms of financial services, which have been created specifically for developing countries and are not an imported western solution. These types of localized innovation are an interesting phenomenon and one that is a central issue in Richard Heeks recent work on development 2.0 and the role of information technology in transforming international development. Within this work, Heeks describes how the combination of business and technological development has enabled traditional banking services, previously denied to individuals on low incomes like rural farmers, to be made available in an entirely new way, via mobile technologies. Kenyas M-PESA is just one example in which traditional banking facilities such as savings, loans and insurances are being made available via a digital money platform developed specifically for the mobile phone. These developments are seen as positive because they have the benefit of disintermediating traditional gatekeepers and brokers (Heeks, 2010). With the result that farmers can approach banking institutions virtually, via platforms like M-PESA, when they require money to invest in their farms, save money or purchase other services. This removes the need for a borrower to rely on usurers to access lending services and thereby avoids the extortionate interest rates these intermediaries typically impose for their services (Heeks, 2010).

Matthew Shaun Craven

Page 10 of 14

What is particularly interesting about these types of services is that they represent an important adaptation and appropriation of mobile technology within developing countries. Services like M-PESA are a powerful example of just one-way in which western technology is being used in ways that are distinctively different from how they where intended to be used or how they are used in the west. This reveals a process of technology appropriation and innovation that is specifically oriented towards delivering practical solutions to very specific local problems. In a remarkable break from traditional modes of development, these solutions are not imported from the west. They are not based on abstract notions of what developing countries need to do to resolve social and economic challenges. Rather, they are an example of how information communication technologies can act as pliable tools, which when combined with the local knowledge and creativity of those in the developing world, can support the creation and deployment of contextually appropriate solutions that promise to be far more effective at resolving real world problems. SUMMARY What can be drawn from our discussion here is that mobile technologies in and of themselves are not a solution to the social and economic difficulties facing the developing world. A mobile phone cannot solve hunger, it cannot cure aids and it cannot educate a child or increase democratic involvement. These problems are immense in their scale and in their complexity, and technology is only a tool like any other. For solutions to emerge this tool must be applied. What we have seen so far is a series of technology-supported transformations that are made possible by mobile technologies, but which are fundamentally the result of the creativity and ingenuity of a human being not a machine. Mobile technologies are a partner in the process of development, they support the creation and deployments of new services, and it is these services that are truly transformational. The mobile phone supports the operation of M-PESA, but it is M-PESA itself that transforms what it means to offer banking services in a developing country. Similarly, a mobile phone makes it possible for a farmer to locate the most profitable buyers and for buyers to discover the most affordable produce, but this again is a technology-facilitated service, it is the service that changes the status quo not the technology by itself.

Matthew Shaun Craven

Page 11 of 14

CONCLUSION We conclude our discussion by reflecting on the work of Dambisa Moyo, the economist and author of Dead Aid: Why aid is not working and how there is a better way for Africa (2009). In her book, Moyo suggests that traditional forms of foreign aid are simply ineffective in delivering sustainable solutions to the problems affecting the developing world. To build a real economy and to establish a foundation for long-term development she suggests that farmers and entrepreneurs in the developing world need opportunities to trade. To create these opportunities, developing countries must look to ICT and to mobile technologies in particular. For Moyo, there is a meaningful relationship between Ethiopias failure to adopt and expand mobile telecommunications, and their heavy dependence on foreign aid. She reveals that in a continent where mobile phone penetration is around 30%, Ethiopia lags far behind, at only 4% in a population of 90 million. By contrast, Rwanda has a mobile penetration rate of 38% and has already initiated a large-scale project to expand its mobile telecommunication infrastructure. As part of this, the Rwandan government is working with mobile operator MTN and the Rwandan Development Bank to delivery telecommunications access across 94% of the countrys rural areas. This focus on mobile technologies is part of Rwandas long-term goal of reducing its dependence on foreign aid. As a country it is investing heavily in these technologies, in an effort to establish an infrastructure that will actively support local innovation and entrepreneurship; which might then translate into a strong foundation upon which long-term self-sustaining economic and social development might emerge. Technologies enable and support entirely new opportunities for development in which local people are given the opportunities to adopt and adapt technological tools, in ways that enable them and their communities to do what they do better, and to establish real solutions to their own economic and social problems. While information communication technologies are not a panacea to the ills affecting the developing world, they are seen as an increasingly powerful vehicle for promoting and enabling self-driven development. When they are actively embraced and supported, such as in the case of Rwanda and Kenya then these technologies have a very real potential to facilitate meaningful and sustainable forms of social and economic development.

Matthew Shaun Craven

Page 12 of 14

REFERENCES ANDERSON J.R & G FEDER (2004) The World Bank Research Observer, World Bank BADARU, S. (2004) Time to Fight Cell Phone Theft, Technology Times [Accessed on 24 April 2010 from http://www.techtimesnews.net/shina.asp?id=125] BHAVNANI, A., R. WON-WAI CHIU, S. JANAKIRAM, AND P. SILARSZKY (2008) The Role of Mobile Phones in Sustainable Rural Poverty Reduction, Working Paper of the Global ICT (GITC) department, June. Washington DC: World Bank DONNER, J. (2009) Mobile-based livelihood services in Africa: pilots and early deployments. In M. Fernndez-Ardvol & A. Ros (Eds.), Communication technologies in Latin America and Africa: A multidisciplinary perspective (pp. 3758). Barcelona: IN3. EGGLESTON, K., JENSEN, R., & ZECKHAUSER, R. (2002) Information and telecommunication technologies, markets, and economic development. In G. Kirkman, P. Cornelius, J. Sachs & K. Schwab (Eds.), The global information technology report 2001-2002: Readiness for the networked world. New York: Oxford University Press. HAMILTON, J. (2003) "Are main lines and mobile phones substitutes or complements? Evidence from Africa." Telecommunications Policy 27(1-2): 109-133. HEEKS, R. (2010) Development 2.0: The IT-Enabled Transformation of International Development, Communication of the ACM, Vol.53 No.4 JENSEN, R. (2007) The Digital Provide: Information (Technology), Market Performance, and Welfare in the South Indian Fisheries Sector, Quarterly Journal of Economics 2007 122:3, pg. 879-924 ROGERS, E. M. (2003) Diffusion of innovations (5th Edition), New York: The Free Press. RLLER, L.H. AND L. WAVERMAN (2001) "Telecommunications Infrastructure and Economic Development: A Simultaneous Approach." The American Economic Review 91(4): 909-923. SCHWASS, R.H. (1984) Problems of agricultural extension and development in the South Pacific, Paper delivered at Pacific Science Congress WAVERMAN, L., MESCHI, M., & FUSS, M. (2005). The impact of telecoms on economic growth in developing countries. The Vodafone Policy Paper Series, 2 (March): 10-23. WEI, R., & LO, V.H. (2006) Staying connected while on the move: Cell phone use and social connectedness, New Media & Society, No. 8, pg.53-72. BIBLIOGRAPHY
Matthew Shaun Craven Page 13 of 14

MOYO, D (2006) Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa, Alan Lane Publishing: London

Matthew Shaun Craven

Page 14 of 14