Wednesday, June 27, 2012

Kiva Innovations: Reducing poverty along the supply chain

In 2001, a team of French and American doctors successfully removed the gallbladder of a 68-year-old woman in Strasbourg, France. The routine surgery was remarkable for one reason: the doctors were in New York at the time

While robotic surgeries had been commonplace in hospitals for years, the 45-minute operation proved the feasibility of performing such a procedure over a long distance with only a 200 millisecond delay. This technology has endless applications, from advanced triage on the battlefield to operations in remote areas -- and even in space.

In the age of globalization, individuals and businesses alike operate in a digitally-interconnected space, finely dividing labor across multiple actors to take advantage of skills and wages. Almost every product we use has been produced this way. 

Take the cell phone in your pocket… 

The cell phone -- both smart and dumb -- may look simple, but it's actually a complex blend of hundreds of components produced all over the world. Supply chains are closely guarded company secrets. For instance, Apple has been rumored to source products from South Korea, Taiwan, China, Japan and Malaysia to make the iPhone. But most of the value comes from the design and technology developed in the United States, even though the raw materials used to make the device come from mining-intensive countries like the Democratic Republic of Congo, Zambia and Brazil. This is a murky process to be sure and one that requires regulation and scrutiny. Still, it's an unshakable reality of our globalized world.

Drive-Thrus and X-Rays

This fragmented approach to production doesn't stop with high-tech devices. Companies have begun to outsource every aspect of their businesses to others who offer higher skillsets or lower wages -- sometimes both. 

Business Process Outsourcing (BPO), as it's called, is big business. Drive thru orders at your local McDonald’s are taken by high school students in California and X-rays are read by technicians in India. Almost overnight, information technology (IT) and BPO operations have sprung up to provide a complex array of services across the globe.

This trend has been a boon to developing countries that have experienced remarkable growth as a result of the IT-BPO and tech industries. In the Philippines alone the industry contributes 5% annually to the country’s GDP and generates 16% of total export revenue. The result: a net gain of approximately 450,000 sector jobs since 2004.

Economic growth from IT-BPO has had a considerably positive impact not only on the lives of the urban upper- and middle-classes, but also on poor and rural groups. Technology from TVs to mobile phones has empowered society with tools to increase access to information and services. For more on this, see a past blog on the topic.

The IT-BPO sector also offers jobs to middle- and low-income families. This has especially been the case for young people who constitute the largest segment of the unemployed in emerging economies. Even low-end jobs in BPO can offer vital work experience for young people to help launch their careers or subsidize higher education.

Uneven Development

As always, there are no quick solutions to complex problems. IT-BPO has not flourished everywhere. Even in a country like the Philippines with expansive growth, many poor people cannot access or don’t have the training to do jobs dependent on technology. On top of that, some rural areas are too remote and some cities are too infrastructure-poor to entice companies. In these cases, economic disparities widen.

Kiva is exploring a number of partnerships with organizations that help poor communities capitalize on BPO-IT trends to generate income and alleviate poverty.

In South Africa, one prospective partner is a university that helps students land BPO contracts while they are still in school. The program helps students earn money to pay down their loans, while, at the same time, gaining useful connections and work experience so they can jumpstart their professional lives.

Another potential Kiva partner recruits young people from urban slums in Laos and rural villages in Cambodia and trains them to work in digital data centers. The organization targets vulnerable groups and often represents a first opportunity for sustained employment. It also provides health care and scholarships for continuing education and further career development.

At Kiva, we believe it's our job to support mindful, responsible organizations in their work creating opportunities for poor and disadvantaged groups. We also believe that the expansive nature of the IT-BPO sector offers rich potential for addressing poverty.

Ian Matthews is an intern on Kiva’s Strategic Initiatives team, looking for new partners and loan products to extend opportunities and access to even more people around the world. Ian has an MSc in Global Politics from the London School of Economics and Political Science and has previously done field work in Honduras. Send him your feedback on this blog series at

This is part of a larger series on Kiva’s strategic initiatives and innovative loan products, which are designed to expand opportunities for more borrowers. Kiva is excited to partner with companies and organizations that use mobile technology to provide access to information.

Photos courtesy the Gates Foundation, United Nations.