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Phone Loan
Wiring Bangladesh-Without Wires
GrameenPhone: good business can mean good development

By Robert Rothery (rrothery@adb.org)
Senior Procurement Specialist

It is 6 am in Barigaon Village in Bangladesh, and Halima Begum is opening her shop. Her first customer is waiting—not to buy goods, but to use her telephone. The telephone is a second business, augmenting her family's income by 1,000–1,500 taka (US$20–30) per month.

At 8 am, Ms. Begum leaves the grocery store to her husband and goes home to tend to other responsibilities, taking the phone with her. Her customers know where to find her. And if she receives a call from an overseas worker wanting to contact a relative in the village, she can take the phone to her customer. It is a state-of-the-art cellular phone and completely portable.

Throughout rural Bangladesh, village women have gone into the telephone business. For the first time their villages have ready access to the outside world, and it has really changed daily life. In Chhoto Chandrai Village, Dilwara Begum says business people use her phone to order supplies and follow up on deliveries. The phone is a source of additional income to her family and has brought financial solvency. It has also helped the village community to grow closer. In nearby Chhoybaria, Anwara Begum's husband is kept happily occupied helping manage her phone service. Profits are used to stock their grocery shop.

The village phone has drastically improved the risky business of receiving remittances from abroad—so much, people say, that it has made their community financially viable.

Academics back up the stories of these women. Researchers at the University of Guelph, Canada, say that Bangladesh's village telephones are an important economic tool. Farmers, traders, and business people use them to check market prices and currency exchange rates. A team from the University of Bonn, Germany, concluded that it is the poor who reap most of the benefits. All of this—thanks to a project financed in part by the Asian Development Bank (ADB).

SHOP TALK: Phones are typically used to call commercial centers and abroad—not other villages.

The Village Meets the Information Age

Mohammad Yunus, the well-known founder and head of Grameen Bank, is a driving force behind the village telephones. In an interview with Time magazine, he explained that his efforts are about much more than telephones: "Information technology has become the order of the day. It will change the way we do things," he told Time. "Somebody needs to push this technology to help the poor."

In 1994, Professor Yunus met Iqbal Qadir, a Bangladeshi national who had just returned home from a 10-year career on Wall Street. Mr. Qadir had the idea of bringing the information age to rural Bangladesh, and he had some financial backing from a New York venture capital company called Gonophone. Professor Yunus immediately saw the potential for Grameen Bank and enlisted the help of the International Telecommunication Union (ITU) to assess the venture. ITU was positive, and with its help, Professor Yunus and Mr. Qadir began the search for a technical partner and the necessary financing.

Telenor, the Norwegian telephone company, accepted the challenge of technical partner, while Grameen Bank formed a subsidiary called Grameen Telecom to represent its interests. Telenor engineers and marketing and operations experts set up shop in Dhaka, and Grameen Telecom began laying the plans for the village phones. With Gonophone as the third partner, the venture was launched. The partners would later incorporate under the banner of GrameenPhone.

Marubeni was tapped for an initial capital infusion, which along with contributions of the founding partners was sufficient to get the project started. However, more money was needed, and Dr. Yunus approached Bhanuphol Horayangura, ADB's Resident Representative for Bangladesh, who passed on the request to ADB headquarters. In late 1995, Mr. Qadir and a Telenor manager visited Manila and processing began for what would become a US$18.3 million dollar investment through ADB's private sector window. The International Finance Corporation and Commonwealth Development Corporation later joined ADB as cofinanciers.

Wiring a Country—Without Wires

In Dhamrai Village, a banana farmer is considering expanding his operations—a feasible option since the telephones arrived. He can now check market prices and talk directly to large buyers rather than depend on intermediaries. To enable the rural economy to reap these kinds of benefits, approximately 30,000 village phones will be installed this decade. When completed, the project will provide telephone service to more than 90 percent of Bangladesh.

Wiring rural Bangladesh is a formidable task, even for as impressive a duo as Grameen Bank and Telenor. Two events have helped make it possible. The first occurred in mid-1995, when GrameenPhone bid and won one of three new cellular telephone licenses being offered by the Bangladesh Government. This was a critical event, as it established both the technology the venture would use, and the business model it would follow.

From a business perspective, becoming a national cellular telephone company gave GrameenPhone its much needed "network economies." Putting in a system just for the village phones would be prohibitively expensive. But by combining the village phones with the traditional cellular telephone service in the main cities, the whole venture became viable.

Today GrameenPhone has more than 200,000 cellular phones of the type familiar to urban professionals the world over. These share the network with about 3,000 village phones, used by more than one hundred thousand villagers throughout rural Bangladesh.

Surprisingly, it was an "old economy" organization who gave GrameenPhone its second break. Bangladesh Railways, the state-owned railway, operates a telecommunications system, something all railways do for controlling trains and communicating between stations. Fortunately Bangladesh Railways used optical fiber, giving it a modern digital system, with more capacity than it could use. GrameenPhone bid for, and won, the right to lease part of this facility.

With its nationwide cellular license, and the help of Bangladesh Railways, Grameen- Phone has all the pieces it needs for wiring Bangladesh. The airwaves of the cellular system connect the village phones to the nearest cell site, while the glass fiber buried alongside the railway tracks weaves together the cell sites, switching centers, and other bits that make up the network.

Connecting to the World

Grameen Telecom, the subsidiary of Grameen Bank, manages the village phone program. A woman from a village applies, and if accepted, is leased a telephone. She is trained on its operation, especially the timing, charging, and recording of calls. Grameen Telecom collects weekly lease payments and call charges. A margin is allowed on each call, which provides the operator with her profit.

Village phones are seldom used to call other village phones. Most calls are made to commercial centers, Dhaka, and—importantly—to other countries. For this to work, the village phones must interconnect with the network of the Bangladesh Telegraph and Telecoms Board (BTTB), the state-owned operator of the landlines.

Grameen Bank is no stranger to shaking things up. After all, it got its start convincing bankers that the poorest people of the world are among the most creditworthy. However, getting BTTB to provide the necessary interconnection has been challenging and GrameenPhone users are commonly frustrated in their attempts to get through to a BTTB landline or to call internationally.

Things are improving. Thanks in part to technical assistance provided by ADB, the first steps have been taken to set up an independent regulator—one who will treat BTTB, GrameenPhone, and others on an equal footing. When in full operation, this regulator will ensure the different networks are fully interconnected and that charges are reasonable. This should ease the occurrence of blocked calls and make calling more affordable.

New Models, New Ways of Thinking

In his acclaimed book The Lexus and the Olive Tree, Thomas Freidman talks about the real impact of GrameenPhone—that it demonstrates to the world the positive social impact of putting digital technology in the hands of the poor.

As entrepreneurial skills are stimulated and catalyzed across the country, new thinking is unleashed and new business models are created, not just for Bangladesh, but for all developing countries.

As developing countries generally have large poor populations, it is not difficult to imagine the enormous potential if these technologies can be used to empower the poor and harness their talents for development.

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