In the midst of the cruel second wave of Covid, rays of hope are still visible, offered by technology and digital solutions. The pandemic has made two things clear: Digitalisation will power the developing world out of economic crisis and digitalisation of the medium, small and micro (MSME) sector is a necessary ingredient for it.
The pandemic has accelerated economic reforms in many developing countries; social distancing has accelerated the adoption of digitalisation by governments, companies, consumers, educational institutions and NGOs; the decreasing cost of technology and prediction makes it accessible and possible; and platforms are the new institutions – now easier to build and participate in. At the cusp of this new era, how can we ensure equity and a level playing field in digitalisation? There are some challenges to consider, as this process is still fundamentally different in developed and developing countries.
First, there’s a difference between ‘access’ and ‘usage’ of technology. The issue facing the developed world is ‘usage’, that is, consumer privacy, security, data protection, productivity. The developing world needs ‘access’ – digital availability, affordability and usage of infrastructure. Second, there’s a ‘hard’ and ‘soft’ infrastructure gap – ‘hard’ includes devices, electricity, telecom, servers, data centres, while ‘soft’ includes digital platforms, content, legal and policy measures across value-chains. The developing world lacks both.
The world is also tied down to three approaches: proprietary digital platforms owned by a few private players, a government mandated system, and a broad regulation for consumers disconnected from their needs. A universalist approach is necessary to reconcile these worlds. One way is by making digitalisation a ‘public good’ – available, affordable, accessible, auditable, scalable, with privacy embedded in its design. The UN secretary general laid this out in his substantive road map for digital cooperation.
A ready and demonstrated model of digital public goods is available in India, in the form of IndiaStack – a set of open, modular, interoperable protocols, building blocks that allow “governments, businesses, startups and developers to utilise a unique digital infrastructure to solve India’s hard problems”. It can be compared to the public highways which governments finance and build – on which private and public vehicles can drive, commerce can thrive and people can prosper.
The base of this is a biometric identity, connected to bank accounts through which citizens receive services and subsidies, from pensions to remittances, licences to food rations. The identity stores the digital records – but consent of sharing data lies with the individual. It has been tested during the pandemic across India’s vast, diverse population, and at continental scale – with food rations for migrant workers, vaccines taken and digital certificates provided.
Efforts are also underway globally, to adopt all or part of this model. The Philippines, Morocco, Ethiopia, are working with MOSIP, or the Modular Open-Source Identity Platform, a not-for-profit foundation offering the open-source code. The UN high-level panel for digital cooperation endorsed MOSIP in its June 2020 report.
Once the pandemic ends, the focus will be on getting people back to work, and this is where digital public goods are critical, especially to revive MSMEs. In developing countries, they are plagued by low digitalisation and poor access to low-cost and easily available credit. In the absence of data, the costs of reaching these MSMEs, underwriting, monitoring and repayment risks of small-sized loans, make it difficult for lenders to provide credit.
India is democratising credit flows to MSMEs while simultaneously driving digitalisation within them – this is Microfinance 4.0. Building blocks such as the Open Credit Enablement Network (OCEN) bring together private participants like app-based companies, credit-scoring, mutual funds, insurance, telcos, which can innovate across the entire lending value chain.
We cannot forget to consider sustainability. Massive digitalisation requires mountains of silicon chips, magnets and batteries, which need rare earths and lithium, all difficult to mine. Data centres are responsible for 1% of global energy consumption. Chip-making is water-intensive, and the chemicals are polluting. The need of the hour is yes, more digitalisation, but also innovation for a smart, non-polluting chip. Till that comes, the hope is for democratic digitalisation to create new tiger economies, across continents – in the Indo-Pacific, Africa, South America, the Caribbean. It’s more possible now than ever before.
(The article is based on a speech delivered at the UNGA High Level Debate on Digital Cooperation and Connectivity)
Views expressed above are the author’s own.
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