Barriers of the Sharing Economy in Developing Countries

Not many people have noticed that the sharing economy is changing the world. The value of the sharing economy worldwide is predicted to increase to some 335 billion U.S. dollars by 2025 from only 15 billion dollars in 2014 according to Statista. That is a crazy increase that hopefully can help the global economic downturn. In my previous three posts, I mainly talked about the sharing economy in the U.S. (which represent developed countries). Now, Let’s deep in discussing the sharing economy in developing countries.

Remember that the sharing economy is commonly considered as a metaphor that exchanging values not based on ownership so that social resources can be reallocated and maximize the utilization. One of the features of the sharing economy can be interpreted into an economic model in which the services providers and the consumers can be connected directly usually through media platforms. Some examples are Airbnb, Uber, Zipcar, and JustPark. Three highlights of this metaphor are “not based on ownership”, “connect suppliers and consumers directly”, and media platforms.

These three requirements can be satisfied easily in developed/high-income countries but not in low-income developing countries. Thus, these requirements become barriers to the development of the sharing economy. Besides, in the article “The Sharing Economy In Developing Countries” published by the Institute for Sustainable Futures (ISF), it says “The key barriers to the sharing economy in developing countries are likely to include: a lack of trust, social norms, technology, electronic payment systems, a lack of assets and skills and a lack of regulations.” That is to say, it is not possible to have a modern sharing economy in low-income countries in the short term with these barriers. The social norms appear to be the most significant barrier from previous researches. Ownership is be viewed as very important in tradition, so it is reasonable that people reject to share something with strangers. In many cultures, a big goal of working is to own something whether a house or a car so people may find it uncomfortable to share it with others. Also, conflict of interest might occur and resist the entry of the sharing economy to the market. For example, Tuk Tuk (auto-rickshaws) lost a part of its consumers since PassApp (a Cambodian version of Uber) exists.

These different perceptions of the sharing economy can be changed over time but some software foundations needed to be available to adopt the sharing economy. Technology enables the media platforms which connect suppliers and consumers directly and the media platform requires electronic payment systems. However, in many low-income countries, owning a mobile phone is luxurious, then how can the sharing economy network be built? From the Pew Research Center, Africans who own a mobile phone are mainly upper-class young males. For example, in Kenya, there are approximately 40% to 60% of mobile phone users (not necessarily smartphones), but 58% of the people said they shared phones with others. Even though there is an increase in mobile phone users in developing countries, for the sharing economy to take place, the widespread use of smartphones is the first requirement.

The lack of regulation is the biggest barrier in the sharing economy. The law and regulation are not comprehensive even in developed countries. Some challenges are regulatory fairness, monopoly issue, protection of labor’s rights, protection of users’ information, and tax issues. In other words, regulations are needed to protect the right of suppliers, consumers, laborers, and taxpayers. One example involving the trust issue is the protection of users’ information. The authors Yide Ma and Haoran Zhang state so in their article “Development of the Sharing Economy in China: Challenges and Lesson“, “If there are no sound protection measures, once the information is leaked, the user’s personal privacy will be damaged… also involve national security risks if massive amounts of data and information were leaked.” Otherwise speaking, for the trust of the sharing economy, privacy is a core.

We have said that the new era is coming embracing the sharing economy. As for now, developed countries present well, and the sharing economy contributes a lot to their GDP (Gross domestic product). For developing countries, there are barriers needed to be removed. However, why do we desire the sharing economy in developing countries? A recent project lead by the International Development Research Centre (Canada) illustrates that “Advocates of the sharing economy … have a significant impact on labour markets, environmental sustainability and consumption habits… Largely urbanized regions in developing countries with substantial challenges related to transport, climate change and housing are seen as frontier markets for businesses that engage in the sharing economy.” The sharing economy is expected to be a solution to issues in developing countries such as urbanization, a large amount of population, and an economic downturn. If the sharing economy can be achieved, the issues mentioned above can be solved since the social resources will be reallocated. 

Some developing countries have made significant progress in the sharing economy. According to Xinhua News, in China, the sharing economy market size stood at 7.36 trillion RMB (about 1.054 trillion USD). The Chinese government supports the sharing economy a lot these years too. The benefits of the sharing economy are obvious, but there is still a long way to make the system perfect. 

After all, the sharing economy can be a way to encourage economic growth and sustainability in developing countries; but before that, we should have necessities such as regulation and software infrastructure. I believe that both developing countries and developed countries will embrace the sharing economy in the recent future.