GrameenPhone’s Success, Phone Ladies’ Loss

Who has not heard of Grameen phone ladies? In 1997, GrameenPhone (a for-profit affiliate of Grameen Bank) piloted an innovative concept called the Village Phone Program. GrameenPhone would lend money to village women under this program. Women buy a cell phone and airtime from GrameenPhone to become phone ladies. They start a service business renting out their phone and airtime to other villagers. Villagers talk to their friends and family dispersed all over the world. Villagers pay money to phone ladies. Phone ladies make a handsome profit. Phone ladies buy more airtime from GrameenPhone. GrameenPhone makes a good profit. And everyone lived happily ever after.

Or may be not.

This month’s issue of has an intriguing story, Unplanned Obsolescence, on how GrameenPhone’s increasing success has translated into Grameen phone ladies’ loss.

Bangladesh Phone LadyGrameenPhone has invested $1.2 billion in creating a communications infrastructure that covers all of Bangladesh. Cell phone handsets have also become cheaper over the years. These two had combined to increase the number of cell phone users in the country which then resulted in lesser business for the phone ladies. The article highlights Laily Begum, an enterprising entrepreneur who was one of the first phone ladies.

Start in 1997 – Laily Begum takes out a loan of $580 to buy a cell phone. She is the only person with a cell phone in her entire village (pop: 10,000). Business is good. She makes $800 profit per month. Cut to 2007 – She competes with 284 other phone rentals around her. And that is not counting the users who have their own phones. Now she makes about $22 a month.

Thankfully Laily Begum’s story does have a happy ending. She has used her profits in the intervening years to diversify into other areas. As a testament to her enterprising spirit, she now is the owner of a house, a barn, and a shop. She is also the landlord from whom five families rent temporary housing.

The story is not as rosy for other phone ladies who want to get into the business in the current times when the shared access model of usage is declining. The Village Phone Program can no longer make the same promise as ten years ago that “village phone ladies can make anywhere from $750 to $1,200 a year.” Profit per operator is less than $70 in 2006. Quoting from the article:

“The program is not dead,” says its manager, Mazharul Hannan, chief of technical services at Grameen Telecom, “but it is no longer a way out of poverty.”

This is not a dire story by any means. Cell phones have been called a transformational technology, especially for the connectivity-constrained countries in the Global South. The article has some great stories of people who acquired cell phones, sometimes even at unaffordable costs, and are finding it to be extremely beneficial. There is hard proof too. A research study by London Business School found that a 10% increase in cell phone use translates to .006% increase in GDP per capita in developing countries.

Cell phone use is booming in Bangladesh. GrameenPhone alone has 13 million subscribers. The telecommunications infrastructure is growing. There are five other service providers in the country. People are getting connected. All causes for celebration. So, why then is there this twinge of sadness for the phone ladies?

Unplanned Obsolescence by Richard Shaffer, photos by Daniel Pepper (FastCompany, September 2007)

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Categories: asia, regions, resources

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