Digital economy creating opportunities in the developing world

An increasing amount of commercial transactions are moving online, while digital technologies are affecting every facet of the traditional economy. This has provided businesses with new channels through which to reach existing clients, as well as new opportunities for expanding their market share. For consumers, the ever-expanding digital economy promises not only greater access to goods and services, but also to information regarding these products, thereby encouraging more competitive pricing. In emerging economies the development of digital channels has, in some cases, allowed sectors to essentially skip stages of development, moving directly to digital solutions without needing to first heavily invest in certain hard infrastructure.

Digital Divide

While the digital economy has opened up many potential growth opportunities, the so-called global digital divide remains. The capacity and quality of internet and mobile phone network coverage in many emerging and frontier markets still lags behind that of more advanced economies. Closing this gap can be challenging in countries with lower rates of urbanisation or tough terrain, as this complicates the extension of physical network infrastructure.

Alongside the requisite investment in at least some hard infrastructure, there is a need for policymakers to put in place the legislative and institutional frameworks necessary to sustain growth in the digital economy. The Gulf states have been among the most forward-looking in this regard. In countries such as the UAE the digitisation of public services, coupled with the implementation of a favourable regulatory environment, is driving the transition, while also helping to foster and support digital innovation across the economy.

Mobile Banking

Building on the success of earlier pilot projects in Africa and elsewhere, Kenyan mobile network operator Safaricom brought M-Pesa to market in 2007, in partnership with Vodafone. This service allows anyone with a basic mobile phone to use it as an electronic wallet and transfer money to others, pay utility bills, deposit and withdraw funds via agents, and even access microcredit. This mobile money system has brought financial services to large swathes of the previously unbanked population.

This coincided with a surge in mobile phone subscriptions in the country, from 30 per 100 people in 2007 to 86 by 2017, according to the UN’s International Telecommunication Union (ITU). By early 2019 the service had garnered 21m users in Kenya alone and was processing over 1.7bn transactions per year in the country. Furthermore, in early 2019 M-Pesa was making preparations to enter Ethiopia, one of the fastest-growing economies of the past decade. This follows its earlier success in neighbouring Tanzania, as well as in countries like Egypt, Afghanistan and India. The M-Pesa model has since spread to other countries, with similar platforms having been launched worldwide.

In developing economies with relatively poor ICT infrastructure and a limited number of bank branches, the growth of mobile and smartphones is allowing financial service providers to reach more clients. Moreover, once the initial investment is made in establishing a digital platform, the marginal cost of each new client is much smaller than that associated with physical infrastructure. Indeed, in Kenya the number of ATMs in operation has fallen by about one-third, as more of the population has switched to mobile money platforms.

Emerging Opportunities

Building on the success of mobile money systems, a wider range of more sophisticated financial services are being made available to emerging market consumers. Insurance technology (insurtech), for example, is becoming an increasingly important player in the insurance sector globally. In the second quarter of 2018 China, India, Israel and South Africa together accounted for one-third of all insurtech deals globally, and the highest projected growth rates over the coming decades are in large emerging markets.

Faster economic and demographic growth in the developing world make it likely that these countries will remain important growth drivers for years to come, particularly in transport and logistics. In some cases ride-hailing apps have filled a market gap that stems from inefficient public transport systems. For example, in late 2018 Uber executives hailed Argentina as the company’s fastest-growing market, despite the fact that the platform is only operating in the capital, Buenos Aires, and notwithstanding the economic challenges currently facing the country. Meanwhile, India has become Amazon’s top growth market, as well as the fastest-growing subscriber base for its Prime service.

Although the biggest names in global digital technology are profiting from surging growth in emerging markets, they are by no means alone in looking to capitalise, with these countries also giving rise to a range of internationally competitive domestic firms. Alibaba is the dominant player in China’s online retail space and is rapidly expanding across Asia to compete directly with Amazon. Since 2015 Alibaba’s online sales have surpassed those of Amazon, eBay and Walmart combined. While the population densities in Alibaba’s primary markets give it an advantage, digital firms are not relying solely on demographics to drive revenue. The Chinese ride-hailing app Didi Chuxing began an aggressive global expansion in 2018, entering Brazil, Mexico, Taiwan, Japan and Australia, where it is now competing directly with Uber.

Sub-Saharan Africa

The average number of mobile phone subscriptions per 100 people in sub-Saharan Africa rose to 75 in 2017, according to the ITU. However, while certain digital technologies – such as M-Pesa – function on all mobile phones, the overwhelming majority of new digital services require a smartphone. The average number of broadband mobile phone connections per 100 people stood at 36 in the final quarter of 2018, according to figures from global telecoms industry association GSMA. At just under 32 and 34 mobile broadband connections per 100 people, Tanzania and Gabon fell slightly behind the regional average, while Nigeria and Kenya were marginally ahead of the trend, with 40 and 41, respectively. The best performers in the African markets covered by OBG were Ghana with 80 and South Africa with 105.

However, even countries with relatively developed ICT infrastructure are finding ways to improve their internet penetration. Côte d’Ivoire is a case in point; its National Agency for the Universal Service of Telecommunications is in the process of deploying a 7000-km fibre-optic network to underserved rural areas.


Countries in Asia generally benefit from well-entrenched ICT infrastructure. Among those covered by OBG, the mobile broadband penetration rate exceeds the regional average of 82 connections per 100 people in Thailand (127), Malaysia (112), Indonesia (108), the Philippines (106), Brunei Darussalam (95) and Sri Lanka (87), while falling short in Mongolia (81), Myanmar (78), Vietnam (66) and Papua New Guinea (14).

Having only opened its mobile telephony segment to foreign investment in 2013, Myanmar is currently catching up in terms of developing its ICT infrastructure. The country demonstrates the positive role new entrants can play in improving services and driving down prices through market competition. This was highlighted by the arrival of Mytel in 2018, backed by Vietnam’s Viettel Group, as the fourth entrant to the local telecoms market. In January 2019 – within eight months of operating in Myanmar – the firm had already achieved an 8% market share.

Middle East & North Africa

At 85, the average number of mobile broadband connections per 100 people in the MENA region is above the global average. Of the countries covered by OBG, rates are highest in the UAE (163), Kuwait (159) and Qatar (135), and lowest in Egypt (71), Morocco (70) and Jordan (64). Countries in the Gulf Cooperation Council (GCC) were among the earliest to recognise the potential of digitalisation for all areas of the economy. These markets have also pioneered the implementation of legislation to support the development of the digital economy. For example, Bahrain introduced the region’s first 4G-LTE network in 2013 and issued a nationwide law on the protection of personal data in 2018. In another important initiative, in September 2018 Abu Dhabi Global Market – the emirate’s international financial centre – announced the creation of a digital sandbox to accelerate financial services innovation, and boost financial inclusion in the UAE and across the region. In addition, building on its developed ICT infrastructure, Algeria has been trying to foster ICT start-up clusters as late. Furthermore, through the Algiers Smart City initiative, the country is seeking to harness digital solutions to improve living standards of people in the capital.

Latin America & Caribbean

As of late 2018 just one of the countries in the region covered by OBG – Argentina – had an average number of mobile broadband connections per 100 people on a par with advanced economies, with 102. Only Mexico, at 66, stood below the global average. All remaining markets covered by OBG exceeded this figure; Panama and Trinidad & Tobago each had an average of 77, behind Colombia (83) and Peru (87). Nevertheless, while some countries in the region have lagged behind in mobile broadband penetration, several have led the way in policies to foster, regulate and tax the digital economy. In 2018 Mexico became one of just a few countries worldwide to promulgate a dedicated financial technology (fintech) law. The new legislation governs firms operating in the crowdfunding, online payments and cryptocurrency segments, and includes measures to guard against money laundering. The law introduced an accelerated process for the registration and approval of fintech firms, allowing them to set up operations within six to 12 months.

Path Ahead

The combination of rapid catch-up growth and increased infrastructure investment should ensure that emerging and frontier markets remain important drivers of growth in the sector for years to come. Although innovation and market dynamics in higher-income countries will ensure that these nations continue to play a leading role globally, digital firms from the developing world appear set to competitively challenge those from more advanced economies.

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The Report: Trinidad & Tobago 2020

ICT chapter from The Report: Trinidad & Tobago 2020

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