Iqbal Quadir, one of the founders of Grameen Phone – the remarkable Bengali phone company that puts cellphones into the hands of women entrepreneurs – is speaking at PUSH 2005. He starts by reminding us that Bangladesh was producing 1/3rd of all European textiles in 1757, and that Dhaka dictated terms of trade to Europeans. So what happened? It’s not just colonialism – Bangladesh has been free of colonialism for 60 years. Why is growth so elusive, for Bangladesh, and for the rest of developing nations?
Iqbal points to a “top-down approach” favored by the World Bank and others… and notes that it puts power into the hands of authority, not into the hands of people. The US didn’t develop this way – technoloogical empowerment from below led to success in developed nations. Technology can amplify voices, make it possible for individuals to have a voice that gets heard by central authorities.
As an example of top-down and bottom-up, Iqbal points towards the explosive growth of mobile phones, versus stagnation in landline growth in Africa. The fixed lines are an example of a top-down approach, the mobile lines of more agile, bottom up approaches.
Iqbal’s story behind Grameen Phone goes back in time, to the war between East and West Pakistan. (East Pakistan later became Bangladesh.) To avoid the conflict, Iqbal’s family moved away from the city, and Iqbal grew up in a very rural part of Bangladesh. He remembers wasting a day walking to a nearby village to try to buy medicine, and discovering the pharmacist was out. Thinking about computer networks twenty years later, he realized that “connectivity equals productivity”. ITU research supports this contention – in low GDP per capita countries, econmic impact of each phone line is quite high. It gets lower as GDP per capita increases.
Thinking about classical economics, Iqbal wonders how Bangladesh can follow Adam Smith’s maxim, “Specialization leads to productivity.” For people in an economy to specialize, they need to depend on one another – if I’m going to stop farming and become a basketweaver, I need to rely on someone who’s going to continue farming and growing my food. Dependability needs connectivity. So connectivity can lead to specialization and to productivity.
Why are rich economies spending more and more money on communications, given that the cost of phone lines has gone down? We’re communicating more.
In Bangladesh, 1993, there were only 2 phones per 1000 people, and virtually none in rural areas. There was a $500 connection fee, and a 5-10 year waiting period. Most phones were analog, and many didn’t work. How much brainpower was being wasted by virtue of wasting productivity because of an absence of connectivity?
Iqbal found himself challenging some myths about economic development and the poor. Can shared costs overcome the problems of low individual buying power? Can the value of purchasing a productivity tool make it possible for people to “overinvest” in communication technologies, because these technologies can increase income?
What’s the real problem with digital divides in Bangladesh? The lack of other infrastructures. There are no credit checks, rpads for repairmen, banks to collect bills, schools for the children of workers. Grameen Bank looked like a solution to a lot of these infrastructural problems. Would it make sense to put GSM towers within Grameen offices?
Grameen had 1138 branches in Bangladesh, 2.3 million borrowers, 94% female, with $33 million lent per month. The core model – a woman borrows money from the bank, buys a cow, sells the milk and repays the loan. So why can’t a cellphone be a cow?
There was a great deal of skepticism about the idea, so Iqbal moved home and started a company. He eventually convinced Telenor – the Norwegian national telephone company – to help fund the project and provide technical expertise. With Grameen’s distribution and Telenor’s technology, the business has grown radically, and now covers the majority of the nation – it’s by far the largest company in Bangladesh. By 2004, 95,000 women are selling access to phones that they own in 50,000 villages. And Grameen Phone provides $200 million a year to the government in taxes. Net income in 2004 was $125 million. And each phone owner is making about $700 a year, which is an excellent income in Bangladesh.