Grameen Phone Project-Colloquium Aug 26

Posted on August 29, 2005  /  3 Comments

Points of discussion

Gender neutrality
Women have built trust via a long term relationship with GB. Hence women are chosen based on their prior relationship with GB.
MKJ:  Gender patterns do emerge from the fact that GB’s best customers are women.
AZ: Groups of VPOs  “monitor” each others repayments within a village since if one person doesn’t repay on time it reflects badly on the rest of the VPOs in that village
Mahinda: even in the Suntel-Ceylinco-Gramin scheme most of the credit-worthy customers are women.

On Subsidies
Since the cost structures were not available, we cannot say if the handset discounts and airtime discounts, etc. constitute subsidies
Mahinda: what does the final consumer pay?
AZ: it varies from location to location, since the VPO decides how to cost each telephone call from the user?
RS: A map of BP’s coverage overlaid on top of the railway line map over time would give a good indication of the access to the fiber network has helped expand coverage.

Trigger factors
Success was determined by the fact that GP access to infrastructure but also by the fact that they were able to piggy back on GB. That window of opportunity was only available to GT at that time.
RS: Why didn’t Suntel utilize a similar model and not establish similar relationships with communications shops?
Mahinda: Its hard to recover payments from communication bureaus. Individual customers are better at repayment.
DG: are there other ways to identify credit worthy individuals without using the microfinance system as has been used in Bangladesh? For example, Suntel can work with a banks that has a network of branches in the rural areas to identify customers  who have repayed their loans.
MKJ: Social capital i.e. shared values is what sustains such a business model like Grameen. The question is if we strip microfinance would this be viable.
RS: With regards to Suntel what are the bad-debt customers like:
Mahinda: While ’s bad-debt rate is high when compared to developed countries. Even with developing countries are bad debt rate is high since we don’t utilize too many coercive measures to force customers to pay. As for the classes of bad-debt users: generally Consumer default rate is high. However in terms of numbers, business are the highest bad-debt user class followed by communication bureaus.
RS: GP pushes down the credit-worthiness problem to Grameen Bank. Similarly Suntel has pushed it to Ceylinco. Hence for success, credit-worthiness needs to be dealt with by somebody.
DS: Why don’t companies in build links with Banks suggest that linkages be built up in with Banks. However as RS points out then it begs the question, how many people in actually use banks. In the case of this is figure is low.
RS: What microfinance does is to allow people without established credit-worthiness to start.
Mahinda: Tritel buys bulk from Suntel and takes the risk out for Suntel allowing Suntel to bring down bad-debt from 14% to below 5%.
Mahinda: at present levels of technological development, CDMA is cheaper than GSM,
RS: There are significant economies of scale in telecom. What was Grameen’s roll out like? When Grammen found that they couldn’t negotiate interconnection, they compensated by driving up the number of subscribers in the network. Because of fiber and brand name they were available to rollout quickly.
RS final thoughts: It might be good to have another section on credit-worthiness and then another section on rollout. Fit of structure and problem, i.e. this may be good model for countries which have similar regulatory regimes to and with similar teledensity. It seems that fiber was very important for Grameen’s rollout since it helped bring their capex down. The brand name goodwill value of Grameen is extremely valuable for everything that Grameen does in . And actually Grameen is becoming a monopoly: it is used to be the case that Grameen couldn’t get interconnection when they started, but now they are not willing to give interconnection to others.




  1. Let me pen few thoughts you might find useful.

    “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!

  2. Clarifying few issues raised by Chanuka:

    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.

  3. please send me a assignment on grameen phone on the base of management pratices
    it involbes-