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. We believe that these successful models can and should be adapted for mass markets in the developing world -- the sharing economy is especially relevant in asset-scarce emerging economies.

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:

 
 
 
“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.

What We Found

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.

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.

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, red is not a no-go zone on the map, it means 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 ridesharing app in Kenya in which drivers show certifications and training credentials).

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 Bostwana and Liberia show increased literacy, trust, and mobile payments. Much of Eastern Europe, 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

How to Translate Promise into Reality

We can and should apply digital sharing to tough development challenges. We call on funders with experience in tech 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. 

Ex. 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. 

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.
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Ex. 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. 

 

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

 

Ex. 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. 

Designing for Inclusivity

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 of digital sharing around the world.