What do building materials have to do with tackling economic inequalities? Surprisingly, a lot. During the pandemic, as governments around the world moved swiftly to provide much needed financial assistance to its citizens, West African country Togo was faced with a challenge: how to identify its most cost-effective citizens. vulnerable and put money in their hands.
In partnership with a US-based charity called GiveDirectly, the Togolese government used an AI algorithm that analyzed satellite image data to target pockets of poverty in the country. “You can use different types of proxy for income level, like the types of roofing material used,” says Robert Opp, digital manager at the United Nations Development Program. For example, villages where houses have predominantly thatched roofs are more likely to be economically disadvantaged compared to villages with metal roofs.
The project in Togo helped the government target its financial aid efforts on those who needed it most. Moreover, it offers a powerful illustration of how digital tools are helping to solve problems of economic inequality around the world. “GiveDirectly has dramatically increased the ability to get money quickly into the hands of the people who need it,” says Michael Froman, Vice President and President of Strategic Growth at Mastercard and President of the Mastercard Center for Inclusive Growth. “He was able to bring the tools of the digital economy, like data science, to the table in a way that promotes inclusion, not exclusion. “
THE DIGITAL SIDE
Our increasingly digital world is definitely a double-edged sword. Tools like AI and machine learning are helping to bridge the gap between economic inequalities through innovative ways. But lack of access to basic digital tools like smartphones and wireless data limits economic opportunities for a wide range of people around the world. The United Nations recently announced that nearly half of the world’s population, some 3.7 billion people, is still offline. “The majority of the problems with this digital divide are that people cannot afford or know how to use connected digital devices,” says Opp.
Access is a major problem in the developing world, where most of these 3.7 billion people live. But developed countries like the United States are not immune to access issues. Some estimates put the number of Americans without high-speed Internet access at 42 million, or nearly 13% of the American population. Among blacks and Hispanics, this percentage is considerably higher. Wole Coaxum, CEO of MoCaFi, a financial technology firm focused on bridging the racial wealth gap, likens a lack of broadband connection to a critical infrastructure failure. “This is the 2021 version of access to electricity and clean running water,” he says.
The inability to access fast and reliable Internet service puts individuals in a severe economic position. This became even more acute during the pandemic, when so much financial activity – from traditional banking services to sending and receiving payments – quickly went digital. This transition has left a lot of people behind. In the USA record number of bank branch closures meant that people without internet access had few options to effectively manage their financial lives. “Some families spend money on expensive financial service products like payday loans, check cashing fees, etc.,” says Coaxum. “They can spend more on these costs in a year than they do on food.”
Globally, people whose livelihoods relied on in-person cash transactions, whether a farmer in Uganda or a fish merchant in the Philippines, have faced barriers. considerable. For starters, social distancing during the pandemic meant fewer opportunities for in-person transactions. But for people who can’t afford to bank digitally, it also means a lack of financial history that makes it harder to start a business. “If you don’t have the ability to show your credit history, then you aren’t really able to access financial services for loans and things like that,” says Opp.
THE POWER OF SIMPLE INNOVATIONS
Globally, efforts to bridge this digital divide are gaining momentum. Organizations are working with telecommunications companies in developing countries to reduce the cost of airtime to give merchants and individuals more opportunities to transact digitally. In fact, several mobile service providers in Africa have waived access fees during COVID-19 to encourage more digital transactions, which Opp says has likely helped increase adoption of these services.
Innovative digital tools are also helping connect unconnected people to essential financial services. Recently, MoCaFi and Mastercard partnered with the City of Los Angeles to create the Angeleno Connect Card, a digital card and app that allows LA residents without a bank account to access a wide range of financial services, from deposit to remote check to cash deposits at no charge. at places like CVS or 7-Eleven. It also allows the city government to quickly and efficiently channel funds to those in need.
“These are the kinds of things that can be done all over the country – and all over the world,” Froman says. “These are relatively simple innovations, but they can help transform people’s daily lives in a very positive way. It provides the comfort and safety net that comes with knowing they have access to the resources they need when something goes wrong. “