Why only Grameen could partner with Bangladesh Railways (BR)? Why not any other operator?

GrameenPhone has partnered with Bangladesh Railway through competitive bidding. Numbers of private operators participated in this bid. As Grameen offered the highest price, it succeeded to clinch the deal. That’s why no other operator has access to BR optical fibre.

Can this model be IMPROVED?

Yes. The Village Phone programme operates post-paid package. It has been an operating nightmare. Because Grameen Telecom has to generate bills for the Phone Ladies (Borrowers) in Bangla language. Then it sends the bills to various Grameen Bank offices. Then the Grameen Bank employees deliver the bills to respective operator (borrower). The collected amount is then sent back to GT, which then pays for the aggregate airtime to GrameenPhone. This cumbersome administrative exercise could be wiped out if the Village Phone service operates with prepaid package. Apart from reducing the cash collection time cycle, the 7.5% service charge of GT no longer exists and this benefit could be passed over to the borrowers.

Why only Grameen is doing this model. Why not any other NGO?

Grameen Telecom is the 38% shareholder of GrameenPhone. It enjoys the 50% subsidised airtime from the operator. This extraordinary discount has been an exclusive privilege for GT. No other NGO have such access to concession.

Let’s make no mistake that Village Phone is merely one of the poverty alleviation product of Grameen Bank. It is no different than poultry, dairy and other lending instruments in the micro finance business of Grameen Bank. All the Phone Ladies, not necessarily, earns better than the other borrowers who are in dairy or poultry business.

“If you give a man a fish, you feed him for a day; but if you give him a fishing rod and teach him how to fish, you feed him for life. ”
An ancient Chinese proverb

First I suggest that you include a small box in the report highlighting the difference between the ordinary micro finance schemes and GP. Ordinary schemes give people fish. (direct credit) GP gives a fishing rod. (livelihood) The second approach has far reaching outcomes than the first and definitely more SUSTAINABLE.

Why the defaulting rate low in GP than in other schemes?

Two reasons.

One. The women who takes the phones are in a better position to pay back. Consider an ordinary Micro Finance project. Say, farmer X takes a loan. Usually at the village level, the bulk of the micro credit is used for agriculture related work. But this is risky. Farmer X might invest his money properly, but a drought might prevent him getting the harvest he expects. Or, on the other hand there is a bumper crop and the prices will go down and he might not be able to sell his products. In both these cases X does not earn the money back (and no matter how honest he is or how willing he is) he cannot pay back the loan. He may even commit suicide. In contrast, the GP scheme ensures the women who get the phones get a regular and continuous income. So they are in a much better position to pay back.

Two. What will happen if a woman who takes a phone does not pay? She will lose not only the phone connection, but also a means of income. (even a livelihood) So she has an incentive to pay back. You can compare this with the incentive to pay back in an ordinary micro credit scheme, and you will find the incentive is higher in this case.

Can this be explained by ‘prisoner’s dilemma’?

Yes. Paying back is the easy option. So any rational individual will select the easy way out. It is not a question of trust. The prisoner selects the option the jail guards want him to select not because he trusts the guards. It is the easy way out. Same here.

Why only Grameen is doing this model. Why not any other NGO?

Grameen pioneered it. Right man at the right time. So with the brand name and all they built a sort of monopoly. Others might not have been able to do the same because they might not have resources or there would have been entry barriers. If you are really interested in find out you can apply Michael Porter’s five forces model to the market and analyse.

Why only Grameen could partner with Bangladesh Railways (BR)? Why not any other operator?

Easy. BR is a govt. organisation. GP is an NGO. Any Govt. organsation will feel more comfortable in building up a relationship with another govt. organisation or an NGO. If a private operator tried to build up this partnership with BR, it would not have happened so easily. Public-private partnerships are not common in this part of the world.

Can this model be replicated in other countries?

Yes. As long as;
(a) There are micro-finance projects
(b) There is a need in the community for communication facilities;
this model can be replicated in any society.

Can this model be IMPROVED?

Why not? Why limit only to phones? The model can be improved to provide credit facilities for any communication equipment – a fax machine, a PC with an Internet / E-mail connection or even a complete tele centre or a communication centre. In most of the African countries you can replicate it to give only phones. But is countries like Sri Lanka, you can think of improving the model to give something much better.

Is the 7.5% charge by GT and GP unreasonable?

No. They are the service charges. They have to charge this to cover their administrative costs. However, I am not sure whether these amounts are too high. I don’t think GP or GT should earn a profit by this venture, though it is fair that they fully cover their costs.

Can this model be replicated through a ‘partnership’?

Yes. In many micro finance programmes partnerships are common. ‘Gemi Pubuduwa’ is an example. In that project Central Bank of Sri Lanka (CBSL) provides the micro credit in bulk and the loans are disbursed, credit is monitored and collected by HNB. CBSL provides this money to HNB at a low interest rate. For HNB, it is more or less a profit venture. (Though the profit rates are not as high as they earn from other ventures) So it is perfectly possible to get a provider (say Suntel) in to the partnership and HNB can say it will provide Gemi Pubuduwa loans to buy Suntel phones. In effect, the client gets the phone from Suntel. HNB pays to Suntel and the client pays back to HNB. Suntel does not have to worry about the repayments.

In fact this model can be integrated with ANY welfare scheme like Samurdhi or even Mahapola. Students now get Rs. 2,000 pm. So they can be offered an option to obtain a CDMA phone in the place of 6 monthly payments. They can lend the phone to other students and earn an income!