Livestock Research for Rural Development 11 (1) 1999

Citation of this paper

Connecting Bangladeshi Villages

Iqbal Z Quadir

Grameen Phone, Aarong House, Floor # 14-15-16-17, 65, Mohakhali C/A, Dhaka-1212, Bangladesh
E-mail: iqbal@grameenphone.com

Paper presented at Development Workers' Course: Women in Agriculture and Modern Communication Technology.
Tune Landboskole, Denmark, March 30-April 3, 1998.


Abstract

Illustrated by the author's personal communication experience and the potential that good communication connections have,  in enabling development, the paper describes an initiative in Bangladesh that within a few years will bring cellular phones into the 35,000 villages covered by the Grameen Bank. The company - GrameenPhone - in a pilot program involving 150 villages has confirmed that the village phone concept is economically viable. It is concluded that microcredit should not be viewed as a narrow program to help the poor, but as a tool to release the entrepreneurial energy of the poor, which can meet the two important objectives of uplifting the economy and benefiting the poor.

Key words: Rural connectivity, cellular phones, microcredit, women, economic development


Introduction: Connectivity is productivity

Early in 1993, I used to work at an investment firm in New York where my colleagues and I worked together on the same reports requiring cumbersome and frequent exchanges of floppy disks. When a simple link was installed among our computers obviating the need for physical exchanges of disks, we produced reports faster and worked more comfortably and creatively. Then one day, when the link failed, I could not escape thinking of the contribution the link had made to our productivity while it worked.

Somehow I put these thoughts next to my experiences in a village in rural Bangladesh during its war of independence in 1971. The war started in urban areas forcing my family to take refuge in a relatively remote village. The place had no modern infrastructure, except for two motorized boats that carried passengers and cargo between two towns and touched near this village as one of their stops in between. For several months, the war made these boats suspend their services. When they started running again, there was an immediate positive effect on the village life, making it obvious how communication mattered. Farmers and fishermen got a better price for their produce, and more things became available for purchase. The improvement was so dramatic that even at 13 I observed it clearly.

In addition, one day during this period, I spent a whole day walking between two villages. My parents had sent me to a village 10 kilometers away to collect some medicines. After walking most of the morning, I arrived at my destination only to learn that the relevant person had gone to a city to replenish his supplies. I walked back home all afternoon.

Thus, when the computer link in my office snapped in 1993, I saw the wasted day in 1971 in a new light. Connectivity is productivity, be it in a modern office or an underdeveloped village; connection enables, disconnection disables.


Poverty in initiatives

If connectivity meant productivity, then it must be a weapon against poverty. But how was my native Bangladesh doing in 1993 on this front of its battle against poverty? Research made me rediscover that Bangladesh chugged along mostly without phones and I wondered how much human energy was wasted in an unconnected nation of 120 million. There were 2 phones per 1,000 people (as opposed to 10 per 1,000 people in India) and virtually none in rural areas where 100 million people lived. This was disturbing particularly because it was a time when new forms of connectivity such as Internet and email were transforming even matured economies such as that of the USA. As a practical matter, I also learned in 1993, that the Government of Bangladesh would initiate a process to issue cellular licenses in 1994 meaning that I had a realistic window of opportunity from a legal point of view.

I also looked for any evidence of a link between telecommunication and economic progress. I got surprised not because I found the evidence, but how compelling it was. It appeared that telecommunication made a bigger contribution to economic growth than almost anything else. According to established data (World Bank 1999) including those by International Telecommunication Union, an arm of the United Nations (Kayani and Dymond 1997), a poor economy like Bangladesh would grow by $4,000 annually in GNP due to one additional phone that, it turns out, would cost only a $1,000. Moreover, telecommunication equipment, being made like computers from microchips and software, declines in price every year, making the logic even more compelling. Interestingly, the telephone services were priced higher in countries like Bangladesh than they needed to be only to curtail demand so that the limited supply, limited due to failures in investments, would not be overwhelmed by demand.

But suppressed demand meant suppressed economic progress. And suppressed demand due to artificially high price and statistics from India, a country with economic conditions comparable with Bangladesh, but five times as many phones on a per-capita basis, convinced me that the problem in Bangladesh was probably more the lack of initiatives than its economic poverty. There was a clear need for taking an initiative and I volunteered.


Devising a solution

Although attracting commercial investments for a service in rural Bangladesh was perceived to be extremely difficult, I felt there had to be a way. If connectivity indeed meant productivity, there had to be a way to collect a part of that productivity gain to pay for the necessary investment. This realization allowed me to delve into the problem without having the right solution at hand.

After a year of self-study, I concluded that the general lack of other infrastructures was the main impediment to bringing connectivity to Bangladesh, especially to its rural areas. There were not enough roads to send repairmen, not enough records for credit checks on customers, not enough access points for potential subscribers or not enough banks for collecting bills.

One bright spot in this gloomy situation was the Grameen Bank (Fuglesang and Chandler 1993, http://www.grameen.com and http://www.grameen.com/grameen/gbank/biblio.html), which had rekindled hope throughout the rural areas and had some of the necessary infrastructures. It operated in 35,000 villages through 1,100 branches and 12,000 workers. Its workers obviously made good credit decisions as 97% of its two million borrowers paid back their loans. Typically, a woman would borrow $100-200 without collateral from the Grameen Bank to purchase, say, a cow. The cow would produce milk that she would sell to her neighbors enabling her to make a living and pay off the loan. The process allowed the poorest of the poor to stand up on their feet.

To me, connectivity could play a similar role since both credit and connectivity empower individuals. Just as credit obviates a producer's need to depend on middlemen, a telephone could connect producers with customers and suppliers without intermediaries. More importantly, following the Grameen Bank theme of promoting self-employment, I proposed that a cellular phone can be a means for income generation for the poor, i.e., a telephone could be a 'cow' as well, at least from the perspective of the Bank's borrowers. A woman could borrow, say, $200 from the Bank and purchase a handset and sell telephone services to villagers, making a living and paying off her loan. It would create a self-employment opportunity in each village and provide access to telephones to all.

Although, at the time, modern telecommunication was far removed from the activities of the Bank or its borrowers, my proposal of income generation for the poor caught the attention of Muhammad Yunus, the founder of Grameen Bank. Yunus, a man of extraordinary visions, quickly appreciated all the arguments I made in favor of a connectivity program for rural Bangladesh. He gave me access to himself and to Khalid Shams, Yunus' deputy, an epitome of professionalism with an impeccable record of public service. The access to two of them meant an access to the best reservoir of clear thinking in the country. And Yunus's endorsement of the idea gave it the necessary credibility.


Implementation

With Yunus's encouragement to explore the possibilities, in early 1994 I plunged into the efforts to establish realistic plans and find telecommunication operators who would be willing to invest in such an operation in Bangladesh. In order to have funds for these organizing efforts, I convinced a socially conscious American investor and formed a company in New York, promising him a piece of ownership in the possible operation in Bangladesh for an eventual economic return to him. At the end of 1996, nearly four years after I dreamt of bringing connectivity to rural Bangladesh, a nationwide cellular license was issued by the Government of Bangladesh to GrameenPhone, a company owned mainly by Grameen Telecom, a non-profit organization solely established by Grameen Bank to manage the Bank's interests in telecommunications, and Telenor AS, the primary telephone company in Norway. Grameen Telecom also administers Grameen Bank borrowers who choose to retail telephone services in the rural areas.

As a practical matter, attracting foreign investment to Bangladesh still turned out to be difficult. But, over time, I learned to show to potential investors the bright sides of the concerns they had about Bangladesh. For instance, a terrible telecommunication situation in Bangladesh meant that the investors needed no anxiety over saturating the market. The bad image of the country meant a relief from competing with too many strong foreign operators. Its overall poverty meant that the Government could not ignore reform prescriptions from outsiders such as the World Bank. Low purchasing power was addressed through our economizing solution, not to mention the late stage entry into cellular telephony when the prices for equipment and handsets have sufficiently declined. The country's slow bureaucratic process also ironically gave us enough time to organize our own efforts slowed by lack of resources. In short, the bad things were not so bad.

There was another problem that involved reconciling the Grameen Bank's development agenda and foreign investors' need for economic returns. These apparently conflicting goals were reconciled by careful design of the project and by the fundamental point that good businesses are good development. Specifically, for instance, the involvement of the rural poor is a good development strategy for promoting self-employment while, from a business perspective, it lowers the distribution costs of telecommunication services in the rural areas. The provision of connectivity to the rural areas meant development of those areas while, from a business perspective, it meant tapping into the neglected rural market constituting 80% of the population and at least 50% of the economy. Providing services all over the country meant connectivity for neglected areas with a profound impact on their development. Yet from a business perspective, a nationwide service meant tapping into a lucrative long-distance market, a market that had been sidestepped by having most telecom services confined to a few cities.


Results

Today GrameenPhone is a commercial operation providing cellular services in both urban and rural areas and already has 25,000 customers. GrameenPhone is proceeding with an initial funding of $125 million, including a $50 million loan from International Finance Corporation, Asian Development Bank and Commonwealth Development Corporation in Britain.

A pilot program involving 150 villages has confirmed that the village phone concept is economically viable. Each of the village operators is making $2 per day on average, or $700 per year, after covering all her costs. This earning of more than twice the country's annual per-capita income is a proof that phones are being put to good use in these villages. Soon hundreds of villages are expected to have the same facilities.

Grameen Telecom, the Grameen Bank's arm for administering the village phone operators, typically selects women by their past borrowing records with the Bank. For instance, if a woman has demonstrated clear skills in learning new things, she is favored as a candidate for retailing phone services. Another factor is the location of her house; a central location in the village is preferred. Grameen Telecom also ensures that at least one member of the family knows the English letters and numbers. Interestingly, women choosing to retail telephone services, it turns out, need only one-day of training from Grameen Telecom. Their success in rapid training and in their business has to be at least partly attributed to their general entrepreneurial skills and the confidence they have built through their past income generating businesses with the help of the Grameen Bank.

In spite of this success, GrameenPhone is pursuing its rural program in a small scale in the initial stage. This leaves the door open for fine tuning the service after a learning period through pilot programs. In addition, a commercial operation such as GrameenPhone has to concentrate on securing its position in the competitive urban markets. GrameenPhone has no especial concession from the Government for its development agenda and can only serve the rural areas well after securing profitable urban programs. Moreover, rural callers' real needs are to connect to cities highlighting the need for a well-established urban network even to serve the rural areas.

In terms of economic impact, it is probably too early to make scientific assertions. The average daily earning of $2 by phone operators is of course one indication of their usefulness. However, there is plenty of anecdotal evidence of how people living in villages with phones are thinking and doing things differently after phones arrived. For instance, one lady is thinking about raising a large number of chickens, a business she has not pursued earlier for the fear of not being able to call a veterinarian on time if the chicken develop a disease. Another man wants to cultivate bananas on a large scale because he is now able to obtain market prices on time to make the correct shipping decisions. One woman contacted the doctor on time when her child was running a high fever. The migrant workers throughout the world from Bangladeshi villages can now call home to know how their families are doing and if the money they are sending home is indeed reaching its destination. Thus, in villages where phones have arrived, life is changed for all that live there, not just for the women who retail telephone services.

There is also a great deal of social impact due to this new service. With some of the poorest women in the villages holding in their hand instruments of global communication, there are ripples in the highly stratified villages. Even a relatively rich person in the village is walking up to a poor woman's home for a service he needs. The phone service being retailed in these villages almost exclusively by women, a situation due to the fact that 94% of borrowers of the Grameen Bank are women, is turning out to be another good thing. Since it is the men who tend to go to the cities for work or trade or even to foreign countries as migrant workers, it is the women left behind in the villages who need to contact their men travelling or residing outside. The women naturally feel more comfortable going to other women to make phone calls.


Conclusion

Microcredit is often narrowly viewed as a program to uplift the poor only; its role in uplifting the larger economy of a country is often underestimated. The real role of microcredit is unleashing the entrepreneurial energy of the poor, a source of energy that, if properly harnessed, can uplift an economy at large along with the direct benefits that accrue to the poor. This is particularly so since poor countries, by definition, have large poor populations and, consequently, must rank this energy as one of their strengths in moving themselves forward. The rural connectivity program of GrameenPhone is such an instance whereby the entrepreneurs energized by Grameen Bank's microcredit bring a powerful economic force to rural Bangladesh in addition to uplifting themselves.


References

Fuglesang A and Chandler D 1993 Participation as Process - Process as Growth. Grameen Trust, Mirpur, Bangladesh.

Kayani R and Dymond A 1997 Options for Rural Telecommunications Development. World Bank Technical Paper No. 359 as used by International Telecommunication Union (1998) World Telecommunication Development Report 1998: Executive Summary (http://www.itu.int/ti/publications/WTDR_98/indeks.htm) fig 4.

World Bank 1998 World Development Report: Knowledge for Development. Oxford University Press, p. 64.

 

Received 1st December 1998

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