Days before Prime Minister Manmohan Singh’s Independence Day speech, there was a strong rumour that he would announce a scheme to provide free mobile phones and talk-time worth Rs. 200 for households below the poverty line. Though the announcement never came, the media reports focused on the political motives behind the scheme and the fiscal burden it’d impose on the already resource-strapped Treasury. Interestingly, not much was said about possible gains from making access to cell phones universal. This blog-post highlights some of these potential benefits.

A cell phone makes it much easier and cheaper to access information, and this can lead to huge economic gains at an individual and aggregate level, as shown by Jensen (2007) and Aker (2010), in the context of the fishing industry in Kerala and grain markets in Niger[1]. Jensen (2007) has looked at the introduction of mobile phones in Kerala between 1997 and 2001 and its effect on the fishing industry. Before the era of mobile phones, fishermen sold their catch almost exclusively in their village market because they rarely knew prices in other nearby markets. This, in many instances, led to either excess demand or excess supply, and a great deal of price variation across the markets. But once mobile phones were introduced, fishermen, wholesale dealers and retail dealers started coordinating even when fishermen were at sea. This resulted in a dramatic fall in price variation and instances of excess demand or excess supply vanished. The fishermen’s profits went up and prices paid by consumers declined, too. Aker (2010) provides a similar example in the context of grain markets in Niger, where price variation across different markets dropped substantially once mobile phones were introduced. The drop in price variation was even larger for markets that were more remote and not connected with paved roads.

In fact, according to the newspaper reports, the Nigerian Agriculture and Rural Development Ministry is planning to distribute 10 million mobile phones to small farm holders by next year.

The policy of providing free mobile phones is not unique to developing countries. The ‘Life Line Assistance Program’ in the United States provides a free basic cell phone with free talk time of 250 minutes per month for a low income household. The idea is that vulnerable sections (job seekers, senior citizens) would be at a disadvantage without a cell phone due to being disconnected from the rest of the world.

Cell phones also play an important role in making money transfers more cost-effective and hassle-free. Everybody, I guess, knows about M-PESA by now. It’s a mobile phone-based payment and money transfer service, launched by Kenyan wireless service provider Safaricom in April 2007. The service provides users an M-PESA account accessible through their cell phones. This account can be used to deposit money into this account, to send balances using SMS to other users, and redeem deposits. Given the safety, low transaction costs of making transfers even for small amounts, M-PESA has become quite popular with Kenyans. Currently, about 38% of the adult population has access to M-PESA[2]. Buoyed by the success of M-PESA, a number of countries are experimenting with strategies to utilize mobile phones to achieve financial inclusion.

People are coming up with various innovative ways to use cell phones. One such example is ‘Ushahidi’, a software platform to collate and display crowd-sourced information. This platform was created in the aftermath of the 2007 Presidential Elections in Kenya and the associated wide-spread violence. Eye-witnesses can report incidents of violence by email and text messages, which are then placed on Google maps on the web site. These ‘crowd-sourcing’ techniques have become quite popular since then. In the Indian context, www.powercuts.in has been collecting information about the power cuts, and putting it up in an accessible format. Such crowd-sourcing techniques have immense potential to monitor the implementation of various government schemes. I have discussed one such possibility in the context of ‘Cooked Mid Day Meal’ scheme in my previous blog.

The text messaging feature of cell phones is also attracting the attention of researchers and policy-makers. The associated low cost, quick delivery and ability to reach many people simultaneously have made it possible to utilise them in different contexts. In Chhattisgarh, text messages are sent to the beneficiaries of the public distribution system (PDS) or interested citizens, informing them about the departure of trucks carrying food-grain from the Food Corporation of India (FCI) godowns to the local grain shop. Using insights from behavioral economics, researchers are using text messages to increase saving among poor people, improve loan repayments, inform and educate people about various aspects of health care, and so on[3].

In this context, making cell phones available to the entire population might be quite useful. Just thinking of the top of my head, once everybody, especially poorer households, has mobile phones, the government can think of implementing something like this: collecting the cell phone numbers of all the pregnant women through ASHA and sending them text messages/ pre-recorded voice messages reminding them about getting regular check-up done; informing them about the location of the nearest health centres; giving them information about anganwadis where they can receive nutritious grain/ food; giving them information about the Janani Suraksha Yojna; informing them about immunization for children once they give birth and so on. Further, the government can have one dedicated toll-free number for all the schemes related to pregnant women and children in the age-group of 0-3 years or 0-6 years. Anybody can call that number and get the required information. But then why just limit such a service to maternal and child health? Reminders can be sent to people at the beginning of the month to deposit money in their saving account; to ask their kids about what is happening in school every day and so on. These small ‘nudges’ might go a long way in helping people to make useful decisions for themselves[4].

[1] Jensen, Robert (2007). “The Digital Provide: Information (Technology), Market Performance and Welfare in the South Indian Fisheries Sector”, Quarterly Journal of Economics, 122 (3), p. 879-924;

Aker, Jenny (2010). “Information from Markets Near and Far: Mobile Phones and Agricultural Markets in Niger”, American Economic Journal: Applied Economics 2 (July 2010): 46-59

[2] Jack, William and Suri, Tavneet. “The Economics of M-PESA”, August 2010 version

[3] http://wbi.worldbank.org/wbi/content/behavioral-change-using-technology

[4] http://www.ghdonline.org/malaria/discussion/the-effect-of-mobile-phone-text-message-reminders-/;

http://redcrosschat.org/2010/10/25/text-messages-to-fight-cholera/;

http://irevolution.net/2012/07/26/impact-of-sms-on-behavior/