The digital sharing economy creates new markets, produces millions of job opportunities, and revives “sharing” – one of civilization’s oldest forms of economic and social empowerment – as a tech business model.

Dozens of digital sharing ventures are already driving economic and social change in Africa, Asia, and Latin America, and there is potential for these models to address some of the world’s thorniest development challenges.

Digital sharing is already massive, and here to stay. Make no mistake, this is not a trend. We estimate global sharing economy revenues to be $25 -$30 billion per year, and expect the global sharing economy to grow 25-30% a year for the foreseeable future. [1]

What is the Digital Sharing Economy?

Sharing assets - physical, financial, and/or human capital -  
between many, without transferring ownership, via a digital platform
to create economic value for at least two parties.


The Power to Transform Emerging Markets

Commercial success stories, like Airbnb, Uber, and Kickstarter, are not designed for those at the base of the pyramid. The 2.2 billion people living on less than $2 a day typically do not have a room to rent, a car to share, or idle cash to lend. 

However, that doesn’t mean the sharing economy is irrelevant to the world’s poorest. Quite the opposite.

As digital sharing models grow in size and expand into new geographies, we think emerging economies are where these companies will truly flourish. Why? Because the heart of the model, sharing via technology, converts these markets' liabilities – scarce assets and abundant labor – into opportunities.

What’s more, those in emerging markets are, as a whole, more disposed to share: 64% of people in the world with access to the internet are willing to share their assets or services online for financial gain. In India, it’s 78%. In Mexico? 79%. In China? 94% of people with access to the internet are likely to participate in a digital sharing community, given the option. Compare that to the 43% of North Americans who express willingness to participate in online sharing. On average, we estimate that people in emerging markets are around forty to fifty percent more likely to engage in digital sharing – given access to the right tools – than people in the US and Western Europe. [2]

Let’s zero in on just one sector: digital sharing in finance, often called “crowdfunding.” Roughly 600-700 crowdfunding platforms are operating in over 45 countries, delivering approximately $35 billion to entrepreneurs and small businesses through lending and investment. To put that into perspective, HSBC, the UK’s largest bank, lent just under $1 billion to its customers in 2014. Even more interesting: these crowdfunding dollar volumes doubled from last year, and are growing fastest in Asia and South America. [3] 

The key principles that underpin current digital sharing models are potent and globally applicable. Organizations that apply them successfully can create tremendous value. Here we’ve laid out how the digital sharing economy can address three pressing development needs:

 
 
 

 

Apart from the three examples we've chosen above, there are many other current -- and future -- applications of digital sharing models, from disaster relief to peer-to-peer education. 

 
“Developing nations are already there. They are already ready for the digital sharing economy.”
— Parag Jain, CEO and Co-founder of Juggernaut, a startup powering on-demand tech platforms
 

We see five signals for high growth potential in digital sharing: Trust, digital connectivity, literacy, digital payment usage, and regulations supporting entrepreneurial activity. We synthesized data on each of these into the “Digital Sharing Readiness Score,” a simple, transparent measure showing which developing markets are more conducive or more challenging environments for digital sharing.

Digital Sharing Readiness Score by COuntry

See the methodology behind the Readiness Score here.

Here are some of the takeaways from the "Digital Sharing Readiness Score" for entrepreneurs, companies and governments:


Look beyond income per capita to gauge a country’s readiness for digital sharing.

Wealthier countries tend to score better, but there are many exceptions. For example, Algeria is significantly wealthier per capita, yet Morocco fares better in digital sharing readiness.

 

Dig deeper: Sub-Saharan Africa may appear unready for digital sharing, but there is opportunity if you know where to look.

Lack of social trust, difficult environments for entrepreneurship, and low literacy rates are barriers, but in “borderline” markets like Kenya, Senegal, and Rwanda, digital sharing can be tailored to overcome specific barriers. While digital sharing initiatives are operating in several countries with low readiness scores, they will tend to face more severe challenges than they would in countries with higher scores. In other words, lower scores are not a no-go zone on the map, but mean proceed with caution and pursue a tailored strategy. For example, partner with a local company or seek out creative ways to overcome gaps in trust (a la Safe Boda, a ride-sharing app in Uganda in which drivers show certifications and training credentials).

Focus on levels of social trust to determine readiness for digital sharing.

Argentina, Chile, and Brazil share comparable per capita incomes, levels of technological development, a geographic region, and economic, cultural, and social ties. However, different interpersonal trust levels result in very different readiness scores.
 

Be a first-mover in markets primed for digital readiness.

Ghana and South Africa doubled their mobile connectivity rates over the last 5 years and Botswana and Liberia have increased literacy, trust, and use of mobile payments. Chile, Thailand, and Malaysia have above-average trust, connectivity, literacy, digital payments, and entrepreneur-friendliness.

Trust is really essential. It makes people amenable to digital sharing.
— Shelby Clark, Founder, RelayRides

We can and should apply digital sharing to tough development challenges.

We call on funders to support the growth of digital sharing models using three approaches: advance incentives, author insights, and advocate for light-touch regulatory approaches.


Advance incentives for entrepreneurs, incubators, and accelerators in developing countries to experiment with digital sharing.

Though not perfect, prize models can be effective in entrepreneur-rich environments like digital sharing where “solution creators” are willing to accept risk.  Prizes for technological breakthroughs have a storied history of stimulating entrepreneurial investment by creating competition. Prize models could include “exemplar” prizes that crown a single winner with the aim of defining excellence, and “showcase” prize models, which allocate funds to a handful of innovative winners to stimulate private investor interest in the space as a whole.

Development actors that eschew a prize model could of course consider more traditional investment approaches to digital sharing, such as technical assistance. A benefit of technical assistance is that it can be closely tailored to the needs of individual digital sharing organizations. It can also infuse software development expertise - provided the right partners are selected - helping to overcome the shortage of developer talent that stymie some tech initiatives.

Advocate for light-touch, bespoke regulatory approaches that support the growth of digital sharing. 

The digital sharing economy is a different way to exchange goods and services and therefore requires different regulatory approaches. Sofia Ranchordás – Resident Fellow at Yale Law School’s Information Society Project and Professor of Law at Tilburg Law School – argues that lack of regulatory frameworks in developing countries is the largest barrier facing digital sharing economy firms. She says that limited, light-touch regulation will help generate innovation by building user trust in digital sharing platforms. 

Of course, not all regulations are created equal. Regulations designed for industry incumbents are generally detrimental to the growth of digital sharing initiatives. For example, regulations that force every individual who wishes to share their living space on Airbnb to go through a lengthy and costly hotel permitting process would quickly halt the platform’s growth. Applying these types of legacy regulations to digital sharing in developing countries in order to protect the privileges of market leaders would threaten the growth of promising models – and the income-generation possibilities they provide.

Author in-depth research.

Right now we have only a vague sense of what people want to share -- we need much better data on the supply and demand in each market to help companies and entrepreneurs spot and pilot new digital sharing models. New research could fill three information gaps:

  1. The digital sharing marketplace: including market size and segmentation, barriers to growth, and relevant policies and regulations;
  2. Business models: common challenges and solutions across the developing world, keys to success and major pitfalls, and an understanding of which business models gain traction; 
  3. User needs: contexts and motivations for sharing, sharing behaviors, and user wants and needs to design better sharing solutions


Traveling Spoon was the winner of a showcase prize, from University of California, Berkeley's Venture Lab; gaining recognition helped them to establish credibility and push their model forward. 

A knowledge aggregation hub with valuable data from market research, business surveys, and human-centered ethnographic research would go far and could be an opportunity for someone to gain “first-mover advantage” by building this platform. 

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Uber requires all of its drivers to pass polygraph tests in Mexico because the company can’t access criminal background information there. A regulatory framework mandating the sharing of criminal background checks with all ride-sharing initiatives in Mexico would help to increase public trust in ride-sharing initiatives, and establish a level playing field between competitors. 

While we are excited about the potential of digital sharing, these models are also no panacea.  With French taxi drivers on strike and rising concerns around the implications of the “gig economy,” negative consequences of sharing economy models will have to be monitored closely. Additionally, asset-sharing models, like Airbnb, (as opposed to labor providing models, like Upwork), favor asset owners by definition and therefore may worsen inequality in some environments.

Nonetheless we think there is a strong case that supporting current models or pilots can be hugely beneficial in emerging economies by creating livelihoods, promoting asset building, and improving access to finance. In particular, many emerging markets are characterized by scarce assets and abundant labor. Digital sharing models can convert both of these problems into opportunities by sharing limited assets more efficiently and creating opportunities for workers to find jobs exactly when and where they are needed. Read on to see the positive effects digital sharing could have around the world.


 

[1] “The sharing economy: how will it disrupt your business?,” PwC; Credit Suisse; Collaborative Consumption; Dalberg analysis.

[2] Nielsen Global Survey of Share Communities, Q3 2013, Dalberg analysis. 

[3] HSBC Annual Reports; “The Power of Sharing: Exploring the Digital Sharing Economy at the Base of the Pyramid,” IRDC, 2013; “The sharing economy: how will it disrupt your business?,” PwC, August 2014; “2015CF – Crowdfunding Industry Report,” Massolutions; Dalberg analysis.