How one new company brought hope to one of the world's poorest countries

By selling mobile phones in Bangladesh, GrameenPhone has made an important contributoin to the fortues of poor villagers.


Marco Visscher | April 2005 issue

“The battle against poverty has gained a surprisingly effective ally: business. By treating the poor like clients and consumers, they are accepted into the global economy. As a result, they are ultimately given the chance to prosper.

Many decades of international aid, after all, has not succeeded in closing the gap between rich and poor. On the contrary, it appears that aid to poor countries—recently promoted once more by the United Nations as a way to end poverty—only contributes to their inefficiency and bureaucratic headaches, which puts the brakes on their economic potential. Business people, on the other hand, have a persistent aim to overcome inefficiency and bureaucracy.

In this cover story, Indian senior economist C.K. Prahalad describes how businesses are discovering a promising, fast-growing market: the four billion poorest people on the planet. Ode managing editor Marco Visscher traveled to Bangladesh to investigate whether one company selling mobile telephones in remote villages is making a real contribution to the lives of the poor.” – The editorial staff

She had never talked on the telephone before she bought her first Nokia. How is it possible, she must have thought four years ago, to talk to someone who is somewhere else using this tiny little thing… That same mobile telephone has become Anju Monwara Begum’s constant companion. It goes where she goes.

Except just now. A neighbour is using her cell phone to find out how her family in Sri Lanka is doing in the aftermath of the tsunami.

But hang on a second. This is Bangladesh, just about the poorest country in the world. We’re standing here on the muddy sand paths of Kalampur, a village with a population of 2,000 families—mostly farmers—50 kilometres (31 miles) outside the capital Dhaka. Have these people also been overtaken by the modern creed that you have to be reachable anywhere, anytime?

No, that’s not it. Begum is simply earning money. She is actually a walking telephone booth, making her phone available to other villagers. When her neighbour has finished with her call, Begum will look to see how much she owes. She charges the villagers the market rate: 6 taka, around 7 euro cents (9 cents U.S.), a minute for a domestic call, half that for calls made within the district or even less during off-peak hours. Begum pays half this amount to the telephone company. The difference is her income: around 200 takas, or 2.5 euros ($3.20 U.S.), a day, which is at least twice the average income in Bangladesh, and comparable to some office jobs in the city.

The country currently has around 100,000 women like Anju Monwara Begum spread throughout 50,000 villages out of its total of 68,000, which has helped open access to the outside world for some 100 million Bangladeshis. She took out a loan from Grameen Bank, the world’s first and largest microcredit bank, which she used to buy the mobile telephone that has hooked up her village to the rest of the world. It means, for example, that people can boost their earning potential because they now have access to information that was previously difficult to come by.

Combating poverty with mobile telephones. Has any large telecom company in Europe considered raising used mobile phones for the poor people in Bangladesh? No. This radical idea is an example of a company that saw an opportunity to make a profit—for its shareholders yes, but also for the country.

Begum and the other women are like billboards for GrameenPhone, the country’s largest mobile telecom company, founded in 1996. GrameenPhone is an unprecedented success story. In Bangladesh, a fixed telephone line is an uncommon luxury only afforded to an elite few in cities. The company had expected to have around 70,000 subscribers by 2002, but already had 100,000 two years earlier in 2000. It reached the one million mark in 2003. Today, it has some 2.5 million subscribers around the country.

Until the end of last year, GrameenPhone’s success has required an investment of 230 million euros ($300 million U.S.). In 2001, the company reported its first profit back of 22 million euros ($29 million U.S.) on a turnover of 77 million euro ($100 million U.S.). Since then, the company’s profitability has steadily improved. By 2003 the company had booked a net profit of 58 million euros ($75 million U.S.) and currently has 62 percent of the Bangladeshi mobile phone market.

GrameenPhone was not the first and is not the only mobile telephone provider operating in a poor country, but it is the first and—so far—the only one offering such large-scale service outside the cities. And this is noteworthy, because the telephone companies in developing countries are often in the hands of the government and serve only the urban elite. But this company’s motto is that good business and good development can go well hand in hand.

GrameenPhone is not your typical exploiter of cheap labour in the developing world. For example, the company offers free healthcare and sports facilities to its 1,000-odd employees. By Bangladeshi standards, “revolutionary” is the only accurate word to describe its parental leave policies, the opportunities for women and the degree of staff input in decision-making. Moreover, a portion of the profits is invested in public initiatives to enhance people’s lives, such as hiring day labourers to work cleaning up and beautifying the median strips of highways.

Who in heaven’s name came up with the crazy idea that it’s profitable to operate a mobile telephone company in this land of poverty, hunger and natural disasters? Enter Iqbal Quadir, born and raised in Bangladesh until he left to study in the United States and is now a fellow at Harvard University where he taught graduate classes on development during the last three years. He worked in New York for a company that manages money for major investors until one day back in 1993 when the computer network went down. He couldn’t work all day and thought back to a day when, as a 13-year-old boy, he had walked from his village to another one to get medicines only to discover they were out of stock. And this was another such lost day. Then… the brainwave of his life hit him…

If he could have known as a boy that the medicines were not available, he could have spent his day more productively. If he just could have found out before walking all that way, he could have spent the day studying. The young Quadir came from a wealthy family that had temporarily fled the commotion in the city during the 1971 War of Independence. But there are 130 million people living in his small country, the vast majority of whom struggle to survive every day. If they waste their day walking to the doctor, it means they can’t work in the rice fields, or milk the cow—in short, that they can’t earn money.

The lives of poor people are full of inconvenience associated with isolation and a lack of information. Farmers, for example, sell their products to an unscrupulous middleman who cheats them with an unreasonably low price, when a simple telephone call would have enabled them to find out what the market prices are or what prices the competitors are offering.

“I thought, has this man gone crazy?” Tawfiq-e-Elahi Chowdhury, Bangladesh’s former Energy Secretary and an acquaintance of Quadir, clearly remembers when his friend disclosed his ideas. Sitting in his tastefully decorated home in a Dhaka suburb, Chowdhury recalls: “This is Bangladesh, I told him. People here don’t have enough to eat. What would they do with mobile telephones?!”

It was 1994. Bangladesh had the lowest number of telephones per capita in the world: one phone per 300 inhabitants, with a significant chance that the one they had didn’t work. Anyone living in the city who applied for a phone, would have no grounds to complain if he got it within a year. Back then, mobile telephones were only seen in the most industrialized countries and even there, you paid a lot of money for one. What Chowdhury was trying to say was that he didn’t have a lot of faith in Quadir’s idea. And he was by no means the only one.

But Iqbal Quadir knew that a telephone call was definitely going to be cheaper than the value people lose by not being able to connect with others. Wasted time is a huge cost for everyone and poor people should not waste time, he believed—time is at least one resource they have the same amount everyday as rich people do. In addition, Quadir knew a thing or two of what, back then, was referred to as the “new economy”. One: the costs of software and hardware decrease as volume rises. Two: the value of a product increases when greater numbers of people use it. After all, the more people who have a phone, the more there are who can be called. Quadir foresaw spectacular price declines—and was proven right. Now you can buy a mobile telephone for 50 euros ($65 U.S.).

And there’s another reason why mobile telephones were certain to be a success. Quadir sums it up in an anecdote: “When I was in Dhaka, back in 1994, investigating about the telecommunications situation, one time my mother asked me to call her as soon as I had arrived in New York. That was interesting because when I first left Bangladesh 20 years earlier—without American citizenship, a credit card or any acquaintances there—she had plenty to worry about for an 18 year old in a new country, but she was willing to wait a month before hearing from me: via a letter. But now that you can simply call, people no longer tolerate waiting a long time; they want a response immediately.” And this points to the third rule Quadir was banking on: if there is a possibility of faster communication, increasing numbers of people will use it with increasing frequency.

Quadir had set his sights on a successful company. He discovered that Bangladesh’s government was planning to issue licenses for mobile telephony—probably because the government civil servants underestimated its potential and because the World Bank had refused to extend a loan to Bangladesh government for this sector.

The next step was to find a Western telecom company, a partner Quadir needed to realize his crazy plans. Thanks to an investment from Josh Mailman—a New York businessman and the founder of the Social Venture Network, which encourages companies with socially and ecologically progressive goals—Quadir set up Gonofone Development, whose only aim was to achieve what ultimately became known under the name GrameenPhone. Quadir travelled all over the world looking for support for his business plan. After many rejections, he discovered the ideal partner in Norway: Telenor, the country’s largest telephone service provider, which was then a state-owned company. At one time, the Norwegian government started a development program in Bangladesh to lay an 1,800-kilometre fibre optic cable network along the country’s railway tracks. This was a good place to start in building a network of mobile transmission towers as well.

But there were still plenty of doubts. Telenor had become accustomed to a particular image of the ideal customer: young, talented and career-minded. But this project involved just the opposite: an illiterate, shy village woman dressed in a sari in a poverty-stricken village. Although Telenor now has subsidiaries in various countries—including Russia, Pakistan, Thailand and Malaysia—this was a completely new adventure and was viewed with quite a bit of suspicion and mockery. Why should a Norwegian company get involved in developing the rural areas of a poor and overpopulated country?

It was thanks to one man in particular that Telenor persevered, despite all the internal criticism: the company’s former CEO Tormod Hermansen. What convinced him? In his Oslo office, he links the fingers of his hands together before answering that question. “I used to work at the United Nations, I have worked as a social democrat for various ministries,” Hermansen begins. “I think I wanted to participate because I share an interest with Quadir in combining development with doing business. I’m interested in bottom-up development and saw in this an effective way to help a population to move forward.”

While Quadir was trying to convince a foreign telephone company, he looked for a second partner for the distribution of the phones. He was drawn to Grameen Bank who knew village life in Bangladesh like no other as it issues small loans to landless villagers throughout the country. This commercial bank is internationally renowned, as is its founder Muhammad Yunus, the visionary whose microcredit model has been imitated in over 100 countries since the 1970s and whose service record impressed Tormod Hermansen.

Initially, Quadir found Grameen disinterested. We’re a bank, we provide a service, why would we want to get involved in the telephone business? The cooperation only got off the ground when the idea emerged to issue loans to current, reliable customers who would then use the mobile telephones to earn money in their village as an income generating entreprise. This “telephone lady”—Grameen Bank’s experience is that women are better able than men to repay their loans—would get a 50 percent discount on the airtime tariff. With the money she earned she could repay the bank, perhaps in as little as a year. She could run her own small business, be independent and, thanks to her income, increase her status in her own family and in society. This is because every villager would be dependent on her to use the phone: not an insignificant detail in a culture in which social standing is reserved for men.

In his office in Dhaka, Muhammad Yunus falls silent for the first time since the interview began and then bursts into uncontrollable laughter. “Now you’ve gotten me into trouble!” The question was whether GrameenPhone has not become more important than the bank. Indeed, Yunus concedes in his carefully worded answer: “Grameen Bank has an impact on the poor, GrameenPhone on the entire economy.” After all, a single loan helps out a family while a telephone helps the entire village.

To help form a partnership with Telenor, Grameen Bank established Grameen Telecom. This non-profit arm of the bank was given the responsibility of purchasing calling minutes in bulk, handling administrative processing and collecting on calls made by all the owners of the Village Phone, as the program in the villages was dubbed. This saves money for GrameenPhone, which now sends out a single phone bill for its 100,000 Village Phone customers. While these women only represent a marginal proportion of the company’s total customer base (4 percent), the telephones are used much more often than those of the average subscriber in the city and calls are more often placed to family abroad. As a result, these telephone ladies account for 25 percent of GrameenPhone’s monthly turnover now.

Who would have thought something so successful could sprout from the curious partnership between Grameen Bank, Grameen Telecom and a Western telecom giant? In 2003 GrameenPhone contributed around 25 million euros ($32 million U.S.) to Telenor’s profits, a marginal share in light of the Norwegian company’s overall profit of 540 million euros ($700 million U.S.). Still, it appears that the residents of Bangladesh continue to represent an important source of income for Telenor. With 4.5 million residents, tiny Norway has a limited number of potential customers, while in densely populated Bangladesh, there are many millions of people yet to be reached.

The first telephone call made via GrameenPhone on 26 March 1997 involved the former prime ministers of Bangladesh and Norway, Sheikh Hasina and Thorbjørn Jagland, as a symbol of the unique cooperation between the two countries. After the statesmen had verified that it was 32 degrees Celsius in Dhaka and the same in Norway, except below freezing, they hung up.

And then, ring, ring, the mobile telephone rang in the office of Prime Minister Hasina. Laily Begum, a resident of Patira just outside Dhaka, was on the line. Her husband was a day laborer and she had turned to Grameen Bank for help a few years earlier. From her first loan of 4,500 taka, around 50 euros ($65 U.S.), she bought a cow. She was able to repay what she owned with the proceeds from the milk. Three loans and three repayments later, Begum had pulled her family out of poverty. The bank had now approached her to become the country’s first telephone lady. Her children, who are at school, would help her figure out the instructions.

Eight years later Laily Begum, together with her husband, now owns five different types of shops and a restaurant. They earn a whopping 13,000 taka (165 euros or $212 U.S.) a month, a fortune that has given them status in their community. Begum has even become nationally renowned; she is living proof that information technology can free a family from poverty. Begum is now in talks with Grameen Telecom about setting up an internet service in her village.

But the figures also tell another story. Laily Begum initially earned double what she is now making with her telephone. But now that there is competition—from other telephone ladies and other companies—her earnings fell quickly. In other villages, competition has led to similar drops in income. In Kalampur, Anju Monwara Begum, who was the first in this village, has already trained three competitors to use the cell phone, only to have one of them scour the village actively—and successfully—to poach her customers.

Will the success of mobile telephones end in a downward spiral? No, according to Abdul-Muyeed Chowdhury, director of BRAC, Bangladesh’s largest and widely respected development organization. “More telephones means that more people will be more accessible,” he calculates while sitting in his office sandwiched between Dhaka’s fanciest neighbourhood and a slum. “More competition means lower prices and that means that more people can call, and therefore have more opportunities to make economically useful phone calls.” In other words, the decrease in income of a few telephone service owners are cancelled out by the increasing economic activity and growing wealth of many others.

BRAC will forever be grateful to the mobile telephone. Because the organization is active in almost every village, offering loans and educational access to villagers, its internal communication among 2,667 offices is now faster and more effective than ever. BRAC’s Chowdhury is now considering introducing mobile telephones to the villages via a competing telecom company. “Competition would be good for GrameenPhone,” Chowdhury believes. “The company has a monopoly outside the cities and charges relatively high prices.”

High prices are now an issue. Erik Aas, the Norwegian head of GrameenPhone, sighs as he says, “It’s up to the market to determine telephone rates, not the government,” for what seems like the umpteenth time, referring to a Bangladeshi parliamentary committee that has publicly expressed its annoyance about how many takas people must pay for a telephone call. “We have built around 700 mobile telephone transmission towers in Bangladesh,” he continues. “We have invested 230 million euros ($300 million U.S.). These are costs we incur to develop the country, but the government seems to be forgetting that.”

And those towers aren’t cheap. All the technology comes from foreign companies like Ericsson and Siemens and the steel must be imported from China. And Bangladesh’s government, Aas complains, isn’t flexible about keeping import duties low on such products.

After years in which a doubling of the number of subscribers and profits was not unusual, a new era appears to be dawning for GrameenPhone. While it has always been able to remain well ahead of the competition in the Bangladeshi mobile telephone market—including Aktel, CityCell and Sheba—a formidable competitor is waiting in the wings. BTTB, the state-owned fixed-line monopoly, has started a mobile phone project, Teletalk, which is expected to enter the market anytime now. And a number of other companies has also purchased mobile telephone licenses in an effort to take their share of the spoils.

How will GrameenPhone respond? By offering new, innovative high-quality services, says a self-confident Aas who refrains from offering details. The price war will likely be concentrated in the bigger cities among customers with the most money to spend—customers that GrameenPhone has faithfully served for years. The area of concern is mainly the urban middle class, which will be tempted by new, affordable telephones that are not equipped to accept SIM cards from other telephone companies.

“There is truly no reason at all,” Iqbal Quadir says, emphasizing every word, “why someone couldn’t apply this same model in any other developing country.” So far the only country where the concept has been exactly replicated is Uganda—where nearly 80 percent of the population lives in rural areas—by the telecom company MTN. Once again, the microfinancing model was the key to the project. Now that microcredit—access to credit—has been copied around the world since being introduced in Bangladesh by Muhammad Yunus, mobile telephones—access to information technology—could well be the next successful development in efforts to combat poverty. And once again, the innovation involved is driven by commerce.

Indeed, it isn’t easy to copy his model, Quadir concedes. It took GrameenPhone four years to get off the ground and anyone requesting a mobile telephone license in a developing country needs a great deal of patience. “At most you need a little more power of persuasion and talent to make it happen.”

There’s one thing Quadir knows for sure: although governments of developing countries aren’t exactly eager to allow new technologies in that could weaken established power structures, these technologies are priceless to those living in poor countries.

Is a solution to combating poverty being developed here in Bangladesh—often called the “world’s basket case”? Is business the right instrument? For Quadir, the answer is yes. He thinks part of the problem lies in the way poor countries are looked at. “In the West we establish companies to solve our problems,” he says. “When they are not appropriate, we establish non-profits. But in developing countries people refer to the same type of organizations as non-governmental organizations. Why is that? Perhaps because in developing countries they think the government is the most suitable body to tackle a problem in an organized way. But look at the wealthy countries. There, entrepreneurs, investors, employees, consumers—collectively, citizens—have the power to require their governments to be supportive of their productivity. But in poor countries, the state has too much power. The best way to change that is to strengthen the hands of the citizens. GrameenPhone’s handsets are doing that, literally.”

The four mobile telephones in the village of Kalampur won’t suddenly make the village a hotbed of economic growth. But they can help individuals to move ahead and it’s likely that this effect will eventually benefit the community as a whole. But don’t forget that Bangladesh’s per capita yearly income is 280 euros ($360 U.S.): the shape of the economy only allows small steps to be made in the right direction.

Ibrahim Muhammad is someone who is taking these steps. Anju Monwara Begum’s telephone in Kalampur offers him the prospect of a better price for the fertilizer he sells. “I always went to the same market, just down the road, to sell my fertilizer,” the 22-year-old Muhammad explains. “But sometimes the prices are a little higher in a village that is further away. Now I always call first to find out what the prices are in the area.” For him, the difference may be no more than a few extra takas in profit, but it means that Muhammad has a little more money after deducting his costs for the phone calls and longer trip to the market.

When we go to say good-bye, Muhammad wants me to know he doesn’t just use the phone for business. He falls silent for a moment and looks down. “Sometimes, when my girlfriend is at her parents a couple of villages away,” he says, “I’ll call her too.”

Solution News Source

How one new company brought hope to one of the world's poorest countries

By selling mobile phones in Bangladesh, GrameenPhone has made an important contributoin to the fortues of poor villagers.


Marco Visscher | April 2005 issue

“The battle against poverty has gained a surprisingly effective ally: business. By treating the poor like clients and consumers, they are accepted into the global economy. As a result, they are ultimately given the chance to prosper.

Many decades of international aid, after all, has not succeeded in closing the gap between rich and poor. On the contrary, it appears that aid to poor countries—recently promoted once more by the United Nations as a way to end poverty—only contributes to their inefficiency and bureaucratic headaches, which puts the brakes on their economic potential. Business people, on the other hand, have a persistent aim to overcome inefficiency and bureaucracy.

In this cover story, Indian senior economist C.K. Prahalad describes how businesses are discovering a promising, fast-growing market: the four billion poorest people on the planet. Ode managing editor Marco Visscher traveled to Bangladesh to investigate whether one company selling mobile telephones in remote villages is making a real contribution to the lives of the poor.” – The editorial staff

She had never talked on the telephone before she bought her first Nokia. How is it possible, she must have thought four years ago, to talk to someone who is somewhere else using this tiny little thing… That same mobile telephone has become Anju Monwara Begum’s constant companion. It goes where she goes.

Except just now. A neighbour is using her cell phone to find out how her family in Sri Lanka is doing in the aftermath of the tsunami.

But hang on a second. This is Bangladesh, just about the poorest country in the world. We’re standing here on the muddy sand paths of Kalampur, a village with a population of 2,000 families—mostly farmers—50 kilometres (31 miles) outside the capital Dhaka. Have these people also been overtaken by the modern creed that you have to be reachable anywhere, anytime?

No, that’s not it. Begum is simply earning money. She is actually a walking telephone booth, making her phone available to other villagers. When her neighbour has finished with her call, Begum will look to see how much she owes. She charges the villagers the market rate: 6 taka, around 7 euro cents (9 cents U.S.), a minute for a domestic call, half that for calls made within the district or even less during off-peak hours. Begum pays half this amount to the telephone company. The difference is her income: around 200 takas, or 2.5 euros ($3.20 U.S.), a day, which is at least twice the average income in Bangladesh, and comparable to some office jobs in the city.

The country currently has around 100,000 women like Anju Monwara Begum spread throughout 50,000 villages out of its total of 68,000, which has helped open access to the outside world for some 100 million Bangladeshis. She took out a loan from Grameen Bank, the world’s first and largest microcredit bank, which she used to buy the mobile telephone that has hooked up her village to the rest of the world. It means, for example, that people can boost their earning potential because they now have access to information that was previously difficult to come by.

Combating poverty with mobile telephones. Has any large telecom company in Europe considered raising used mobile phones for the poor people in Bangladesh? No. This radical idea is an example of a company that saw an opportunity to make a profit—for its shareholders yes, but also for the country.

Begum and the other women are like billboards for GrameenPhone, the country’s largest mobile telecom company, founded in 1996. GrameenPhone is an unprecedented success story. In Bangladesh, a fixed telephone line is an uncommon luxury only afforded to an elite few in cities. The company had expected to have around 70,000 subscribers by 2002, but already had 100,000 two years earlier in 2000. It reached the one million mark in 2003. Today, it has some 2.5 million subscribers around the country.

Until the end of last year, GrameenPhone’s success has required an investment of 230 million euros ($300 million U.S.). In 2001, the company reported its first profit back of 22 million euros ($29 million U.S.) on a turnover of 77 million euro ($100 million U.S.). Since then, the company’s profitability has steadily improved. By 2003 the company had booked a net profit of 58 million euros ($75 million U.S.) and currently has 62 percent of the Bangladeshi mobile phone market.

GrameenPhone was not the first and is not the only mobile telephone provider operating in a poor country, but it is the first and—so far—the only one offering such large-scale service outside the cities. And this is noteworthy, because the telephone companies in developing countries are often in the hands of the government and serve only the urban elite. But this company’s motto is that good business and good development can go well hand in hand.

GrameenPhone is not your typical exploiter of cheap labour in the developing world. For example, the company offers free healthcare and sports facilities to its 1,000-odd employees. By Bangladeshi standards, “revolutionary” is the only accurate word to describe its parental leave policies, the opportunities for women and the degree of staff input in decision-making. Moreover, a portion of the profits is invested in public initiatives to enhance people’s lives, such as hiring day labourers to work cleaning up and beautifying the median strips of highways.

Who in heaven’s name came up with the crazy idea that it’s profitable to operate a mobile telephone company in this land of poverty, hunger and natural disasters? Enter Iqbal Quadir, born and raised in Bangladesh until he left to study in the United States and is now a fellow at Harvard University where he taught graduate classes on development during the last three years. He worked in New York for a company that manages money for major investors until one day back in 1993 when the computer network went down. He couldn’t work all day and thought back to a day when, as a 13-year-old boy, he had walked from his village to another one to get medicines only to discover they were out of stock. And this was another such lost day. Then… the brainwave of his life hit him…

If he could have known as a boy that the medicines were not available, he could have spent his day more productively. If he just could have found out before walking all that way, he could have spent the day studying. The young Quadir came from a wealthy family that had temporarily fled the commotion in the city during the 1971 War of Independence. But there are 130 million people living in his small country, the vast majority of whom struggle to survive every day. If they waste their day walking to the doctor, it means they can’t work in the rice fields, or milk the cow—in short, that they can’t earn money.

The lives of poor people are full of inconvenience associated with isolation and a lack of information. Farmers, for example, sell their products to an unscrupulous middleman who cheats them with an unreasonably low price, when a simple telephone call would have enabled them to find out what the market prices are or what prices the competitors are offering.

“I thought, has this man gone crazy?” Tawfiq-e-Elahi Chowdhury, Bangladesh’s former Energy Secretary and an acquaintance of Quadir, clearly remembers when his friend disclosed his ideas. Sitting in his tastefully decorated home in a Dhaka suburb, Chowdhury recalls: “This is Bangladesh, I told him. People here don’t have enough to eat. What would they do with mobile telephones?!”

It was 1994. Bangladesh had the lowest number of telephones per capita in the world: one phone per 300 inhabitants, with a significant chance that the one they had didn’t work. Anyone living in the city who applied for a phone, would have no grounds to complain if he got it within a year. Back then, mobile telephones were only seen in the most industrialized countries and even there, you paid a lot of money for one. What Chowdhury was trying to say was that he didn’t have a lot of faith in Quadir’s idea. And he was by no means the only one.

But Iqbal Quadir knew that a telephone call was definitely going to be cheaper than the value people lose by not being able to connect with others. Wasted time is a huge cost for everyone and poor people should not waste time, he believed—time is at least one resource they have the same amount everyday as rich people do. In addition, Quadir knew a thing or two of what, back then, was referred to as the “new economy”. One: the costs of software and hardware decrease as volume rises. Two: the value of a product increases when greater numbers of people use it. After all, the more people who have a phone, the more there are who can be called. Quadir foresaw spectacular price declines—and was proven right. Now you can buy a mobile telephone for 50 euros ($65 U.S.).

And there’s another reason why mobile telephones were certain to be a success. Quadir sums it up in an anecdote: “When I was in Dhaka, back in 1994, investigating about the telecommunications situation, one time my mother asked me to call her as soon as I had arrived in New York. That was interesting because when I first left Bangladesh 20 years earlier—without American citizenship, a credit card or any acquaintances there—she had plenty to worry about for an 18 year old in a new country, but she was willing to wait a month before hearing from me: via a letter. But now that you can simply call, people no longer tolerate waiting a long time; they want a response immediately.” And this points to the third rule Quadir was banking on: if there is a possibility of faster communication, increasing numbers of people will use it with increasing frequency.

Quadir had set his sights on a successful company. He discovered that Bangladesh’s government was planning to issue licenses for mobile telephony—probably because the government civil servants underestimated its potential and because the World Bank had refused to extend a loan to Bangladesh government for this sector.

The next step was to find a Western telecom company, a partner Quadir needed to realize his crazy plans. Thanks to an investment from Josh Mailman—a New York businessman and the founder of the Social Venture Network, which encourages companies with socially and ecologically progressive goals—Quadir set up Gonofone Development, whose only aim was to achieve what ultimately became known under the name GrameenPhone. Quadir travelled all over the world looking for support for his business plan. After many rejections, he discovered the ideal partner in Norway: Telenor, the country’s largest telephone service provider, which was then a state-owned company. At one time, the Norwegian government started a development program in Bangladesh to lay an 1,800-kilometre fibre optic cable network along the country’s railway tracks. This was a good place to start in building a network of mobile transmission towers as well.

But there were still plenty of doubts. Telenor had become accustomed to a particular image of the ideal customer: young, talented and career-minded. But this project involved just the opposite: an illiterate, shy village woman dressed in a sari in a poverty-stricken village. Although Telenor now has subsidiaries in various countries—including Russia, Pakistan, Thailand and Malaysia—this was a completely new adventure and was viewed with quite a bit of suspicion and mockery. Why should a Norwegian company get involved in developing the rural areas of a poor and overpopulated country?

It was thanks to one man in particular that Telenor persevered, despite all the internal criticism: the company’s former CEO Tormod Hermansen. What convinced him? In his Oslo office, he links the fingers of his hands together before answering that question. “I used to work at the United Nations, I have worked as a social democrat for various ministries,” Hermansen begins. “I think I wanted to participate because I share an interest with Quadir in combining development with doing business. I’m interested in bottom-up development and saw in this an effective way to help a population to move forward.”

While Quadir was trying to convince a foreign telephone company, he looked for a second partner for the distribution of the phones. He was drawn to Grameen Bank who knew village life in Bangladesh like no other as it issues small loans to landless villagers throughout the country. This commercial bank is internationally renowned, as is its founder Muhammad Yunus, the visionary whose microcredit model has been imitated in over 100 countries since the 1970s and whose service record impressed Tormod Hermansen.

Initially, Quadir found Grameen disinterested. We’re a bank, we provide a service, why would we want to get involved in the telephone business? The cooperation only got off the ground when the idea emerged to issue loans to current, reliable customers who would then use the mobile telephones to earn money in their village as an income generating entreprise. This “telephone lady”—Grameen Bank’s experience is that women are better able than men to repay their loans—would get a 50 percent discount on the airtime tariff. With the money she earned she could repay the bank, perhaps in as little as a year. She could run her own small business, be independent and, thanks to her income, increase her status in her own family and in society. This is because every villager would be dependent on her to use the phone: not an insignificant detail in a culture in which social standing is reserved for men.

In his office in Dhaka, Muhammad Yunus falls silent for the first time since the interview began and then bursts into uncontrollable laughter. “Now you’ve gotten me into trouble!” The question was whether GrameenPhone has not become more important than the bank. Indeed, Yunus concedes in his carefully worded answer: “Grameen Bank has an impact on the poor, GrameenPhone on the entire economy.” After all, a single loan helps out a family while a telephone helps the entire village.

To help form a partnership with Telenor, Grameen Bank established Grameen Telecom. This non-profit arm of the bank was given the responsibility of purchasing calling minutes in bulk, handling administrative processing and collecting on calls made by all the owners of the Village Phone, as the program in the villages was dubbed. This saves money for GrameenPhone, which now sends out a single phone bill for its 100,000 Village Phone customers. While these women only represent a marginal proportion of the company’s total customer base (4 percent), the telephones are used much more often than those of the average subscriber in the city and calls are more often placed to family abroad. As a result, these telephone ladies account for 25 percent of GrameenPhone’s monthly turnover now.

Who would have thought something so successful could sprout from the curious partnership between Grameen Bank, Grameen Telecom and a Western telecom giant? In 2003 GrameenPhone contributed around 25 million euros ($32 million U.S.) to Telenor’s profits, a marginal share in light of the Norwegian company’s overall profit of 540 million euros ($700 million U.S.). Still, it appears that the residents of Bangladesh continue to represent an important source of income for Telenor. With 4.5 million residents, tiny Norway has a limited number of potential customers, while in densely populated Bangladesh, there are many millions of people yet to be reached.

The first telephone call made via GrameenPhone on 26 March 1997 involved the former prime ministers of Bangladesh and Norway, Sheikh Hasina and Thorbjørn Jagland, as a symbol of the unique cooperation between the two countries. After the statesmen had verified that it was 32 degrees Celsius in Dhaka and the same in Norway, except below freezing, they hung up.

And then, ring, ring, the mobile telephone rang in the office of Prime Minister Hasina. Laily Begum, a resident of Patira just outside Dhaka, was on the line. Her husband was a day laborer and she had turned to Grameen Bank for help a few years earlier. From her first loan of 4,500 taka, around 50 euros ($65 U.S.), she bought a cow. She was able to repay what she owned with the proceeds from the milk. Three loans and three repayments later, Begum had pulled her family out of poverty. The bank had now approached her to become the country’s first telephone lady. Her children, who are at school, would help her figure out the instructions.

Eight years later Laily Begum, together with her husband, now owns five different types of shops and a restaurant. They earn a whopping 13,000 taka (165 euros or $212 U.S.) a month, a fortune that has given them status in their community. Begum has even become nationally renowned; she is living proof that information technology can free a family from poverty. Begum is now in talks with Grameen Telecom about setting up an internet service in her village.

But the figures also tell another story. Laily Begum initially earned double what she is now making with her telephone. But now that there is competition—from other telephone ladies and other companies—her earnings fell quickly. In other villages, competition has led to similar drops in income. In Kalampur, Anju Monwara Begum, who was the first in this village, has already trained three competitors to use the cell phone, only to have one of them scour the village actively—and successfully—to poach her customers.

Will the success of mobile telephones end in a downward spiral? No, according to Abdul-Muyeed Chowdhury, director of BRAC, Bangladesh’s largest and widely respected development organization. “More telephones means that more people will be more accessible,” he calculates while sitting in his office sandwiched between Dhaka’s fanciest neighbourhood and a slum. “More competition means lower prices and that means that more people can call, and therefore have more opportunities to make economically useful phone calls.” In other words, the decrease in income of a few telephone service owners are cancelled out by the increasing economic activity and growing wealth of many others.

BRAC will forever be grateful to the mobile telephone. Because the organization is active in almost every village, offering loans and educational access to villagers, its internal communication among 2,667 offices is now faster and more effective than ever. BRAC’s Chowdhury is now considering introducing mobile telephones to the villages via a competing telecom company. “Competition would be good for GrameenPhone,” Chowdhury believes. “The company has a monopoly outside the cities and charges relatively high prices.”

High prices are now an issue. Erik Aas, the Norwegian head of GrameenPhone, sighs as he says, “It’s up to the market to determine telephone rates, not the government,” for what seems like the umpteenth time, referring to a Bangladeshi parliamentary committee that has publicly expressed its annoyance about how many takas people must pay for a telephone call. “We have built around 700 mobile telephone transmission towers in Bangladesh,” he continues. “We have invested 230 million euros ($300 million U.S.). These are costs we incur to develop the country, but the government seems to be forgetting that.”

And those towers aren’t cheap. All the technology comes from foreign companies like Ericsson and Siemens and the steel must be imported from China. And Bangladesh’s government, Aas complains, isn’t flexible about keeping import duties low on such products.

After years in which a doubling of the number of subscribers and profits was not unusual, a new era appears to be dawning for GrameenPhone. While it has always been able to remain well ahead of the competition in the Bangladeshi mobile telephone market—including Aktel, CityCell and Sheba—a formidable competitor is waiting in the wings. BTTB, the state-owned fixed-line monopoly, has started a mobile phone project, Teletalk, which is expected to enter the market anytime now. And a number of other companies has also purchased mobile telephone licenses in an effort to take their share of the spoils.

How will GrameenPhone respond? By offering new, innovative high-quality services, says a self-confident Aas who refrains from offering details. The price war will likely be concentrated in the bigger cities among customers with the most money to spend—customers that GrameenPhone has faithfully served for years. The area of concern is mainly the urban middle class, which will be tempted by new, affordable telephones that are not equipped to accept SIM cards from other telephone companies.

“There is truly no reason at all,” Iqbal Quadir says, emphasizing every word, “why someone couldn’t apply this same model in any other developing country.” So far the only country where the concept has been exactly replicated is Uganda—where nearly 80 percent of the population lives in rural areas—by the telecom company MTN. Once again, the microfinancing model was the key to the project. Now that microcredit—access to credit—has been copied around the world since being introduced in Bangladesh by Muhammad Yunus, mobile telephones—access to information technology—could well be the next successful development in efforts to combat poverty. And once again, the innovation involved is driven by commerce.

Indeed, it isn’t easy to copy his model, Quadir concedes. It took GrameenPhone four years to get off the ground and anyone requesting a mobile telephone license in a developing country needs a great deal of patience. “At most you need a little more power of persuasion and talent to make it happen.”

There’s one thing Quadir knows for sure: although governments of developing countries aren’t exactly eager to allow new technologies in that could weaken established power structures, these technologies are priceless to those living in poor countries.

Is a solution to combating poverty being developed here in Bangladesh—often called the “world’s basket case”? Is business the right instrument? For Quadir, the answer is yes. He thinks part of the problem lies in the way poor countries are looked at. “In the West we establish companies to solve our problems,” he says. “When they are not appropriate, we establish non-profits. But in developing countries people refer to the same type of organizations as non-governmental organizations. Why is that? Perhaps because in developing countries they think the government is the most suitable body to tackle a problem in an organized way. But look at the wealthy countries. There, entrepreneurs, investors, employees, consumers—collectively, citizens—have the power to require their governments to be supportive of their productivity. But in poor countries, the state has too much power. The best way to change that is to strengthen the hands of the citizens. GrameenPhone’s handsets are doing that, literally.”

The four mobile telephones in the village of Kalampur won’t suddenly make the village a hotbed of economic growth. But they can help individuals to move ahead and it’s likely that this effect will eventually benefit the community as a whole. But don’t forget that Bangladesh’s per capita yearly income is 280 euros ($360 U.S.): the shape of the economy only allows small steps to be made in the right direction.

Ibrahim Muhammad is someone who is taking these steps. Anju Monwara Begum’s telephone in Kalampur offers him the prospect of a better price for the fertilizer he sells. “I always went to the same market, just down the road, to sell my fertilizer,” the 22-year-old Muhammad explains. “But sometimes the prices are a little higher in a village that is further away. Now I always call first to find out what the prices are in the area.” For him, the difference may be no more than a few extra takas in profit, but it means that Muhammad has a little more money after deducting his costs for the phone calls and longer trip to the market.

When we go to say good-bye, Muhammad wants me to know he doesn’t just use the phone for business. He falls silent for a moment and looks down. “Sometimes, when my girlfriend is at her parents a couple of villages away,” he says, “I’ll call her too.”

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