Title page
Contents
Acknowledgements 5
Abbreviations 10
Executive Summary 13
Types of devices covered in this report 14
Supply-side analysis 15
Demand-side analysis 16
Financing schemes and private capital mobilization 18
Roles for the public sector and international financial institutions 19
Policy recommendations 21
1. Introduction 25
1.1. Global scope, with a focus on four target markets 26
1.2. Types of devices covered by this rep 26
2. Supply-Side Assessment 31
2.1. Introduction 31
2.2. Supply-side assessment of new entry-level devices 31
2.2.1. New entry-level device value chain and cost structure 32
2.2.2. Cost structure assessment for new entry-level devices 37
2.2.3. Materials and manufacturing costs of new entry-level devices 42
2.2.4. Taxation and import duties 47
2.2.5. Development costs, operations, and profit margins 56
2.2.6. Distribution and marketing costs 60
2.3. Local manufacturing as a strategy to lower costs of entry-level devices 67
2.3.1. Manufacturing mobile devices in Rwanda-the case of Maraphone 68
2.3.2. Local assembly of mobile devices-the case of Pakistan 71
2.4. Supply-side assessment of pre-owned devices 75
2.4.1. Types of internet-enabled devices sold in the secondary market 76
2.4.2. Value chain of pre-owned entry-level devices 77
2.4.3. Growth of the refurbished smartphone market 78
2.4.4. Cost structure of refurbished devices 81
2.4.5. Consumers seek higher-end pre-owned devices, and the market is responding accordingly 82
2.4.6. Retail prices of pre-owned devices depend on multiple factors and vary widely 84
2.5. Conclusions 87
3. Demand-Side Assessment 89
3.1. Introduction 89
3.2. Research methodology 89
3.3. The state of smartphone ownership in low- and middle-income countries 91
3.4. Consumer motivations for purchasing a smartphone 95
3.5. Consumer approaches to paying for major purchases 101
3.6. Fair financing from the consumer's perspective 104
3.7. Conclusions 109
4. Financing Schemes 111
4.1. Introduction 111
4.2. Financing schemes for the purchase of entry-level devices 111
4.3. Typology and assessment of financing schemes 116
4.3.1. Determinants of the supply of credit 117
4.3.2. Financing schemes in low- and middle-income markets 120
4.4. Conclusions 139
5. Private Capital Mobilization for Device Financing 143
5.1. Introduction 143
5.2. IFI and state actions for mobilizing private sector capital 144
5.2.1. Facilitating the role of NBFIs 145
5.2.2. "Lean into" schemes that are structurally more likely to address the target segment 145
5.2.3. Taxes and subsidies 146
5.2.4. Guarantees 146
5.2.5. Debt funding at favorable interest 148
5.2.6. Equity funding with moderate return thresholds 150
5.2.7. Kick-starting or providing earlier stage support 150
5.2.8. Receivable purchase facility 150
5.3. Conclusions 152
6. Policy Recommendations 155
6.1. Introduction 155
6.2. Policy context 156
6.2.1. Importance of policy alignment 156
6.2.2. Survey of national broadband plans 157
6.2.3. Examples of device affordability as strategic priorities 158
6.3. Barriers to affordability and steps to action 158
6.3.1. Barriers to affordable entry-level device ownership 159
6.3.2. Market context 160
6.4. Evaluating policy recommendations 162
6.4.1. Type of policy action 162
6.4.2. Evaluation criteria for policy design 164
6.5. Policy recommendations for entry-level device affordability 165
6.5.1. Direct interventions 167
6.5.2. Enabling environments 184
6.5.3. Virtuous cycles 193
6.6. Conclusions: Designing an effective program for increasing device ownership 196
Appendix A: Stakeholder Consultations 200
Appendix B: Income Decile Estimate Methodology 202
Table 1.1. Technical specifications of entry-level Internet capable devices used in this report 27
Table 2.1. Estimated cost structure of a low-cost smartphone in target countries (June 2022) 39
Table 2.2. Estimated cost structure of a smart feature phone in target countries (June 2022) 40
Table 2.3. Overview of applicable taxes on entry-level devices in target markets 50
Table 2.4. Comparison of approach to development, cost, operation, and profit margin by lead firm 60
Table 2.5. Example of air freight rates to target market by kilogram, July 2022 65
Table 2.6. Examples of maritime shipping container costs from China to target markets, July 2022 65
Table 2.7. Number of device buyers by country, device type, and location 80
Table 3.1. Reference least expensive entry-level smartphones, by target country 93
Table 3.2. Average number of activities conducted online, by country, gender, and device type (number of respondents) 96
Table 3.3. Average purchase price in US$, by country, device, and location (number of respondents) 97
Table 3.4/Table 3.2. Average number of activities conducted online, by country, gender, and device type (number of respondents) 100
Table 3.5/Table 22. Payment and savings methods for major purchases (percentage of respondents), by country 102
Table 3.6. Savings methods (percentage of national population, age 15+), by country 103
Table 3.7. Consumer motivations for purchase location (as percentage of commercial device buyers), by country 105
Table 3.8. Participation rates, financing for expensive item (percent of respondents), by country, gender, and geography 108
Table 4.1. Demand survey results- types of bank accounts possessed by respondents in target countries 113
Table 4.2. Demand survey results-methods to finance phone purchase 114
Table 4.3. Financing arrangements for mobile devices identified 121
Table 4.4. Evaluation of financing scheme suitability for low-income and unbanked individuals-five determinants of supply of device financing 139
Table 4.5. Assessment of financing scheme suitability for low-income individuals-key varia 140
Table 4.6. Tools to assess creditworthiness and mitigate default risk by lender type 141
Table 5.1. Initiatives that can positively impact those determinants of supply of device financing 153
Table 6.1. Examples of inclusion of device affordability within national broadband plans in the target countries 158
Table 6.2. Evaluation criteria for policy design 164
Table 6.3/Table 5.1. Initiatives that can positively impact those determinants of supply of device financing 165
Table 6.4. Minimum phone design specifications according to the use 166
Table 6.5. Design recommendations-tax exemptions for entry-level devices 170
Table 6.6. Design recommendations-Device subsidization 174
Table 6.7. Design recommendations-FLCG 179
Table 6.8. Design recommendations-debt and equity funding 181
Table 6.9. Design recommendations-favorable fiscal treatment/subsidies for financing 183
Figure 2.1. Cost structure of entry-level devices 38
Figure 2.2. Estimated total cost as a percentage of monthly income in target countries, 2022 41
Figure 2.3/Figure 2.2. Estimated total cost as a percentage of monthly income in target countries, 2022 42
Figure 2.4/Figure 2.3. Global Android smartphone AP chipset volume share by wholesale price band, 2021 47
Figure 2.5/Figure 2.4. Commercial import and local manufacturing/assembly of mobile devices 72
Figure 2.6/Figure 2.5. Volume of locally manufactured/assembled mobile devices by brand, June 2022 73
Figure 2.7/Figure 2.6. Circular economy of mobile devices 75
Figure 2.8/Figure 2.4. Commercial import and local manufacturing/assembly of mobile devices 76
Figure 2.9/Figure 2.8. Framework for assessing the second-band market value chain 78
Figure 2.10/Figure 2.9. Refurbished smartphone market growth by region, 2020-2021 80
Figure 2.11/Figure 2.10. Global smartphone shipments market share by brand (left); Refurbished smart-phone global market share by brand (right), 2021 83
Figure 2.12/Figure 2.11. Average loss in resale value of smartphones by brand depending on age in India 84
Figure 3.1. Smartphone affordability in target countries by income decile 93
Figure 3.2/Figure ES.2. Theoretical consumer price-motivation matrix 98
Figure 4.1. Financial intermediation to promote consumer purchases within the context of the device value chain 116
Figure 4.2. Determinants of the supply of financing for devices 118
Figure 5.1. Financing scheme with/without receivable purchase facility 151
Figure 6.1. Key barriers to affordable smartphone ownership 159
Figure 6.2. Demand relative to price considering financing and subsidy programs 161
Figure 6.3. Framework for structuring FLCGs 177
Figure 6.4/Figure 6.3. Framework for structuring FLCGs 180
Figure 6.5. Policy program design framework 197
Boxes
Box 2.1. Proposed framework for assessing the smartphone value chain 33
Box 2.2/Box 2.22. Key costing terms used in this report 34
Box 2.3. Cost structure for entry-level devices 36
Box 2.4. Manufacturing ecosystem-China 43
Box 2.5. Impact of COVID-19 on mobile device manufacturing supply chain 46
Box 2.6. Key costing terms used in this report 48
Box 2.7. The use of import duties on mobile devices to support local assembly in Pakistan 50
Box 2.8. Assessment of tax reductions for entry-level devices 54
Box 2.9. Assessment of retail prices of Orange's Sanza Touch in Africa 58
Box 2.9.1. GDP per capita (2022) and Sanza Touch retail prices in selected countries 59
Box 2.9.2. Orange market share (subs) and Sanza Touch retail prices in selected countries 59
Box 2.10. Transsion distribution and marketing optimization strategies in Africa 62
Box 2.11. Sales channels for mobile devices in Colombia 64
Box 2.12. Impact of COVID-19 and other shocks on maritime shipping costs 66
Box 2.13. Mara S-entry-level device cost structure 69
Box 2.14. Assessment of buy-back, refurbished, and new device prices with reference to the market in India, June 2022 81
Box 2.15. Typical grading of refurbished handsets 86
Box 3.1. Rwanda focus group, select responses 91
Box 3.2. Focus group, select responses on motivations for purchasing a smartphone 95
Box 3.3. Focus group, select responses on consumer motivations to purchase a device 99
Box 3.4. Focus group, select responses 106
Box 3.5. Focus group, select responses 107
Box 4.1. Access BankF -Nigeria 123
Box 4.2. Movistar Colombia-Movistar Money 124
Box 4.3. Vodacom South Africa-Installment payment plans 127
Box 4.4. Lipa Later-Installment payment plans 128
Box 4.5. Claro Colombia-Installment payment plans 128
Box 4.6. PayJoy- PAYGo model 130
Box 4.7. Kistpay-PAYGo model 131
Box 4.8. Safaricom Kenya , Lipa Mdogo-PAYGo model 131
Box 4.9. M-KOPA-PAYGo model 132
Box 4.10. ENGIE Energy Access-Alternate asset-based financing model 134
Box 4.11. Standard MNO subsidy 136
Box 4.12. KaiOS-Kai Vibe program 136
Box 6.1. Tax exemptions for entry-level mobile devices-Colombia 168
Box 6.2. Tax exemptions for mobile devices-Kenya 169
Box 6.3. Device subsidization-the Dominican Republic 172
Box 6.4. Device subsidization-Malaysia 173
Box 6.5. FLCG-ADB for India Solar Power 175
Box 6.6. FLCG-MCF for African health care providers 176
Box 6.7. Regulatory environment- Pakistan 186
Box 6.8. Regulatory environment-China 187
Box 6.9. Pakistan-MFI licensing regulations expending financial supply 188
Box 6.10. Trinidad & Tobago-EMI licensing regulations restricting financial supply 190
Box 6.11. Consumer protection regulations in Kenya 192
Box 6.12. Local and relevant content-Burkina Faso 194
Box 6.13. Digital skills-Latin America 195
Box Tables
Table 2.7.1. Rate of duty and taxes on mobile phones in Pakistan (2021-22) 51
Table 2.7.2. Sales tax for mobile phones in Pakistan 52
Table 2.7.3. Income tax for mobile phones in Pakistan 53
Table 2.7.4. Regulatory duty for mobile phones in Pakistan 53
Table 2.9.1. Retail prices of Sanza Touch in select African markets, June 2022 58
Table 2.13.1/Table 15. Mara S technical specifications 69
Table 2.13.2. Mara S cost structure 70
Box Figures
Figure 2.11.1. Market share by sales channel, Colombia 64