Economist Article

This article from the Economist is an interesting counter-point to the New York Times magazine article recently and others about the prospects of using cel. phones as a link to the internet in developing countries. It basically argues that while mobile technology is being widely used for calls & text, using mobile phones to access the internet would still require a huge infrastructure investment. The article raises the question about whether governments should step forward to make this investment in infrastructure since it’s not clear that the private sector will.

Grameen USA

Grameen Bank has extended its services to the U.S. with a pilot program in New York City. Over the last month Grameen has loaned $50,000 to immigrant women in Queens, NY, as described in this Financial Times article by Daniel Pimlott. After looking at the Kiva site a few times I started wondering about whether microfinancing would work or was available in the U.S. This speech by the Fed Chairman Ben Bernanke from Nov. ‘07 gives a pretty good overview of the challenges with microfinance in the U.S. as opposed to its use in developing countries.

There are a number of obstacles which make it more difficult in the U.S. One of the major ones is the fact that many of the small businesses in developing countries operate outside of tax and legal systems in their countries, whereas in the U.S. even the smallest businesses are subject to taxes and regulations. This can actually be a major barrier for a lot of small businesses here.

Other obstacles include the fact that the U.S. market is more sophisticated and for small businesses to succeed it often requires education and a broader understanding of the market they’re competing in. For that reason, certain microfinance companies in the U.S., like Accion USA, which Bernanke talks about in his speech, offer educational programs in addition to loans as part of their services.

In bringing its services here to the U.S., maybe Grameen will help to overcome some of these obstacles. Still, the program will be somewhat limited, operating only in New York City where Grameen plans to offer $176 million in loans over the next 5 years.

M-banking

There have been a lot of stories lately about m-banking or mobile banking, including this one from The Economist.  Pilot programs which allow for cel. phone-based banking transactions have been highly successful in the Philippines and South Africa in particular.  M-banking provides access, convenience, lower banking fees, and safety to low-income populations in these regions, and has been adopted at very high rates.  There are still issues with regulation and consumer protection but as the article points out the transaction amounts are often capped at relatively small amounts to discourage money laundering and fraud.

Mohammed Yunus has endorsed m-banking as a complement to microfinancing because ‘micro-entrepreneurs’ have been able to get approved for microloans and conduct banking transactions using their mobile phones in regions where it’s offered.   M-banking has also simplified the transfer of remittances from one country to another.  These transfers have been widely used in the Philippines, and could be adopted in countries like Mexico where remittances from the U.S. especially, are a significant part of the economy.    

M-banking is one of those rare applications of ICTs which has been initially adopted in developing countries and is likely to become far more widespread in the West.  Since mobil phone ownership rates are so much higher then PC and internet rates in developing countries m-banking is a natural fit.  In 2008, banks like Wachovia, Wells Fargo and B of A are considering major m-banking programs in North America.  A recent report by the Yankee Group indicates that m-banking can benefit low-income populations in the U.S. as well.     

 

 

Google Article

There’s an interesting article by Ken Auletta in the Jan. 14th New Yorker Magazine about Google.  The focus of the article is about whether Google is becoming too powerful as a company, and also about it’s increased lobbying efforts in Washington.  While this isn’t necessarily about development, some of the issues raised in the article seem relevant to our class discussion.  

One was that Google had, “declared that it wanted to digitize all the world’s books, including those under copyright.”  The article talks about how Google was stopped in that effort by publishers, but in a number of different areas including books and software, Google has been trying to speed the transition from “goods” to “information” as we talked about in class. 

The most interesting part of the article to me was the conclusion of a Stanford law professor, Lawrence Lessig, who said, “Google’s brilliant because it architects its system so that when people do what they want to do, they give something to Google.  When I do a search, I give Google my evaluation of what the best search is.” 

 While Google is providing what would seem to be a free and valuable service to all- at least all who have net access- it is actually reaping huge profits from that service, often without its users even knowing it. Google also advocates things which would seem to serve the public good, like universal broadband access, but which are also obviously in its own financial interests.

This raises the bigger question which seems relevant to the internet as a whole about whether the net is really a democratizing force as many people believe, or whether it is actually enriching a small number of people disproportionately and making them incredibly powerful.  I guess both of these things could be true to some extent as well. 

As a result of Google’s incredible growth, Auletta says, “there has never been a company whose influence extended so far over the media landscape, and which had the ability to disrupt so many existing business models.”  It seems like there are certain interesting parallels between the growth of Google and the growth of the internet as a whole.