Scale is not a myth; development successes can and do become widespread, with dramatic consequences. Improved seeds and fertilizers revolutionized agriculture in South Asia in the middle of the twentieth century, the spread of modern drugs and vaccines led rapidly to better control of diseases, motorcycles dominate the streets of Asian cities, and there are now half as many mobile phones in Africa as there are people.
What is a myth is that development can be achieved with a silver bullet. More rural roads don’t guarantee farmers will sell more produce. An education for their children doesn’t mean there will be good jobs for them when they leave school. And certainly, a PC or a telecenter in a village doesn’t ensure that local entrepreneurs will have more solutions to their pressing problems. All of these development ventures are beneficial, but their impact will be felt only when enough of them are undertaken at roughly the same time.
That’s the macro picture. At the project level, one has to contend with a bewildering range of challenges, which Kentaro Toyama covers well. And as Toyama points out, deficiencies in local capacity and commitment present a challenge. But that challenge is multifaceted, and we need to be deliberate in identifying and addressing the crucial points where capability falls short of intention. Unless we isolate what, specifically, is lacking, we won’t be able to take advantage of the promise of ICT.
In order to discern what is absent in cases of ICT intervention that fail, consider a success. Leading Kenyan mobile operator Safaricom offers a mobile banking product called M-PESA, which allows customers to open a simple electronic account, transfer money to each other by pressing a few buttons on their mobile phones, and deposit or withdraw funds at a large number of local shops near where they live and work. Three and a half years after M-PESA’s commercial launch, half of Kenya’s adult population is using it, and collectively they make more money transfers than Western Union handles globally. That’s real scale.
We shouldn’t underestimate how significant M-PESA’s services are for poor people. At the time of M-PESA’s launch, only 19 percent of the population had access to a bank account. For the other 81 percent, sending money to support needy relatives, paying school fees or utility bills, collecting on business sales, or repaying a microloan was often a costly, time-consuming affair.
Why does M-PESA work in Kenya? Why hasn’t it followed into irrelevance the telecenters that Toyama observed? It’s not that there was no demand for telecenters. It is only in hindsight that successful interventions are deemed demand-driven, whereas any that fail may be tarred as supply-driven. There is no inherently greater demand for payment services than for information; people’s needs are diverse. And explaining to a previously unbanked person how to make payments from a mobile phone sounds about as tough as explaining to a poor farmer that with the right hocus pocus he can get the computer in the flashy new telecenter to tell him what disease is ailing his crop.
There are four keys to M-PESA’s flourishing. First, it is marketed for a use that everyone can relate to: sending money home. These three simple words target a need that is not only large (generating good volume and willingness to pay) but also immediate (generating a willingness to try). Second, it is available anywhere. Today customers can deposit and withdraw cash at any of 20,000 locations—that’s twenty times the number of bank branches in Kenya. Third, new customers are supported through the learning phase by a well-incentivized and supervised retail channel of independent, local shops that put a human face on the service. Fourth, Safaricom successfully leveraged its brand to create trust in the system.
ICT-based projects often have significant spillover effects, benefits beyond the specific objectives of the intervention.
Notice that none of these four factors are technology-related. Instead, they are functions of intelligent marketing, distribution, and branding. Most development projects fail because they do not adequately address these core business concerns. This failure of business logic, rather than inept project management or a lack of technical or operational skills, is the essence of the local capacity-building gap that Toyama bemoans.
But technology is not a mere footnote to the M-PESA story. While business savvy might have enabled MPESA’s growth, what makes it useful is the system’s ability to communicate information in real time. Instant authorization and recording of transactions allows customers to send money to each other without fear that transactions will be mysteriously cancelled. And customers can deposit cash at participating retail shops securely: the deposited sum will immediately be reflected in their account balances. Indeed, ICT’s main promise is to give people the right information, here and now. This opens up huge possibilities.
ICT is particularly suited for finance applications because the information requirement is low. A transaction requires only three pieces of information: destination, amount, and a secret code to confirm the sender’s identity. That’s why M-PESA can work on even the most basic mobile phone.
At the Bill & Melinda Gates Foundation, we are trying to replicate M-PESA’s success outside of Kenya and to find ways to ensure that these transactional platforms provide poor users with a range of relevant financial services.
ICT is not the only basis for development, but such projects do have unique promise. First, by dealing with digital information, ICT creates an opportunity for (though not a guarantee of) large-scale implementation.
Second, ICT-based projects often have significant spillover effects, benefits beyond the specific objectives of the intervention: the Kenyans who now use M-PESA will be better prepared to “graduate” into full banking relationships and take up other useful mobile data services that have nothing to do with finance. Finally, ICT interventions do not always work, but unlike many traditional development avenues, they haven’t been tried and retried unsuccessfully for decades. Technological advance replenishes both our options and our reasons for optimism.