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Asia Pacific Region Microcredit Summit (APRMS) Council Meeting Of Corporations, Banks, Foundations And Philanthropists

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Asia Pacific Region Microcredit Summit (APRMS) Council Meeting Of Corporations, Banks, Foundations And Philanthropists

Introduction by Greg Casagrande, Presentations by Ola Ree and Bindu Ananth, and following questions and answers
Original transciption by Gloria Garrett

Greg Casagrande: … I believe that this summit has been quite provocative in challenging the commitments that world leaders have made to the Millennium Development Goals. I believe that this summit has laid down a clear challenge, asking if our work in microfinance is contributing as much as it can to the goal of cutting absolute poverty in half by the year 2015. I believe that we have an opportunity here today to have a clear idea of the way corporations and banks can link with microcredit programs, be true to their bottom lines and to the Microcredit Summit’s four core themes. If our discussions today are not frank about the challenges that we face in working with MFI’s that we support, then we will not reach our goal. If our discussions today are not frank about the importance of working with financially self-sufficient institutions and how to forward that, then we will not reach our goal. And if we are not frank about the challenges that we face in demonstrating the impact upon the lives of our poor clients and their families, then our goal will be meaningless. I say all of this in preparation for our presenters and our discussions with them….

Ola Ree, Managing Director of Grameen Phone in Bangladesh: Grameen Phone is the largest mobile operator in Bangladesh. …[At] Grameen Phone—we have a slogan that can be read in two ways: either “Good development is good business” or “Good business is good development”…Grameen Phone is a joint venture of four companies. First of all it is Telenor, the biggest Norwegian telecom operator…we have 51% of Grameen Phone. Grameen Telecom, an associated company with Grameen Bank, is our local partner and they have 35% of the company We also have Marubania Yapan (Marubania Corporation) who has 9.5% and a small group of five Bangladeshi expatriates living in New York, they call themselves Organaphone. We are also backed by IFC, ADB and CDC through a loan agreement and up to recently they also were preferred shareholders. That is now ended but we still refinance the company using only IFC and ADB. We also have both a donation and a soft loan from Norad, that is a Norwegian agency.

When we started our operation, we were able, through an international lender, to rent a Bangladeshi Railway fiber optic cable…and that immediately gave us a very good backbone for our coverage. One of the advantages is…that through that extensive coverage…we reached a lot of villages. We also cover the most divisions—Bangladesh is divided into…65 divisions so now we are covering 62 of those 65 divisions…

We are lucky to have a workforce of very young people. We are now approximately 700 people…most of them between 26 and 30 years old…So what we did is we recruited people directly from university and trained them by ourselves so they could learn and get the know-how of how to operate a mobile phone company.

What is the telecom scenario in Bangladesh?…The penetration is just about 1%… As of today there are 2.2 million mobile phones in Bangladesh. The fixed line operators have 700,000. They used to say that the fixed line operators took 40 years to get 700,000 subscribers. The mobile phone operators took only seven years to get 2.2 million. Out of that 2.2 million Grameen Phone has 1.3 million subscribers.

So what is the Village Phone Concept?…It is a community phone, a public phone, out in the villages…that have never had access to a phone before they got the mobile phone. Perhaps, in the past, if people wanted to receive a call or make a call, they had to walk half a day, perhaps even a day, to the nearest phone.

"The farmers out in the villages, when the people were coming to buy their product, they were cheated. Now if the people want to come there and buy to bring it to the market and sell it, the farmers go to the village where they live, make a call to the market and ask “What is the price for rice today? What is the price for mango today?” And then he knows what he can ask for from the buyer."

So now they have [more free] time and they have access to information. We get case studies telling that the farmers out in the villages, when the people were coming to buy their product, they were cheated. Now if the people want to come there and buy to bring it to the market and sell it, the farmers go to the village where they live, make a call to the market and ask “What is the price for rice today? What is the price for mango today?” And then he knows what he can ask for from the buyer. It’s the gateway also to IT based services in the long-run. The objectives are connectivity through telephones within remote and advanced areas of the country. And most of all it is to create an income source for independent older citizens…it’s a tool for fighting poverty.

We have a strict responsibility regarding the Village Phone Program…Grameen Telecom…operate[s] the program, they identify the poorest ladies, they give them through Grameen Bank a financial possibility to buy the phones, they collect the money from the village phone operator and they do all of the administration for us. We, Grameen Phone…have the responsibility to get the network available out of Bangladesh. We do the activation of the phones. We also…do the charging and the billing, but we are giving the bill directly to Grameen Telecom in bulk. So that’s also why we are able to give a good discount, because we don’t have the workload of collecting the money. Collections is an operation that happens from Grameen Telecom and we also give administrative support to Grameen Telecom. So…we work very, very closely with Grameen Telecom and of course also Grameen Bank.

We contribute to the development of the village…the company and…to the country’s development. There is a study done by ITU (International Telecom Union) that in a developing country, if you add one phone…you add US$6,000 per year to the GDP…In the first couple of years we’re talking about a few hundred phones. I would say that it really started to grow at the end of 2000 when we had approximately 4,000 mobile phones out in the villages and we doubled and tripled…So at the end of 2003 we had 45,000 village phone operators and by this day [February 2004 we are] very, very close to 50,000 village phone operators. That means that we cover more than 30,000 villages and…the average monthly income for a village phone operator is $100 per month, which is far, far above the average income level in Bangladesh…We have studies saying that one phone in one village will cover at least one thousand people, that is one thousand people suddenly have access to a phone. One thousand people in 30,000 villages—that is 30 million people who have now got a phone within reach.

[We are] reaching and empowering women—because more than 95% of the village phone operators are women. And of course it gives them greater involvement in generating income activities…[and] family decisions. Women’s exposure to domestic violence has decreased due to women’s exposure to people outside the family and new social control that restricts the domestic violence. Also…I have talked with several of them who were saying, “From being no-one, being the poorest in this community I am now perhaps the most important person in this village. Now everybody has to come to me because they need to make a phone call or to receive a phone call.” It totally, totally changes their lives. And of course it exposes them to new ideas, and information increases. It increases their awareness about social, economic and health issues, gives them a chance to build their own identity and builds self-confidence. Increase in the adoption of family planning methods—that is a part, as you know, of the Grameen Bank policies when they identify their ladies and…I have met a lot of ladies that have suddenly been able to send all of their children not only to the basic school but also to college and a lot of them also further on to the university…I also want to add that many of them…have earned back and paid back the phone very quickly so there are more and more businesses in the villages and the ladies have got so much earnings [that] they have bought more poultry farms, they have bought fish-breeding ponds and they build houses and, as I said, most of all, they educate their children.

So what we are doing, as I mentioned, is that we are allowing these village phone operators to sell phone calls and we give them a 50% discount on their airtime and they of course take a small mark up on that so that they can still bill below the price of any competitor who is trying the same thing but will have to pay the full rate. So that is also one of the reasons that this has been growing very quickly… We are trying to identify where we know we will have most traffic…[for example] villages that have a lot of guest workers abroad because they are calling back to the village.

How the village phones operate is that they receive a call and the caller says “I would like to speak with him or her” and the operator says, “Okay, call back in 15 minutes.” And then she goes or she sends one of the children to find the person and bring them back and when they are back then they will wait for the call. They also have to pay a small fee for that service of course, to be picked up and to have the use of the phone for receiving calls.

So, basically, what we have seen is that this has been a very successful program…We have seen very good business in the village phone operation…but in addition to that…we have…1.3 million subscribers and 45-50,000 of them are village phone operators. The rest of the customers we have are also building up a very good business. We started up the operation back in 1997. Already in year 2002 we had made earnings that also had paid back all losses we had in the start. When you start up an operation you always lose in the first year or so. At the end of 2002 we were net profit black figures. And in 2002 we were the second biggest corporate tax payer in Bangladesh.

"We [Telenor] were the biggest foreign investor in Bangladesh and actually brought Norway as the top country who did the most foreign investment in Bangladesh."

So we are contributing to the country quite a lot. We have invested so far US$260 million in equipment. We have contributed to the government, directly or indirectly, through taxes, VAT, import taxes and so on. So we have actually paid more to the government than we have used for extending our network…Every single taka of our profit has been returned back into new investment in Bangladesh… we were the biggest foreign investor in Bangladesh and actually brought Norway as the top country who did the most foreign investment in Bangladesh…Telenor is listed both in NASDAQ and…we are highlighted now in every quarterly presentation to the stock exchange. Grameen Phone is highlighted as one of the success stories of the 12 international operations of Telenor.

Question: ….Is there any kind of training attached to becoming a village operator? And specifically thinking about going through business training as these women seem to be very new in business. For instance, how do they do the pricing on the services? Are all of the women using the same pricing mark-up? And what happens for instance if there comes a new actor into a village? Do you have some experiences from that, on what it does with the competition and are they still able to make a profit?

Ola Ree:…Training is basically the responsibility of Grameen Telecom….Back in 1997, people were saying that "this will never go, these poor ladies, how could they know how to use a phone? It has numbers here and they can not read even the numbers!" It took them one hour. And now [the women] say…"Okay, we see from the receiving calls in which country code it is, if it is out of that country code it comes from Saudi Arabia and I know the timing is two hours less. If the code is this it comes from the US and I know the timing there is so-and-so…" It was amazing to me…They will [also] get advice from Grameen Bank through that system on how to take care of the money…Pricing, it is a recommended price from Grameen Telecom…I haven't really an example as you say when competitors come up but at the same meeting with these high officials one of the officials asked them "Is there something you want me to do for you?" And one of the ladies said, "Yes, secure that there will not be another village phone in my village."

Question: …My question regards replication…how can an MFI go about making a linkage to the local cellular telephone company that is beneficial to both the cell phone company, the MFI and the members? …What would be the few key factors that we would need to pursue in order to make the linkage work?

Ola Ree: …I am a little surprised actually that we have seen very little replication…Of course you need a local mobile company to work together with you and what you need to do is convince them that there is business in this for them…And the key element for them is that as an MFI, you take care of all of the collection of the money so that the workload is reduced on the operator and that is the basic way that they can give a discount…

Continue to Presentation by Bindu Ananth