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Technological Leapfrogging And Development: The Example Of Kenya

'Leapfrogging' refers to the phenomenon of skipping one or several stages of technological development

Credit card companies have been flourishing in the West since the middle of the last century. The basic premise of such payment systems is that people have a bank account. As a result, countries such as Kenya where most people own a mobile phone but not a bank account, resorted to other means. This is the starting point of the M-PESA, a service which revolutionized the payment system in Kenya by democratizing mobile payment before it even had a widespread credit card infrastructure.

This phenomenon has a technical name: technology leapfrogging. Essentially, it refers to the phenomenon of skipping one or several stages of technological development. There are countless examples in other sectors. To name but a few: Ethiopia and its project of Grand Renaissance Dam on the Blue Nile would permit it to significantly increase its electricity capacity while leapfrogging the use of coal. The African startup Eneza Education offers quizzes and lessons via cellphones to kids who do not own a computer nor have access to the internet. This approach to development has already been exploited very successfully by China and is sought to become a major factor for growth in Africa as well as other developing regions such as India.

A shop in Kenya offering M-PESA sim-cards. Image: Flikr

I would like to focus on the stories of M-PESA and another similar service, M-TIBA, both from Kenya and owned by the same company, as they often are cited as some of the most inspiring examples of technological leapfrogging.

M-PESA, where ‘M’ stands for ‘Mobile’ and ‘Pesa’ is the Swahili for money, started off in 2007 as an initiative by Michael Joseph for Safaricom, a Kenyan partner company of Vodafone. In his own words, ‘Our aim was that customers would visit [M-PESA’s] agents with cash, then, through a series of SMS messages, convert [their] money into electronic funds that securely sat on their SIM cards. Then, via SMS, they could transfer that money to anyone else, who would then visit their local agent and withdraw that cash again.’ He and his teams did not expect that this project would flourish to the spectacular extent it did. A group of researchers from MIT studied the social impact of this innovation. They published their results in Science, reaching the conclusion that it ‘increased the efficiency of the allocation of consumption over time while allowing a more efficient allocation of labor, resulting in a meaningful reduction of poverty in Kenya.’ Ten years after its launch, M-PESA transfers amounted to nearly half of Kenya’s GDP. It has now expanded to countries such as Tanzania, India, Romania or Albania. Afghanistan even lead a pilot project to pay civil servants via M-PESA. To put things into perspective: Swish was used by about 70% of the population in Sweden in 2018, M-PESA by 93% of the Kenyan population already back in 2016.

Building on this experience, Safaricom decided to tackle another issue in the Kenyan society. Over 30% of the population suffers from difficulty when it comes to paying for healthcare. As a result, the company launched in 2016 a service called M-TIBA, ‘Tiba’ meaning ‘treatment’ in Swahili. Basically, M-TIBA is connected to an M-PESA account and permits its users to manage their healthcare expenses and helps them obtain health insurance. It allows to save, borrow and share money, obtain vouchers or get access to managed funds. For instance, M-TIBA has entered into partnerships with a number of institutions such as the National Hospital Insurance Funds and PharmAccess Foundation to provide affordable services such as vaccinations or support for pregnant women. This project is gaining a lot of traction and recognition, shown by the fact that the Financial Times and the International Finance Corporation granted M-TIBA with a Transformational Business Award in 2017. After mobile payments it seems that Safaricom is on track to revolutionize healthcare in Kenya.

But it does not stop there. Joseph Mucheru, the Kenyan Cabinet Secretary of the Ministry of Information, Communication and Technology, explained in an interview during the ITUPP 2018 conference in Dubai that his country is experimenting into more leapfrogging endeavors to democratize access to information and communication technologies. For instance, he explained that Kenya would partner up with Google’s Loon project and that they ‘expect their balloons will come and that should hopefully give 4G coverage across the whole country.’ All these stories provide an inspiring example that, in the words of Bill Gates, when people are empowered, they will use digital tech to innovate on their own behalf.’

A clinic in Nairobi offering the M-TIBA health service. Source: Flickr

Leapfrogging is however not a blanket solution to all of the world’s development issues. In 2017, the World Bank published a report on leapfrogging and development in Africa. Although optimistic, it highlighted a number of challenges ahead. In particular, issues such as education, infrastructure and sanitation may hold back transformative technological change. On that note, Harvard Professor Calestous Juma warns that cutting technological corners cannot always be a sustainable strategy and that infrastructure is still the backbone to industrialization and economic development. As The Economist summarized it: ‘Most of the time, to go high-tech, you need to have gone medium-tech first.’

Maximin Orsero

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