Archive for July 30th, 2008

I just finished Nicholas Sullivan’s account of GrameenPhone’s birth and development, a formation which revolutionized telecommunications and how developing countries use technology. “You Can Hear Me Now” is both a case study of GrameenPhone and a wider look at how technology transforms developing nations.

GrameenPhone is the brainchild of Iqbal Quadir, an American educated Bangladeshi who, while working as a venture capitalist in New York City, realized that “connectivity is productivity.” Thinking back to his home country, Quadir recognized a missing web of connectivity due to the lack of information communication technologies (ICTs). His battler to bring cell phones to Bangladesh provides fascinating insight into development and international finance.

Bangladesh, one of the poorest countries, was already home to an innovative development approach. Muhammad Yunus, who won the Nobel Prize in 2006, is widely credited with starting microfinance, the approach which gives small loans (less than a couple hundred dollars) to people without a credit history or much collateral. The amazing success (hardly any defaults and increased income) of microfinance has seen the system spread income to the historically ignored 2 billion people who live on less than $2 a day.

The typical example of Grameen Bank, Yunus’s venture, is a loan given to a rural woman to buy a cow who sells milk to pay off her debt. Quadir’s insight was that a cell phone could function as a cow. Pushing past dissenters who though cell phones were only for the rich, Quadir developed a model through which village “phone ladies” would sell minutes to others and, in turn, make a profit and provide an important service to people who otherwise had no conectivity. The phone calls are used to check market prices, connect with expatriate family or check the availability of medicine 5 miles away.

As mobile phones have spread like wildfire through developing nations, an entire ecosystem of advanced applications, many financial, have created even new opportunities. Sullivan’s book is filled with wonderful examples and statistics showing just how revolutionary the cell phone can be.

In discussing development, the author uses what he calls the “external combustion” model which relies on introducing ICTs, through native entrepreneurs, with the backing of foreign investors. The exogenous shock of this combination is what made GrameenPhone so successful (as of 2006, had more than 10 million subscribers, revenue pushing $1 billion and profits above $200 million). And, while many worried that foreign capitalists would suck out value like modern day colonialists, the opposite has been true: the mobile phone industry in Bangladesh has created $812 million in value and GrameenPhone has reinvested $1 billion in Bangladesh. When the African telecom CelTel sold for $3.4 billion, it created 50 new millionaires, many of them Africans. What Sullivan calls “inclusive capitalism” creates both external income (development) and internal profits.

Quadir is now exploring energy options for the developing world through his start-up Emergence Bio-Energy which is using adaptable engines to power villages. Energy is a big problem not only in the developed world, but in the global South where it is unreliable and halts economic growth. In Brazil, the Sun Shines for All has used solar power and microfinance to electrify the countryside. Grameen Shakti is apparently trying a similar approach. A major obstacle that Quadir points out is that, unlike telecommunications, Moore’s Law doesn’t apply to energy production.