Economic growth is usually a mixed bag in the developing world. It generally includes heavy involvement from foreign players that may or may not have the best interests of the host country in mind.
When I sat down to think about this, an avalanche of questions tumbled into view:
What industry or industries are we talking about? Who or what is funding the growth? What resources are at stake? What are relevant regulations like? How are consumers faring? How are citizens faring? Are profits going to domestic or international players? Is corruption taking place? How viable is the growth long-term? Are local cultures being affected?
That’s a lot to consider, I know. And each of these questions branch out in many directions.
For simplicity’s sake, let’s consider a few possible pros and cons.
Possible pros of dynamic business growth:
Create jobs
More revenue for infrastructure and public services
More educational, professional and personal opportunities
Improve civil rights such as gender and racial equality by expanding opportunities
Provide essential and leisure goods
Reduce dependence on foreign aid
Create vibrant cottage industries and also economic ecosystems
Possible cons of dynamic business growth:
Hurt local economies by crushing competition
Siphon or destroy natural resources (ex: sand, clean water) if regulations are weak
Cause citizens to get stuck in dead-end, low-paying jobs with little protections
Create an environment of labor exploitation
Erode civil rights by entrenching social classes
Weaken local cultures
Pollution
Corruption
The best rule of thumb, in my opinion, is if the growth is spearheaded by people of the country in question, who understand the cultural and economic context; they are more likely to know what’s best for their fellow citizens.
Otherwise, it’s generally a case of a rising tide that fails to lift all boats, meaning profits accrue to a sliver of people rather than to a broad swath of people. (Or companies take all of the profits out of the country to avoid taxes.)
Just look at the global clothing manufacturers that exploit cheap labor and resources in nations with weak regulation to flood Western markets with cheap clothes. They have effectively set off a consumption crisis in which “growth” is unlimited but mostly destructive.
Fishing is another industry that has been dominated by Western modes and technologies, leading to severe depletions of fish populations.
Mining across continents is generally orchestrated by multinationals that exploit labor and pollute like crazy.
I can go on and on pointing to industries with bad records that shouldn’t be emulated.
One industry that actually has a commendable record in the developing world is mobile banking and money management. The great thing about this industry is that it has largely been a ground-up development--by the people, for the people.
In countries such as Bangladesh, Tanzania, Cameroon, the Philippines and Kenya, domestic entrepreneurs have created successful business models that aid in the fight against poverty.
How does mobile banking help poor people? In more ways than you might think.
Kenya, in particular, has led the world in this arena, with more than 1,018 active accounts on the mobile banking service M-Pesa per 1,000 adults in 2013.
Prior to mobile financial services, poor Kenyans struggled to access their money, convert assets to funds, send money to relatives and, as a result, cover everyday expenses, mostly because banks were too expensive and hard to get to in short notice.
This sometimes meant forgoing important medical or educational decisions. People were also forced to make bad financial choices such as investing in depreciating assets to have concrete proof of wealth.
Mobile banking simultaneously allays the problems of expense and distance. Since mobile phones are widely used in the developing world, adoption has been relatively easy.
Mobile financial services cost a fraction as much as traditional banking and they go with you anywhere and everywhere.
As the Gates Foundation notes, “By making small commissions on millions and millions of transactions, mobile money providers can make a profit serving poor customers, just as brick-and-mortar banks do serving the wealthy. Once these services get going, then there will be competitive innovation in offerings like special savings or credit plans related to farming or education.”
Mobile financial services open the door to more affordable lines of credit and the ability to quickly move or liquidate assets. This speeds up almost every other facet of the economy by minimizing the time people spend managing and worrying about their wealth and by hastening the everyday flow of money.
Businesses fare better in such environments because transactions become more regular and consistent. When businesses fare better, more people become employed and more entrepreneurs emerge.
Unlike other industries that squeeze the existing resources of an area, mobile financial services open up a community’s potential. All companies should strive to have this impact on local economies.