The COVID-19 pandemic sent advanced and developing economies into starkly divergent paths—with advanced economies expected to recover fully by 2023 and developing economies expected to lag for years to come. Developing economies have nevertheless embraced innovative digital solutions that are enabling economic transformation and putting them on a path toward green, resilient, and inclusive growth.
Private and public investment in digital solutions is bringing critical services to the poorest, creating jobs, strengthening small and medium businesses, enabling trade and services, and building resilience to shocks. At the same time, more than half the developing world remains digitally unconnected, and risks around privacy and cybersecurity are growing worldwide.
During the 2022 World Bank Group-IMF Spring Meetings, we explored how countries can boost growth, productivity, inclusion and resilience as they recover by embracing private sector innovation coupled with enabling government policy. World leaders came together to discuss how to best build resilience & manage uncertainty. Listen to the Spring Meetings highlights in a special series of The Development Podcast.
- Paul Kagame, President of the Republic of Rwanda
- Michael Miebach, Chief Executive Officer, Mastercard
- Omobola Johnson, Senior Partner, TLcom Capital
- David Malpass, President of the World Bank Group
[00:00] Ntombie Siwale: Welcome to a special edition of The Development Podcast from the World Bank Group, I'm Ntombie Siwale. In the next five episodes, we will be recapping the World Bank Group - IMF Spring Meetings. This year's discussions took place as the world tackled overlapping crisis and conflicts. The focus was on the actions countries can take to manage uncertainty and build resilience. In today's show, the global digital revolution, opportunities and hurdles.
Michael Miebach: Where is my data? Is my data safe? Where is my money? Is my money safe? If I have it under the mattress, I can see it, I can feel it. If it's somewhere in an app, I'm not quite sure.
Ntombie Siwale: The inside view from Rwanda.
Paul Kagame: On our continent, the major challenge continues to be the insufficient reach of fiber optic cables in rural areas. This means that the majority of Africa's population does not have access to high-speed internet.
Ntombie Siwale: The tech transforming commerce and the challenges still ahead in connecting the world.
Omobola Johnson: Most of these tabletop entrepreneurs, most of these small-scale entrepreneurs are women and they have been largely excluded from this digital economy, but this is one way of including them.
Ntombie Siwale: All that and more over the next 25 minutes.
Ntombie Siwale: For many of us, it's hard to imagine life without access to the internet in the palms of our hands, thanks to smartphone and hard to fathom the last two years of the COVID-19 pandemic without digital tools and connectivity. A digital world meant business and education could in some shape or form continue as we physically ground to a halt. Governments could provide services, financial technology lept on at a lightning pace and of course we could connect with our loved ones. Digital innovation is driving economic transformation, access to finance and job creation. But despite all this, nearly half of the global population is still unconnected. At the same time as developing and deepening our relationship with digital technologies, we need to mitigate risks, data privacy and cybersecurity to name but two.
[02:48] Ntombie Siwale: Let's start by hearing about Rwanda's own digital journey. We joined the President of Rwanda, Paul Kagame in conversation with World Bank Group President David Malpass.
Paul Kagame: Over the years, Africa's digital transformation has been driven in particular by mobile financial services. Africa is in many ways a global pioneer in this sector. 80% of Africa's population has a mobile phone, but not everyone has access to high-speed internet on a smartphone, yet broadband is the key to unlocking digital transformation. On our continent, the major challenge continues to be the insufficient reach of fiber optic cables in rural areas, so if we address this means that the majority of Africa's population does not have access to high-speed internet and therefore these are key areas to focus on in dealing with the matter. In Rwanda, we have made a significant investment in broadband infrastructure. We have been able to reach over 95% broadband coverage. If you look at our country health sector for example, most of the facilities in Rwanda are connected to the internet just to give that example. I should that add that therefore, our partnership with the World Bank has helped us to tackle digital barriers, and I wanted to take this opportunity to appreciate you President Malpass and the World Bank for having been of great help in this.
David Malpass: Thank you very much for that. We want to push forward with that in your neighbors and in Africa as a whole. I was very interested as you described the financial transactions and the payment systems as being the backbone. We find in many countries that people are eager to use and to make digital transactions. It's a way of having a very inexpensive form of payment for services and for goods. Can I drill down on that a little bit? The Rwandan Franc is unique to Rwanda, so how do you envision the importance of cross-border payments? If someone drives a truck across a border, they're not able to use the same digital payment system. Do you think that will evolve, and is it important that there be a single currency or how will that evolve do you think?
Paul Kagame: There has been effort across the region during the integration process of a region? For example, if you take the East African Community, there has been harmonization of a number of things, including looking at therefore how that can be solved to the point that from one place to another, it's like moving within a country in itself. The East African Community has more or less come closer together, in the sense that it becomes one big country that brings the number of countries that are partner states together. I think that is well underway, it's being discussed. It's looking at how we can even have monetary union under that, therefore different commonization activities and services will be undertaken to ease on the movement and therefore the currencies and the payment within the payment system as it is.
David Malpass: I imagine that as there's more and more trade across borders among the East African countries, that will also draw along the idea of transactions that are accepted in the various countries. Mr. President, as you think about the challenges within Rwanda, around the world, privacy is one of the issues that people consider. How do people store data safely? How do they avoid surveillance of their own data? I wonder your thoughts on that, and also this challenge around the world of having all information available to people. There are some countries that are really closing the internet to certain flows of information. What do you think about those issues?
Paul Kagame: Well, first of all, one has to be aware really of the risks involved with these new technologies, and therefore people have to take steps to make sure that risks are mitigated. But the same time, harness the productivity and efficiencies and all the values entailed in these new technologies. Therefore people have to think about safety in all forms indeed, and being aware of the risks of course. Within our own system for example in Rwanda, we officially launched recently in the Kigali, the first center of the Fourth Industrial Revolution in Africa, in partnership with the World Economic Forum. This helps us to have a full grasp of the issues, and therefore maximize on the benefits and also minimize on the risks as well as in between allowing for the freedoms to do with the management of data and allowing people to freely rip benefits from that.
Paul Kagame: I think it'll be built on how people come together to discuss this, put necessary laws in place, not only just nationally, but rather regionally and also learning from the best practices across the globe. It's not an easy thing, but I think it is doable. Let me give example. Last year, Rwanda adopted a personal data protection and private law and the center played an instrumental role in development. There are these laws that are being developed to make sure that data protection is of essence and it will also allow fostering of trust which we in turn promote innovation and facilitate cross-border data flows.
David Malpass: My sense is, there are now so many services being provided across the internet that it pays for the investments that countries are making. We find that regulatory advances are one of the critical enabling steps for countries as they consider the internet. But I think some of the biggest advances can be in physical trade across borders, and then digital trade across borders and payment systems. Can you describe the physical trade that's going on and whether digitalization is going to help it advance?
Paul Kagame: I think there is no conflict really between the physical aspects of that trade and the digital aspects, but rather there is complementary and the more we digitize these processes, we find that things work more efficiently. For example, in some parts of our borders with our neighbors, we have created really one clearing house where for officials on one side of the border, and on the opposite side are in one place. Whatever information that is required is delivered on spot and people move with ease, and people and businesses and services move very fast. It's not either all, but rather for me, it's how the two can interact and work together as fast as possible. We're not going to have purely one process or purely the other, it's how we can bring together the two and be able to move on. I think we are beginning to see development in this area and good progress.
Ntombie Siwale: That was the President of Rwanda, Paul Kagame, with World Bank Group, President David Malpass. You are listening to the Development Podcast from the World Bank Group, with a special addition on the Spring Meetings. I'm Ntombie Siwale.
Various speakers: Namaste, I'm Shilpa in new Delhi. / Ola, I'm Samir [inaudible] Fiji. / [inaudible], I'm Muslim Sidi Mohammed in Niamey, Niger. / I am Mampunza Esther in Uganda. World Bank Group-IMF Spring Meetings. / World Bang Group-IMF Spring Meetings. / World Bank Group-IMF Spring Meetings. / The World Bank Group-IMF Spring Meetings.
[12:45] Ntombie Siwale: We've heard a bit about the bigger picture, how government can design new digital strategies. But given our globe stark digital divide, how can we address the chasm of connectivity, unfurl opportunities for small firms, for more women, and of course for those living in rural areas. Well, let's join a conversation moderated by Lana Wong, with Omobola Johnson and Michael Miebach. Dr. Johnson is the former minister of information, communication and technology of Nigeria, a current member of the Alliance for Affordable Internet and a private equity investor. Mr. Miebach is the CEO of MasterCard.
Omobola Johnson: Nigeria has made tremendous progress in terms of internet connectivity. Today 2G coverage is 90%, 3G coverage is 80% of the country and 4G is 70%. The gaps where there's 10%, 20% or 30% those gaps are in the rural areas and that's where the challenge is, really get those rural areas connected. But I think what I would like to say is borrow from the term that the Alliance for Affordable Internet uses. That is the term that is called meaningful connectivity, and that's what we need to be worrying about. Not just connecting the rural areas, but ensuring that connectivity is meaningful. That means a fast connection, at least 4G so to speak. It means ownership or devices. It means having daily access to the internet for work, for business, for social, for communication, and finally means that you have enough update and you can afford that data.
Omobola Johnson: What regulations can we put in place in Nigeria to ensure that everybody has meaningful connectivity? I think there are a number of them, and some of them we need to be fair to Nigeria. We are actually doing some of those things already. Firstly, faster connection. Encouraging collaborations between the community networks and the national networks, where the community network have built ours based on subsidies given by the Universal Service Provision Fund. The national networks can expand their spectrum, expand their ranges, expand their connectivity to those community networks and share revenues based on that. The second thing that we need to do is around smartphone ownership, and that is really first of all reducing the taxes, because we import most of the phones that come into this country. Reducing the taxes and the duties that are placed on those smartphones, and also actually support or encouraging the manufacturing of devices locally, because that away all the taxes, takes away all the customs duties and really making those smartphones more affordable for the average Nigerian.
Omobola Johnson: I think the third thing that we need to do is affordability, and that speaks to the daily access of meaningful connectivity. If it's affordable, people can get on when they want, for as long as they want and how they want to. Making it more cost effective, roll outs, considerations rights away all those kind of charges that are placed on telecom companies to roll out the networks. Also things like data bundles are very important. Zero rating for some of the very important content that we have on the internet and data bundles that allow you to actually provide those services cheaper.
Omobola Johnson: Finally, enough data. Having enough spectrum that is affordable. Enough spectrum that will enable us to roll out the data requirements, because literally as soon as the data is rolled out, it's all doubled up. But having spectrum available for the telecommunications company, but having it available at a cost that is not as exorbitant as it is now. We just completed our 5G options in Nigeria, we raised the bar, Nigeria is about half a billion dollars and I would put it to the government that if we just saved a small fraction of those dollars, and instead of having spectrum expensive, making sure that we reduce the cost of spectrum, but then give the national communication companies roll out obligations for getting that spectrum and forcing them to roll out into those rural areas as opposed to them doing it at their pace, at their time, by partnering with the community networks.
Lana Wong: That's great, thank you. I think your point about a meaningful connectivity and also affordability is critical. That also really brings us down to making it meaningful for the consumers. Let me turn to Michael on that topic. Michael, how can the private sector help bring the innovation and expertise needed to support financial health and prosperity?
Michael Miebach: We were clear as a private sector player that it starts with access to that digital economy. It actually starts with everything Omobola just said. You got to have fundamental access to become online. But then building from there on, what is your access to the digital economy? It was actually here at the World Bank stage seven years ago that we took a leap of faith and we said, "Well, with 5 billion people not being part of the digital economy, we have to do our part as a private sector player." And we committed to put half a billion people, 500 million people into the digital economy. Fast forwarding into COVID, that was just about a time in 2020 that we had actually delivered against that goal. Building on what Omobola just said, government does its piece, but the private sector comes in and uses the infrastructure, uses the access, uses the spectrum that you just talked about to deliver financial services access, and then start to build towards prosperity.
Michael Miebach: How do we do that? What are some of the learnings? Some of the learnings are that, across the private sector, you need partnerships. I'll give you an example to bring all of this to life. Let's go to Egypt. One of the largest industries in Egypt is the garment industry. Employs one and a half million workers. The salaries have been given in brown bags today. They're coming on a digital wage account, a digital wage account leaves a data trail that allows you to get better access to credit, which will smoothen purchases you want to do as a family, as an individual, as a small business and then the virtual circle closes. This is in partnership with Levi's, with a local set of local banks in Egypt. That is a private sector-government model at scale, because the garment industry obviously matters in other countries as well. For example, Bangladesh.
Michael Miebach: Now we've doubled down, we took all of those learnings and we said, "Well, there's still over 2 billion people that are not in the formal financial system, that are not in the digital economy. What else can we do?" We doubled down. We upped the goal to 1 billion, so I hope to be back on your stage at some point in time and say, "We achieved that as well and here are the learnings." But the private sector is critical. We cannot rely on grants. The private sector will look, "Does this make sense? Does it pull other players into the ecosystem?" At telco for example, to provide financial services into rural areas. Without commercial sustainability, it's not going to happen. The private sector will look for economies of scale to make it commercially sustainable. The private sector will drive for innovation, leverage technology and competition and all of that is needed and that's why I think we are playing a critical role. We want to be a role model.
Lana Wong: Fantastic. Well, no that's why these partnerships public-private, government, philanthropic, they are critical, so thank you for that. But that does bring us to job creation, so let's talk about job creation. We know it's not only unemployment that needs to be tackled, but underemployment which disproportionately affects women. How can we ensure that women and marginalized populations are included in this new digital economy, Omobola?
Omobola Johnson: Thanks Lana. First of all, to talk about the structure of an emerging economy that is going digital. If I give the example of Nigeria which is a proxy for most African economies, where most of the jobs are created by smaller and medium... smaller and micro businesses. In Nigeria for example, 40% of the GDP is contributed by small and medium scale businesses. 90% of businesses are micros, small and medium, and 84% of jobs are in these small and medium scale business. To unlock this sort of job creation, whether it's women and men, and I'll speak about women in a minute. To unlock the capacity for job creation in any economy or any emerging economy, you've got to figure out, how do I scale these micro and small businesses? These are businesses that... There's tremendous fragmentation as I said in Nigeria. We have 20 million of them, each employ less than 10 million people.
Omobola Johnson: They're fragmented, they're small, they are ignored because you just can't serve them, because they just don't have the capacity for scale. Being able to unlock what is in those SMEs is important. The way that we're seeing that, and I speak as a venture capital investor now, is around companies that are serving those small businesses. They're the companies that we call the B-to-small B. Not B-to-B, but B-to-small B. These are companies that are aggregating the demand of small-scale businesses and using technology to provide services to meet that demand, and allow them to scale and to grow. To explain this better, to illustrate this point better, Let me speak about Trigger, one of our portfolio companies. Trigger is a company in Nairobi that serves what we call tabletop entrepreneurs, small scale retailers. The way that Africans shop for food, we don't go to hypermarkets or the Tesco or Sainsburys of this world.
Omobola Johnson: We shop in small corner shops, tabletop entrepreneurs, people that put their wares by the roadside, this is how we shop, and Trigger is addressing that. These are all entrepreneurs, they're all small scale entrepreneurs. Trigger has served over 130,000 of these as small scale entrepreneurs. How do they do that?
Omobola Johnson: They're able to deliver fresh produce and dried goods to those 130,000 entrepreneurs across Kenya. Simply buy them ordering by a mobile app. They place their orders for bananas, for oil, whatever it is. The produce is delivered to them as opposed them going to the market. Secondly, they pay. Of course everybody knows about M-Pesa so let's just say mobile money, they pay with mobile money. With those payments in mobile money and payment for the goods in mobile money and also selling the goods with mobile money, there is now digital transparency., So there's transparency on their cash flows.
Omobola Johnson: We know how much they buy, we know how much they sell. Trigger is then able to offer working capital to these informal retailers, because they understand how their money flows, and they know that they can actually develop a credit score based on the flow capital, or flow of money in these businesses.
Omobola Johnson: Now the point about saying all this, most of these tabletop entrepreneurs, most of these retail, small-scale entrepreneurs are women, and they have been largely excluded from this digital economy. But this is one way of including them, by allowing them to buy their produce online, accept payments and make payments online and offer them much capital online, is what we have to scale and grow their businesses. These are the ways, it's really around private capital to mark this point, private capital really providing capital to companies that are looking to serve these small-scale entrepreneurs, where most of our jobs are created and most people work in Africa and Nigeria in particular.
Lana Wong: That's great. Thank you, Omobola. But let's turn to Michael now. Related to all of that, I guess of course COVID has shown us with increased urgency the need to tackle this digital divide. What are some concrete actionable ways to narrow that divide, and what do you think are the greatest threats that we need to address?
Michael Miebach: The digital divide is a reality, so what do we do? What do we do to avoid people who are in the digital economy, who are the digital haves? Have a whole set of better choices than the digital have-nots. I mean, that is just not how the world can work. If everybody's in, that will be good for us, and then if not everybody is in, that will not be good of us. Now, we're a tech company and I believe in technology and I believe in technology being something good that can actually help address some of these issues. We have digital tools that matter for everybody, for example cybersecurity tools. How does the small business actually get online and can compete in that kind of a market? Yes, it's that one app, but how do you actually get online? How do you build a website? Once you're online, how do you find new customers? How do you keep your business safe?
Michael Miebach: This issue of the digital divide is so big, nobody can solve this by themself. Government cannot, private sector cannot, NGOs cannot, but across the board we can. The Egypt example that I gave is one that cuts across the board and these public-private partnerships are important. There is a starting point of eyeing technology with some skepticism. Where is my data? Is my data safe? Where is my money? Is my money safe? If I have it under the mattress, I can see it, I can feel it. If it's somewhere in an app, I'm not quite sure, so we need to deal with this trust deficit. We need to really focus on the creating digital trust and this is done in a few ways. Making sure that from a cybersecurity side, things are clear. There's a lot of technology to do that today and it doesn't have to be cumbersome, biometrical security.
Michael Miebach: There's all sorts of things that can be put to play. But I think that mindset of realizing that people are skeptical and you have to address it from the outset so that you can leverage technology, because people trust it I think it's important. The digital haves are the people that can put their own data to their own good to get better choices and better services. People will only do that if they know that their data is treated safely. Check ESG mindset, partnerships and trust. If we pull that off, that's pretty concrete. It's not easy to do, but I think we have enough learning of being on this journey for the last 10 years that we can pull this off and now is the golden moment with this race towards a more digital life, we should do it now.
[26:04] Ntombie Siwale: A fascinating discussion there on the role, the private sector can play in bridging the digital divide. With Omobola Johnson and Michael Miebach, moderated by Lana Wong. Thanks so much for listening to the special edition of the Development Podcast, recapping the key conversations from our Spring Meetings. Next time, we'll be exploring how to finance climate action and best help developing countries. It'll be another great show so please do join us then. I'm Ntombie Siwale, and the producer Sarah Treanor. See you then.
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