IT World finally posted an interview I did a while back. I wondered what was taking so long, and now I know. They cleaned up the audio and made me sound good. The interview offers a good description of the phone ladies of Bangladesh. LISTEN!
Archive for March, 2007
World Resources Institute (WRI), creator of the Next Billion “development through enterprise” blog, has just published a new book called The Next 4 Billion: Market Size and Business Strategy at the Base of the Pyramid. The authors use household survey data to measure the empirical size and scope of bottom-of-pyramid market.
In a recent post, WRI senior VP Al Hammond notes the remarkable success of cellphone companies in cracking the “BOP code,” and notes several of the key themes of You Can Hear Me Now. He attributes the success, unmatched in any other sector, to extraordinary “push” using “sachet marketing,” i.e. selling text and voice combos in small prepaid increments. He also notes the way local cellphone companies have leveraged local entrepreneurs to create deep distribution into rural areas.
At the same time, he notes the “pull” of ICT–”the insatiable demand for ICT services even for very poor people.”Â Â This, of course, is what has surprised so many development and industry experts. Hammond notes that in virtually every country, the share of spending on ICT rises exponentially as income rises. In fact, the percentage of income spent on ICT is higher than that spent on food, housing or transportation.
Remarkable–it reminds me of the Bangladeshi lady who referred to the cellphone as “magical as Aladdin’s lamp.”
One of the key messages in You Can Hear Me Now is that cell phones are not only providing untold rural income opportunities that didn’t exist before, but also providing access to financial services for the “unbanked.” This mobile banking revolution is also greasing the skids for remittances from overseas relatives, which now total in the range of $300 billion per year, most of that going to people without bank accounts. In many countries, remittances outpace foreign investment and foreign aid combined.
Cell phones are helping the flow of money by cutting out the middle man, i.e. banks and transaction agencies, such as Western Union. In some cases, people in the West are sending money directly to the phones of relatives in poor, rural areas; in other cases, the money goes to a bank or money store. Smart Communications and Globe Telecom in the Phillipines have been at the forefront of this particular revolution.
Look for this money flow to explode over the next decade. The GSM Assosiation, along with 19 mobile cellphone operators and MasterCard International, has embarked on a pilot to engage local banks as payment centers. GSM expects that this could increase the flow of remittances from $300 million to $1 trillion over the next decade.
Smart Communications, for example, Â plans to launch several pilot projects in collaboration with mobile phone operators and banks in Bahrain, Italy and other countries hosting large Filipino migrant populations. In Bahrain, Smart will work in partnership with MTC Vodafone Bahrain and a leading bank in the Middle East.
“Aside from lowering costs, we shall provide Filipinos overseas greater control over the manner in which their remittances are transmitted and used back home — enabling them to send funds in the amounts of their choice, whenever they want, wherever they are,” said Napoleon L. Nazareno, Smart President and CEO.
I just got the MP3 for a recent interview with Jesse Dylan, host of The Good Life on Sirius satellite radio. It’s about 6 minutes. Listen!
Unfortunately, the C-SPAN BookTV airing over the weekend is not archived, but it went pretty well. I’ve been hearing from some unusual suspects, who turn out to be closet BookTV watchers.
I’m appearing on CSPAN-2′s BookTV this Saturday, March 17 at 10 pm. The event was filmed at the Aspen Institute on Feb. 21, a roundtable luncheon that includes me and Iqbal Quadir, the driving force behind GrameenPhone in Bangladesh.
The show may also air on Sunday (check the BookTV schedule), and may then be viewable in the BookTV archives, but I don’t know for sure.
BookTV runs 48 hours every weekend, from Sat 8 am to Monday 8 am.
Here’s a report I submitted to the Development Through Enterprise blog at www.nextbillion.net:
“The 8th annual Harvard Social Enterprise Conference last Sunday (March 6) at the Harvard Business School drew a sellout crowd of 1,000 people. Cheryl Dorsey, president of Echoing Green, and Victoria Hale, founder and ceo of the Institute for One World Health, gave morning keynotes.
Echoing Green acts as an â€œangel for emerging social enterprises,â€ and has awarded $25 million to more than 400 entrepreneurs since 1987. Dorsey noted that when she graduated from medical school, she intended to practice medicine, but saw a Boston Globe story on the high incidence of infant mortality in Boston’s black neighborhoods. It was this â€œZIP code as destinyâ€ epiphany that led her in 1992 to start The Family Van, a community-based mobile-health unit that provides basic medical services to at-risk residents in Boston’s inner city neighborhoods, and earned her an Echoing Green fellowship.
Dr. Hale is an Ashoka Fellow festooned with awards from The Economist, Skoll Foundation, and Schwab Foundation, not to mention a MacArthur Fellowship. She is founder of the America’s first non-profit pharmaceutical company, which recently received Indian government approval (FDA approval in 2005) for a low-cost drug to combat Visceral Leishmaniasis, a deadly disease of the spleen and liver that occurs primarily in the Indian state of Bihar (as well as Nepal and Bangladesh). More â€œgeography as destiny,â€ for in this state alone a sand fly bite injects the deadly parasite. She showed slides of children with inflated bellies trying to fight off infection, slides of Indian women and girls with red hair due to malnutrition. Because the disease is confined to a poor and remote region, it has not been on the radar screen for big pharma, but Hale has corralled industry to develop a low cost drug.
One World Health now has a $10, 21-day cure, but still has to deal with the issue of distribution and education. Hale notes that of all the big pharma companies who have tried to develop effective drugs to combat diseases in poor countries (Glaxo Smith Kline, Merck, Pfizer, Novartis, Eli Lilly), only Merck has succeededâ€”with its cure for river blindness in Africa. Hale is out to change that lamentable track record, and noted that â€œindustry doesn’t know the world’s poorest people, doesn’t know what need doing, but they want to do well and do good. We need to ask, she says, â€˜What do you need to engage? What are you afraid of?’â€
The â€œPrivate Capital in Developmentâ€ panel, moderated by HBS’s Michael Chu, former CEO of ACCION International, was superb. Sarah Alexander, executive director of EMPEA (Emerging Markets Private Equity Association), noted that $33 billion in private equity flowed into emerging markets in 2006, compared to $26 billion in 2005, $6.4 billion in 2004, and $3.5 billion in 2003. She also noted that the â€œbarbarians at the gateâ€ (Carlyle and Blackstone?) mentality was widespread in Europe and emerging markets, and that private equity’s image in developing countries was an issue for governments. They want the money; they don’t want the buyouts, the cut-and-run.
Yasminda Zaidman, a director at Acumen Fund a non-profit venture capital fund (one of my favorite oxymorons), says they use â€œphilanthropic capital to show private capital the path.â€ She also mentioned the â€œlost yearâ€ that many social entrepreneurs face when they try to start a business and spin regulatory and financing wheels for 365 days. Acumen prefers loans to equity, as â€œit’s hard to see exits.â€ Milton Namude of the IFC split the difference, saying the IFC took a long-term horizon, using debt and equity when needed, that private equity and venture capital were a small piece of the puzzle. He urged students to â€œjoin the IFC and have it all!â€
The â€œPast, Present and Future of Microfinanceâ€ panel, also moderated by Michael Chu, hit the many fissures in the microfinance industry. Nancy Barry, president of Women’s World Banking, started out by saying that Grameen Bank was a huge success but had not innovated on its original models, and that MFIs should not be â€œloan dispensersâ€ but â€œfinancial intermediariesâ€ that provided insurance, savings, and consumer finance. Jeffrey Ashe, manager of community finance for Oxfam America, noted that 6 of 7 borrowers come from a â€œhandful of countriesâ€ and that his Saving for Change Initiative aims to promote savings (rather than lending) as a way of changing lives and mobilizing capital. Carlos Castello of ACCION International, spoke about the commercialization of microfinance. Of ACCION’s 33 partners, 28 are generating better than 20% returns. He pressed the idea that returns were key to sustainable success.
All panelists talked about the impact of commercialization, and saw a split in the industry between banks that moved further upstream (targeting the rich poor), and NGOs that moved further downstream (targeting the poor poor).
This conference moved the ball, however defined, forward.”
InÂ Toronto’s Globle & Mail, Jennifer Hollett writes about cellphones connecting the “poor and vulnerable to the rest of the world.” Some parts of her Cellphone gaining global reach are based on an interview with me, but the most interesting quote comes from a research officer at CARE Canada, for which Hollett volunteered in Africa:
“People will often prioritize connectivity above nourishment.”
This seems inconceivable, at first blush, but it does point to the fact that for most people in developing countries the phone is a productivity tool that either saves time and money–or makes money. It also helps to explain the answer to one of the big questions about phones in poor countries: How can people living on $1 or $2 a day afford phone service?
Because they a) share the phone and thus the cost and b) they find that the phone more than pays for itself.
Indeed, an old but still relevant study in Bangladesh by the Canadian Telecommons Group found that the cost of a trip to Dhaka was anywhere from 2 to 8 times the cost of a phone call. In economic jargon, the resultant “consumer surplus” suggests that people get far more than what they pay for in a phone–and that they’d be willing to pay more. The surplus is increasing all the time; a new study from TeleGeography’s Wireless Operators Research Service notes that ARPU (“average revenue per user) is declining globally–giving subscribers more and more bang for their buck.