Saying that developing countries ‘leapfrogged’ tradition information communication technology adoption is a massive understatement. Ten years ago, cell phones and traditional landlines were virtually non-existent in low income countries. In 2002, there was less than one cell phone per 100 people in UN least-developed countries compared to 64 cell phones per 100 people in the OECD. By 2010, the rate of cell phone ownership increased tenfold – currently, 1 in 3 people has a cell phone in the world’s least-developed countries. Mobile phones have long been touted as key tool in economic development, although the rapid rise in mobile phone use has made it difficult to measure the broader macroeconomic impacts on developing countries.
Mobile phones allow the exchange of information on prices, job opportunities, and supply-chains, as well as access to banking. In cases where getting new price information or meeting new business contacts could take hours or days, it take minutes or seconds with a mobile phone.Aker and Mbiti provide a number of examples where information technology and mobile phones have been shown to increase economic efficiency at the firm or sector level. For example, Aker found that in Niger, farmers used mobile phones to research reduced intra-day price differences in local grain markets and increased daily profits by 29 per cent.
Quite surprisingly, although there are a number of studies examining sectoral or local impacts of mobile phones on economic development, the effect on broader national measures, such as GDP and employment, is not entirely clear. Aker and Mbiti note that empirical studies trying to determine if mobile phones do impact GDP suffer from endogeneity – do cell phones promote economic growth or does economic growth promote mobile phone adoption?
Researchers at the Ottawa-based IRDC also pointed out the unclear picture at the national level. Rashid and Elder note that there are cases where mobile phones have shown a clear local impact on economic outcomes in Ghana and Senegal. But, they found that the number one reason people in developing countries purchased a mobile phone was to stay in touch with family and friends, rather than to seek out new economic opportunities.
The incredibly brisk adoption of mobile phones may be the reason there is still uncertainty on their broader macroeconomic impact in developing countries. Quite simply, it’s nearly impossible to estimate long-term national impacts when mobile phone service has been accessible in some countries for only a few brief years. Mobile banking services are even newer – the most popular service, Safaricom’s M-pesa, launched in Kenya in 2007. So called, m-banking may be even more revolutionary than mobile phones themselves, because m-banking creates regular day-to-day banking services where none currently exist. Early studies on m-banking have found significant economic gains. Although it’s hard to measure the national economic impacts, mobile phones, nevertheless, seem destined to play a central role in the personal and economic futures of people in developing countries.
EDIT: I forgot my sources for the graph and data in the first paragraph. They are both World Bank Indicators from data.worldbank.org