E-commerce against poverty


One of the main goals of charitable foundations, non-profit organizations and philanthropists around the world for the decades and centuries has been fight against the poverty.

Although great work has been done so far (in last 25 years absolute poverty has been reduced by half) there still is a huge space for improvement.

One of the promising trends that could help fighting world poverty at a really large scale and actually seems to be a breakthrough in this field is the rise of digital technology. But how latest technologies could help countries where very basic needs like need for food and shelter still are not satisfied? What could sophisticated smartphones and neat apps do in poor countries? Actually, much more than in developed ones.

One of the main things needed to help people move out of poverty is availability of, at least, basic financial services. Opportunities to save and borrow are crucial for development of the economies, but they are missing in poor countries where financial infrastructure is limited or non-existent at all. People cannot borrow money for kids’ education or for buying seeds and fertilizers, they cannot buy insurance to protect their future harvests; they cannot save money (in cash) because risk of that money to be stolen is extremely high.

Digital technology can make payment systems and digital transactions very inexpensive, easy to use and accessible to everyone.

Video: Digital payments in Kenya

A smartphone and an app with a simple interface create access to digital payment platforms. Surprisingly enough, a very few people in, for example, Bangladesh have bank accounts, but a lot of them do have smartphones. At first these digital payment possibilities were used to make transactions between users, but soon merchants realized that they could directly accept mobile payments, which actually creates digital currency.

One of the greatest success stories in the history of serving customers in the poorest countries is M-Pesa, mobile-phone based money transfer and microlending service that allows people sending and storing money on their mobile phones and converting that money to cash through a nationwide network of agents. The service was launched in 2007 and by the end of 2013 43% of Kenya’s GDP flowed through M-Pesa.

There are also other success stories. Probably Somali is the last country you would expect to have developed digital payment platform, but it is so widely used there that people hardly cash out.

The main reason why such technologies work in one countries and are still not used in other is differences in regulations. Therefore to enable the development of digital financial platforms governments should work on regulatory frameworks that favor the development of such services.

As it is stated in 2015 Gates Foundation annual letter, published by the Bill & Melinda Gates Foundation (organization putting a lot of effort and investment in digital enablement of poor countries), “the lives of people in poor countries will improve faster in the next 15 years than at any other time in history.” And according to Gates, innovation will play a vital role in that.

Sources:

http://www.huffingtonpost.com/2015/01/22/bill-gates-annual-letter_n_6523880.html

http://www.csmonitor.com/World/Making-a-difference/Change-Agent/2014/0106/M-Pesa-helps-world-s-poorest-go-to-the-bank-using-mobile-phones

http://www.gatesfoundation.org/What-We-Do/Global-Development/Financial-Services-for-the-Poor

http://www.scmp.com/news/world/article/1689327/bill-gates-predicts-2030-poverty-breakthrough

 

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One response to “E-commerce against poverty”

  1. 439328knmelanie says :

    There is actually one more positive impact of digital payment systems in developing countries — money flows are completely traceable. That could help a lot in fighting money-laundering and corruption, which definitely are “hot” issues in Africa and other developing countries.

    That is one more reason for government to create digital-money-favourable regulatory frameworks.

    More information on this issue can be found in GSMA report (2013): http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2013/02/MMU-Enabling-Regulatory-Solutions-di-Castri-2013.pdf

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