Interview: Nicholas P. Sullivan, author of "You Can Hear Me Now: How Micro Loans and Cell Phones are Connecting the World's Poor

by David Geer

February 20, 2007 —

David Geer recently spoke with Nicholas P. Sullivan, author of You Can Hear Me Now: How Micro Loans and Cell Phones are Connecting the World's Poor to the Global Economy. Following is an edited transcript of that conversation.

Listen to the original interview here, or visit our Podcast Center for more audio interviews.

David Geer: Brief us a little bit on GrameenPhone.

Nicholas Sullivan: GrameenPhone is a cell phone company in Bangladesh. It is celebrating its 10th anniversary this March. It is a partnership between Grameen Bank, the fabled micro lender that just won the Nobel Peace Prize along with Muhammad Yunus, and our Norwegian telecom company -- It used to be the state owned telecom in Norway, which is now partially privatized. So basically, Telenora came in, partnered with GrameenPhone, won the license about 11 years ago and then began building up the network very quickly. They now have 10.5 million subscribers, about a 63% market share in Bangladesh, and notably, they have 300,000 so-called village phones, which are out in the very rural areas where there is no electricity and there are phone ladies who have borrowed money from Grameen Bank to buy a phone and then lease time to the villagers, and they use that money to pay back the loan. So it's created in that fashion and others, a kind of indigenous supply chain of local entrepreneurs that has really added to the income opportunities in the rural areas.

Geer: Tell me a little more as far as the detail about the phone ladies and their buying the phones and making them available, the leasing of time and so forth.

Sullivan: It used to be that they would borrow money from Grameen Bank and buy cows and then sell the milk and so forth. So the cell phone is just essentially a replacement for the cow. They are just using the money to buy a cell phone and then using returns on that to pay back the loan. So the phone, which used to be, 10 years ago, in the $400 range, which was almost twice the per capita annual income, are now about $100 when all the tariffs and duties and taxes are added on top. So they buy the phone and then they set up shop at a little table, either in their own shop, or just in a little corner of a pharmacy or a supply store. And people come in, they have a cell phone on a desk, they have a little book that gives them the rates to different places overseas, and villagers just come by when they need to use the phone. And they pay a la carte, so they don't own the phone, and they don't subscribe, but they get to use the phone whenever they need one.

Geer: And so the cost of the leasing for the villagers is pretty affordable for them.

Sullivan: Yes. I think the average call or per minute fare is about three taka in Bangladeshi money, which is about four cents per minute. So that's pretty affordable. Overseas, obviously, is a different thing, and there's a lot of calls overseas. I visited one phone lady who had, I was there about 11:30 in the morning and she had already recorded 30 calls and several of them were to Saudi Arabia because there's a lot of Bangladeshis and Indians working in the Middle East and the Gulf Region. So their subscriber number is low, it's only about 3 or 4% of the total number of GrameenPhone subscribers. But the revenues are more like 15 or 20%, because the phones get a lot of use and a lot of long distance overseas calls.

Geer: And this is profitable for the phone ladies?

Sullivan: Yes it's definitely very profitable to them. And they're making anywhere from $750 to $1,300 a year, which is not much by American standards obviously, but the per capita income is still $400 a year. So they're anywhere from twice to three times the average income there. And they've often used it as a way to kind of parlay themselves into mini moguls. They take that and then they start other businesses, or they use the money to build out their house and so forth. So it's profitable. And one reason why it works as well as it does, well, there are two reasons. One is that all the phone ladies are Grameen Bank borrowers who have paid back at least two loans. So they have a credit history with Grameen Bank, so they've never had any problem with loan recovery on the phones. And the other thing is that Grameen Telecom, which is a kind of nonprofit offshoot of Grameen Bank, is buying minutes from GrameenPhone in bulk at a 50% discount. So, essentially, the phone ladies are paying half what they would pay if they were, say, subscribing in a city to the phone. They've got two advantages, which certainly helps their profitability. But more importantly, it's profitable for GrameenPhone as well because of the high average revenue per user, and it certainly is an empowering thing to spread communications. Before GrameenPhone started, there was only one phone for every 500 people in the country. And they were almost all in the major city of Dhaka. In the rural areas there was no phone. And now, nationwide, there's about 15 phones per every 100 people, which is a 75-fold increase. Aside from the kind of small businesses and opportunities, the spreading of the phones has just been kind of a magical thing to many Bangladeshis.

Geer: And how does all this work to lift the private citizens of Bangladesh out of poverty?

Sullivan: In two ways really. One is just the phone itself is just a productivity enhancer, as you know from your own business life. Without a phone it would be hard to transact and do business and communicate. So it certainly just enhances people's ability to operate any kind of business, even if you're a farmer going to market and you want to negotiate for the best price to sell your grain, instead of just having to go in and sell to the first middleman you see in the market. And the other way, of course, is just that there are so many jobs that have been created in this process, in addition to the phone ladies. There's another 250,000 jobs in Bangladesh because there are now six cell phone companies. So they're either direct or indirect employees who are selling phones, selling prepaid cards, selling antennas and cables, selling solar panels to power the phones in villages where there's no electricity. They're now manufacturing cell towers, base stations in Bangladesh, which is fairly new. So there's a huge economic chain of activity. And certainly, several studies, in fact, a recent one by McKenzie, show that adding 10 phones per 100 people in a poor country ups the economic growth rate by a half a percentage point, from, say, 3% to 3.5%. So in a poor country where there are very few phones to begin with, adding just 10 phones for every 100 people just has a direct effect on economic growth.

Geer: In the book's preface, there's a mention of a relationship between poverty and anti-U.S. terrorism, lifting people out of poverty can have an effect on perhaps decreasing the terrorism, and these kinds of enterprises then having a connection with decreasing the poverty. What is that premise, and what are your thoughts on that?

Sullivan: The premise, and this goes back to right after the September 11th attacks and I was engaged in some work in the UN and on kind of development issues. And there was kind of a widespread feeling amongst a lot of people that there was a link, maybe not necessarily a direct link, but a link between kind of poverty in poor countries and that were also feeling kind of left out of the whole globalization picture. I mean you think about [Thomas] Friedman's The Earth is Flat, and a lot of places are really not feeling that flatness. So there was a sense that a lot of people were feeling left out and disenfranchised and angry at the West, and that it might have contributed, not to say the Osama Bin Laden's of the world, but to the kind of foot soldiers who would be open to partaking in terrorism. Now, I certainly don't make any claim in the book, and I don't necessarily think that a company like GrameenPhone would have any direct impact on that. But I do kind of buy into the general principal that populations that are feeling disenfranchised by globalization certainly do have an anti-West stance. And particularly in a place like Bangladesh, which used to be a part of India and had been colonized by the British. So there's a certain amount of anti-West sentiment in many parts of the world.

Geer: And it can aid to curb some of that sentiment if people are helped to lift themselves out of poverty, so to speak, with these kinds of enterprises.

Sullivan: Well, exactly. And also, if foreign investors, say, like Telenora, come in and behave like good corporate citizens, not only in supplying income opportunities, but also reinvesting some of their profits in the country, which is what they've done. I think to date they've invested, reinvested about $1 billion overall. And in a country with a small economy like Bangladesh, that is a huge impetus. And it's certainly different from a lot of the older kind of foreign investors that may have just extracted wealth in terms of minerals or labor and so forth without returning anything to the country.

Geer: What do socially conscious IT organizations need to do to consider getting involved in similar endeavors like GrameenPhone in impoverished populous?

Sullivan: Well, I think the first thing is to do what Iqbal Quadir, who is the entrepreneur who sparked all this, native Bangladeshi American who went back to Bangladesh and kind of persuaded Grameen Bank to back this project. I think one of the real keys is getting a really strong local partner with credibility with government connections who can understand the bureaucracy and the culture, because without that, it's just too hard to establish a foothold. And the other thing I think is just to look at the ways to deliver products and services into remote rural regions that really need them the most and understand that the best way to do that is to engage local people in part of that distribution chain because that sets up the income opportunities and furthermore, without that, it would be hard probably for a Western investor to actually set that up on their own. So I think those are the two things, a strong local partner, and then that kind of grassroots local entrepreneur distribution chain would certainly be the two top things for a socially conscious investor to look at.

Geer: Is there evidence that is going to be kind of a wave of the future in approaching both socially conscious IT enterprise and lifting people out of poverty?

Sullivan: Other suggestions you mean in terms of the economic growth, looking to the future? Well, for sure, because now in Bangladesh, as I said before, there are say 15 phones for every 100 people. So there's still a lot of demand and upside for growth as far as that goes. And the other thing is that the phone, because there's very little computer or Internet access there, the phone is being used increasingly as a kind of mini PC and there are applications that use it is as like kind of a mini eBay or Craig's List so you can transact or post goods for sale on the cell phone. It's being used in telemedicine for remote villagers to communicate with doctors in the city. So I think that (A), it's going to keep spreading and reaching more and more people, and (B), the applications are going to go way beyond straight voice communication. And that certainly, in places like, not so much in Bangladesh, but in the Philippines and in Africa, there's an awful lot of mobile banking and mobile commerce beginning to take place. So that you have people who a few years ago who didn't have phones or bank accounts now transferring money by phone. That is a radical transformation.

Geer: Anything else that you can think of that we're missing that's really crucial to this discussion?

Sullivan: One thing that I haven't mentioned that seems kind of very interesting to me from a development perspective is that so often people have, when they think about development, social or economic development in poor countries, they think about aid, foreign aid to governments and so forth. And to me the GrameenPhone story is a clear example of how private enterprise can often do a much better job of development than aid to governments because what has happened, especially in the case of Bangladesh, which has long been dependent on aid, is that the government becomes more and more corrupt and entrenched and it keeps the money in the capital city, and it does very little to promote or allow for any kind of private economic growth outside of their control. So to me, and that's one of the first things that really got me interested in this story, is that it's a huge external shock to the system and a spark to the economy that is coming from private enterprise and not aid. And I think this last year or this year for the first time the amount of foreign investment will outpace the amount of aid that Bangladesh receives. And that's happening all over Sub-Saharan Africa, as well, for the same reason.

Geer: Thank you, Nicholas. If you would like to learn more about Mr. Sullivan's book and topic visit http://www.youcanhearmenow.com.

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