The great digital divide – investing in access, inclusivity, and equality

The COVID-19 pandemic has given rise to a new wave of technological enthusiasm. Businesses and policymakers are imagining the post-COVID world where physical location, thanks to digital connectivity, loses importance. Surely, if this is the case, then we could solve some of the most complex issues of our time? A teacher in Finland could educate children in the rural regions of Somalia, right? Or perhaps we could provide remote prenatal counselling to reduce child mortality?

The luxury of connectivity

As inspiring as it sounds, a lot needs to happen first. If you are reading this, it means you are online. Then, it is easy to forget that a vast majority of the world’s population lives in countries, where less than half of the people have access to internet. In most parts of Latin America, 60-80% of people have access, whereas in most of South and South East Asia, only 20-40% have access. Africa is diverse but there are several countries where less than 20% of the population has access to internet.

And while lack of access is a huge hurdle, affordability is another one. For anyone streaming Netflix daily it may come as a surprise but for most of the world’s population access to internet, if it exists, is so costly they cannot afford it. In Sub-Saharan Africa, the average cost of 1GB of mobile data is 6.44 USD compared to 0.97 USD in Finland, while gross national income is more than 30 times higher in Finland than the Sub-Saharan Africa average. Downloading an HD quality movie in Chad, which provides the most expensive mobile data in the world, could cost more than 90 USD compared to less than 4 USD in Finland.

Lack of access is driving inequality and undermining human rights

So, while technology is being praised as a miracle medicine to the ills of our time, for most, it remains a distant luxury product. This is true to the extent that the IMF has acknowledged that low access to internet is driving inequality, both within and between countries. And the inequality embedded in the lack of access does not only divide the rich and the poor. It fosters a complex set of intersecting inequalities.

According to the United Nations, the gender gap in internet use is growing in Africa and in many low-income countries. This gap stands as a significant hurdle to female empowerment, limiting women’s labour force participation and hurting their income as their access particularly to digital financial services is effectively curtailed. As the UN has defined, access to internet serves as a catalyst to several human rights, like the right to freedom of speech or the right to freedom of assembly, and the gender digital divide severely undermines women’s full enjoyment of their human rights.

Life-improving investments in digital infrastructure and solutions

Internet access also divides people living in urban centres vs. people inhabiting rural areas, and access is generally lacking in fragile and conflict-affected states. To connect people in countries like Somalia or the Democratic Republic of the Congo, particularly the remote regions, we need investments in nationwide backbone networks and in last mile distribution. Luckily, connecting countries and continents as well as extending connectivity to landlocked regions or urban areas has become easier thanks to the rapid improvement in submarine cables and terrestrial fibre optic cables.

Connecting the unconnected is crucial if we are to reduce inequality, but we must also invest in productivity. Where connections exist but remain unreliable, expensive, and slow, we invest in smart infrastructure that brings efficiency gains. This will ultimately foster growth in digital solutions, the core of our investment strategy in countries like Kenya or Nigeria, that host local tech-hubs. When investing in digital solutions, our focus remains on the underserved people, facilitating access to finance, social support, education, or healthcare. It could help small businesses such as farmers, by enabling technologies that help them e.g., to anticipate changes in weather or plan more efficient logistics, indirectly supporting food security.

Bringing on board new people and new investors, leaving no one behind

As we address the infrastructure and service gaps in our target markets, we also aim to crowd in other investors. For example, through the OP Finnfund Global Impact Fund I, private investors in Finland have invested in Net1, a company that provides fixed broadband connections in rural Indonesia, where there are less than four fixed broadband subscriptions for 100 people. For Finns, this theme is close to heart since Finland’s transformation from basically a natural resource exporting country to a technology intensive knowledge economy was enabled by the rapid emergence and growth of the telecom sector.

The COVID-19 pandemic has exacerbated inequalities globally. Understanding that the dividends from digitalisation, currently, are so unevenly spread is important. It means that the new wave of the digital revolution can either be the great divider or the great equalizer, depending on how we implement it. We want the latter. That is why we are committed to investing in access for those who currently lack it, and in solutions that promote inclusivity – bringing more people on board and leaving no one behind.

Minna Kuusisto
Economist

Read more about Finnfund’s investments in digital infrastructure and solutions > >