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Villages leapfrog the grid with biometrics and mobile money

In low-tech villages, biometrics and mobile money can level market spikes and allow a way for people to bypass the grid and still eat.

By / Correspondent / April 14, 2011

Millet wholesalers in Bakin Birgi, Niger, have seen fewer price spikes since the introduction of mobile money (on cellphones) and biometrics that allow kiosks to travel village to village for local banking.

Frank de Ruiter/File

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A drought destroyed much of the millet harvest in Niger in 2009. Villages emptied as people left in search of money to buy food. The crisis promised to have lasting effects on already-poor rural households. But an unlikely deus ex machina blunted the crisis for some families: Cellphones allowed them to call relatives in cities for help.

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"They didn't have to sell off their plow or take their kids out of school, which is going to have an impact on the longer term," says Jenny Aker, a development economist at Tufts University in Medford, Mass., who saw the drought firsthand.

Cellphone usage has exploded in Africa. In 1999, just 10 percent of Africa's population lived in areas with a signal; by 2008 that number stood at 60 percent, according to data from the GSM Association, an international mobile phone industry group.

Niger may seem an unlikely place for cellphones. Houses are made of straw; paved roads and power lines have yet to arrive. The cellphones are often shared between families. They are charged on a neighbor's diesel generator.

In countries like Niger that largely lack landlines, cellphones are having a pervasive impact. People selling millet or cowpeas in Niger traditionally traveled from market to market to learn prices – wasting money and time while the shelf life of crops ticked away. Farmers sold harvests without knowing prevailing prices. Prices of millet, the main food crop, fluctuated wildly – a potential disaster for families dependent on buying it.

People now call around for prices before buying or selling, creating what Ms. Aker calls a more efficient market. "On average, price levels went down" when cellphone service came in, she says. "But the most important thing is you don't have these extremes in consumer prices."

The rise of cellphone technology reflects a larger dynamic. Poor countries that lack expensive infrastructures like telephone lines, power grids, paved roads, and national ID systems are bypassing these massive investments and "leapfrogging" directly to lower-cost, decentralized technologies: cellphones instead of landlines. Satellite TV instead of local transmissions. Diesel generators or solar panels instead of grid electricity, and so on. In some cases, developing countries are adopting technologies that have yet to catch on in industrialized nations – such as biometrics, or digital fingerprinting.

A new form of cellphone commerce, called mobile money, is allowing rural people without access to banks to transfer money across long distances, pay electronically for supplies, or even save money through a process similar to using a prepaid ATM card. The first step toward this happened in 2005, when the Kenyan cellphone provider Safaricom began allowing people to transfer phone time that they had purchased to other customers. This transferable phone time soon became a de facto currency: People actually transferred phone time to one another to pay their debts and bills; those who received phone time from others could then convert it back to cash by selling it to informal brokers.

Safaricom followed up in 2007 with M-PESA – the world's first formal mobile money system. It replaces the brick-and-mortar bank with a man by the road, holding a cellphone, who accepts cash to charge customers' phones with electronic, or "mobile," money.

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