By Sarah Miers, Consultant to the Social Innovation team at the MIF
Roughly 54% of the world’s population resides in cities. By 2050, an additional 2.5 billion people will join this vast urban population. This trend is especially apparent in Latin America, which is already the second most urban region in the world. Latin America’s urban population is growing at a rate of 1.5% per year and is projected to account for nearly 90% of the region’s population in the coming decades.
Latin America’s high urbanization does present opportunities for economic development. Yet we have also seen how rapid urbanization and high urban consumption levels create challenges for shared and sustainable development, including environmental damage, inefficient resource use, and unequal access to goods and services.
The sharing economy presents one compelling opportunity to accommodate Latin America’s rising urban population in a more sustainable manner. Also known as the collaborative economy and access economy, the sharing economy is a network of innovative new business models that increase access to goods – including cars, bikes, and even household items such as tools – and services like peer mentoring.
Take car sharing, for example. Sharing rides not only reduces city traffic, space required for urban parking, and pollution, but it also increases access to convenient urban transportation options by reducing accessibility costs. Understanding these benefits, the Brazilian city of Recife just initiated the PortoLeve ride sharing platform that enables community members to access cars for just US $30 per month. Priced well below the cost of owning a car, this platform is one option to increase access to cars for more people while supporting more efficient use of resources.
PortoLeve is just one example of the sharing economy at work. On a global level, bike sharing is spreading across the US, ride sharing is decongesting streets in Europe (BlaBla Car), and city dwellers are even sharing their closets in Seoul, South Korea (Open Closet). The sharing economy is projected to double in the next 12 months and investors are taking notice. Here at the MIF, we are intrigued by this growth and are exploring opportunities to use this concept of “access over ownership,” or sharing rather than buying, to promote more sustainable urban development across Latin America.
While we remain optimistic about this growth and its potential impact on sustainable urban development, we are also aware of barriers that undermine the potential of adopting these platforms more broadly across the region, including internet access and trust.
Internet access: Many sharing economy platforms require some level of internet or mobile phone access. While this presents a constraint for expanding these platforms, this challenge is diluted by the rapid increase of internet and mobile access. For example, World Bank data highlights how the percentage of internet users in Latin America rose from just about 4% in 2000 to nearly 50% in 2013 while cell subscriptions rose from 12% to 115% during this same period. As access to these technologies continues to increase, the sharing economy becomes an even more viable opportunity for sustainable urban development.
Trust: The success of the peer-to-peer platforms in the sharing economy depends on high levels of trust. This presents a significant challenge for expanding these platforms in Latin America, which the Pew Research Center reports as having lower levels of societal trust than other regions. The Center’s 2008 study found that only a third of Peruvians and Chileans agreed with the statement: “Most people in this society are trustworthy”- some of the lowest figures across all countries surveyed. However, higher levels of trust in Mexico (46%) and Venezuela (51%) demonstrate the diversity across the region and may show greater potential for successful sharing economy platforms in select markets.
Understanding both the challenges and the potential benefits of the sharing economy for sustainable urban development, the MIF is exploring new opportunities to engage with innovative platforms to spur growth in the region. We’re especially excited about our collaboration with MercyCorps on the expansion of MicroMentor in Guatemala and Mexico. Using crowdsourcing technology, MicroMentor addresses existing challenges in scaling access to professional mentoring services for SMEs, thereby increasing SME access to social capital and encouraging enterprise development.
In time, we anticipate that sharing economy platforms like MicroMentor will help us reach a new form of urban development- one where rising consumption levels are accompanied by more equitable access to goods and services, environmental sustainability, and efficient resource use.