Wednesday, August 16, 2006

Doing Well by Doing Good

Yes, indeed, it is possible to do financially well by doing something virtuous and good—and truly innovative. My former research assistant Kyra Peyton (who recently graduated MBA with honors) brought this combination aw-shucks/entrepreneurial genius story to my attention.

Are you familiar with GrameenPhone? After you read this piece, I know you’re going to want to google it. GrameenPhone is Bangladesh’s leading provider of GSM cellular services. It is owned 38%-62% by the country’s Grameen Telecom and by Norway’s Telenor AS. The company provides affordable telecommunications to millions of Bangladeshis at the lower base of the economic pyramid, enabling them to lift themselves out of abject $2-a-day poverty by starting self-sustaining micro-businesses as village phone operators.

Yes, you read that right. Through its innovative “Village Phones” program, GrameenPhone partners with GrameenBank to generate micro-loans and cell phones as tools to combat poverty. Here’s how it works:

Before GrameenPhone, many Bangladeshis had extremely limited access to capital and telecom services, and no skills or means to live beyond subsistence farming. Now, some of the country’s poorest citizens are able to secure a micro-loan from GrameenBank, use the capital to start a small business as a village phone operator with a Grameen cell phone, and earn a living wage—while opening up telecommunications to people (also through Grameen bank loans) who never imagined they’d have the opportunity.

Are you aware that 75% of the world’s population earns less than $2,000 annually? That’s 4.5 billion people. Are you aware that nearly that same number do not have direct immediate access to a telephone? GrameenPhone recognized a huge opportunity in this vast untapped segment. Unlike most businesses that succumb to the lure of the up-market (which is usually swamped with competitors), GrameenPhone moved down-market and now dominates a hitherto incumbent-free market that it created.

Again, this is not just a feel-good story. Grameen is not a charity. In 2004, net earnings increased 59% and the company has more than doubled its total number of subscribers to nearly 2.5 million, while providing telecom access to a market space representing 60 million people in rural Bangladesh . It turns out that seemingly destitute people want the service, they’re willing to find a way to pay for it, and lo and behold, they pay their bills and repay their loans. GrameenPhone’s strategy has caught the attention of Nokia. In November 2005, Nokia and GrameenPhone announced a partnership to launch the Village Phones program in Uganda and Rwanda.

Bless them. Tragically, global poverty is a huge market niche. But I’m glad to see that some companies are doing their shareholders well by doing their painfully poor customers some good.


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