How Old Nokias Are Helping Solve Poverty

The Challenge of Poverty and a Unique Solution

• The idea of eradicating poverty is a long-standing one, but it's a complex issue with monumental challenges, and there's no single solution that can completely solve it (16s).
• Imagine living in a situation where your children can't afford to eat more than one meal per day, hindering their development and forcing them to drop out of school due to lack of energy and focus (41s).
• However, a unique and efficient technique has been discovered, which involves using old Nokia feature phones, also known as "dumb phones," to lift people out of poverty (1m27s).
• This method allows people to text money or pay for things without using the internet, and it has been successful in transforming lives in ways that may not have been thought of before (1m44s).

The Power of Simple Technology: Feature Phones and Mobile Money

• The technique was used to lift an entire village out of poverty, enabling people to pay for cancer treatments, buy clothes and food, and start businesses (1m13s).
• The organization GiveDirectly, which uses simple yet effective innovation to help those less fortunate, collaborated on this episode and has done extensive research on the best ways to help the less fortunate (2m6s).
• The research has shown that the ways people often think will help aren't always the most effective, and that simple technological tools can be used to make a significant impact (1m59s).
• The lack of access to the internet in some regions makes it difficult to use technology to help the poorest people in the world, but feature phones and basic cell networks can be used to make a difference (1m36s).
• In some countries, 1 GB of data is equivalent to 8% of a month's wage, making it unthinkable for people to use the internet regularly (3m8s).
• The poorest regions of the world often have entire communities living in extreme poverty, making it nearly impossible for them to get ahead (3m33s).
• Approximately 700 million people worldwide live in extreme poverty, defined as living on less than $25 US per day, with some areas having a daily income of under $1, making it difficult for individuals to escape poverty (3m53s).
• Helping individuals in poverty on an individual level can be challenging, especially in rural areas with limited access to banks, making it difficult to effectively distribute money (4m22s).
• Cryptocurrency solutions are not practical in these areas due to limited access to the internet and smartphones, with an $80 smartphone being a significant expense for those living in poverty (4m54s).
• The cost of 1 GB of data can be as high as 8% of the monthly wage in some countries, and digital literacy may be low, especially among the elderly (5m3s).
• The implementation of cryptocurrency is further complicated by the need to convince local vendors to accept it (5m24s).

The Rise of Mobile Money: M-Pesa's Success Story

• In Kenya, a solution emerged 20 years ago, where people could exchange money from SIM cards of feature phones via text message, known as M-Pesa or mobile money (6m9s).
• M-Pesa started in 2002 when phone companies noticed users trading phone credits like currency, and it was developed into a text-based money system distributed by vendors that sold phone credits (6m30s).
• Initially used for microloan repayments, users found diverse applications for M-Pesa, such as overnight safes, money transfers, and savings accounts (6m41s).
• M-Pesa served as a substitute for inaccessible financial services and experienced rapid growth, reaching 8 million subscribers in Kenya by 2009 and 50 million by 2012 (6m53s).
• Today, 1.6 billion people have access to mobile money banking, and it has revolutionized financial access for billions globally, offering alternatives to cash-only systems (7m3s).
• Mobile money allows users to transfer funds directly from one phone to another without the need for a bank account or NFC chip, making it a simple, cheap, and effective solution in constrained environments (7m30s).

GiveDirectly's Approach: Targeted Cash Transfers via Mobile Money

• Since the early 2000s, Kenya has evolved in terms of internet connectivity, entrepreneurship, and features its own tech hub, but rural areas within Kenya and other African countries have been left behind (7m47s).
• A New York-based organization called GiveDirectly uses door-to-door surveys, government data, AI, and machine learning to identify villages that need money the most, enroll them in mobile money, and send them cash, usually around $11,000 per household (8m10s).
• Research shows that this approach works well, and the results are revolutionary, with small amounts of money being life-transforming in poor communities in Africa (8m31s).
• Mobile money allows for cash transfers directly from someone in the United States or Europe to the most extreme poor in Africa, with results showing improvements in education, housing, livestock, nutrition, and education enrollment (8m37s).
• Cash transfers give agency to the recipients, allowing them to define their own pathway out of poverty, making it different from traditional development approaches (9m17s).
• Users can access their cash after transferring money through human ATMs, where human agents are deployed in locations across the country for deposits and withdrawals, enabling cashless transactions even in remote areas (9m42s).
• Studies in Kenya showed that mobile money access alone lifted 192,000 Kenyans from extreme poverty and provided financial stability, allowing for savings and easy cash transfers between family members (10m6s).
• Mobile money has also enabled small businesses to operate more efficiently, with users able to send money to suppliers via text message and receive goods without having to physically travel (10m37s).
• Money transfers from family members outside of Africa to family members in Africa, including mobile money transfers, exceed all African aid combined (10m51s).
• Remittances to developing countries are over $50 billion in USD, with a significant portion being sent through mobile money, allowing for easier access to cash transfers and facilitating the work of non-profits like GiveDirectly (11m6s).
• GiveDirectly's cash injections into mobile money systems can "turbocharge" the benefits of mobile money for the poorest members of society, providing them with greater financial flexibility and security (11m41s).

Mobile Aid: Innovation in Aid Delivery

• In 2021, the government of Togo partnered with GiveDirectly and other organizations to launch an innovative direct payment system that used machine learning, AI, and satellite imagery to target aid to the most impoverished communities and individuals (12m3s).
• The program, called Mobile Aid, was able to deliver funds to almost 140,000 people in Togo, often just minutes after they enrolled from their phones, and won several awards for its innovation and effectiveness (12m28s).
• Mobile Aid combines machine learning with in-person validation to deliver aid effectively, and can even provide phones to those who don't have them and build new cell towers in areas without coverage (12m48s).
• The system allows recipients to receive mobile money transfers and spend their money on what they need most, such as school fees, new homes, farmland, livestock, or starting a business (13m2s).
• During emergencies like famines or floods, Mobile Aid can quickly screen populations and identify those most in need, providing them with cash assistance to prepare for the crisis (13m12s).
• The system cuts out bureaucracy and has been shown to be effective in several countries, including Nigeria, where cash was given to communities before a predicted flood, allowing them to prepare and stock up on essentials (13m36s).
• GiveDirectly uses data from an AI prediction model to identify flood-prone areas and trigger payments to those affected, allowing them to prepare for the flood (13m52s).
• The system has a built-in audit team and security measures to prevent fraud, with estimated losses from fraud at less than 1% annually, lower than other forms of aid (14m17s).

The Effectiveness of Cash Transfers vs. Traditional Aid

• Research from the World Bank shows that traditional charities or NGOs don't actually help people get out of poverty, with a success rate of about 0.3%, whereas people getting out of poverty themselves through finding a job, starting a business, or migration has a success rate of over 75% (16m50s).
• Giving cash directly to people in need is a more effective way to help them, as it allows them to address their specific needs and gives them dignity and choice (17m9s).
• In Kenya, a lump sum injection of $500 resulted in a 65% revenue increase in village businesses, 20% more businesses, a 141% increase in annual income from self-employment, a decrease in depression, 14% better primary school outcomes, and a 4% decrease in alcohol consumption, measured two years after the original cash injection (17m51s).
• A similar positive outcome was seen in a village in Rwanda with a $1,000 cash injection, where community members kept tabs on each other and encouraged responsible spending (18m14s).
• The concept of giving cash directly also promotes community peer pressure, encouraging individuals to make the most of the investment and not waste it (18m49s).
• Guaranteeing people a basic income enables them to take on investments or business ideas they wouldn't have tried before, leading to increased school attendance, food security, and a decrease in child mortality (19m2s).
• Overall, providing a basic income has positive effects on communities, making them healthier and happier (19m36s).

Challenging Traditional Aid Methods and Embracing Cash Transfers

• In 2019, economists Abhijit Banerjee, Esther Duflo, and Michael Kremer won a Nobel Prize for developing a method to conduct randomized control trials and field experiments on poverty relief, which challenged the traditional notion that giving physical things or teaching skills was the best way to help people in poorer regions (19m44s).
• A project with a $40,000 budget resulted in two holes in the ground with brick walls and five red plastic buckets, with a maximum impact of $22,000, raising questions about the effectiveness of such projects and whether the money could have been better spent (20m32s).
• An alternative approach, where an NGO gave $900 in cash to villagers with no strings attached, resulted in a community transformation, with increased electricity, health insurance, and school attendance, and a general improvement in the quality of life (21m25s).
• Researcher Abhijit Banerjee noted that the fear of cash being misused is overemphasized, and that people tend to spend it in sensible ways (22m0s).
• A study by GiveDirect and research partners found that giving a large lump sum of $1,000 to poor households in Kenya did not cause significant inflation, with an average price inflation of 0.1% after 2.5 years (22m34s).

The Economic Impact of Cash Transfers and the Debate on UBI

• However, the effectiveness of a blanket Universal Basic Income (UBI) is still debated, and the Federal Reserve has noted that stimulus efforts during the pandemic contributed to inflation in multiple countries (23m12s).
• Cash transfers have been found to be more effective than traditional charity methods, with a multiplier effect that generates $250 in spending or income for the larger economy for every dollar of cash input (23m41s).
• Both recipients and non-recipients of cash transfers have benefited from the program, with evidence suggesting that cash improves the lives of the poorest more than traditional aid programs or goods (23m50s).
• Small local businesses receiving money in a frictionless way through mobile money could have a significant positive impact (24m7s).

Mobile Money: An African Innovation Transforming Lives

• Various charity efforts and novel technologies from the West have failed to make a lasting change in poorer nations, while mobile money, an innovation from Africa, has proven to be an effective solution (24m33s).
• A basic phone and well-designed financial targeting can help people escape poverty, and a group of educational creators are raising funds to distribute money via mobile money to a village in central Kenya (24m54s).
• Each family in the village will receive $850, with the goal of changing the lives of 164 families, and donations can be made through the URL give directly.org (25m17s).
• The use of old Nokias and mobile money is helping people in need escape poverty, and this method is considered a conventional but effective way to make a positive impact (25m26s).