A Firsthand Report of Cellphone Economics in the Developing World

The following is a guest post from my cousin, Jon Chalmers. Jon is a missionary in Mombosa, Kenya with Africa Inland Mission. A little while ago I posted an article on cellphones called Mobo Vertigo and Jon responded with some interesting content in a comment, but since what he wrote was so fascinating I didn’t want to limit the audience to a comment. Instead I invited Jon to write some material on the topic of “Cellphones in the Developing World.” I have organized his content into two separate posts; the next one is titled “Cellphone Deportment in the Developing World,” and will be published in the next few days. Enjoy!

We were not heavy cellphone users in Canada. Which I know is kind of strange for some people but not odd for Canada since cellphone costs are so expensive compared to most places in the world.  We sporadically kept one in Canada on a pre-pay plan when we were doing heavy traveling. But, it was more of an emergency tool.

In Africa, it has completely changed for us! This is partly because of cost. Cellphones are CHEAP here since airtime does not hurt the wallet like at home. One can buy a low end cellphone new for 10 dollars or so. We can call to Canada for around 4 cents a minute! And within Kenya on the same network we can call for around 1 – 2 cents a minute!

Since phones are so cheap here it should not be surprising to find out that cell-phones are prolific here—almost everyone has one, which is astounding when you consider that minimum wage is probably around 100 dollars a month (and many people are getting paid a lot less). Even unemployed people seem to have cellphones. Yet it seems to fit the economy since people live day-to-day here. For example, unless you are rich you don’t have a refrigerator, so you only buy enough food for the day. Everything works this way, including cell-phones.

This is really the main difference between cellphone companies in North America and similar companies in the developing world. Cell-phone companies here have created an infrastructure that caters to a market where people are just getting by. So, phone companies offer scratch cards for about 10 cents and up.

It’s common to watch people come up to the little shops which are all over town and just buy a small 10 cent scratch card.

These micro-transactions have made telecommunications one of the biggest and most visible businesses here; everywhere you go you will see Safaricom and Airtel advertising just like you see Coca-Cola in North America, its everywhere! In the following picture you can see an apartment building just plastered with Safaricom ads.

But its not just cell-phones, everything is on a pre-pay system here. Even the Internet is the same. I can go and buy scratch cards and load my computer with a pre-pay plan for the Internet measured for gigabyte use. I usually buy about 8 gigs for 45-50 bucks. If you think this is extreme, the pre-pay model is integrated even into something like household electricity. We stayed in a house in Nairobi for a few weeks and were shocked to see a small panel near the breaker box; you just go to the supermarket, buy a scratch card and then load up your power meter with kilowatts! Crazy!

The other amazing thing cell-phones do here is send money. About 5 years ago in Kenya, Safaricom developed something called M-Pesa. It has become revolutionary and much has been made about it around the world. There are small M-Pesa outlets all over Kenya, from very remote rural areas to the cities where you see them like Tim Horton’s in Hamilton.

Basically, it’s like getting a small bank account on your phone. You go to an outlet, give a person cash and they electronically credit that amount to your cellphone. You then can pay for things with M-Pesa; even big stores are starting to accept it as a means of payment.  I pay my power bill to Kenya Power with it each month. It’s intuitive and easy. The brilliant thing about is that it has allowed those with jobs in Kenya to support their families who do not have work. If people work in the city they can get their paycheck, load up their phone and send a few shillings to the rural areas so their family will have food to eat. Once you send the money the receiver gets a message on their phone. They then go to another outlet near them and make the transaction with the clerk and pick up the actual cash. It really is amazing! Also, it was recently announced that you can now take out a small loan using your cellphone.

Finally, if you don’t have electricity in your home, for a small fee M-Pesa outlets will charge your phone for you:

Follow Jon and Ami’s blog at: http://jachalmers.blogspot.ca/

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