Cell phones are quickly transforming markets in low-income countries. The effect is particularly dramatic in rural areas of sub-Saharan Africa, where cell phones often represent the first telecommunications infrastructure. Niger had approximately 2 landlines for every 1,000 people when mobile phones were first introduced in 2001. Since that time, mobile phone coverage has increased significantly throughout the country, with over 78 percent of markets covered by 2007.
In this CGD Working Paper, post-doctoral fellow Jenny Aker assesses the impact of mobile phones on grain market performance in one of the world’s poorest countries. She finds that the introduction of mobile phones is associated with a 20-percent reduction in grain price differences across markets, with a larger impact for markets that are farther apart and those that are linked by poor-quality roads. Cell phones also have a larger impact over time: as more markets have cell phone coverage, the greater the reduction in price differences. This is primarily due to changes in grain traders’ marketing behavior: cell phones lead to reduced search costs, more market information and increased efficiency in moving goods across the country.
Aker concludes by outlining the ways in which information technology can be used as an effective poverty-reduction strategy in low-income countries. While information—rather than information technology—is crucial for market performance, cell phones are particularly well-suited to the way in which many households search for information, and they should be central to any debate on market information systems.
Second, information is necessary but not sufficient for efficient markets, especially in sub-Saharan Africa: investments in IT should also ensure that the necessary market infrastructure is in place to allow market participants to use the information that they receive. And finally, using IT as a poverty-reduction tool can be best accomplished via public-private partnerships. By combining the public sector’s knowledge of and expertise in development-oriented domains (agriculture, health and education) with private companies’ technical expertise and innovation, public-private partnerships can increase the potential impact, sustainability and efficiency of development interventions.
The key is ensuring that such partnerships are used to develop and disseminate relevant and effective information technology solutions to solve specific development challenges.