Improved access to the internet has the potential to lift millions out of poverty and offer exciting opportunities for investors, says abrdn.
Samuel Bevan, investment director and manager of the Emerging Markets Sustainable Development Corporate Bond, says that for people who have been locked out of a formal financial system, mobile and internet connection can be quickly transformative.
“A phone can act as a bank branch and ATM, bringing access to transactions, saving and credit, as well as insurance services and cheaper ways to transfer money – this has been shown to rapidly lift people out of poverty,” says Bevan.
In every developing country, key infrastructure investment now needs to include mobile and broadband coverage, with wifi almost more important than roads, according to Bevan.
Bevan explains: “Along with banking and financing, the internet brings educational, employment, commercial and healthcare opportunities; it fosters knowledge and greater freedom of expression. It can boost inclusion in all kinds of ways, reduce carbon emissions and the Covid pandemic has only increased the importance of the internet.”
Sub-Saharan Africa remains one of the least connected regions of the world. Research from abrdn has shown that 270 million people in the region are unconnected, meanwhile 520 million people in sub-Saharan regions are covered by mobile broadband but can’t afford to use it, leaving just 26% of the Sub-Saharan population with access to the internet.
Bevan says: “Once communities become connected, economic growth and development gets an immediate boost – every 10% increase in mobile coverage in a poor country can speed up GDP growth by 1.2%. Connecting developing economies is so crucial that the United Nations has a sustainable development goal for achieving universal and affordable internet access and a target for 1GB of data to cost less than 2% of monthly income for everyone by 2025.”
Bevan acknowledges that there are negatives to creating an increasingly connected world, creating extra hard-to-recycle e-waste, the risk of scams and privacy breaches and the concern that electricity can be unavailable or unreliable.
However, there are companies that are seeking to overcome these challenges, he says, for example IHS Holdings which owns 14% of telephony towers in sub-Saharan Africa and has begun to use satellite connections and solar power to connect rural areas at no greater costs to users than in urban areas.
Bevan adds: “Connecting Africa involves huge projects that require significant investment and major infrastructure capabilities. Helping the least connected parts of the world online offers interesting and worthwhile opportunities for investors. Extensive research can help to identify the right companies – ones that take their social mission seriously and can unlock the potential in connecting the world and developing sustainably.”
