Mobile phones: small solutions to big problems?

In my economic development class, we listened to an interview with Jenny Aker at Tufts University which applauds the wide adoption of mobile phones in Africa and the resulting welfare gains to the people there.

It might be counterintuitive for one to know that mobile phones are more widely used in Africa than landlines. Mobile phones, relying primarily on a net work of specialized base stations, cost much lower than landlines which require cables being built to every community. In terms of communication, mobile phone also excels landline because it is portable and personal.

The author argues that mobile phones reduce the search costs and improve market efficiency. Households can check out information about input and output prices more easily, and they can find jobs in a bigger area which increases labor mobility and improves market efficiency. Moreover, mobile phones themselves are generating an industry and providing more jobs for the local population.

In Africa, mobile phones also worked for people in ways that you might not expect. M-Pesa (which stands for “mobile Pesa”), a Kenyan mobile banking service, was introduced in 2007 and was well received. This service allows people to transfer money, pay bills, and to keep small amounts of money invisible to others by mobile phones, thus reducing the risk of theft. But there are two problems here. First, as one of my classmates who worked last summer at Kenya suggested, the mobile phone company is not accountable for the money “saved” as M-Pesa. The mobile phone service is just saving steps for daily banking activities, but cannot serve as a reliable means for savings and future investment. Second, the “savings” on the phone do not generate any interests, so it is merely a way to protect the money from being stolen. The role of financial institutions cannot be overlooked, and the M-Pesa on the phone is not a substitute for the physical banks which allow people to plan how they should invest into the future.

It is good to know that mobile phones are improving people’s welfare by distributing health information and encouraging education (CNN report) to a wider range of people. In the class, the professor also mentioned that a mobile phone service which sends out healthcare information for migrant women in Beijing, China. But we need to examine the business models behind these projects to make sure they are sustainable.

As Jenny Aker pointed out, mobile phones are not the silver bullet to solving development problems. In my personal view, whatever good policy takes good institutions to make it truly happen. This is often missing in the picture, and even if it is addressed, it is much deeper to tackle.


One thought on “Mobile phones: small solutions to big problems?

  1. Pingback: Mobile Phones: Does the Intrahousehold Allocation of Technology Matter? | Marc F. Bellemare

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