Digital Transformation: Escape From The Poverty Trap?

By

Ashraf Farid

06-09-2020

1 min read

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The vicious cycle of a poverty trap

One of the biggest problems in countries with large populations of the poor is something called a poverty trap.

Briefly, this describes is a situation where the poor do not have opportunities to upskill themselves or find new channels of income. Why not? Because they have neither the time nor the money to spare. Many already work long hours for wages that barely make ends meet. 

This goes on month after month and year after year and can persist for generations. 

What is needed are interventions that provide opportunities for a better standard of living. Increasingly, digital transformation seems to be addressing this gap. As stated by former Treasury Secretary Larry Summers in 2014, “The economic challenge of the future will not be producing enough. It will be providing enough good jobs.”

Thanks to the mass availability of smartphones, the digital divide has never been narrower. As of 2014, an Internet Trends report by Kleiner Perkins showed that 40% of the world population is already online. Most everyone can now afford to be connected to the Internet, and by extension, the gig economy.  

Boasting flexible working hours, fairer wages, and a low barrier to entry, it attracts millions of people every year. The gig economy has grown to include more manual and low-skill work, giving those from lower-income brackets a time and cost-effective method to make money. 

Read: Gig Economy: How To Manage A Rapidly Changing Workforce

Digital transformation as a great equaliser

Maideasy is just one example of a Malaysian SME whose business model combines digital transformation, the gig economy, and benefiting the B40. Think Grab, but for domestic cleaning services.

Need your house cleaned, but hate going through maid agencies? Make a request on their app, and a Maideasy cleaning crew member will soon come knocking. 

poverty trap

No longer must we live in fear of surprise mother-in-law visits.

According to its co-founder Meriza Mustapha, Maideasy was founded to “bring dignity to domestic workers” by providing them with fairer wages, and the recent pandemic saw them digitising part of their crew selection process with great success.

Both said that even if COVID-19 were to be eradicated tomorrow, they would not want to go back to the previous method of doing things.

Joining Maideasy involves three stages: an interview, a briefing on house rules, and a practical session on how to carry out cleaning tasks. Before COVID-19, the three stages were conducted physically on different days.

Then came along the Malaysian Movement Control Order that completely shut down their operations. 

In an effort to stay competitive, Maideasy experimented with transitioning the first two parts online. The result was not only increased convenience for applicants but significant savings by Maideasy on what would normally be spent on booking training venues. 

Why, then, didn’t Maideasy implement this all along? 

With a wry smile, Meriza replied that they “Just didn’t think of it.”

They were too comfortable, she said. Business was good, and any inconvenience on the part of the cleaning crew was repaid for with ample work opportunities. Then came the lockdown order and business dried up completely. To survive, they had to innovate and find new solutions. 

When asked about the challenges faced during online interviews and briefings, Meriza found that outside of occasionally spotty Internet connection, there were no drawbacks. Hiring Manager Amie who conducted the online sessions added that plenty of opportunities were given to those joining the session to ask questions and clarify. 

Both said that even if COVID-19 were to be eradicated tomorrow, they would not want to go back to the previous method of doing things.

A poverty trap no more?

Twenty-three-year-old Zulain and 27-year-old Nurfarahana are part of Maideasy’s cleaning crew, and both agreed that the online interviews were very convenient and time-saving. 

What is clear is that in its current iteration, digital transformation has presented new avenues for income that are accessible to many.

Nurfarahana is a recent graduate and works a full-time office job, doing Maideasy gigs to supplement her main income. Zulain, on the other hand, owes his entire monthly earnings to Maideasy and says that the ratio of working hours to compensation is much better than his previous job. 

Both enjoy and take full advantage of the flexible working hours it affords them. Their experiences and the experiences of millions like them worldwide attest to the value digital transformation can have on the lives of average folks just trying to make the best of their situations. 

The same can be said of the 500 people that make up the MaidEasy cleaning crew and the millions of people worldwide who are part of the gig economy. 

On a larger scale, digital transformation has also resulted in companies like TechnoServe, which connects high-potential SMEs to market and investor information. Just one or two generations ago, this would not have been possible.

Of course, there’s no free lunch, as while digital transformation brings with it many benefits to the common man, it presents unique challenges for a world that is not advancing equally. Will its capability to replace even cognitive job functions outpace mankind’s ability to reskill existing labour? That’s a tough question to answer, one I’m glad is far above my pay grade.

There’s something to be said about digital transformation empowering the poor with an honest way out of the poverty trap.

What is clear is that in its current iteration, digital transformation has presented new avenues for income that are accessible to many. It’s not a handout, it’s a way out.

Don’t get me wrong, being able to help companies make even more millions is nice, but if Zulain and Nurfarahana’s stories are one of many, there’s something to be said about digital transformation empowering the poor with an honest way out of the poverty trap.

See Also: Why People Are The Key to Successful Digital Transformation

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