Emerging Markets Provide Millions of New Customers

Published on November 18, 2010

In a small rural village in Bangladesh, a country where about 82 percent of the people live on less than $2 a day, a woman is given a subsidy for a mobile phone business. She holds the phone for the whole village and sells the villagers service. Within two or three months, she has paid off the subsidy. Eventually she becomes the wealthiest villager.

This scenario is successfully playing out across Bangladesh in more than 50,000 villages, with 473,000 phones handed out so far, said Delwar Hossain Azad, head of financial services for Grameenphone. He gave the keynote at the Emerging Markets Conference presented by the student-led Emerging Markets Group November 5 at Harper Center.

Called Village Phone, the program is an innovation of Grameenphone. The company is a joint venture of Telenor, a Norwegian telecommunications company, and Grameen Telecom Corporation, a nonprofit concern of microcredit pioneer Grameen Bank.

Azad said Grameenphone's guiding principles are illustrated by the questions "How do we take the services to the reach of millions?" and "How do we touch the lives of the people?"

The devices provided by Grameenphone, which means "rural phone" in the Bengali language, play a crucial role for 27 percent of the population who live in the country's urban areas, he said. With a mobile phone, buyers can compare the prices sellers post for bananas, rice, and other products and services through a virtual marketplace called CellBazaar. People can use their mobile phones to buy tickets for the train, lottery, and sporting events. They can more conveniently pay bills, which otherwise would require several trips and waiting in lines, a stack of proof of payments in hand, Azad said.

Workers in or out of the country can transfer money back home to the families they have left behind in the rural villages. Without the mobile service, sending remittance back to their families is "costly and inefficient" for Bangladesh's 7 million migrant workers spread across the globe, he said. They pay 6 percent to 14 percent fees to send the money, and it could take months. The amount of wages lost in such fees would be substantial enough to affect foreign reserves, Azad said.

"We have found that an increase of 7 to 10 percent remittance can increase a country's foreign reserves from 0.5 percent to 4 percent of GDP," he said.

Workers within Bangladesh's cities would have to trust a bus driver or a neighbor to deliver remittance back to their rural families with no assurance that the money got there.

"We must not forget the face of these people for whom we are designing and building this service," Azad said, showing a photo of a room full of Bangladeshis sleeping head to toe on the floor, crammed into every conceivable space.

Grameenphone started in 1997 in three cities. It faced the challenge of building everything from scratch, from technology and infrastructure to customer service. Today Grameenphone offers 140,000 outlets throughout Bangladesh and employs 300,000 people, with 28 million subscribers. The mobile phone industry makes up about 10 percent of Bangladesh's gross domestic product. "We are a dominant player in the market," Azad said.

Similar mobile commerce is happening in other developing countries. "This is not only changing the life of the people, but this also makes good business sense," he said.

"It's just fascinating," said Britton Lombardi, a student in the Evening MBA Program. "They're just leapfrogging us in technology, going directly to the mobile phone (for electronic transactions) without having a lot of internet penetration first."

She said Azad's presentation "just opened my eyes to all the different possibilities out there" offered by the clean slate of an emerging market. "It's very entrepreneurial."

— Mary Sue Penn