Unwired Bangladesh: Taking a Lesson from Microcredit

In a country where 80 percent live below what the world considers poverty level and virtually all rural villages lack telephone connectivity, how do you bridge the digital divide? Entrepreneurship is one answer.

by / September 4, 2007
Getting bright ideas while performing everyday tasks in life is not really unusual; after all many have gotten their brightest ideas while doing the most mundane things in life. But getting the idea of bridging the digital divide from wheeling and dealing in Wall Street?

That's what happened to Iqbal Quadir way back in 1993, when this Wharton-educated Bangaldeshi national working as investment banker in Wall Street, realized that just like people find gold mines in "unglamorous companies" by buying them cheap and selling high, he too has an "unglamorous" country Bangladesh, whose huge population of very poor people could be an "asset" if only they could communicate.

Quadir knew that one of the biggest reasons why over 80 percent of his country's residents lived below what the world considers poverty level, is the fact that most homes in Bangladesh and virtually all rural villages lack telephone connectivity, making the nation one of the least wired in the world. So, if connectivity meant productivity, then it must be a weapon against poverty.

Thus in 1997 GrameenPhone was born (Grameen means rural in the local lingo) to offer affordable mobile phone services to as many people as possible.

However, it wasn't easy in the beginning. The country had a very large population of poor, who lived in places underserved to such an extent that it took four hours of walking to reach the nearest post office or a medicine shop. So how does one get a mobile phone to all those Bangladeshis, most of whom couldn't even afford to pay for a call, let alone afford to own a mobile telephone?

The solution came from of a Nobel-prize winning innovative concept called Grameen Bank, a microfinance organization and community development bank in Bangladesh that agreed to work with Quadir as a partner and to provide its extensive network of branches in Bangladesh for spreading mobile telephony in the country. Ever since 1974, Grameen Bank has been providing small loans (known as microcredit) to the impoverished so that they could create a small business without the burdens of predatory lending practices. , This micro credit company not only had an extensive network spanning 2100 branches covering over 65000 villages, but by serving 6.5 million borrowers, it also well understood the economic needs of the rural population.

Meanwhile although Quadir has sold off his interests in this venture two years ago and Grameen Phone is now a part of the Grameen Bank, which holds 38% stake in the company -- the balance is held by Telenor, Norwegian telecom company- GrameenPhone today is the largest mobile telephony operator in Bangladesh

The company has a market share of over 60% with a network that covers more than 95% of the country's population, up from around 50% two years earlier.

Building a Community
According to Erik Aas, the current CEO, Grameen Phone is unique instance of how a joint venture between two partners with completely opposite business objectives, can work together to achieve the dual purpose of receiving an economic return on its investments and, at the same time, build a community that can contribute to the economic development of the country. While Grameen Telecom, a subsidiary of Grameen Bank that owns 38% stake in Grameen Phone is a not-for profit organization, Telenor the majority shareholder seeks mainly profits.

"Much of Grameen Phone's success is due to its ability to adapt to the needs of its customers," says the company spokesperson. "It has implemented customer-driven innovations that meet the specific needs of low-income segments."

The concept has an unusual business model too. For instance, like all phone companies, it sells mobile connections to urban areas or cities where the subscribers are "rich enough" to buy their own mobile phones. But in rural areas, Grameen Phone provides the service by creating "micro-enterprises that can both generate individual income

and provide whole villages with connectivity."

Simply put, the Grameen Bank provides the finance to local entrepreneurs to own a handset and a connection. In turn, these entrepreneurs take it to whoever wants to make a call. Call rates are generally twice the rate charged by Grameen Phone in the urban area. But still, on an average, about 70 customers use each phone a month, which officials say is enough to generate the required cash flow, even in poor villages, for the hand set owners to make regular loan payments and turn a small profit.

"Just like the Nobel-prize winning concept created by Muhammad Yunus, the founder of Grameen Bank, the Grameen Phone model today is replicated elsewhere in the world," said the company spokesperson, "as the company provides an opportunity to about 2,50,000 local entrepreneurs to distribute this service in villages."

Last year, Yunus won the Nobel Peace Prize, "for their efforts to create economic and social development from below." In February 2000, the company's Village Phone initiative also won the "GSM in the Community" award at the GSM World Congress held in Cannes, France for "proving its immense potential in boosting income of poor households in rural areas, promoting health care, development of agri-business and in the social empowerment of rural women."

Bridging the Digital Divide
Although providing telecommunications services to low-income groups, was its main objective during the initial stages Grameen Phone is now much more than just connecting villages; "it is also a community service enabler," says the company.

Last year, in October 2006 for instance, Grameen Phone launched a Health Line Service -- a 24-hour Medical Call Center manned by registered physicians who provide medical advice and assistance. The Call Centers, open 24X7, are manned by licensed physicians that allow Grameen Phone subscribers an opportunity to seek health-related advice or consultation through an interactive teleconference.

The Service is accessible to all Grameen Phone subscribers as well as registered users. "With just one doctor per 4,000 people, this service is the much-needed extension of primary health care services in Bangladesh," says the company. This service too received the GSMA Award for "Best use of mobile for social and economic development" at the 3GSM World Congress held in Barcelona, Spain in February 2007.

Grameen Phone is now building on its mobile network to bring affordable Internet and email access to people across Bangladesh. Through a concept called Community Information Centers (CIC), it has set up more than 550 centers in rural areas that are run by local entrepreneurs for providing high- speed Internet access and other information-based services in areas where previously the nearest facilities were at least 15 miles away. Typical services are telemedicine, and local and foreign "blue collar" employment services.

"These Centers have narrowed the gaping digital divide between the urban and rural populace, giving over 20 million people access to the Internet and other information-based services for the first time," says the company.

Set up with technical assistance from the GSM Association, the Community Information Centers are equipped with the minimum of a computer, a printer, a scanner, a web-cam and an EDGE-enabled modem to access the Internet using EDGE connectivity. They operate on shared premises in select rural markets around the country, and are designed to run independently as small businesses by local entrepreneurs.

The CICs also provide e-governance services like access to passport application forms, birth and death certificate forms, and other related information. Market prices of agricultural produce are also available through the website of the Agricultural Extension Department.

Connectivity for Upliftment
Grameen Phone officials believe that the Grameen Bank concept has proven to the world that micro credit is not only a tool for the upliftment of the poor but also plays a significant role in uplifting the larger economy of a country. Similarly, just as this concept can unleash the entrepreneurial energy of the poor, the company hopes the Grameen Phone initiative too can be a powerful tool to lift much of the country from perennial poverty.


Indrajit Basu is international correspondent for Government Technology's Digital Communities.

Photo by Steve Evans. Creative Commons License Attribution 2.0