Business and development gains for telecoms expansion in the developing world

The expansion of telecommunications infrastructure can have a substantial multiplier effect for the broader economy in poor countries, and Africa in particular is taking the lead on mainstreaming mobile payments over the rest of the world.

Those are two main takeaways for development professionals in a new report released by the Paris branch of BearingPoint, a global management and technology consulting firm based in Amsterdam. Titled “The Role of Technology in International Business Development,” the report surveyed 3,000 executives from 800 leading French companies and touched on how the introduction and expansion of technology by businesses can lead to greater economic and social development gains.

Jean-Michel Huet, BearingPoint partner and author of the study, believes technology truly has the potential to bring sustainable development to poor countries.

For instance, Huet pointed to an earlier report by his firm that examined the impact of investments by Digicel in Haiti. The mobile phone network provider entered the Haitian market in 2006 backed by Proparco, the private sector financing arm of the French aid agency Agence Française de Développement. The investment generated over 60,000 jobs, about 1,000 in-house, with the rest going to a network of street vendors of scratch cards for prepaid phones. Digicel’s entry into the market helped boost Haiti’s mobile phone penetration from 5 percent in 2005 to 33 percent in 2008. This increased connectivity, the BearingPoint partner explained, while helping job seekers and small-scale independent contractors in the Caribbean nation, one of the poorest in the world.

“Having a phone is like having a professional address,” Huet said during an exclusive interview with Devex in Paris. “There have been direct and indirect effects — it is clearly an example of a good investment. It was good for Digicel, but also for the population.”

One region that is learning from that experience is sub-Saharan Africa, where as mobile penetration increases, phone companies are beginning to take up some of the slack on basic financial services for the unbanked majority in a region where only 18 percent of adults have bank accounts, according to a Proparco report that cited 2013 figures from the European Investment Bank.

With over 20 million subscribers — nearly half the population — and a market share estimated at 67 percent, Safaricom is the largest mobile company in Kenya. The operator's widely popular M-Pesa mobile payment system boasts over 17 million subscribers and is supported by a nationwide network of 79,000 outlets. In addition to mobile payments, its M-Shwari product allows customers to borrow and save — while earning interest — via their mobile phones.

Another telecommunications giant heavily invested in the developing world is Orange, which now serves more than 10 million customers in 13 countries in Africa and the Middle East through its mobile banking service Orange Money.

“Africa has something to teach us about mobile banking,” Sébastien Crozier, senior vice president of Orange and general director of Orange Horizons, a subsidiary tasked with seeking inexpensive ways to tap new markets in places where the company is not yet present, noted during the report's launch in Paris. “It isn’t so much a technological breakthrough, it is the movement of technology into another ecosystem.”

Huet linked this expansion of mobile banking in the developing world to the fact that banks have not yet occupied that space, unlike in Europe, where he said banks would not like telecommunications firms moving in on their business.

The mobile banking business in the developing world, though, comes with its own challenges — including inadequate energy distribution and a lack of training and education.

“The main thing is not just having broadband but also access to electricity,” Huet explained. “In the United States and Europe, this is not an issue, but in places like India and Africa you have problems.”

To illustrate how a poorly prepared workforce can hinder otherwise ambitious investment schemes, the BearingPoint partner recalled a plan to turn Nouakchott into a hub for accounting services for the mining industry in Africa. The Mauritanian capital seemed to have all the prerequisites for success, including sufficient cable and good broadband, “but there weren’t enough controllers, not enough specialists.”

And what lessons can be drawn by the international development community from such experiences? It's about being a bit less ambitious in the beginning and focusing initially on development to facilitate the business opportunities later on, Huet explained, giving the example of Orange's mobile birth registration program in Senegal.

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