Lesson from Bangladesh

Sudan Jha

The Grameen Bank, the pioneer of micro-credit in Bangladesh, is using its vast network of village banks to establish a network of village telephone service businesses around Bangladesh. Using digital, wireless telephone technology, it is targeting poor village women to become village phone operators.

Operating a telephone service in their own village has become an important way for women in rural areas to increase their family income. In Bangladesh, over 1000 village phones are now being operated, and these are giving over 70,000 people access to telephones for the first time. The aim is to have 40,000 village phone operators, with a net income of $24 million, by the end of 2002.

The village phone programme has been set-up by Grameen Phone Ltd. and Grameen Telecom, subsidiaries of the Grameen Bank. The programme, which began in 1997, uses modern digital wireless telecommunication systems, and a network of cellular towers. Once a village is selected as being satisfactory to provide a village phone service, the Grameen Bank manager selects, from existing Bank members, the women who are suitable to become the operators. Selected candidates must have a good track record for repaying loans; they should have a store or some other business; be literate, or have children that can read and write; and should be living in the centre of the village.

Each women, referred to as "VP operator", are trained and supplied with the necessary hardware, which includes a transceiver and a battery fast charger. This costs 15,000 Taka (Tk), and is repaid through weekly loan payment instalments of 220 Tk. The VP operators also pay a minimum monthly bill which is made up of the usage charges of Tk 154. These charges are paid out of the profits made on the actual airtime charges.

The VP operator pays Grameen Telecom TK 2 per minute for a local call at peak hours to another mobile phone, but charges her customers TK 5. All the payments made by the VP operator are made through the local Grameen Bank branch, which is responsible for collecting the money. This process solves the problem of revenue collection that sometimes plagues the operators of the rural telephone systems.

In the study made on the earnings of these VP operators, it was found that the income they earned from the phone was about one-fifth of their total income. On average, the phones produce a net profit of TK 1100 per month, though much higher earnings of TK 2000 per month have been reported. This compares to the average monthly income of TK 1150.

Another benefit for the women operators is that their status is improved, especially within the household. They become, for instance, more involved in decision-making. Another benefit stems from the fact that phone users tend to congregate at the house or store of the VP operator, and this means added status.

Electricity supplies:Electricity supplies are fairly widespread across Bangladesh, so most VP operators are able to recharge batteries. Where there is no electrical supply, the programme is used through solar-power. The equipment, costing about TK 8500, includes a sunlight receptor panel, a battery, a charge controller, and other equipment. With normal sunshine, this installation can support the power needs of a VP operator continuously and a tube light for over 4 hours in each 24 hour period. Only if the sun is out for more than three days will the unit fail to provide the necessary power. The solar panels have stood the test of time: one village has used them for over 6 months, and another for nearly a year. The VP operators say that there has not been any problem with the units as yet and that they are satisfied with the performance.

Grameen Phone is able to provide a rural service, because it holds a license for a "mobile" service. Thus, the mobility of GSM cellular phones enables Grameen Phones to work with Grameen Telecom to provide public calling offices in rural areas where its towers and signals can reach. Grameen Telecom is limited to providing village phones within the thin corridors covered by its network of cellular towers.

The problem of interconnection have limited the extension of the rural telephone service. One of the competing operators to Grameen phone currently operates 1500 rural lines as public calling offices and will likely also expand its coverage if the inter connection problem is solved. Another operator told the study that the revenue from 1500 rural public calling office lines equalled the revenue from 12,000 urban cellular lines.

Poor inter connection is a significant factor that led to the emergence of Grameen Telecom’s service. Normally it would be uneconomical for a GSM cellular operator to only target rural subscribers, but when there is an existing urban service which also reaches un-served rural areas with high demand, the additional cost of providing a rural service is small. Grameen Telecom also had the benefit of the Bank’s extensive network for making loans and collecting revenue. These factors have helped make it a profitable enterprise.

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