Mobile Usage at the Base of the Pyramid: Research Findings from Kenya and South Africa May 2013 MOBILE USAGE AT THE BASE OF THE PYRAMID: RESEARCH FINDINGS FROM KENYA AND SOUTH AFRICA May 2013 2 The report “Mobile Usage at the Base of the Pyramid: Research Findings from Kenya and South Africa” is available at http://www.infodev.org/mbopsummary. For the full Kenya report, please visit www.infodev.org/en/publication.1194.html. For the full South Africa report, please visit www.infodev.org/en/publication.1193.html. © 2013 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved This work is a product of the staff of The World Bank with external contributions. Note that The World Bank does not necessarily own each component of the content included in the work. The World Bank therefore does not warrant that the use of the content contained in the work will not infringe on the rights of third parties. The risk of claims resulting from such infringement rests solely with you. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved. Rights and Permissions This work is available under the Creative Commons Attribution 3.0 Unported license (CC BY 3.0) http://creativecommons.org/licenses/by/3.0. Under the Creative Commons Attribution license, you are free to copy, distribute, transmit, and adapt this work, including for commercial purposes, under the following conditions: Attribution—Please cite the work as follows: infoDev (2013). Mobile Usage at the Base of the Pyramid: Research Findings from Kenya and South Africa. Washington, D.C: World Bank. Available at: http://www.infodev.org/mbopsummary. License: Creative Commons Attribution CC BY 3.0 Translations—If you create a translation of this work, please add the following disclaimer along with the attribution. This translation was not created by The World Bank and should not be considered an official World Bank translation. The World Bank shall not be liable for any content or error in this translation. All queries on rights and licenses should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: [email protected]. Cover photograph: © 2006 Arne Hoel/The World Bank Cover design: infoDev 3 ABOUT INFODEV infoDev is a global partnership program within the World Bank Group which works at the intersection of innovation, technology, and entrepreneurship to create opportunities for inclusive growth, job creation and poverty reduction. infoDev assists governments and technology-focused small and medium sized enterprises (SMEs) to grow jobs, improve capacity and skills, increase access to finance and markets, ensure the appropriate enabling policy and regulatory environment for business to flourish, and test out innovative solutions in developing country markets. We do this in partnership with other development programs, with World Bank/IFC colleagues, and with stakeholders from the public, private and civil society sectors in the developing world. For more information visit www.infoDev.org or send an email to [email protected]. 4 ACKNOWLEDGEMENTS This summary report was commissioned by infoDev, a global partnership program within the World Bank, and drafted by Kevin Donovan. It is based on case studies of Kenya (conducted by iHub Research and Research Solutions Africa) and South Africa (conducted by Research ICT Africa and Intelecon). It is part of a broader research project looking at how the poorest of the world’s citizens use mobile phones to enhance their lifestyles and livelihoods. The task team leader on behalf of infoDev is Tim Kelly and the task team manager is Maja Andjelkovic. The task team would like to thank external reviewers, including Ilari Lindy (World Bank Institute), Angela Bekkers, Toni Eliasz and Nicolas Friederici (infoDev), Monica Kerretts Makau (Communications Commission of Kenya), Rohan Samarajiva (LIRNEasia), Marta Milkowska (PREM), Cecilia Paradi-Guilford (TWICT), and Juhee Kang (MSU). The original work of the case study authors is also acknowledged, including Enrico Calandro, Alison Gillwald, Mariama Deen-Swarray, and Christoph Stork (Research ICT Africa), Steve Esselaar (Intelecon), Angela Crandall, Albert Otieno, Leonida Mutuku and Jessica Colaço (iHub Research), and Jasper Grosskurth and Peter Otieno (Research Solutions Africa). The report was made possible by the support of the Ministry for Foreign Affairs of the Government of Finland and UKaid. For further information contact: infoDev / World Bank 1818 H Street NW Washington, DC 20433 United States www.infodev.org [email protected] 5 TABLE OF CONTENTS Introduction 8 Mobile Communication in Developing Countries 8 The Fortune at the Base of the Pyramid? From Consumption to Production 9 I. Mobile Insights from the Base of the Pyramid 11 a. The Evolving Mobile Entrepreneurship Ecosystem 11 b. The Social Context of Use 12 c. Jobs and Job Creation 12 d. Innovation Business Strategies for the Base of the Pyramid 14 e. Regulatory Issues, Old and New 15 II. Kenyan Mobile Usage at the Base of the Pyramid 17 a. Introduction 17 b. Methodology 18 c. Mobile Access and Use at the Base of the Pyramid 18 Access 18 Usage 20 d. Mobile Money 21 e. The Entrepreneurial Ecosystem 21 f. Policy Discussion 23 g. Conclusion 23 III. South African Mobile Usage at the Base of the Pyramid 24 a. Introduction 24 b. Methodology 24 c. Mobile Access and Use at the Base of the Pyramid 24 d. Mxit 26 e. The Entrepreneurial Ecosystem 27 f. Policy Discussion 28 g. Conclusion 28 IV. Conclusion 29 6 LIST OF FIGURES, TABLES AND BOXES FIGURES Figure 1. Effects of pricing on mobile applications usage in Uganda 14 Figure 2. Research Locations 18 Figure 3. Reasons for not having a phone 19 Figure 4. Operator Market Shares 24 Figure 5. Elements of the Mobile Ecosystem 27 TABLES Table 1. Kenya & South Africa at a Glance 16 Table 2. Reasons of non-users for not using the Internet 25 BOXES Box 1. Defining 'the Base of the Pyramid' 9 Box 2. Mobile Innovation at the World Bank 10 Box 3. Building Entrepreneurial Ecosystems: AkiraChix 11 Box 4. Public? Private? Both? Neither? The Indeterminacy of Share Usage 12 Box 5. Frequent Obstacles for Large Corporations at the BoP 14 Box 6. Sacrificing for Mobile Connectivity 21 Box 7. Powering Mobile at the BoP 22 All dollar amounts are U.S. dollars unless otherwise indicated. 7 are seeking to use mobile phones and applications to meet human and economic development goals. Introduction However, many of these innovations have been stymied, not least because they have not proven The phenomenal growth of mobile communications acceptable or desirable to the locality into which in developing countries over the past ten years has they are introduced. Technical know-how and been widely celebrated. There were more than 6.8 entrepreneurial acumen must be complemented by billion connections by the end of 2012, representing sociocultural understanding. 3.2 billion subscribers. More than 650 million connections were in Africa alone. Networks across infoDev’s Mobile Use at the Base of the Pyramid the world are being upgraded to higher speeds and (m@BoP) program seeks to contribute to this capacities, and devices, too, are becoming more agenda through on-the-ground studies in developing sophisticated. As such, calls and SMS are markets. The first phase of this program supported increasingly being augmented by more advanced both qualitative and quantitative research on mobile apps and services. usage by low-income populations in Kenya and South Africa. These locations were chosen for a At a general level, the contours of this success are variety of reasons. Both economies display regional well known: from nearly absent at the turn of the and continental clout. The growth of their ICT century, mobile phones have spread widely across sectors has been marked by both successes and the developing world, now sitting in the pockets of shortcomings in the past ten years. And both are the most poor and remote individuals; more recently, home to emerging communities of software calls and SMS have begun to be complemented by developers, many of whom are associated with the more sophisticated applications and services, from Mobile Innovation Labs (mLabs) that infoDev and financial products to government services. A variety partners have supported to help incubate an of causes for this shift are well documented: entrepreneurial ecosystem. While Kenya and South privatization and liberalization created an enabling Africa are not representative of the continent as a environment, technological advances brought down whole, they are among the most exciting given the the cost of connectivity, business model innovations confluence of technical talent, financial resources, made them accessible to the base of the pyramid, and generalized interest. and the inventive communication strategies of users opened new doors. Mobile Communication in Developing Less well understood, however, are the particular Countries and diverse ways in which mobile connectivity is By now, the surge in access to mobile connectivity being used in everyday life, from Kinshasa to is no secret: across the world, regulatory reforms, Kibera.