Can information and communications technology applications contribute to poverty reduction? Lessons from rural India

Information and Communications Technology (ICT) can reduce poverty by improving poor people’s access to education, health, government and financial services. ICT can also help small farmers and artisans by connecting them to markets. It is clear that in rural India -as well as in much of the developing worldrealization of this potential is not guaranteed. This paper outlines a simple model to explain why a digital divide may exist between rich and poor. Low-cost access to information infrastructure is a necessary prerequisite for the successful use of ICT by the poor, but it is not sufficient. The implementation of ICT projects needs to be performed by organizations and individuals who have the appropriate incentives to work with marginalized groups. Furthermore, grassroots intermediaries and the involvement of the community are identified as the key factors that foster local ownership and the availability of content and services that respond to the most pressing needs of the poor. 1. The poverty-reducing potential of ICT The World Development Report 2000/01: Attacking Poverty identifies three priority areas for reducing poverty: increasing opportunity, enhancing empowerment, and improving security. Opportunity makes markets work for the poor and expands poor people’s assets. Empowerment makes state institutions work better for poor people and removes social barriers. Security helps poor people manage risk. In light of current experiences in rural India and elsewhere in the developing world, it is apparent that ICT -defined as the set of activities that facilitates the capturing, storage, processing, transmission and display of information by electronic means [32]can be utilized to support poverty reduction strategies. The use of ICT applications can enhance poor people’s opportunities by improving their access to markets, health, and education. Furthermore, ICT can empower the poor by expanding the use of government services, and reduce risks by widening access to microfinance. 2. ICT projects for poverty reduction in rural India Although most of the rural poor in India are isolated from the information revolution, there are several examples in rural India where ICT is used to contribute to poverty reduction in the areas of opportunity, 0268-1102/03/$8.00  2003 – IOS Press. All rights reserved 74 S. Cecchini and C. Scott / Can information and communications technology applications empowerment and security. The following case studies highlight ICT applications that are attempting to realize the potential of ICT. The first two focus on improving opportunity, the third is on improving empowerment and the last on security. 2.1. Supporting pro-poor market development: Computerized milk collection centers Small farmers and artisans living in rural areas typically lack access to information about prices, data on crops, weather conditions, credit facilities, and market opportunities. ICT can remedy such information asymmetries and stimulate poor people’s entrepreneurship by better connecting them to markets [30]. In Gujarat, computerized milk collection centers with integrated electronic weights, electronic fat testing machines and plastic card readers are ensuring fair prices for farmers who sell milk to dairy cooperatives. Traditionally, the fat content in milk was calculated through a cumbersome measurement process hours after the milk was received. Although farmers delivered milk on a daily basis, they were only paid every ten days and had to trust the cooperative society staff’s manual calculations of the quality and quantity of milk. Malfeasance and under-payment to farmers, although difficult to substantiate, were commonly alleged. Computerized milk collection centers have increased transparency, led to faster processing, shorter queues and immediate payment to farmers. Furthermore, the Dairy Information System Kiosk (DISK) software developed by the Centre for Electronic Governance at the Indian Institute of Management, Ahmedabad (CEG-IIMA) provides relevant information to farmers through a database that contains complete histories of all milch cattle owned by members of the cooperative and a dairy portal connected to the Internet. The 50,000 dairy farmers who use the computerized system benefit from a more transparent and efficient cooperative system [7,9,10]. 2.2. Improving access to basic services: India Healthcare Delivery project ICT can also improve health care delivery to the poor. Telemedicine can diminish the cost and hardship of long distance travel for medical attention and diagnosis, and medical list-serves can deliver at minimal cost recent medical findings to health workers lacking research and technological facilities. Furthermore, ICT can simplify medical data collection, record management and paper filing [13]. Handheld computers, or Personal Digital Assistants (PDAs), are allowing auxiliary nurse midwives (ANMs) participating in the India Healthcare Delivery project to reduce redundant paperwork and data entry, freeing up time for healthcare delivery to the poor. ANMs shoulder most of the responsibility for healthcare delivery in vast and densely populated rural areas. Their duty is to administer immunization, offer advice on family planning, educate people on mother-child health programs, and collect data on the rural population’s growth, birth, and immunization rates. Each ANM serves 5,000 people, typically residing in different villages and hamlets, often located several kilometers apart. ANMs usually spend 15–20 days per month on data collection and registration. PDAs are facilitating data collection and transmission, saving up to 40 percent of ANMs’ work time. Redundant data entry prevalent in paper registers is eliminated and reports are generated automatically. These gains in efficiency multiply the impact and reach of limited resources, thus expanding access to basic services [9,10,19]. 2.3. Improving access to government services: Gyandoot ICT can be used by government agencies to transform relations with citizens and businesses. In India, as in much of the developing world, it is not uncommon for rural villagers to travel long distances to government district headquarters in order to submit applications, meet officials, obtain copies of public S. Cecchini and C. Scott / Can information and communications technology applications 75 records, or seek information regarding prevailing prices in commodity markets. This involves the loss of a day’s income as well as the cost of transportation. Once at the government office, the relevant official, record, or information could be unavailable, forcing repeated visits and additional expenses. In effect, government officials working with paper records enjoy a monopoly over information and records. Villagers may also face discomfort, harassment, and corruption on the part of public officials and are often given incorrect information about government programs and market prices [27]. In fact, compared to middle or upper classes, the poor end up paying a disproportionate share of their income on bribes. With ICT, it is possible to locate service centers that provide documents, land records and other public services physically closer to citizens. Such centers may consist of an unattended kiosk in a government agency, or a service kiosk located close to the client. Potential benefits include increased transparency, less corruption, better delivery of government services and greater government responsiveness [33]. Information disclosure and the possibility of interacting with public officials also build pressure for government accountability. The poor become empowered because they feel they are getting a service rather than a favor. Since January 2000, Gyandoot -a government-owned computer networkhas been trying to make government more accessible to villagers in the poor and drought-prone Dhar district of Madhya Pradesh. Gyandoot attempts to reduce the time and money people spend trying to communicate with public officials and to provide immediate, transparent access to local government data and documentation. For minimal fees, Intranet kiosks -or telekiosks-2 provide caste, income, and domicile certificates, avoiding villagers the common practice of paying bribes. The telekiosks also allow farmers to track crop prices in the region’s wholesale markets-enabling them to negotiate better terms. Other services include information on school results and on the names of people included in the below poverty line list, and a public complaint line for reporting broken irrigation pumps, unfair prices, absentee teachers, and other problems. Telekiosks are run by local operators along commercial lines and are placed in villages located on major roads or holding weekly markets, so that each of them can serve 25 to 30 villages [8,11]. 2.4. Improving access to microfinance: Smart Cards Microfinance is an important tool for poor people to reduce, mitigate and cope with risk. Computerization, Smart Cards, and software systems providing loan tracking, financial projections and branch management information can reduce costs and help microfinance institutions reach clients more efficiently. Smart Cards with an embedded microchip containing information on clients’ credit histories are helping SKS, a microfinance institution operating in the Medak district of Andhra Pradesh to reduce transaction costs. One of the main problems faced by SKS, which follows the peer-lending model developed by the Grameen Bank, is the high cost of service delivery to the poor. All cash transactions take place at village group meetings and each transaction takes about 90 seconds per person. Much time is spent not only on paperwork but also discussing terms and conditions and counting coins. Office computerization alone would not bring much time savings because staff would have more free time during the day, but not in the mornings and evenings when people in villages are available for meetings. Smart Cards have been identified as a solution to the high cost of delivery, because they can lead to gains in efficiency, Best and Maclay [6] differentiate between telekiosks -which typically have only a single computer and are staffed with a facilitatorand telecenters -which have one or more personal computers and some access to the international telecommunications network. 76 S. Cecchini and C. Scott / Can information and communications technology applications eliminating paperwork, reducing errors, fraud and meeting time. Potential savings in operations are estimated to be around 18 percent. Once all of SKS operations are conducted with handheld computers, a read-only device will be left in each village for clients to check the information stored on the Smart Cards. Microfinance projects like SKS enable poor people and their microbusinesses to gain broader access to financial services [1,4,10]. 3. Realizing the potential of ICT is not an automatic process Realizing the poverty-reducing potential of ICT is not guaranteed. It requires attentive public policy formulation and careful project design. Insufficient information and communication infrastructure, high access costs, and illiteracy have bestowed the benefits of ICT on the better off, urban segments of the population to the detriment of the poor and rural areas. General theory and observation of the Indian experience illustrate these dynamics. 3.1. A diffusion model of new ICT The argument can be presented in a single diagram shown in Fig. 1 which explains: 1. Why the poor and the rich use different communications techniques. 2. Why the nature of technical change in new ICT has hitherto been biased towards the rich. 3. How the consequence of this bias in technical change has been a widening of the digital divide, and 4. What the policy implications are of the current diffusion process of new ICT. The model is adapted from Keith Griffin’s [16] work on the generation and diffusion of Green Revolution technology in agriculture, which raised issues similar to those arising in the contemporary debate over ICT. Like all models, it is a simplification of reality, and so does not address all the issues which arise from the empirical data presented in Section 2. Suppose that in the first period, ICT consists of three fixed-coefficient communications techniques (oral, written word, fixed line telephony). Each technique requires different amounts of user time combined with different amounts of ficapital’ (hard/software, human capital) to transmit a given amount of information. Since each technique is technically efficient, an information isoquant (q1) can be constructed as a convex combination of techniques. The ratio of the hourly value of user time to the hourly user-cost of capital varies between rich and poor. The value of time to the poor is low due to under-employment and low productivity, while the user cost of ICT capital to the poor is high due to liquidity constraints, imperfect capital markets and lack of infrastructure (see Sections 3.2 and 4 below). Thus, the relative price of capital faced by the poor is high (PP in Fig. 1). By contrast, the value of time to the rich is high as they are more likely to be employed and at a higher wage than the poor. The user cost of ICT capital to the rich is lower as they are more likely to live and work in an infrastructure-rich environment, and borrow at lower rates than the poor. Consequently, the relative price of capital faced by the rich is low (RR in Fig. 1). This analysis implies that the rich and the poor choose different least cost ICT techniques, even if they face the same choice set (isoquant). The rich choose to communicate by fixed line telephony (technique β), while the poor choose to communicate orally (technique α). The size of the ICT divide in the first period is shown by the angle Ω. In the second period, two new techniques become available (mobile telephony and computer access to the Internet). Mobile telephones save on significant amounts of associated infrastructure (transmission S. Cecchini and C. Scott / Can information and communications technology applications 77 Input of user’s time Capital input (hard/software, skills) Oral Written word Fixed-line telephony Internet