How Old Nokias Are Helping Solve Poverty

the slim new Nokia phone with voice dialing fits the way you live Nokia connecting people now when covering topics like poverty and extreme poverty I want to make sure that it's treated with dignity and respect because at the end of the day we're all humans the idea of eradicating poverty is one that's always been there at no point in this episode do I want to come across as reductionist there are Monumental challenges when it comes to solving Global poverty and what I'm going to talk about isn't a complete Silver Bullet but it's a unique and efficient technique that could be the start of reducing poverty in a very meaningful way so that's why I'm bringing this method to light hi welcome to another episode of Cold Fusion imagine being in a position where your children can't even afford to eat more than one meal per day your child is so hungry that their development is hindered they're sleeping in class because they don't even have the energy to stay awake let alone focus eventually they have to drop out of school you do what you can for your family in order to get by but sadly escaping poverty was a pipe dream but just when things seem hopeless one day suddenly your family is pulled out of poverty and it's not just your family but the whole village subsequent to the sudden change of Fortune comes countless stories from people being able to pay for Cancer Treatments to buying clothes food and starting businesses now you might think that's all nice but what's so significant about that well here's the catch the mechanism used to lift these people out of poverty was a feature phone otherwise wise known as a dumb phone exactly like the old school nokas from 20 years ago so what if the humble feature phone and a basic cell network is all that's needed to lift people out of poverty imagine just being able to text someone money or pay for something without even having to use the internet how on Earth is that possible in this episode we will see how simple technological tools are transforming lives in ways that we may not have thought of before we'll also cover some economics here and look at some research on the best ways to help the less fortunate it turns out that the ways which we often think will help aren't the most effective this episode was made in collaboration with give directly an organization that uses simple yet effective Innovation to help those less fortunate I chose to work with them because of their organizational transparency the vast amounts of research that they've done and the proof of their successful outcomes some other educational channels and I are doing our part to help you can learn more later in the episode all right so let's get into it you are watching C Fusion TV technology today is the lifeblood of modern society without the internet computers and the software we use every day where would we be we all take for granted the economic productivity that it gives us but what about the far away corners of the world the places where people can barely afford to eat we generally think about using technology to help the poorest in the world but it's not that straightforward because in a lot of regions even using the internet regularly is is out of the question now there's a lot of talk in the media about a billion people coming online in the next 5 years but the reality is in some countries 1 gbyte of data is 8% of a month's wage for some of us this is Unthinkable because we take the internet as just a part of life so if we wanted to help these people the very poorest Among Us in the most rural of areas how would it be done well first let's take a look at how people in the poorest regions of the world live in some places in the world entire communities are extremely poor not by any fault of their own it's just that getting ahead is next to Impossible without capital or the infrastructure that provides them with opportunities the fact of the matter is if you're born into poverty it's very hard to escape we hear stats all the time like 8% of the world lives in extreme poverty but what does that mean according to the World Bank almost 700 million people live in extreme poverty and that means to live on less than $25 us per day and in some places that number is under a dollar per day there's no getting around it if you're born into conditions like that it's very very hard to escape a lot of us may look at this and feel the urge to help on an individual level after all it doesn't cost much to LIF someone out of poverty if they're used to $215 per day but where do you even begin how do you get money to them effectively of course you could hand out cash but I don't have to explain why carrying cash around is dangerous Plus in rural areas there may simply be no banks to store it we could look at another way and try a crypto solution where everyone has a mobile wallet it's a Forward Thinking idea but it's not practical given that access to the internet and even smartphones could be few and far between while a payment network of some kind is a solution to bypass Banks and avoid being a target for carrying cash the only problem is it doesn't fit in with the reality on the ground in the poorest areas of the world $80 for a smartphone is a lot of money that cost could be 2 months of saving every cent that you earn further to that as mentioned in some countries 1 gbyte of data is 8% of the monthly wage aside from expense smartphones are easier to break and could be stolen when everyone else around you is also desperate this isn't to mention that digital literacy could be very low especially for the elderly and sometimes this isn't even unique to the regions being discussed here even if crypto could be implemented somehow how could local vendors be able to be convinced to accept it so this does poise an interesting question how exactly do you build out a payment Network under such stringent conditions this is where the humble feature phone comes into the picture we all remember the original nokas where just about the most advanced thing you could do is play a game of snake or Space Invaders in a world of smartphones that can do everything even fold in half how does such an Antiquated device provide a solution interestingly part of the solution to this problem came about organically from Kenya the nation invented the first ever Financial Service where people could exchange money from the SIM cards of feature phones via text message this happened 20 years ago before anyone had implemented the concept in the west the service called mobile money or impesa in Swahili emerged as a solution functioning like a bank account without needing physical Banks it gained Traction in developing country through text Based Services it all started in 2002 when phone companies noticed something interesting users started trading phone credits like currency Safari comp a Kenyon subsidiary of vone saw this and developed it into a text based money system distributed by vendors that sold phone credits initially used for microloan repayments users found diverse applications such as overnight safes money transfers a vehicle and mechanism for payment and savings accounts it served as a powerful substitute for inaccessible Financial Services the growth was rapid by 2009 it had over 8 million subscribers in Kenya reach reaching 50 million by 2012 it now operates in many regions of Africa and is now in Asia today 1. 6 billion people have access to mobile money banking mobile money has revolutionized Financial access for billions globally offering alternatives to cash only systems you can think of it a bit like venmo but unlike venmo mobile money doesn't require a bank account well okay so how do you physically pay for things there's no NFC chip feature in feature phones yet alone any Tap and Pay machines at storees well the cool thing is it's a direct transfer from one phone to another you could buy a goat groceries or anything else with mobile money and I think overall it's a cool solution not only is it simple but it's cheap and it's a great example of using technology effectively in an extremely constrained environment now since the early 2000s Kenya itself has evolved greatly in terms of internet connectivity entrepreneurship and the country even features its own Tech Hub its own Silicon Valley of sorts but there's a dichotomy there are still those rural areas within Kenya and other African countries that have been left behind what about them a new york-based organization called GI directly decided to build on it by using door-to-door surveys government data Ai and machine learning in some cases they're able to identify the villages that need the money the most enroll them in Mobile money and send them cash usually around $11,000 per household that's what they might be surviving on in a year given to them all at once now this might set off some alarm bells for some people but the research says that this works well and we'll get to that in a later part of the episode so we've been helped by a revolution in technology in Africa which is mobile money and many many Africans now are able to receive money directly on their phones that allows us to transfer cash directly from someone in the United States or Europe right into the hands of the most extreme poor and the results are revolutionary it is extraordinary how what would be a small amount of money for you or I can be life transforming in a poor community in Africa you see the most wonderful things on education on housing on people getting livestock amazing improvements in nutrition in education enrollment but what we've seen with cash transfers is that you are transferring the cash directly to the people who need it most and you're transferring the agency from people like me who work in the development sector to the recipients themselves and they can Define for themselves the pathway is out of poverty so I think that's what makes cash transfers very different and give direct different as well but let's continue with the story in all of these cases how do users get their cash after transferring money well this is the crazy part the system uses human ATMs in a small Booth I guess in regions like this low Tech is the best tech human agents are deployed in locations across the country for deposits and withdrawals enabling cashless transactions even in the most remote areas there's a digital ledgend of what's happening so the agents aren't going to do anything dodgy without being fired this text based system significantly impacts poor families studies in Kenya showed that mobile money access alone lifted 192,000 Kenyans from extreme poverty and provided Financial stability it allowed for savings and easy cash transfers between family members creating a financial safety n and this is even without any cash injections just the power of the network alone so how does this look in practice imagine if you live in rural Kenya and you need some supplies for your shop some rice for example instead of getting some cash venturing out to find a seller and bringing the rice to your shop with mobile money all you have to do is whip out your feature phone call the supplier send him some money via text message and he'll bring you the rice it's much more efficient for small businesses interestingly money transfers coming from family members outside of Africa to family members in Africa is more than all African Aid combined a growing part of this is mobile money transfers that can be facilit ated internationally I think you might know that in terms of like remittances to to to this part of the world it's over 50 billion in USD and and this is money people are sending back home and it's largely through mobile money these days and so I think this came at a really good time that has allowed uh give directly to ride on this wave both in terms of access to mobile phones but also access to mobile money uh transfer service to be able to do cash trans for us at scale and enriching some of the most vulnerable most difficult to reach areas of of the country all over the globe actually when you add cash injections from a nonprofit such as give directly into the mix it turbocharges all the benefits of mobile money for the poorest members of society things can be taken a step further we can use machine learning and AI to amplify the effectiveness of Dum phones in 2021 during the co lockdowns Togo's government partnered with give directly and other organizations they were going to launch an Innovative direct payment system they analyzed satellite imagery of urban layouts and housing materials Plus mobile phone data patterns to Target Aid to the most impoverished communities and individuals researchers used algorithms to identify the 200 poorest cantons in Togo the researchers managed to get funds to almost 140,000 people often just minutes after they enrolled from their phones the program model called mobile Aid won both a Paris peace Forum award and the 2022 South by Southwest Innovation award the program in Togo proves so successful that experts recommended the give directly system should be widely adopted the system combines machine learning with in-person validation to deliver Aid effectively if anyone didn't have a phone a phone would be supplied to them and in areas without a cell network give directly would help build new towers once this was all done the SMS payment system could be integrated the recipients get their mobile money transfers and can spend their money on what they need most like school fees new homes Farmland livestock or starting a business during emergencies like famines or floods mobile Aid can quickly screen populations and identify those most in need what I find interesting about this method is that it basically cuts out all bureaucracy another interesting example was in Nigeria there's a village called ogba Ojo unfortunately the village floods every year there's a lot of fishermen and Farmers whose livelihoods are affected General Aid doesn't solve the problem but sending cash before the flood is predicted to hit does help communities prepare it allows them to brace for the tough times ahead in 2024 cash was given just days before the flooding arrived here's how it works in simple terms when the flood season begins GIF directly uses data from an AI prediction model from Google to identify flood prone areas when the water rises above a critical threshold a trigger is activated and from there payments can be sent out those affected take the opportunity to stock up on food and other Essentials while they can so what about fraud well there's an audit team to track transfers and a PIN number and complimentary phone call to check that who's receiving the money is the correct person it's not perfect as fraud still happens according to give directly losses from fraud are estimated to be just under 1% annually and the fraud happens through bribes Sim swapping and imposter recipients 1% is about 150,00 of the 150 million given out that is lower than other forms of Aid which lose about 5% per year but unlike other forms of Aid mobile money can be monitored and tracked similar to credit card companies but despite that the benefits of the system are there for all to see for the cool thing is that you can help in the next effort through a gift directly by donating at this link GD directly. rg/ coldfusion but I'll tell you more about it later in the episode now let's get on to the economics surely just giving people cash and letting them do whatever they want is going to end in disaster is it not so you'd think that giving people stuff or skills to help themselves would be the best way to help them but this isn't actually the case it turns out that giving people money directly is much more effective it sounds crazy as we've all heard the saying give a man a fish and he can eat for a day but teach a man to fish and he can eat for life but the data tells us something different if the fish in this case is money he can indeed eat for life but it depends on how this is done research from the World Bank shows that traditional Charities or NOS don't actually help people get out of poverty that often it's a rate of about 0.

3% actually the most common way that people get out of poverty is via doing it themselves that is by finding a job starting a business getting additional income or migration the rate of these factors helping someone leave poverty is over 75% giving cash directly helps to this end this isn't something that I would expect or even something that I've ever heard of but it makes sense when you think about it we are not having the confidence of giving cash to people most African communities know much better than a foreign government does what their real needs are if you imagine yourself in a very poor Community every house has a different need one person might need to get their kids back into school their neighbor might need to fix their roof somebody else might need to put some food on the table and giving cash to people is the most efficient and effective way of delivering support and it gives them dignity gives them Choice lets them be in charge of the decisions in their own lives in Kenya a lump sum injection of $500 resulted in a 65% Revenue increase in Village businesses 20% more businesses 141% increase in annual income from self-employment a decrease in depression 14% better Primary School outcomes and a 4% decrease in alcohol consumption and these were measured a full 2 years after the original cash injection in a village in Rwanda similar positive outcomes were seen with a $1,000 cash injection an interesting side effect was that those within the community would keep tabs on each other and keep each other accountable and how they spent the money this is a once in a lifetime opportunity you know don't waste it and that's how most of the communities think about you know the the Investments that give directly uh places in their hands and I think to some extent there's also like Community uh peer pressure to be like you know you got your investment you know what did you do with it all your neighbors are also getting the same investment so you can see them buying livestock you can see them putting up a new roof you can see them taking your children to school you're unlikely to waste your transfer as well because you will be left behind so what we've seen is that by guaranteeing people a basic income then they're able to take on investments or business ideas that they wouldn't have tried before we've seen School attendance going up we've seen generally uh food security going up and I think what was also interesting is seeing like child mortality also going down I think that was unexpected but you know very encouraging to see that you know B sick income also has really positive effects on um on child mortality generally the communities are healthier happier you know I think that's that's that's something that has also been interesting to see this all makes perfect sense even if it's somehow a little unintuitive but how do we know that these numbers are statistically and scientifically sound well in 2019 three economists Abby jet benergy Esther duffo and Michael ker won a Nobel Prize for finding out a method to carry out randomized control trials and field experiments on poverty relief it turned around the notion that giving physical things or teaching skills was the best way to help people what the results show is that this isn't necessarily the best way to help people in poorer regions it turns out that we could be thinking about poverty and Aid the wrong way this whole time I set off to visit the project and as you can imagine I received an amazing 100 page document full of descriptions of all the smart stuff that we thought we were do and I arrive at the project and the result was literally two holes in the ground with brick walls around them and five red plastic buckets $22,000 Maximum Impact for a $40,000 project and I said to people why did you not just give $2,000 to the Head teacher and let the head teacher buy those buckets and the answer was we were worried that if we didn't do all our paperworks and studies and needs assessments and consultations the project would go wrong and he would steal the money and my response was we stole the money we could have done 20 times the number of schools we stole the money and I realized that because I went out to see a completely different projects I went to Rwanda to the Rwanda Burundi border 3 years later and I saw a project where an NGO had turned up on the ground and instead of doing capacity building instead of teaching people how to fish they were turning up in village houses and saying here is $900 in cash this is your money you can do with it what you like but the results were absolutely staggering this community had completely transformed the amount of electricity in the community almost everybody was ending up with roofs almost everybody had health insurance was a fantastic increase in the number of children in the school the whole place just felt better happier honestly in my entire life in International Development I'd never seen anything like this Village abuid benerji one of the researchers comments quote it's striking how little evidence there is that when you give people an unexpected bunch of cash they go out and buy booze or something else bad for them this fear that cash will somehow be misused is really extraordinarily overemphasized they seem to spend it in perfectly sensible ways end quote in lower inome countries a relatively small amount of money can go a long way there are some concerns about inflation though but so far the studies conducted show that free money does doesn't cause inflation in lower inome countries in 2014 the nonprofit give directly and research Partners carried out a large study the aim was to see how a large lump sum of payments of $1,000 could help rural communities in Kenya 653 randomized Villages were chosen 10,500 poor households were selected this amounted to 15% of the local GDP a relatively huge amount but wait a second doesn't giving money to people just push up the demand for goods and services contributing to price inflation well not so fast because after 2. 5 years researchers found that the average price inflation was just 0. 1% so mmt and Ubi Advocates would be rejoicing but the fact of the matter is that a blanket Ubi may not always work contrast give Direct's work with pandemic relief efforts the Federal Reserve themselves admit that Co stimulus contributed to inflation in multiple countries the reasons for why this happened are complex but at the end of the day inflation as a consequence depends on where the cash is given out how exactly the cash is given out and how much slack there is in the local economy even though it's better than blowing money on traditional charity give directly still looks for inflationary risks where they're scaling up but according to the study the cash transfers had a multiplier effect this meant that for every dollar of cash input $250 was generated in the form of spending or income for the larger economy interestingly both who received the funds and those who didn't benefited in the last decade there's been a growing body of evidence to suggest that cash improves the lives of the poorest among us more than if that same amount was given in the form of traditional Aid programs or Goods if their small local businesses could receive money in a frictionless way it could do wonders so in conclusion for many multiple decades there's been various efforts of Charity novel Technologies and aid from the West to the poorer nations of the world ideas that come to mind is one laptop per child the socket ball or the play pump these all failed to make a lasting change and it's ironic because what turned out to be one of the most effective Solutions was an innovation from Africa itself mobile money we often forget how others live lives without secure food shelter and education a life without Comfort the internet or Leisure a life just about surviving some novel technology or a cryptocurrency isn't going to work but with just a basic phone and some well-designed Financial targeting this way of living could be a thing of the past for so many to wrap things off a group of educational creators and I are getting together to raise some funds if you want to donate to a village in need and ensure your money goes to them in the best and most efficient way possible you can visit the URL give directly.