With 2.7 billion people globally still offline and not using the internet despite near-ubiquitous mobile network coverage for most of the world’s population, device affordability has become the most critical connectivity barrier. A new report from the World Bank, Affordable Devices: Innovative Financing Solutions and Policy Options to Bridge Global Digital Divides, provides a guide for how governments and stakeholders can work together to make broadband-enabled mobile devices more affordable across the world.
The report provides a comprehensive overview of supply and demand-side factors that impact affordability and device ownership in developing countries and emerging markets and presents a template for assessing countries to determine optimal financing solutions. The report includes deep dives into various markets in East and West Africa, South Asia and Latin America. The project was developed through extensive stakeholder consultation with government ministries, banks and other financial institutions, fintechs, telecom operators and device manufacturers, as well as the GSMA, Smart Africa and the ITU’s Broadband Commission, amongst others.
Key messages from the report include:
- Subsidy programs for mobile devices are expensive and difficult to scale, and so should only be used where financing options are not viable or where there is market failure; in instances where they are used, they should be carefully targeted at intended beneficiaries.
- Device costs are just one component of overall affordability of getting connected to the internet – usage and service costs must also be addressed in parallel to facilitate access and use.
- Taxes and duties often represent a high percentage of the total cost of mobile devices. However, tax reductions may be considered as an option but should assessed at the country level to determine feasibility, especially during periods where governments are facing extreme fiscal pressure.
- Several financing schemes, such as traditional lending, buy now-pay later schemes, PAYGo models, alternative asset-based financing and service subsidies show great promise. Both traditional mobile operators and new fintech start-ups are driving and piloting many innovations in this space that will need support to further test and eventually scale.
- Strategic partnerships between government ministries with the private sector will be critical for designing, piloting, and scaling solutions as well as for mobilizing private capital for financing these solutions.
- Development finance institutions and multi-lateral development banks like the World Bank can support governments with scaling innovative solutions through a variety of interventions including risk and credit guarantees to crowd in private finance, technical assistance to governments to help develop targeted financing programs and subsidy schemes and serving as a convenor to bring together key stakeholders and help coordinate contractual arrangements.
Every country faces a unique set of challenges on the ground, and so local solutions require both supply and demand side assessments as well as an assessment of key factors affecting the availability of credit and access to financing in order to design solutions that can be scaled. In addition to presenting the details of what these assessments should include, the report provides a comprehensive framework to help governments and stakeholders navigate available policy options and interventions to help address specific affordability objectives and broader digital development goals.
This report was produced with funding support from the Digital Development Partnership (DDP), administered by the World Bank Group. The DDP offers a platform for digital innovation and development financing, bringing public and private sector partners together to advance digital solutions and drive digital transformation in developing countries.