Excellencies, Distinguished panelists, Colleagues,
Ladies and gentlemen,
Thank you all for attending today’s side event on “Taking Technology to the Last Mile”, and to Turkey for co-organizing this important discussion with us.
Technology clearly has the potential to educate, empower and include those traditionally excluded.
The technologies making a difference are not just being exported from the developed world to the South. Increasingly, they are being created in developing countries and customized to respond directly to local challenges.
In Kenya and Tanzania, M-Pesa has successfully enabled millions of individuals left out of the conventional banking system to deposit and withdraw money on a mobile phone. M-Kopa has connected hundreds of thousands of homes to solar power.
But serious challenges remain around accessibility and affordability, even when technology solutions are home-grown in LDCs.
Often, investors see high risks and low return possibilities for expanding into frontier markets, or they are concerned about weak regulatory environments. Often, markets do not yet exist for certain technologies, and someone needs to risk moving first to demonstrate business viability.
For their part, consumers – particularly poor and excluded populations – may lack the means to pay for new technologies or may not be familiar with their benefits.
We must bridge the accessibility and affordability gap, and financial intermediation is one way to bring adapted technologies to poor households, communities, and regions.
At UNCDF we’ve been innovating public-private partnerships to that end across three broad categories of technology.
First, digital financial services and payments.
The explosive growth of mobile phones underpins the massive potential opportunity in this space to reach under-served locations and households, and to make sending and receiving payments and remittances cheaper and safer.
The financial intermediation model here is to use seed capital and technical assistance to incentivize financial service providers to expand their reach to last mile communities, including through digital technologies to access hard-to-reach populations.
In Uganda, for instance, a UNCDF partner is offering mobile banking to existing savings groups through a mobile application which enables customers to transact from their cell phones and at mobile money agent locations. Besides improving security and convenience for depositors, this technology also dramatically reduces the transaction cost for clients.
There is no one “right” way when it comes to digital financial services and payments. There are usually several options that will work for different stakeholders in particular markets, and there will be different options available in six to 12 months as technology improves or prices change. But getting the enabling environment right is essential.
We are therefore also building the national eco-systems and regulatory frameworks that accelerate the adoption of digital financial services at scale. Our convening power, paired with a tailored package of technical, financial, and policy support, is helping to reveal markets to more investors and to ensure a level playing field for private sector providers to innovate digital finance models in Africa and Asia. Our objective is to build digital finance markets, such that in each of the markets in which we work, at least 15% of the adult population is using digital financial services. This equates to ten million additional individuals by the end of 2019.
Globally, we host the Better Than Cash Alliance, a partnership of companies, international organizations, and governments – including eight LDCs. It accelerates the transition from cash to digital payments.
Second, technology for climate action.
Globally, nearly 3 billion people lack access to modern energy services. Financial intermediation can help address this challenge too. UNCDF provides risk capital and technical assistance to competitively selected financial and energy service providers, especially during the incubation stage, when new models are tested and refined and when companies face financing constraints.
By targeting the funding gap between the $50,000 grant and the $1 million investment, also known as the “missing middle” of SME finance, this programme is funding initiatives that have gone beyond the proof of concept stage and are poised for wider market testing in diverse geographic and market contexts.
These businesses then develop scalable consumer financing models. The proliferation of mobile technology and rapid growth of digital payment platforms disrupted original assumptions of the programme. Whereas the programmes worked with financial service providers in Nepal, energy lending was not a priority for such providers elsewhere. As a result, UNCDF shifted to working also with energy service companies, including pay-as-
you-go models, which offer people ways to pay for clean modern energy in the same way they use prepaid mobile airtime.
There is potential for the “pay-as-you-go” mechanism to be applied to other technologies, utilities such as water and sanitation, or even the purchase of white goods. There is also strong evidence that pay-as-you-go -enabled businesses are driving financial inclusion through use of mobile transactions as well as offering new ways to do client credit scoring through analyzing payment behavior.
But it is not just essential household technologies to which we want to expand access. Last mile communities may also need sophisticated technologies to help them better navigate a world of risks, including climate risks.
Here too financial intermediation plays an important bridging role. UNCDF provides technical and capacity-building support combined with performance-based climate resilience grants to local authorities. These provide a financial top-up to cover the additional costs of making investments in climate resilient structures and ensure verification of climate change expenditure at the local level.
Through this programme, the Korean Environment Institute – which is on this panel today - is now providing its climate forecasting and satellite expertise so that local governments can prioritize their investments based on how climate change is affecting their ecosystems.
Third, technology for improving lives in municipalities and in poor communities.
There is a wide world of technologies, both old and new, that can build so-called smart cities and improve communities and lives and livelihoods of poor people – if only they could get to where they are needed most.
These range from improved waste management systems to new ways of irrigating crops to technologies that recycle waste water to those that bring internet access to school kids in rural areas and introduce sensors that monitor the safety of roads and bridges.
In each case, there is huge potential for financial intermediation to play a role in expanding access.
For instance, entrepreneurs who seek to bring clean water technologies or better planting tools or crop price information to rural households, where no market currently exists, could get the loans or investments they need to start and grow their businesses sustainably.
Through adapted insurance products, families impacted by a natural disaster could get potentially get the resources and technical assistance to build back better homes.
Products could be created that pool community savings or attract diaspora bonds to improve access to energy or to build better communications links – these could be radio towers or internet hotspots – that improve people’s lives and the competitiveness of businesses.
The point is this: just having the right technology is not enough. An enterprise or organization also needs to have a channel by which to move the product to those localities, communities and households who need it most.
There is huge potential for “last mile finance” programmes and public-private partnerships are able to overcome market failures in taking technology to the last mile, and to bridge the gap between access and affordability.
I look forward to this discussion on how we can together empower under-served communities in LDCs to benefit more from adapted technologies.