COVID-19: Will Digital Tech Drive Inclusion or Inequality?
The economic fallout engendered by COVID-19 has already been dire with many going without food and/or accruing different types of debt to stay afloat. Individuals, households, firms and governments continue to try and find effective strategies to survive and eventually recover from the ongoing devastation.
Three Potentials of Digitalisation
Amidst this devastation is one apparent bright spot: digitalisation. The promise of digitalisation is three-fold:
1) Social distancing protocols, some government policies and remote-working norms, have translated to many turning to digital channels for work, purchases and leisure.
2) Due to these factors the ICT sector has positive prospects for continuity and recovery in an economic environment where many sectors have lengthy recovery prospects, if at all (some key players in the ICT sector have even reported a massive increase in the use of certain products and services).
3) The ICT sector has and will continue to play a critical role in Kenya’s response to the pandemic (Central Bank of Kenya directives on mobile money are an example). This tantalizing trifecta risks digitisation being positioned as a panacea and the blind pursuit of digitisation as the response to COVID-19 in a manner that fails to factor risks that are inherent in this approach.
During FSD’s scenarios planning process, it became clear that the growth of digitisation may help some Kenyans to survive COVID-19 and regenerate livelihoods, but some may be locked out. There are four forms of digital inequality that may deepen income and economic inequality if not addressed:
- Uneven starting capabilities: Research by ODI points out that less than 25% of Kenyan Micro, Small and Medium Enterprises (MSMEs) use cloud computing, compared with over 40% of large Kenyan firms; less than 50% of firms in the services sector in Kenya (barring IT and transport) have a website. This uneven playing field at firm level means that firms without digital capabilities, particularly MSMEs, may be disproportionally locked-out of being a part of, or benefitting from strategies based on a basic threshold of digital capabilities to participate.
- Uneven access to digital tools: Kenyans, as individuals, households and firms have uneven access to digital tools, both hardware and software. FinAccess 2019 revealed that while 91% of Kenyans have basic phones, only 34% have smart phones; the highest estimate of smartphone penetration in Kenya is 43%.
In terms of mobile money, which is assumed to be ubiquitous in Kenya, there are key segments that are under-served. For example, while 75% of Kenyans have access to mobile money accounts, about 28% of local market farmers do not even have a mobile money account. This uneven access to digital tools has a material effect on the ability of all Kenyans to identify, leverage, benefit from and exploit digital opportunities.
- Financial inequality affects digital participation: The costs linked to participating in the digital economy translates to wealthier Kenyans being better positioned to participate in the digital economy. FinAccess 2019 revealed that 57% of Kenyans cite affordability as the main reason they do not use mobile money more. Given that most digital economy opportunities require either payment through mobile money, or the purchase of internet bundles to engage in the opportunity, financial inequality may lead to a form of financial discrimination if digitalisation is prioritised without taking cost into account.
- Unequal levels of digital skills: Finally, clearly individuals differ in terms of basic digital literacy as well as more sophisticated digital skills that allow them to identify opportunities in the digital marketplace and determine which opportunities they should exploit and how to do so. This is particularly important in working with Kenyan firms to develop digital solutions and accrue value from those solutions. Without developing this skills-set, Kenyans risk being reduced to being mainly consumers, and fail to fully capture the value and opportunity linked to the development and ownership of digital solutions.
These four factors ought to be borne in mind when crafting COVID-related solutions, responses and interventions using digital channels. A failure to do so may exacerbate income and economic inequality and the uneven accrual of benefits along a spectrum of digital access, capabilities and financial bandwidth. Thus, when considering leveraging digitalisation in COVID-19 policy responses consider the following:
- Assess the target group and their starting digital capabilities and access to digital tools. This will provide a baseline that will clearly identify how inclusive the intervention is and which segments risk being locked out, even at the design stage. Gendered analysis may be particularly instructive.
- When determining the pricing strategy for the solution/intervention, be cognisant of how this will translate to uptake and use in a context where most have seen incomes severely eroded.
- Leverage solutions that are not intrusive or demanding of end-user effort and time. Partnering with Kenyan tech players in the design and deployment of these solutions present an opportunity to create curated responses with continued relevance in a dynamic and unpredictable environment.
About 3.6 million Kenyans are local food crop farmers and are key stakeholders in food security in the country.
This post was first published in fsdkenya.org
About the Author
Anzetse Were, Senior Economist, FSD Kenya
Anzetse Were is a development economist with over ten years of experience in economic research, analysis, advising and strategy development focused on inclusive economic development and transformation in Africa. Her areas of expertise include the financial sector and finance systems; country and regional economic diagnostics; private sector development; the digital economy; and climate finance. She has a Master’s in Economics from the University of Sydney (Australia) and a Bachelor’s degree from Brown University (USA).
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