Leveraging an Innovative Payment Model to Improve Women’s Digital Inclusion

Sub-Saharan Africa has seen a rapid expansion of mobile phone ownership in the last 15 years, heralded by many for its economic and social empowerment potential – with a 2007 Deloitte report finding that for every 10% increase in mobile phone penetration, a country will experience 1.2% GDP growth. Economic empowerment may come as phones facilitate reduced information frictions, improvements in supply chain connectivity, creation of jobs, resilience to shocks through remittances, and access to other mobile services. In Kenya, the gender gap in mobile phone ownership is nearly nonexistent, with women making up nearly 50% of phone owners.

Smartphones expand the potential economic benefits of phone ownership–offering users greater connectivity to mobile internet as well as a more robust set of functionalities for mobile services like apps. Many countries across the continent have invested heavily in expanding cellular infrastructure, resulting in 84% of adults living in areas with mobile broadband coverage --extremely important when 95% of internet users in Kenya reported accessing through their personal mobile phone. In Kenya, the 2021 FinAccess survey found that only 23.4% of adults had used the internet in the past four weeks. Women, in particular, were nearly 9 percentage points less likely to have used the internet, and research has documented an increasing gender gap in internet usage on the continent more broadly.

These gaps in Internet access reflect gaps in smartphone access. Though smartphone ownership has drastically increased in recent years, gains have not been equally realized by women. The gender gap in smartphone ownership increased from 22% in 2017 to 30% in 2022, and a primary barrier is the high up-front cost of devices. Loans offer one way to overcome barriers associated with up-front costs, but it is often different for lenders to extend credit to low income borrowers, who lack collateral and therefore pose significant default risk. One way to overcome this barrier in low-income settings is through asset-backed loans, which allows lenders to provide credit to individuals for whom identifying collateral is difficult or not cost efficient. There is early evidence that this “pay-as-you-go” (PAYG) structure is an effective means of lending. However there is no evidence on how this structure might facilitate or inhibit women’s access to smartphones. Moreover, little is known about how to leverage PAYG lending arrangements to catalyze additional income and economic growth among borrowers.

Researchers at Inclusion Economics at Yale are partnering with M-KOPA, an asset-financing platform providing PAYG smartphones to customers in Kenya, to generate rigorous evidence on how to better provide women with access to smartphones and the ability to use them for income generation. Over 40% of M-Kopa’s customers live on $3.20 or less per day, and their PAYG financing model for smart phones has reached over 1 million individuals across sub-Saharan Africa. This project is currently in the formative stage, as partners use existing evidence, administrative data, and qualitative research to co-create an evidence-based solution that improves women’s ability to productively engage with digital technology. The team will then run a randomized controlled trial to understand the effects of this solution on women’s digital inclusion and economic empowerment.