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http://www.businessweek.com/magazine/content/07_39/b4051054.htm
Business Week Online
SEPTEMBER 24, 2007
SPECIAL REPORT
Upwardly Mobile In Africa
How basic cell phones are sparking economic hope and growth in emerging—and even non-emerging—nations
Precious little would seem to connect the Kenyan village of Muruguru to the 21st century. The red dirt roads become impassable in the rainy season. Only a few homes have electricity, indoor plumbing, or even a floor other than earth packed by bare feet. The villagers survive on corn, potatoes, and bananas they raise in hand-tilled fields, and earn a little extra cash by cultivating coffee beans that they dry outdoors on burlap sacks.
But a couple of years ago, a red and white tower appeared on a nearby hill. The structure is a cell-phone base station, and its arrival has changed life in Muruguru as much as any development in the past century. "I'm saving time, I'm saving money," says Grace Wachira, who runs a small business knitting cardigan sweaters in the village. Before the tower was built, she had to walk several hours to the nearest town or ride in a communal taxi to buy yarn or meet customers, and she never knew whether the person she wanted to see would be there. Now she uses her Motorola (MOT ) handset to arrange for delivery of yarn and to communicate with buyers.
These days, just about every tradesman, shopkeeper, and farmer in town has a phone—or at least access to one. "Customers give my number to other customers. The business has grown," says Susan Wairimu, whose tailor shop sits in the row of one-story buildings that constitute the village center. And Willson Maragua's transport business in Muruguru, which consists of him and a used pickup truck, could hardly function without mobile technology. Local farmers, members of the Kikuyu tribe prevalent in the area, summon him to haul their coffee beans to a growers' cooperative in a nearby valley. Now Maragua, an ebullient man wearing a baseball cap that says "Bachelorette Party," lives in a home with a concrete floor and a solar panel on the roof to power a radio and a lightbulb—and recharge his family's two handsets. With a mobile phone, he says over a lunch of corn, potatoes, and stewed goat, "You can manage your business."
HIGHER LIVING STANDARDS
Only a few years ago, places like Muruguru didn't even register in the plans of handset makers and service providers. What would a Kenyan farmer want with a mobile phone? Plenty, as it turns out. To the astonishment of the industry, people living on a few dollars a day have proven avid phone users, and in many parts of the world cellular airtime has become a de facto currency. The reason is simple: A mobile phone can dramatically improve living standards by saving wasted trips, providing information about crop prices, summoning medical help, and even serving as a conduit to banking services. "The cell phone is the single most transformative technology for development," says Columbia University economist and emerging markets expert Jeffrey Sachs.
Mobile phones are changing developing markets faster than anyone imagined. Today there are some 3 billion mobile subscriptions worldwide, and that will grow to 5 billion by 2015, when two-thirds of the people on earth will have phones, predicts Finnish handset maker Nokia Corp. Nowhere is the effect more dramatic than in Africa, where mobile technology often represents the first modern infrastructure of any kind. The 134 million citizens of Nigeria, Africa's most populous country, had just 500,000 telephone lines in 2001 when the government began encouraging competition in telecommunications. Now Nigeria has more than 30 million cellular subscribers. Muruguru, meanwhile, had just a single pay phone before people started getting handsets a few years ago. "Communications used to be a barrier," says Paul Ndiritu, the former village head man. Since the advent of mobile phones, he says, "the burden has eased."
Yet billions of people around the world have still never used a telephone. Most of these unconnected masses live in rural areas that are much poorer and more remote than Muruguru. Now cell-phone makers and service providers understand that they can make money by bringing cell-phone service within reach of people who live on $2 a day. Users buy new phones for as little as $20—and secondhand models for far less—as well as airtime in increments of just 75 cents in Kenya, enough for nearly 10 minutes of off-peak calling.
MOBILE MONEY TRANSFERS
That's a far cry from the European or U.S. monthly subscription model, but it works for such outfits as Millicom International Cellular. The Luxembourg-based company invests almost exclusively in poor countries often rocked by violence, and in the second quarter of this year saw its profits climb 65%, to $263 million. Millicom doesn't even wait for the gunfire to die down before moving into new markets, which include the Democratic Republic of Congo, Sri Lanka, and Colombia. "When you build the network you find really good customers," says CEO Marc J. Beuls.
Many economists would agree. A growing body of evidence suggests that access to communications boosts incomes and makes local economies far more efficient. Consider a group of poor fishermen in the Indian state of Kerala studied by Robert Jensen, an associate professor at Brown University. They increased their profits by an average of 8% after they began using mobile phones to find out which coastal marketplaces were offering the best prices for sardines. Yet consumer prices for fish dropped 4% because the fishermen no longer had to throw away the catch they couldn't sell when they sailed into a port after all the buyers had left. "That's what economic efficiencies are about—everyone is better off," says Jensen.
(continued here)
Business Week Online
SEPTEMBER 24, 2007
SPECIAL REPORT
Upwardly Mobile In Africa
How basic cell phones are sparking economic hope and growth in emerging—and even non-emerging—nations
Precious little would seem to connect the Kenyan village of Muruguru to the 21st century. The red dirt roads become impassable in the rainy season. Only a few homes have electricity, indoor plumbing, or even a floor other than earth packed by bare feet. The villagers survive on corn, potatoes, and bananas they raise in hand-tilled fields, and earn a little extra cash by cultivating coffee beans that they dry outdoors on burlap sacks.
But a couple of years ago, a red and white tower appeared on a nearby hill. The structure is a cell-phone base station, and its arrival has changed life in Muruguru as much as any development in the past century. "I'm saving time, I'm saving money," says Grace Wachira, who runs a small business knitting cardigan sweaters in the village. Before the tower was built, she had to walk several hours to the nearest town or ride in a communal taxi to buy yarn or meet customers, and she never knew whether the person she wanted to see would be there. Now she uses her Motorola (MOT ) handset to arrange for delivery of yarn and to communicate with buyers.
These days, just about every tradesman, shopkeeper, and farmer in town has a phone—or at least access to one. "Customers give my number to other customers. The business has grown," says Susan Wairimu, whose tailor shop sits in the row of one-story buildings that constitute the village center. And Willson Maragua's transport business in Muruguru, which consists of him and a used pickup truck, could hardly function without mobile technology. Local farmers, members of the Kikuyu tribe prevalent in the area, summon him to haul their coffee beans to a growers' cooperative in a nearby valley. Now Maragua, an ebullient man wearing a baseball cap that says "Bachelorette Party," lives in a home with a concrete floor and a solar panel on the roof to power a radio and a lightbulb—and recharge his family's two handsets. With a mobile phone, he says over a lunch of corn, potatoes, and stewed goat, "You can manage your business."
HIGHER LIVING STANDARDS
Only a few years ago, places like Muruguru didn't even register in the plans of handset makers and service providers. What would a Kenyan farmer want with a mobile phone? Plenty, as it turns out. To the astonishment of the industry, people living on a few dollars a day have proven avid phone users, and in many parts of the world cellular airtime has become a de facto currency. The reason is simple: A mobile phone can dramatically improve living standards by saving wasted trips, providing information about crop prices, summoning medical help, and even serving as a conduit to banking services. "The cell phone is the single most transformative technology for development," says Columbia University economist and emerging markets expert Jeffrey Sachs.
Mobile phones are changing developing markets faster than anyone imagined. Today there are some 3 billion mobile subscriptions worldwide, and that will grow to 5 billion by 2015, when two-thirds of the people on earth will have phones, predicts Finnish handset maker Nokia Corp. Nowhere is the effect more dramatic than in Africa, where mobile technology often represents the first modern infrastructure of any kind. The 134 million citizens of Nigeria, Africa's most populous country, had just 500,000 telephone lines in 2001 when the government began encouraging competition in telecommunications. Now Nigeria has more than 30 million cellular subscribers. Muruguru, meanwhile, had just a single pay phone before people started getting handsets a few years ago. "Communications used to be a barrier," says Paul Ndiritu, the former village head man. Since the advent of mobile phones, he says, "the burden has eased."
Yet billions of people around the world have still never used a telephone. Most of these unconnected masses live in rural areas that are much poorer and more remote than Muruguru. Now cell-phone makers and service providers understand that they can make money by bringing cell-phone service within reach of people who live on $2 a day. Users buy new phones for as little as $20—and secondhand models for far less—as well as airtime in increments of just 75 cents in Kenya, enough for nearly 10 minutes of off-peak calling.
MOBILE MONEY TRANSFERS
That's a far cry from the European or U.S. monthly subscription model, but it works for such outfits as Millicom International Cellular. The Luxembourg-based company invests almost exclusively in poor countries often rocked by violence, and in the second quarter of this year saw its profits climb 65%, to $263 million. Millicom doesn't even wait for the gunfire to die down before moving into new markets, which include the Democratic Republic of Congo, Sri Lanka, and Colombia. "When you build the network you find really good customers," says CEO Marc J. Beuls.
Many economists would agree. A growing body of evidence suggests that access to communications boosts incomes and makes local economies far more efficient. Consider a group of poor fishermen in the Indian state of Kerala studied by Robert Jensen, an associate professor at Brown University. They increased their profits by an average of 8% after they began using mobile phones to find out which coastal marketplaces were offering the best prices for sardines. Yet consumer prices for fish dropped 4% because the fishermen no longer had to throw away the catch they couldn't sell when they sailed into a port after all the buyers had left. "That's what economic efficiencies are about—everyone is better off," says Jensen.
(continued here)