by Marianne Taflinger
You Can Hear Me Now by Nicholas Sullivan tells the unlikeliest of stories. The story is of one man who dreamed of “connecting” the rural poor to make them more productive, and ended up building a $1 billion dollar cell phone business in Bangladesh.
When Iqbal Quadir’s computer crashed one day, he flashed back to his time in Bangladesh when he went out walking to find a pharmacist, only to find the pharmacist out walking to find medicine. In that flash, he realized that “connectivity is productivity,”—if you cannot connect, you cannot be productive, no matter where you are, or what your circumstances might be.
Quadir and his partners built this business in Bangladesh where the per capita GDP is $415, or the equivalent of $1,197 dollars a year in purchasing power. 83% of the population lives on less than $2 a day, and electricity is virtually nonexistent outside of the capital city. In 2005, the Bangladesh government was tied for last place with Chad in central Africa on international corruption. You could say it’s “top of the list” on perception of corruption when viewed by the foreign business community.
Quadir’s dream faced many hurdles—skepticism about whether the rural poor in Bangladesh represented a legitimate market for cell phones, and longstanding resistance to foreign investment due to the country’s history of colonialists taking money out and giving nothing back. Furthermore, the government’s procedures and rigid bureaucracy stifle innovation and business creation. Starting a business in the United States can take as little as 4 days; in contrast, in Bangladesh it can take 35 days.
To realize this business, Quadir had to sign on partnerships of foreign investors and to
secure local financing for the rural poor. He convinced Mohammad Yunus, 2006 Nobel Peace Prize winner and founder of Grameen Bank, that cell phones were a necessary productivity tool for the poor, not a luxury good. But how do cell phones relate to microlending?
To Quadir, a “cell phone is like a cow.” For a cow, women take out a loan, buy a cow, sell the milk to the community, repay their loan to Grameen Bank, and recirculate the money locally. Likewise with cell phones, women could take out microloans from Grameen Bank, and “sell time” to villagers to use cell phones to connect to local markets, call family members overseas and the like. Currently, there are over 300,000 “phone ladies” in Bangladesh who are running their own small businesses, and enabling their villages to be more productive.
Quadir succeeded because he was able to successfully ignite the three forces of external combustion: native entrepreneurs, technology and foreign investment. Nicholas Sullivan explained these things this way.
Nicholas Sullivan: Native entrepreneurs are necessary as a driver because they are native to the culture, and have a feeling for the right way to approach business in the country. Because Quadir was trained in the West and knew the power of putting capital to work, he also knew the power of creating income opportunities and of spreading technology. A foreigner would have been unlikely to come in and establish a partnership with Grameen Bank, the most famous brand in Bangladesh. It’s unlikely that Grameen Phone could have been created without him.
Information technology is necessary as a driver in order to “open up the country” for all other forms of development. Technology is never passé, must always be upgraded, and is always state of the art. Its adoption can become a model of development to address all other human needs, such as safe drinking water, for example.
Foreign investment is necessary as a driver because the government is not fulfilling this role. The capital markets are not developed and the banks will not lend to business enterprises, so without foreign investment, there is no capital available to build large, scalable businesses. When compared to Silicon Valley, where local entrepreneurs supported by venture capitalists were able to build new information technology businesses, in the developing world there are no venture capitalists who could fund them.
However, the story of India is a story of what happens when a country is able to develop their own economic engines and capital developments after prospering from initial foreign investments.
Marianne Taflinger: What is the power of "inclusive capitalism?”
NS: Inclusive capitalism as I define it creates both wealth and profits for companies and income opportunities for the workers. Henry Ford said that he wanted to pay his workers enough so they could afford to buy the car, to create demand for more jobs, and thereby to create a virtuous cycle. Inclusive capitalism is a new approach to development where the profits are reinvested to create jobs and income opportunities. In developing countries, there is no infrastructure in rural communities so companies have to engage local populations in an indiginous supply chain. It becomes a two-way rather than a one-way street where money is put back into the economy, rather than just being taken out.
Historically foreign investment has focused on extracting mineral resources or labor resources for exploitation which makes the developing country poorer, rather than richer and more self-sufficient. Mohammad Yunus has said that a job can keep someone in poverty forever if it doesn’t pay enough to provide more than a subsistence level. The obvious goal of inclusive capitalism is to reach that point of self sufficiency.
MT: Your book says: “As a great social leveler, information technology is second only to death.” What’s meant by this?
NS: Sam Pitroda, an Indian who worked for GTE in the United States, and returned to India in the 80s and 90s to digitize the phone system said this about himself. He was born as a Hindu into the carpenter caste, a lower class status, but he was able to elevate his status when he became a technology guru. He extrapolated this experience to the society at large, saying that communication tools give poor people access to market information so they can successfully compete. Markets depend on information, and with the cell phone farmers can get better prices for their products because they can shop around and don’t have to sell to the first middleman they meet in the market. This new access to information allows them to negotiate and to compete on a level playing field. It democratizes the process because markets depend on information, and now information is going both ways.
MT: Are there other promising developments in using technology to raise living standards for the developing world?
NS: There are two prime ones that I’m aware of. In telemedicine, people who are cut off from communication, transportation and electricity, as well as easy access to hospitals and doctors are being aided in two ways. In South Africa, for example, health care workers collect data to send information back to cities for analysis. In other projects, people who are cut off from in-person access to doctors are connected to them by communication technology 24 hours a day.
As for education, it’s imagined that communication technology is a precursor to further educational development. The Digital Divide may be a lack of communication, and the cell phone is in and of itself a powerful computer. As people learn how to use it, they will want to use it more and will demand more features, so it could be an important stepping stone to education.
Nicholas P. Sullivan has focused on entrepreneurship and technology for the past twenty years. When he was editor in chief for Inc.com, a sister to Inc. magazine, he conducted many business conferences and radio programs for entrepreneurs. He became intrigued with the developing world because so many people signed up for these conferences. He compiles the annual Wealth of Nations Index, a ranking of seventy developing countries, is publisher of Innovations: Technology/Governance/Globalization: an MIT Press journal, and is a partner in Global Horizon Fund, a private equity fund of local funds in developing markets.
His recent publications include “Do BITs Really Work: Bilateral Investment Treaties and Their Grand Bargain” (Harvard International Law Journal) and “Clinical Economics” (Compass, Center for Public Leadership, Kennedy School of Government. Sullivan is a graduate of Harvard University and the Fletcher School of Law and Diplomacy.
Photos of India by Sarah McGowan