Why emerging economies need digital for boosting growth
Today, digital finance has reached areas in developing economies where brick and mortar banking and financial businesses have found it hard to penetrate. What are the factors of economic development?
The age of affordable smart phones has been a crucial catalyst for delivering financial services that are set to benefit billions of people by boosting inclusive growth. According to reports, this spike in growth can add $3.7 trillion to the GDP of developing economies within a period of 10 years.
Even Today, approximately 2 million individuals do not have access to savings and credit. The same goes for micro, small and medium sized businesses where the number is as high as 200 million. Moreover, those business that manage to gain some access to saving and credit products from are subjected to higher fees and charges. This creates a financial hinderance for such small and mid sized businesses and renders them incapable of effectively contributing to GDP and in turn to the economic growth as whole.
But in recent years digital finance has brought a ray of hope for transforming million of lives and small scale businesses with its online payment and financial services via the phone or internet. Digital financial services are not only restricted to the use of individuals and business but also can be used by government bodies across areas of developing nations making growth through financial inclusion possible.
In the age of cloud computing, AI and revolutionary technology digital has become an important function of economic growth. Developed nations of the world are light years ahead in making use of these innovations for further economic growth. Therefore, it becomes that much important for emerging economics to not fall behind.
If policy makers of developing nations fail to follow suit they would risk the widening of a digital divide and lag further behind from the already advanced economies. Earlier digital connectivity was largely defined in terms of internet access. But now, technology and digital led innovations are created to generate value for businesses and industries. For instance, the block chain technology. The technology behind the crypto currency Bitcoin is being explored to create a secure financial ecosystem. Another is the VR technology that is changing the way consumers look at the digital space.
Today, companies need not look for setting up sites in developing nations for cutting costs. Technologies such as ‘additive manufacturing’, robots, and other non-human tools allow companies to move their production sites directly into the final market. For instance, Adidas is employing some of these innovations to create speed factories for footwear in Germany and US.
Likewise, innovations in digital infrastructure is facilitating more and more cross-border sale of services. This will allow domestic service provides to reach and tap into global markets.
Developed nations are moving fast to bank on the changing technologies and digital landscape. For instance, China which used to have protectionist industrial policies to support the domestic digital giants like Tencent and Baidu is using these firms to explore new tech with a view to expand on a global scale. Also, the European Union through its digital single market and financial policies is supporting investment technologies. As per reports, plans for a European cloud have been set in motion.
In certain developing nations digital technology has already been put to use in operations like data-driven farming techniques which are letting farmers achieve higher yield. Combined with mobile financial services, farmers are able to mobilise and expand their operations and expect a better rate of return from their produce.
But for a healthy economic growth, these transformation efforts of developing countries need support from international trade organisations like the World Trade Organisation to provide for a policies that govern the digital eco system in order to provide for a platform of equal opportunities for all players.