Cellphones and Development

Recently, the NYTimes featured an article entitled, “Can the Cellphone Help End Global Poverty?”, in which it highlighted a new wave of “human behaviour” research funded by cellphone companies such as Nokia in order to tap into less developed markets. The author of the article centers around a series of conversations/interactions with Jan Chipchase, a “user anthropologist” for Nokia, but I will highlight the larger trends presented in the article instead.

According to the article, Asia and Africa are at the cusp of a new wave of technological improvements and access that potentially stand to benefit a significant portion of the poor, underprivileged population (we have highlighted a few key trends here – InternetSpeech, SMS for Blood Donors, Quarter Million Internet Capable Phones, LifeLines Education, Cellphones as a Social Epidemic, and CureHunter). Small improvements in terms of access, suggests the article, can generate exponential returns:

Today, there are more than 3.3 billion mobile-phone subscriptions worldwide, which means that there are at least three billion people who don’t own cellphones, the bulk of them to be found in Africa and Asia. Even the smallest improvements in efficiency, amplified across those additional three billion people, could reshape the global economy in ways that we are just beginning to understand.

To get a sense of how rapidly cellphones are penetrating the global marketplace, you need only to look at the sales figures…Eighty percent of the world’s population now lives within range of a cellular network, which is double the level in 2000. And figures from the International Telecommunications Union show that by the end of 2006, 68 percent of the world’s mobile subscriptions were in developing countries.

How exactly do cellphones contribute to development, you may ask? Well, according to development specialists and business scholars Robert Jensen, cellphones have been proven to augment income:

Robert Jensen, an economics professor at Harvard University, tracked fishermen off the coast of Kerala in southern India, finding that when they invested in cellphones and started using them to call around to prospective buyers before they’d even got their catch to shore, their profits went up by an average of 8 percent while consumer prices in the local marketplace went down by 4 percent.

In fact, “a 2005 London Business School study extrapolated the effect even further, concluding that for every additional 10 mobile phones per 100 people, a country’s G.D.P. rises 0.5 percent.” Further research by the World Resources Institute, which, in collaboration with the International Finance Corporation, published a report entitled, “The Next Four Billion,” has found that poor families invest a significant amount of their savings in the information-communication technology category. Here are further details from their findings (more after the jump): Continue reading

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Sustainable, Scalable Philanthropy

As brought to our attention by NextBillion, Stephen J. Dubner and Steven J. Levitt, authors of Freakanomics, published an article in the NYTimes yesterday entitled, “Bottom Line Philanthropy,” in which they discussed the need for applying business models to philanthropic organizations for the purposes of sustainability and impact.

The article highlights two individuals – Rafe Furst of what is informally called the Cure Cancer Annuity Fund and Brian Mullaney of Smile Train. Furst’s model posits that effectiveness in the social sector lies in the incentivization of innovation through prizes and profits – in this case, for the purposes of curing cancer. As stated in the article, “inspired by the X Prize Foundation’s sponsorship of innovations in space travel and other realms”, Furst conceived of a “charitable business model” – the Cure Cancer Annuity Fund – which employs a two pronged, incentive-based approach to cancer research.  The Fund aims to not only benefit donors in the form of annual returns, but researchers as well, who stand to win a prize of $10 billion for finding a cure for cancer.

The second example mentioned in the article is that of the Smile Train, which employs local resources, social marketing strategies, innovative technology, and cash incentives for the purposes of administering cleft lip or palate operations in developing countries. As stated in the article, “Smile Train works as a charity because it is run like a business”: 

 Fixing a child’s cleft lip or palate is a relatively cheap procedure with outsize payoffs: cleft children in many countries are ostracized and have a hard time going to school, getting jobs and marrying, and the surgery reverses those disadvantages. Indeed, when pitching a reluctant government, Mullaney refers to cleft children as “nonperforming assets” who can soon be returned to the economic mainstream. He fights bad incentives with better ones: when Smile Train learned that midwives in Chennai, India, were being paid off to smother baby girls born with cleft deformities, Mullaney started offering midwives as much as $10 for each girl they instead took to a hospital for surgery.  

 Smile Train has also harnessed technology to create efficiencies in every aspect of its business, from fund-raising to charting patients’ outcomes. It developed surgery-training software that helps educate doctors around the world. There are high-tech quality-control measures: using digital imaging, a Texas cleft expert grades a random sample of operations performed by Smile Train doctors around the world, in order to know which surgeons in, say, Uganda or China need more training. These are the sort of innovations that likely make Smile Train one of most productive charities, dollar for deed, in the world. Over the last eight years, Smile Train has performed more than 280,000 cleft surgeries in 74 of the world’s poorest countries, raising some $84 million last year while employing a worldwide staff of just 30 people.    

Both examples highlight the potential for employing innovative business practices for the purposes of creating sustainable, scalable social organizations. In the end, the purpose of any philanthropic organization is to eventually become purposeless. In the case of Smile Train, which is currently at the “historic break-even point” of “performing more operations each year than the number of children born each year in developing countries with cleft deformities”, this strategy seems to be working.