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Bangladesh: GrameenPhone November 7, 2006

Posted by Jasper in General.
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According to press release on the GrameenPhone website they have recently reached 10 million mobile subscribers. The achievement coincides with the 10th anniversary since the company received its operating license in November 1996. The company started the year with 5.5 million subscribers, after having registered a growth of 130 percent in 2005.

Bangladesh is presently one of the top 10 mobile phone growth markets in the Asia-Pacific region with about 16 million mobile phone subscribers. However, the telephone penetration rate still remains low at around 12%.

What I found particularly interesting about the press release was the brief reference to their GrameenPhone Village Phone Program, which provides business opportunities for more than 260,000 Village Phone operators, mostly poor rural women, all around the country. A Bangladeshi woman can obtain a cell phone kit through a micro-credit loan, and then become the operator of a phone service for the rest of her village. The founder of the micro-credit movement Muhammad Yunus, along with his Grameen Bank has of course recently been awarded the Nobel Prize in economics for 2006. Here is the Yunus story. See also this New Yorker article.

GrameenPhone has also recently started an ambitious program to establish 500 Community Information Centers by the end of the current year. These centers provide shared high-speed Internet access and other information-based services in the rural areas through GrameenPhone’s EDGE network. Another recent community service initiative is the HealthLine Service, a 24-hour Medical Call Center manned by Registered Physicians and accessible to all GrameenPhone subscribers.

GrameenPhone is jointly owned by Telenor of Norway (62%) and Grameen Telecom Corporation of Bangladesh (38%).

UPDATE: Economonitor has a post about a forthcoming paper by Shahe Emran, Mahbub Morshed and Joseph Stiglitz that discusses the large interest rates on micorcredit, why it is possible that demand for loans seems to be unrelated to the interest rate charged and why borrowers seem to have little if any interest in medium-sized loans.

It turns out that the main factor to explain these issues is the place of women in society, and especially extreme illiquidity in the market for women’s labour. A little bit of credit acts as a catalyst for women outside the labour market, turning them into economically productive individuals. Once they become economically productive, they can pay back small loans. However, they are not productive enough to pay back medium-sized loans.

In other words, the interest on a micro-loan is not return on capital, but a return on labour. Without a tiny bit of capital, the labour is nascent and cannot be tapped. That is why microcredit works, and why larger loans are much less popular.

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