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Maximo Torero: Connectivity, content and kids

Maximo Torero, Director of the Markets, Trade and Institutions Division at the International Food Policy Research Institute (IFPRI):

What I am going to talk about today is a little bit different. I am going to talk about the consumer, which will be the small farmer, the producer and the supply of information to them, how this demand is governed by the supply of information and technology for them to have access to that information.

Let us go back 15 years, and 15 years ago there were 480 million cellular phones and there were around six billion people. Today, if we look at the situation today, we have 6.6 billion cellular phones and 7 billion people. As you can see in the graph, the red line, which is the amount of cellular phones, is getting close to the population. It could even be that by today – this is 2013 – the cellular phones are more than the people that we have in the world. What does this mean? It is like magic, cellular phone penetration has increased enormously and we hear all these nice stories about how cellular phones are alleviating poverty, how we can do microfinance, how we can do extension, how we transmit prices today. But is this situation so real? And that is why I want to look at the first element of this talk, which is about access. How is it that we are seeing at the global level, which in 1999, most of the expansion was in OECD countries and today it is across the globe, in developing countries and developed countries? How are we doing internally within these countries and how much are we really reaching the rural poor?

So for that, let me start first by looking at some examples of some countries and here what I am bringing is two countries per continent, I randomly selected basically, and the idea here is to show you that the rural penetration is not as good as we have expected, and this is a number that normally you will not see. Normally, the unit of telecommunications will tell you the global number at the country level. But if you look for example at the case of Bolivia in Latin America, there are 18.7 phones per 100 inhabitants, while the urban penetration is 77. If we go to Malawi, 32.3 in rural areas, and even if we go to Bangladesh, the country of Grameen Bank, of Yunus, who won the Nobel price by trying to link women farmers to microfinance using cellular phones, there we have 56 phones per 100 inhabitants in rural areas. So clearly still we have an access gap, and we do not have these disconvergence that we see at the global level in terms of the number of phones.

But the situation is even a little more complicated, why, because it is not only to have the access to the phone like many of you have here, it is also how much I pay to be able to have the minutes I need to connect and to communicate and to get that information. And if we start looking at the prices, the story changes significantly. And let me bring you the example of Brazil. Why am I going to bring Brazil? The reason I am bringing Brazil is because Brazil is a big country, it has been growing substantially, but not only that, it has been the country where inequality has reduced significantly in the last ten years, and also nutrition and hunger has been reduced significantly because of all the different programmes that we implemented in the last 10 years in Brazil.

Now if we take the basic basket of pre-paid phones that I need to consume to be able to have this minimum communication – remember, I am talking of pre-paid phones, the basket in Brazil of this minimum level consumption costs around 80 Reals. Now, an average household consumes around 5 per cent of their income in telecommunications, and if we look across the income distribution of a Brazilian consumer from the poorer households which would be the rural, the smallholders we are talking about, the middle income and the richer, the poor household will be only be able to pay 2.3 Reals a month, using 5 per cent of his income. The middle income, 26.1 Reals, and the richer 100 and forward. Do you see now the gap? Not only is it a gap in equipment, but once you have the equipment, the price you have to pay is for what I can pay with my income. Now, can we solve this, and the answer I think is yes, this can be substantially improved, and I see two ways in which we can resolve it.

One way of course is regulating, why? Because today, a minute of pre-paid phones costs several times what I am paying and what you are paying in Rome in a ?? plan. So essentially, what happens today is that the rural are subsidizing the urban, and that is why we can have this very fancy equipment in our hands, and it should be the opposite, it should be the urban who are subsidizing the poor. So regulation will have to improve significantly to be able to improve the rate these poor farmers are paying. That is one solution.

But the other way is to go a little bit out of the box and start thinking of technology. If I asked you if you want to do an international call, what will you use, assuming that you do not have access to the IFAD phone, you will use Skype or you will use WhatsApp. Why? Because the marginal cost of an international call is extremely low and the technical reason for that is because they call us and compete with voice. So basically the costs, once they have fibre optics and broadband, of a voice call is zero.

Now, why do the rural poor not have that situation? If you look at the penetration of broadband in rural areas it is exactly the same as in 1999 – close to zero. Why? When we can provide to them IP telephony. They can do these calls with equipment we have today and they could get very low rates. So the point that I want to make is that for access we still need to do a lot and there are ways to do with existing technology and we need to figure out how to improve that.

Now, saying that and assume that we are in a world that will resolve this problem of access – people heard this talk, they employed fibre optics across the world, everybody has a phone today. Is that enough? That brings me to my second concept, the concept of content. So I already have the equipment, I am getting what I want in a document and that is where I want to bring the link between supply and demand. So we need a review of all the work that was done on this topic, how much it impacted farmers to have price information systems, how much it impacted them to have extension systems for cellular phones or ICTs, how much it impacted them to have any different type of information, even there is information for nutrition or health issues. And sadly, the result of this enormous review was that in very few cases the effect of these systems of information were improving the welfare of these farmers. In the only cases where it was improving the welfare was because the supply and information that was provided was customized to their needs, to their demand. That is when it really worked.

For example, if I am a West Bengali farmer in India and I am producing potatoes, I do not care about the market in New Delhi; I do not care about the market in Mumbai, which would normally in this instance provide to me the information of prices in those two capitals. What I care about is the local markets around me and where I can sell my produce, locally. If I do not customize information to that, they will not use the system. That is why today, in many countries, we see very fancy systems where I can enter a four digit code but the price that I am getting is not the price I care about. Therefore I do not use them, and they stopped using them. So content is a huge barrier and we need to significantly improve content to be able to move forward. That is what I want to raise and I think it is something important to think about, how we can improve and make this demand and this supply to respond to that demand. For sure I can create supply. Apple has been extremely successful at doing that. We have created very fancy equipment and the demand has responded but remember, these rural households only spend 5 per cent of their income. They have a huge budget constraint so if I am going to use 1 rupee or 1 dollar in phones, it is money that I am not giving to my kids for food. So I will be very careful what I do. That is why they stopped using these systems.

This moves me to the third word that I want to use today, which is capability. Remember, we are trying to provide information to farmers in rural areas that are ageing, as we know. Most of them are not well educated; the majority do not know how to read and write, and they have very low concepts of mathematics. But they know how to cope the risks, but I am giving them information on prices? Maximum price, minimum price, average price – even in some cases I have seen systems in which they provide the variance so they can predict the price in the future – volatility of temperatures; how do we expect a person who does not know how to read or write, and does not have the basic knowledge of mathematics to understand these concepts? I need to figure out a way to break this capability barrier. I am not only giving them sophisticated technology but I am also trying to change the way they understand things.

This came to me, and crashed into my reality, when I was doing an experiment in West Bengal. We basically decided to go to very poor rural villages and try to provide them phones randomly to be able to test throughout regional randomized control trials the effect of good content. So we resolve the access, because we provide them the phones; we resolve the content, we provide exactly the content they need, and we distributed hundreds of phones in this area, which before did not have access to cellular phones. The result of that was that in the first week we found that many of these phones were not being used. Despite the fact that we were sending good content and they had the phones and we trained the people in basic ways to use the phones, they were not being used. So we went to the households and what we found, sadly, was that many of these households were using these phones as ornaments. For them they were ornaments. They were not charging them, they were not using them, and that is a big problem. That is the capability.

That is what brings me to Milagros, miracles in English. Milagros is a little student of secondary school in the northern part of Peru in a place called Llacanora in the mountains, in the Cajamarca region. Milagros, every morning, has to walk three hours to go to school, and every afternoon she has to walk back three hours. She does not have breakfast normally and if she has, she has a very light meal. So basically she lives on one meal a day. Clearly, she has a problem with nutrition and the quickest thing to observe is anaemia. So Milagros falls asleep in her class; her performance is not good because she does not have the nutrients that she needs to be able to progress. But what is the link between Milagros and my cellular phones and my farmers? The link is that I think Milagros could be the bridge to create this link. Why? Because Milagros goes every morning to school, three hours. She knows mathematics, she is in secondary school, she knows how to read and write. She can help to link and to bridge and break this barrier of knowledge of the farmer. She can also adapt the content and adjust the content for what the farmer needs. Not only that. By being in school it becomes very cost effective to transfer information to them because they have a lot of kids sleeping in the classes.

So Milagros could be a way to create that bridge and that is something that we need to think about. What we did in IFPRI is we started a programme called Happy Faces. The idea of the programme was exactly that. We test in the schools in Llacanora by providing them a lap connected to internet – very cheap, US$10,000, that is what it cost. With that we provide information to them. We started with a very simple message to see if the kids pick up the information, and the message was about taking a pill of iron in a health centre. We used three types of messages: the health centre provider, the official of the location and a soccer player. Why a soccer player? Because the kids told us that they admire soccer players. Strangely enough, both boys and girls admire the soccer players. So we provide them, every time they log on to their computer, information on how and where they should take these pills and why these pills are good for them, iron pills. And the result was that the message spilled over. The first day you had 10 kids, the second day 30, and it grew enormously. Not only that, they started bringing kids from their households, their brothers. So what this showed us is that the message was completely picked up by the kids and that was our first goal.

The second goal to create this bridge was, okay, now that we know that kids not only learn the message, apply it – they went to get the pills for 60 days, which is what they needed – we also wanted to know if they could change the behaviour of their parents. So what we did is we went to all the farms of these kids and we identified very simple problems they were facing on their farms. These problems were as simple as earworm in their maize, very simple problems in taking care of their animals. Then we showed them information on how to resolve the problems and what we found is that they were able to resolve those problems. So the kids helped to create the bridge to communicate to their parents and change their behaviour. On some occasions the kids by themselves created the molasses trap that we were teaching them through the videos to resolve the problem. So clearly, Milagros helped to create that bridge.

I want to end today by saying we have an option and we have an opportunity to empower information and we need to break this barrier of accessibility, content and capability so that Milagros and Tefu, for example, can show their parents and can help to break this barrier to be able to allow and communicate so that we would be able to talk about the power of information.