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The Digital Innovation Divide

Posted 23rd February 2016

A few weeks ago, the Financial Times led with a story about the breakthrough innovations springing up from technology start-ups across the African continent. In the article, entitled Smart Africa, the author likens the mobile phone to the steam train in 19th century Europe. He quotes veteran Africa investor Miles Morland, “what the Great Western Railway was to Victorian England, the mobile networks are to Africa”. The opportunity is clear. But can these digital innovations realise their potential for social and economic transformation for all Africans?

It is easy to see why digital technologies have been heralded as a potential game-changer for international development. Mobile phones can be used to extend a wide range of products and services to communities that could not have been reached previously and can do so at very low marginal cost. Mobile phones also allow us to collect data that will provide much-needed insight into consumer activities, habits and spending behaviour in developing countries. If opened up to the right sources, such data could improve the targeting of commercial services and inform government and donor planning processes, resource allocation and effectiveness.

All promising in theory… but is digital technology living up to all the hype?

World Development Report: Cautious Optimism

The answer seems to be “not yet”. The World Bank recently released its 2016 World Development Report entitled Digital Dividends. The report is a humbling reminder that we are not yet reaping the transformational benefits that are offered by the internet and by other digital technologies in the developing world. Since 2005, the number of internet users has risen from 1 billion to 3.2 billion people and more households currently own a mobile phone than have access to electricity or to clean water. However, an estimated 60% of the world’s population are still offline and can’t participate fully in the digital economy. Until this access gap is narrowed, more than half of the world’s population is missing out on the growth, jobs and service opportunities that digital technologies afford, and we risk increasing rather than decreasing the levels of inequality.

The report is a call to action for expanding access to the digital dividends that are on offer by extending connectivity into the remaining offline areas and making the internet affordable, open and safe to use in those places. The report stresses that what is required goes far beyond an ICT strategy. In fact, it details three ‘analogue components’ that are just as important for people to make effective use of digital technologies. This includes ensuring that regulation encourages rather than stifles creative destruction and competition, that education systems adapt to the evolving skills and capabilities required by a digitally-enabled workforce and that public institutions embrace the potential offered by digital technologies to improve relationships with and accountability to citizens.

Considerations for GIF innovators and funding applicants?

At GIF, our mission is to maximise the social value of our resources, and we aim to achieve that by investing in innovations that have the potential to improve the lives and opportunities of millions of people living on less than $5 a day.

When we say innovation, do we mean technology? Not necessarily. For GIF, innovation encompasses more than technology and includes new productsnew services, new policies, new behaviours or new business models that target very poor people.  While some of these innovations might include a digital component, we are much more interested in how the solution will result in higher adoption rates, more cost-effective outcomes and greater social value creation than existing practices.

For instance, we have invested in Segovia Technology – a software-as-a-service platform that can be used by governments and humanitarian agencies to reduce leakages and delays in distributing cash transfers. This service not only enables government and humanitarian agencies to better track their transactions and improve their accountability, but also increases the cash amount received by beneficiaries by up to 30%.

With the World Bank’s caution in mind, we at GIF are particularly mindful of the potential reach of digital technology-enabled innovations. Innovations that rely on smartphone ownership and reliable internet connections may often be out of the reach of our target beneficiary groups due to both infrastructural and affordability barriers. We are also cautious of digital solutions that fail to acknowledge the non-digital complements that they will require to scale. A tool enabling an individual to report a broken community water point, an absent teacher or a troubling medical symptom via mobile phone will not function at scale unless there are processes in place to address the reported issues. Users will quickly lose the incentive to report such occurrences if it is clear that there is a lack of political will or available resources to offer a practical solution.

We often find it challenging to estimate the social value of innovative solutions without an understanding of the assumed steps in the logic chain that lead to the social impact. Achieving a balance between taking a risk on a new solution and requiring evidence of the ‘theory of change’ can therefore be tricky. A lot will depend on the commitment to generate and interpret data. For this, digital technology can potentially be helpful. Collecting information about use of a digital solution can be built into the system, generating (near) real-time data about its reach faster and at a lower cost than has previously been possible.  However, while an innovation that sends out information via mobile phone might have the potential to improve a farmer’s income or the health of an expectant mother, but it can be difficult for us to assess whether the behaviour change that is required to generate those outcomes is actually likely to happen. For that reason, we are keen to hear from organisations that can tailor their data gathering methods to the later stages of that theory of change.

We remain optimistic about the potential of digital innovation particularly insofar as it can reduce social inequality and contribute to tangible social or economic impact at scale. And as such, we look forward to reviewing more applications and sharing more insights on this fast-evolving topic. However, as we embrace the possibilities of this technology so will we continue to heed the caution: if the mobile phone is to have the transformational impact of the Victorian railways as the FT author hopes, the tracks need to lead to all communities so that even the poorest can afford a seat on the train.