Iqbal Quadir is co-founder of GrameenPhone, an innovative wireless company offering services to poor rural villages in Bangladesh. In this talk, he explains the triple impact of cell phone service in rural areas (connecting the village to the world, creating business opportunities, and generating over time a culture of entrepreneurship.) He also relates his personal “A-ha moment,” when he understood that “connectivity is productivity.” (Recorded July 2005 in Oxford, UK. Duration: 16:37)
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Transcript: Iqbal Quadir, TEDGlobal 2005
Iqbal Quadir: The power of the mobile phone to end poverty
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I’ll just take you for a — to Bangladesh for a minute.
(“A Minute in Bangladesh” video plays: 00:28-00:47 en francais)
(in english, from video: “fulfill their own private dreams, staying in touch with the near and dearest. This is where the journey begins, with one small step. A journey that, today, has reached one million destinations.”
cut to Bill Clinton: “With loans for people to buy cell phones, entire villages are being brought into the information age. I want people throughout the world to help this story.”)
(video stops, slide: “Before I tell that story, let us pause to ask: Why does poverty persist?”)
Before I tell that story, what — we should ask ourselves the question: Why does poverty exist? I mean, there is plenty of knowledge, and scientific breakthroughs, we all live in the same planet, but it’s still — there’s a great deal of poverty in the world. And, I think, so I want to throw a perspective that I have so that we can assess this project, or any other project for that matter, to see whether it’s contributing or — contributing to poverty, or trying to alleviate it.
(slide: “Sending aid to govts. in poor countries over the last 60 years has not alleviated poverty. Why has it failed?” book cover: The Elusive Quest for Growth, by William Easterly)
Rich countries have been sending aid to poor countries for (the) last 60 years. And, by and large, this has failed. And you can see this book, written by someone who worked in the World Bank for 20 years, and he finds economic growth in this country to be elusive. By and large, it did not work.
So the question is, why is that? In my mind, there is something to learn from the history of Europe. I mean, even here, yesterday I was walking across the street, and they showed three bishops were executed 500 years ago, right across the street from here, so my point is — there’s a lot of struggle has gone in Europe, where citizens were empowered by technologies. And they demanded authorities from — to come down from their high horses, and in the end there’s better bargaining between the authorities and citizens, and democracies, capitalism, everything else flourished.
And so you can see,
(slide: “One way to understand poor countries is to see what has helped Europe over the last 1,000 years.” shows chart, with “Devolution of Authorities” pointing down, and “Empowerment of Citizens” pointing up, next to book cover of The Wealth and Poverty of Nations)
the real process of — and this is backed up by this 500 page book — that the authorities came down and citizens got up. But if you look — if you have that perspective, then you can see what happened in the last 60 years. Aid actually did the opposite. It empowered authorities.
(slide: “During the last 60 years, poor countries have undergone a process which is the opposite of what helped Europe over the last 1,000 years.” chart shows “Empowered Authorities” pointing up, and “Citizens” pointing down. facing quote: “Aid has empowered authorities, not necessarily citizens.”)
And, as a result, marginalized citizens. The authorities did not have the reason to make economic growth happen so that they could tax people, and make more money for to run their business. Because they were getting it from abroad. And in fact, if you see oil-rich countries, where citizens are not yet empowered, the same thing goes. Nigeria, Saudi Arabia, all sorts of countries. Because aid, and oil, or mineral money, acts the same way. It empowers authorities, without activating the citizens, their hands, legs, brains, what have you.
And if you agree with that, then I think the best way to improve these countries is to recognize that economic development is of the people, by the people, for the people, and that is the real network effect.
(slide: “If we learn from European history, we should empower citizens, not authorities.” chart shows “authorities” arrow pointing down, a network of interlinked “citizens” pointing up. quote: “Economic development is of the people, by the people, for the people, the most important Network Effect.”)
If citizens can network, and make themselves more organized and productive, so that their voices are heard, so then things would improve.
And to contrast that, you can see the most important institution in the world, the World Bank, is an organization of the government, by the government, for the governments. Just see the contrast. And that is the perspective I have, and then I can start my story.
(slide: cover of The Economist, “The real digital divide,” photo of African child holding toy cell phone, facing quote” “How can we help people network? One answer: Cell Phones”)
Of course, how would you empower citizens? There could be all sorts of technologies. And one is cell phones. Recently, The Economist recognized this, but I stumbled upon the idea twelve years ago, and that’s what I’ve been working on.
So twelve years ago, I was trying to be an investment banker in New York. We had — quite a few (of) our colleagues were connected by a computer network, and we got more productive, because we didn’t have to exchange floppy disks, we could update each other more often. But one time it broke down.
And it reminded me of a day in 1971. There was a war going on in my country, and my family moved out of a urban place where we used to live, to a remote rural area, and where it was safer. And one time my mother asked me to get some medicine for a younger sibling. And I walked ten miles or so, all morning, to get there, to the medicine man, and he wasn’t there, so I walked all afternoon back. So I had another unproductive day.
So, while I was sitting in a tall building in New York, I put those two experiences together side by side, and basically concluded that connectivity is productivity, whether it’s in a modern office or an underdeveloped village. So naturally, I — the implication of that is that the telephone is a weapon against poverty. And if that’s the case, then (the) question is how many telephones did we have at that time? And, it turns out, that there was one telephone in Bangladesh for every 500 people.
(slide: “Virtually no phones back in 1993. Only 1 phone per 500 people. Virtually none in rural areas where 100 million people lived”)
And all those phones were in the few urban places. The vast rural areas, where 100 million people lived, there were no telephones. So just imagine how many man-months or man-years are wasted, just like I wasted a day. If you just multiply by 100 million people, let’s say losing one day a month, whatever, and you see a vast amount of resource wasted.
And after all, poor countries, like rich countries, one thing we’ve got equal, is their days are (the) same length — 24 hours. So if you lose that precious resource, where you are somewhat equal to the richer countries, that’s a huge waste.
So I started looking for any evidence that — does connectivity really increase productivity? And I couldn’t find much, really, but I found this graph produced by the ITU, which is the International Telecommunication Union, based in Geneva.
(sllide: “Connectivity is productivity,” graph showing relation between productivity and telephone connectivity, so that captions at bottom: “Adam Smith: Specialization -> Productivity”; “Specialization needs dependability”; “Dependability needs connectivity”; “Connectivity-> Dependability-> Specialization-> Productivity”; “Connectivity-> Productivity”)
They show an interesting thing. That, you see, the horizontal axis is where you place your country. So the United States or the UK would be here (gestures to right side of graph), outside. And so the impact of one new telephone, which is on the vertical axis, is very little. But if you come back to a poor
er country, where the GNP per capita is, let’s say, 500 dollars, or 300 dollars, then the impact is huge. 6,000 dollars. Or 5,000 dollars. The question was, how much did it cost to install a new telephone in Bangladesh. It turns out — 2,000 dollars. So if you spend 2,000 dollars, and let’s say the telephone lasts, 10 years, and if (the GNP goes up by) 5,000 dollars every year — so that’s 50,000 dollars. So obviously this was a gadget to have. And of course, if the cost of installing a telephone is going down, because there’s a digital revolution going on, then it would be even more dramatic.
And I knew a little economics by then — it says Adam Smith taught us that specialization leads to productivity. But how would you specialize? Let’s say I’m a fisherman and a farmer. And Chris is a fisherman farmer, both are generalists. So the point is that we could only — (the) only way we could depend on each other, if we can connect with each other. And if we are neighbors, I could just walk over to his house. But then we are limiting our economic sphere to something very small (in) area. But in order to expand that, you need a river, or you need a highway, or you need telephone lines. But in any event, it’s connectivity that leads to dependability. And that leads to specialization. That leads to productivity.
So, the question was, I started looking at this issue, and going back and forth between Bangladesh and New York. There were (a) lot of reasons people told me why we don’t have enough telephones. And one of them is the lacking (sic) buying power. Poor people apparently don’t have the power to buy. But the point is, if it’s a production tool, why do we have to worry about that? I mean, in America, people buy cars, and they put very little money down. They get a car, and they go to work, the work pays them a salary, the salary allows them to pay for the car, over time. The car pays for itself. So if the telephone is a production tool, then we don’t quite have to worry about the purchasing power. And of course, even if that’s true, then what about initial buying power? So then the question is why can’t we have some kind of shared access? In the United States, we have — everybody needs a banking service, but very few of us are trying to buy a bank. So it’s — a bank tends to serve a whole community. So we could do that for telephones.
And also people told me that we have (a) lot of important primary needs to meet — food, clothing, shelter, whatever — but again, it’s very paternalistic — you should be raising income, and let people decide what they want to do with their money.
(slide: myths versus facts chart; myths side: “Lacking buying-power, the poor provide no market; Initial individual buying power may be too low; Meet primary needs first.” facts side: “Production tools create buying power; Shared-access reduces costs for everyone; A rise in income helps people meet primary needs”)
But the real problem is the lack of other infrastructures. See, you need some kind of infrastructure to bring a new thing. For instance, the internet was booming in the US because there were — there were people (that) had computers, they had modems, they had telephone lines, so it’s very easy to bring in a new idea, like the internet. But that’s what’s lacking in a poor country.
(slide: “The real problem in the rural areas: A lack of other infrastructures; -No credit checks, A few bank branches to collect bills, Contact points for customer service.” facing: description of Grameen Bank, stats in lecture)
So, for example, we didn’t have ways to have credit checks, few banks to collect bills, etcetera. But that’s why I noticed Grameen Bank, which is a bank for poor people, and had 1,100 branches, 12,000 employees, 2.3 million borrowers. And — they had these branches, I thought I could put cell towers, and create a network.
And anyway, to cut the time short — so I started — I first went to them and said, “You know, perhaps I could connect all your branches, and make you more efficient.” But, you know, they have, after all, evolved in a country without telephones, so they are decentralized. I mean, of course there might be other good reasons, but this was one of the reasons — they had to be. And so they were not that interested to connect all their branches, and then to be — and rock the boat.
So I started focussing. What is it that they really do? So what happens is that somebody borrows money from the bank-
(powerpoint slide, graphically showing the process below as links in a ring)
she, typically, buys a cow, the cow gives milk, and she sells the milk to the villagers, and pays off the loan. And this is a business for her, but it’s milk for everybody else. And suddenly I realized that a cell phone could be a cow.
(cow in ring changes to cell phone.)
because some way she could borrow 200 dollars from the bank, get a phone, and have the phone for everybody-
(slide: Bangladeshi woman with cell phone; “Organizing resources: 1993-99; Basic Results: Telenor provided know-how; Grameen family provided rural distribution network; Both provided equity capital”)
-and it’s a business for her.
So I wrote to the bank, and they thought for a while, and they said “it’s a little crazy, but logical. If you think it can be done, come and make it happen.” So I quit my job, I went back to Bangladesh, I created a company in America called Gono(???) phone — which in Bengali, means “people’s phone” — and Angel Investors in America put in money into that, I flew around the world. After about a million — I mean, I got rejected from lots of places, because I was not only trying to go to a poor country, I was trying to go to the poor of the poor country. After about a million miles, and a meaningful — a substantial loss of hair, I eventually put together a consortium, and — which involved the Norwegian telephone company, which provided the know-how, and the Grameen Bank provided the infrastructure to spread the service.
To make the story short, here is the coverage of the country:
(slide: map of Bangladesh; “Coverage at the end of 2004, after about $500 m invested during 1996-2004. In 2005, another $300 m is being invested.”)
You can see it’s pretty much covered. Even in Bangladesh, there are some empty places. But we also (are) investing another 300 million dollars this year to extend that coverage.
Now, about that cow model I talked about. There are about 115 thousand people who are retailing telephone services in their neighborhoods. And it’s serving 52 thousand villages, which represent about 80 million people.
(slide: “There are about 115.000 women retailing telephone services in 52,000 villages giving access to 80 m. These 115,000 telephones are producing revenues at an annual rate of $100 m in for GrameenPhone. Each entrepeneur makes about $2 day in profits, or about $700/ year.”)
And these phones are generating about 100 million dollars for the company. And two dollars profit per entrepreneur per day, which is like 700 dollars per year.
And of course, it’s very beneficial in (a) lot of ways, it’s increased income, improves welfare, etcetera. And the result is right now, this company is the largest telephone company with 3.5 million subscribers, 115 thousand of these phones I talked about,
(slide: “Increasing Incomes/ Improving Welfare” — “Increasing incomes: profits for entrepreneurs, Better info for farmers, Deals made over phones; Improving welfare: Calling doctors, Contacting loved ones, Avoid unnecessary trips”)
that produces about a third of the traffic in the network. And 2004, the net profit, after taxes, very serious taxes, was 120 million dollars.
(slide: “Commercial results at the end of 2004: Country’s largest telephone company with about 3.5 m subscribers; 115,000 village phones (with 10 times as much usage than regular urban phones) generate about a third of
the total call traffic. The 2004 net income was $120 m. Contributed $190 m to the national treasury (through taxes, custom duties, license fees, etc.)
And the company contributed about 190 million dollars to the government coffers.
(slide: comparing & contrasting “some people think” with “GrameenPhone demonstrates”)
here are some of the lessons (reading from chart):
“The government needs to provide economically viable services.” Actually, this is (an) instance where private companies can provide that. “Governments need to subsidize private companies.” This is what some people think. And actually, private companies help governments with taxes. “Poor people are recipients.” Poor people are a resource. “Services cost too much for the poor.” Their involvement reduces the cost. “The poor are uneducated and cannot do much.” They are very eager learners, and very capable survivors. I’ve been very surprised. Most of them learn how to operate a telephone within a day. “Poor countries need aid.” Businesses — this one company has raised the — if the ideal figures are even 5% true, this one company is raising the GNP of the country much more than the aid the country receives. And as I was trying to show you, as far as I’m concerned, aid does damages because it removes the government from its citizens.
And this is a new project I have with Dean Kamen, the famous inventor in America:
(slide: “On to electricity: partnered with Dean Kamen, the noted American inventor, to establish ‘tiny power plants’ in Bangladeshi villages, adopting the GrameenPhone model. Two such ‘power plants’ are currently running on biogas produced from cow manure. Each is providing electricity to about 20 households or shops.”)
He has produced some power generators, which we are now doing an experiment in Bangladesh, in two villages where cow manure is producing biogas, which is running these generators, and each of these generators is selling electricity to twenty houses each. It’s just an experiment, we don’t know how far it will go, but it’s going on.
[Transcription by Robert Thomas Carter]