KARACHI: It is a well-known fact that the mobile revolution has reshaped the lives of millions of Pakistanis. From providing instantaneous, on-the-go access to information sources and communication channels to mobile financial solutions and online purchases, the smartphone has become a part of everyday life.

However, the on-ground reality is laced with much less optimism when considering that Pakistan has the lowest internet penetration rate in the South Asian region. With internet penetration at 40.95 percent , more than 130 million people remain disconnected from the internet's digital resources; more than half of the country's estimated 220 million population. The GSMA report 'Pakistan: a digital future' is a revealing prism through which to grasp the clear picture of the digital divide that exists in the country.

"Mobile broadband covers about 80 percent of the population but only 39.98 percent of the population benefits from it. Affordability is the biggest barrier to entry at the moment. Although smartphone connections have nearly doubled over the last two years, close to 84 million people are still using 2G feature phones. More needs to be done to reduce the coverage gap," said an industry expert.

In the Network Readiness Index 2019, Pakistan ranked 98th out of 121 countries for the cost of owning a smartphone. "I believe our ranking will improve after the government's decision to reduce income tax, sales tax and customs duty on imported smartphones. Even still, this won't enable us to equip the marginalized with a smart device. We need to look towards other emerging markets to see what they are doing differently in this regard," he further added.

As per experts, this is where the regulator, mobile operators, financial institutions, NGOs, governments, community organizations and policy makers have the opportunity to improve device access, and benefit from increased smartphone penetration and the ensuing socioeconomic benefits.

"There are ideally two models that Pakistan needs to adopt in providing smart devices to the masses. An asset financing model where consumers access financing through financial institutions and a 3rd party payment model where companies that derive value from increased internet access subsidize or offset device costs to the marginalized," says another industry expert.

A mobile phone installment plan, in which the price of the device is spread across low monthly installments, is the best way to facilitate the purchase of smartphones among low-income groups.

Since the market is dominated by prepaid connections and an adult population not registered with banks, credit default risk is high. This is where the telecom regulator can facilitate by covering possible credit default.

Another option is that provincial governments partner with financial institutions, including MFIs, by providing risk capital for smartphone loans at lower interest rates to target populations that would benefit from access e.g. farmers, women and students.

In 2016, Argentina announced the launch of a national programme to provide asset financing for eight million individuals to move from 2G feature phones to 4G enabled smartphones. Individuals could purchase these smartphones on a 12-month instalment plan provided by the government.

During the same year, the government of Punjab partnered with a local MFI on a pilot that saw 485,000 farmers receive interest free loans for smartphones that came pre-installed with Agriapps.

As per a humanitarian working to provide digital access to the underserved, "The smartphone is the most meaningful symbol of technology of our times. Yet, for a device so increasingly essential to our daily needs, the obstacles to owning a smartphone are multiple, especially for women. So many lack the necessary funds to pay upfront the full price of a new device. It is essential that the regulator supports private institutions in making the purchase price more manageable through financing and ensure efficient distribution channels are in place for handsets to reach people in underserved regions."

Moving the unconnected online makes the economy more competitive through the provision of online opportunities. By supporting the masses through affordable loans, millions can avail the entire ecosystem of benefits, such as e-Education, e-Health, financial services, and business efficiencies, amongst others.

This will be a win-win situation. The regulator derives unlimited value from increased internet access. From an increase in government revenues via mobile taxation and device imports to encouraging growth in digital payments, the local ecommerce sector and mobile manufacturing.

Copyright Business Recorder, 2020