Yes, the market works for the poor

In 2005, The Economist published their special reports titled "A Digital Divide." The argument was one of the main reasons for the persistence of poverty is the lack of access to market (goods, labor, or financial). Information and Communication Technology (ICT) has the potential to provide the access to market. The problem is the poor tend to have limited access to such technology. Hence, one way to help alleviating poverty is to provide greater access for the poor to ICT.

A few years ago, this idea did sound absurd. What? Internet or mobile phones for poor farmers or fishermen, while most of them still even struggle to buy food? (Even Rizal once was skeptical. Back in 2005, I asked him how ICT can help the poor. "Sell the computer, buy them rice," was his answer).

However, anecdotal evidences do show that ICT can, and does, help the poor. The Economist's this week special reports provide a series of article - one may see it as a conclusion for their 2005 reports - on how ICT, mobile phone in particular, have transformed lives in the poor world in almost a revolutionary way. It connects buyers and sellers in remote areas; helps small businesses taking orders on the spot; enables farmers to get weather forecast hence deciding whether or not to plant their crops. Amongst all, in India and Africa, mobile phones are the new financial intermediaries:

... mobile money, which allows cash to travel as quickly as a text message. Across the developing world, corner shops are where people buy vouchers to top up their calling credit. Mobile-money services allow these small retailers to act rather like bank branches. They can take your cash, and (by sending a special kind of text message) credit it to your mobile-money account. You can then transfer money (again, via text message) to other registered users, who can withdraw it by visiting their own local corner shops. You can even send money to people who are not registered users; they receive a text message with a code that can be redeemed for cash.

The question is, are anecdotal evidences good evidences? Contemporary studies seem to support the idea. This study is an example. (Of course, there is always a debate on external validity, generalization, etc.)

There is a bigger picture I'd like to point out: this is an example of how market incentives work, and work for the poor. Ten years ago, mobile phones were still a luxury. But in just a decade, costs have fallen dramatically so virtually almost everyone who wants to have a cell phone can have one. Competition and market liberalization has contributed to this falling costs.

On the other hand, (poor) people in the developing world are potential consumers. The market sends this signal to the producers and network providers, who keeps innovating their products. The innovation did not stop there; came Grameen Phone, came M-PESA, and so forth.

So, don't lose faith in the market economy, yet...