Digital Pulse - Ch 2 - Sec 3 - Can Information and Communications Technology Applications Contribute to Poverty Reduction? Lessons from Rural India

Summary

This working paper argues that ICTs can have a positive impact on reducing poverty by improving poor people's access to education, health, government and financial services. However, this potential is not guaranteed and requires concerted policy decisions and actions that will enable ICTs to contribute to the three priority areas for poverty reduction: opportunity, which makes markets work for the poor and enables them accumulate assets; empowerment, which makes state institutions work better for the poor and challenges social barriers, and; security, which helps people manage risk. These priority areas are best dealt with through a combination of locally based market initiatives that are supported by the state and outside agencies.

Key Points

The potential of ICTs will not be realized automatically, primarily because of the barriers of weak infrastructure, high access costs, and illiteracy. ICT diffusion continues to favour the well off, and specific pro-poor ICT policies are required to bridge the growing digital divide. Specifically, (1) the relative price of capital for communications needs to be reduced, and (2) research and development in ICT has to favour poor-friendly hardware and software. Evidence from India shows that these policies will help to address the needs of the poor whose opportunity, empowerment and security are often compromised as a result of having limited access to vital information. The article provides several case studies, grouped under these heading which demonstrate the problems and solutions:

• Opportunity – Problem: Insufficient measurement capabilities lead to milk farmers being under-paid for their product. Solution: Computerized milk collection centres that ensure standard measures and speed remuneration.
• Empowerment – Problem: Long distances of travel and corruption are barriers to appropriate citizen interactions with the state. Solution: Government information and service kiosks reduce travel time and end the monopoly on information of public servants, improving the quality of citizenship.
• Security – Problem: Existing microfinance (especially peer-lending) institutions face high costs of service delivery to the poor because of the need for constant cash counting and inopportune meeting times. Solution: Smart Cards (embedded microchips) improve transaction efficiency, reduce errors and fraud and contribute to improved financial service access.

However, in order for these policies to achieve fruition, gains must be made in improving low-cost connectivity. Blanket access is clearly not an option, therefore, policy makers should focus on universal access strategies – the presence of a public telecom booth in every village. One of the observations stemming from the Indian experience is that universal access is more likely to occur given an environment of competition and free-market opportunity in the telecom sector. Deregulation in India has been shown to significantly reduce communication costs and improve teledensity. Both small entrepreneurs and large telecoms require enabling environments. This is not to say that there is no role for the state, it should operate to fill in the gaps left by the market by enforcing geographic coverage requirements and contributions to universal access funds.

In concluding, the author notes that project design must also meet a few more important criteria. Grassroots intermediaries that demonstrate a diversity of gender and caste (class) are important to ensure participation, as is local ownership and the development of locally contextualized information and ICT applications that address the needs of the community. Training is also an important component and is necessary for awareness raising, ICT adoption, and alleviating marginalization. Finally, all projects must meet basic standards of sustainability and must be equipped with appropriate monitoring and evaluation regimes.

Source: Cecchini, Simone. “Can Information and Communications Technology Applications Contribute to Poverty Reduction? Lessons from Rural India” (Poverty Reduction Group).