Developing countries often have trouble rolling out services, from electricity rollout to internet connectivity, especially in remote areas. However, many developing countries have experienced technological “leapfrogging,” in which new technologies can bypass traditional technologies, effectively offering a shortcut. Leapfrogging can improve quality of life on the ground, while also creating investment opportunities. Insurers, as institutional allocators of capital, can be a catalyst for leapfrogging across emerging markets by taking advantage of the attractive high-yielding investment opportunities that support this trend.

Nigeria’s transition to mobile internet connectivity is one notable example of the impact of technological leapfrogging. According to the non-profit GSMA, just 1% of Nigeria’s 221 million people have a fixed line telephone connection, but 150 million are internet users, driven by mobile phone adoption. Connectivity proved to be transformative: a recent World Bank study estimated that mobile internet access had reduced the number of Nigerians living in extreme poverty by 7% over a two-year period.     

In Sub Saharan Africa, the number of people with mobile phones in has roughly doubled in the past decade and, together with India, the region is expected to account for around half of new mobile subscribers globally between now and 2030.

A common way for bond investors to tap into Africa’s demand for connectivity is the telecom towers businesses that acquire land, often in remote areas, build wireless towers and then rent them out to the big mobile phone operators.

Electricity rollout has been another challenge in developing countries. However, many developing communities that previously had no power supply are increasingly being leapfrogged to renewable energy sources like solar and wind.  Energy transition to renewable and low-carbon sources across the globe has been an area of increasing interest to insurers.

Renewables are growing at a faster rate in India than in any other major economy, and we’ve seen significant issuance from green energy suppliers. India is seeking to meet 50% of its energy needs from renewables by 2030 and is targeting net zero CO2 emissions by 2070..


Figure 1: India Green Bonds by Issuer Type

Source: World Bank with data from Bloomberg as of February 2023.

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In theory, renewables could have huge potential across the emerging world, but often the challenge is alignment. India is unusual in that companies, regulators and government are all motivated and moving in the same direction.

Investing in leapfrogging themes can have ups and downs, and valuations are not always cheap, as some of these trades can become crowded. Credit analysis is needed to ensure that the risks are being adequately priced in. Ultimately, these kinds of early-stage growth opportunities, combined with young demographics and large populations, can yield compelling long-run investment ideas that align with insurers’ long-term liabilities.


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