Issue 4 - What are the Economic and Social Impacts of the Mobile Phone Sector in Developing Countries?

By Luc Rigouzzo, Proparco's Chief Executive Officer

This issue of the magazine Private Sector and Development is being published at a time when Haiti has been struck by a powerful earthquake which has thrown the country and its capital, Port-au-Prince, into chaos. This disaster carries serious consequences for a country which remains one of the most vulnerable in the world, despite efforts to help it emerge. Thanks to an evaluation study conducted a few months ago, we had planned to highlight - in this issue of the magazine dedicated to the developmental impacts of the mobile phone sector - the encouraging lessons to be learned from the development of telecommunications on the Island. We have decided to go ahead with the publication of this article because we see it as an example that should be promoted and a sign of hope and encouragement to send to Haiti.

The growth of African mobile markets over the past decade has been dramatic and well documented. Its impact has been far-reaching, directly through large capital investments and the emergence of large conglomerates, more widely through a positive influence on business practices, overall perception of African business investments and as a transformative technology platform for other industries. This article provides an overview of the performance of the mobile industry in Africa and outlines the main drivers behind the sector’s performance, as well as its overall characteristics and challenges. It also offers some insights into the wider impact of the mobile sector and provides the outlook for the industry in the face of deep economic, regulatory and technological change >> Download Guy Zibi's paper

The past 15 years have brought an unprecedented increase in access to telephone services in developing countries. This growth has been driven primarily by wireless technologies. Mobile phones have made a bigger difference to the lives of more people, more quickly, than any previous technology. They have spread the fastest and have become the single most transformative tool for development. A recent World Bank study of 120 countries shows that for every 10 percentage point increase in the penetration of mobile phones, there is an increase in economic growth of 0.8 percentage points in developing countries. The growth impact of mobile telephony is substantially higher in developing countries than in developed ones >> Download Christine Zhen-Wei Qiang's paper

In Sub-Saharan Africa, the use of mobile phones has positive impacts on the way local consumer goods markets operate. Indeed, a study conducted in Niger shows that mobile phones help reduce costs and give traders access to a wider number of markets. This leads to a harmonization and reduction in prices that is often to the consumer’s advantage. These results appear to be in line with those obtained in other developing countries. They consequently make it possible to learn some lessons that can enhance the impact of information technologies on economic development >> Download Jenny C. Aker's paper

Some mobile phone operators invested in developing countries very early on, whereas profitability seemed to be uncertain. If such investments are to be profitable, it is necessary to respect some key criteria for success. First, the service must be financially affordable for the clients. Similarly, the operator must base its service on prepayment in order to minimize the risk of unpaid bills. Finally, it is necessary to develop an extensive sales network so that consumers can easily purchase airtime. In this context, the operator must see itself as a business selling mass consumer goods, rather than a technology earmarked for a niche market >> Download François-Xavier Roger's paper

The expansion of the mobile phone sector in developing countries would appear to have obvious benefits. However, the conditions in which this takes place can sometimes be questioned. Deregulation in the telecommunications sector has not always led to healthy competition, regulatory authorities seem to be too dependent on public policy, and the sector – even if it does create a lot of employment – has strengthened the informal economy. The share of income that users devote to mobile phones is also very often too high >> Download Annie Chéneau-Loquay's paper

In an extremely difficult context – that of Afghanistan at war – mobile phones provide users with some basic services that are essential for the country’s reconstruction. The explosion in the development of the mobile phone sector has led to a real “leap forward”, particularly for financial services. The implementation of M-Paisa – whereby money transfer can be made via voicemail – has given the population greater access to financial services and has, at the same time, helped combat corruption, the financing of terrorism and money laundering. By reducing transaction costs for financial transfers, the service has also fostered microfinance loan repayments and has consequently promoted the development of microfinance >> Download Samir Satchu's paper

Haitian data confirm that mobile phone development acts as an engine for economic growth, what consequently brings a number of social benefits. However, a large part of the population remains excluded from mobile phone services due to a lack of resources, and those who can afford them mainly use mobile phones to contact their families and friends – mobile phone expenditures can nevertheless sometimes be to the detriment of food and clothing. Yet some evidence suggests that mobile phones can make poor populations less vulnerable by facilitating financial transfers and access to information in case of emergency >> Download Guillaume Barberousse, Tanguy Bernard and Véronique Pescatori's paper