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The poor invest in airtime to grow income, says study

Safaricom CEO Bob Collymore distributes free airtime to passengers in a bus to mark the launch of a promotion run by the firm. A new study has shown that poor people would rather cut back on their food and transport budgets to buy airtime. Photo/File
Safaricom CEO Bob Collymore distributes free airtime to passengers in a bus to mark the launch of a promotion run by the firm. A new study has shown that poor people would rather cut back on their food and transport budgets to buy airtime. Photo/File 

Many of Kenya’s poor would rather go hungry and walk to work than be short of airtime, according to a study commissioned by the World Bank.

The preference reflects the changes in spending priorities brought about by the use of mobile phones.

The study found that seven out of 10 poor people — referred to as the base of the pyramid in the report — cut down on food expenses to spare money for airtime.

“These substitutions were largely undertaken in order to strengthen the longer-term asset accumulation of micro-enterprises,” said the report titled Mobile Phone Usage at the Kenyan Base of the Pyramid.

It found that 83 per cent of the pyramid base kept aside up to Sh100 from basic needs while 70 per cent sacrificed provisions of between Sh101 and Sh500 while another 83 per cent cut their expenditure by between Sh501 and Sh1,000.

Nine per cent of those polled also admitted to regularly cutting back on bus fare by up to Sh100 while another 10 per cent saved between Sh101 to Sh500.

The amount that respondents saved the most was between Sh10 to Sh250, at least once a week.

“Why not buy credit and forgo bread so that I make more money for daily use than bread for a day’s use,” one of the respondents posed, saying phone credit gave her a higher chance of securing a better job.

Those interviewed revealed that they sometimes failed to buy entire meals – usually lunch - for themselves or their families or budgeted for cheaper meals.

The report revealed that individuals also skipped buying body lotion, soap and new clothes although these incidents were less prevalent.

The research conducted over a period of six months last year was commissioned by infoDev — a global partnership programme within the World Bank — and conducted by iHub Research and Research Solutions Africa.

A similar study in the Philippines found that mobile phone and credit purchases had displaced tobacco consumption while in Uganda women were willing to forego store-bought items to stay connected.

The report found that the sacrifices extended to owning a handset for 60 per cent of the poor, reflecting a changed mindset where mobile phones are no longer deemed a luxury.

Kwame Owino, the chief executive for the Institute of Economic Affairs said the findings were indicative of the importance of phones to Kenyans faced with uncertain economic times.

The poor were making such choices in the hope that having an operational phone could help them land a new income source.

“Inflation does not discriminate but it hits the poor people harder and leads them to making tough decisions on which need should be prioritised,” said Mr Owino.

“The reasoning for these individuals is that by having an active phone they can secure new economic opportunities and improve their wellbeing.”

For the better part of 2011, the country experienced high inflation rates but this has since reduced – owing to the intervention of the CBK - to 3.2 per cent in December 2012.

This is a sharp decline from 19.7 per cent registered in November 2011.

These rates pushed the cost of basic commodities further away from the reach of poor Kenyans.

Stephen Mutoro of the Consumers Federation of Kenya (Cofek) said that while food is a basic human need, the poor at times elect to forego meals in the hope of improving their immediate financial situation.

“These individuals struggle to find a balance between their personal and family needs and in the case of casual labourers, their next job could be literally a phone call away,” said Mr Mutoro.

Such decisions had been made easier by airtime being cheaper today compared to three years ago.

This reduced cost is a result of the country’s four telecom firms releasing lower value scratch cards with denominations as low as Sh5 – as they raced to rope in consumers at the lower end of the market.

Only four years ago, the lowest airtime denomination was Sh50, which was on the higher side for low income earners already pressed by food and housing needs.

The report also found that individuals at the lower end of the economic ladder use simple phones as opposed to smartphones that have taken the rest of the world by storm.

Only nine per cent of the respondents owned smart phones, while 37 per cent had feature phones – those with features of basic phone such as Internet capability, memory card slots and cameras.

Slightly more than half — 53 per cent of the respondents — had basic phones with a bulk of the gadgets being considerably low-priced handsets.

This is despite an ongoing explosion in worldwide sales and usage of smartphones with the sales numbers this year alone expected to grow to one billion handsets, according to Deloitte. This will move worldwide smartphone users to almost two billion.

“Many respondents do not understand what mobile applications are and ended up listing basic phone functions such as alarm clocks, calculators, SMS, calling services and torch as applications,” the report noted.

Moreover, the respondents do not exploit the full potential of the feature phones they own with most usage being noted on making calls, sending/receiving text messages and mobile money transactions.

A fifth of the respondents used their phones to read and send emails, 44 per cent to play games and another 29 per cent sending text messages to radio and television stations.

In comparison, only 3.7 per cent used them for Skype calls and only 1.1 per cent used their phones to roam while abroad.

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