Banker to the Poor (23 page)

Khalid tried to interest private businesses in organizing the production and distribution of hand-loom fabrics for the garment industry. As no one showed any interest, Grameen decided to move in by itself. We would play the role of middleman and supplier. We would accept orders from exporters and take responsibility for the quality of the cloth and its delivery. In 1993, we created an independent nonstock, not-for-profit company we called Grameen Uddog ("Grameen Initiatives") to link the traditional hand-loom weavers with the export-oriented garment industry. The weavers, thrilled to participate in the export market, created a beautiful new line of fabrics. We called it Grameen Check.

It was not easy to enter the international marketplace. We had no textile experience. Khalid worked very hard to put together a team and learn the ropes of the business. Grameen is not doing anything fancy—all we do is promote the product, take orders, and work as a marketing agent for independent home-based weavers. We pass on the specifications of the orders to the weavers, give them the best-quality yarn so that they do not wait for working capital, and ensure that they meet the quality controls and deadlines. With our help, weavers do not have to worry about procurement of orders or the marketing of their products. Our method works. During our first year, total sales came to $2.5 million. Three years later, they stood at $15 million. Sales are still growing.

As a product, Grameen Check has great market potential. It is hand woven, 100 percent cotton, and very attractive. In Paris in February 1996, by courtesy of the United Nations Educational, Scientific, and Cultural Organization (UNESCO), we held a fashion show of garments designed and presented by a talented Bangladeshi model, Bibi Russell. Paris fashion personalities, magazines, and other media immediately took up the designs. Today, eight thousand hand-loom weavers produce Grameen Check, which sells in Italy, France, the United Kingdom, and Germany. With all the unemployed weavers in Bangladesh, we could easily raise the production level to 1 million yards per week. We are working to interest more buyers in Europe and North America.

When we were introducing Grameen Check, buyers asked if we could also supply checked flannel. Realizing that we would need our own machines to convert the Grameen Check to Grameen Flannel, we teamed up with a friend of ours, Dr. Zafarullah Chowdhury, who had recently purchased land for a textile factory. This factory, known as Gonoshasthaya Grameen Textile Mills Ltd., went into production in 1998.

Having successfully branched into flannel, we are now trying to produce fabric from jute mixed with cotton. Jute, a natural fiber grown abundantly in Bangladesh, was once used exclusively as a packing material. Grameen is finding new uses for jute by combining it with cotton or silk to make fabrics used in home furnishings. Soon, new technology will provide ways of using jute for clothing at a very competitive price.

Our hope is that as our fabric production becomes more diversified and the market expands, our weavers will revive a beautiful Bengali craft. To this end, we are cooperating with Grameen Foundation USA to open the American market to Grameen textiles. GF-USA is helping us form partnerships with individuals and companies in the United States.

A pleasant surprise during this whole process has been the positive response from the domestic market. All of a sudden, Grameen Check has become a household name and a social statement; to wear Grameen Check indicates pride in Bangladeshi arts and heritage. To cope with this burgeoning domestic market, we created another company, Grameen Shamogree ("Grameen Products"), which focuses its attention on finished goods made from Grameen Check fabrics as well as other Bangladeshi handicrafts.

Khalid was not willing to stop at textiles. His vision for Grameen was far grander. One day in 1994, he introduced me to Iqbal Quadir, a young Bangladeshi American, a graduate of Oberlin College. Khalid said, "Iqbal has an idea. He says we can apply for a license to operate a cellular telephone company in Bangladesh. We can take cellular telephones into the villages."

It sounded like an exciting idea. Step by step, we gathered information on cellular phones. In 1996, the government of Ban gladesh issued three cellular licenses, including one to us. We signed the license agreement on November 11, 1996, and I announced to the press that we would launch our service on March 26, 1997, Bangladesh's Independence Day. We formed two independent companies—one for profit (GrameenPhone),
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another not for profit (Grameen Telecom).

GrameenPhone received the license. The company is building a nationwide cellular network throughout urban Bangladesh. Grameen Telecom would then buy bulk airtime from GrameenPhone and retail it through Grameen borrowers in rural villages. One Grameen borrower in each of the 68,000 villages would become the "telephone lady" of the village. She sells the service of the telephone to the villagers by operating what we call a "village pay phone." Thus, the village would become connected to the world through one poor woman with access to the most modern communication system available.

As planned, GrameenPhone launched its service on March 26, 1997. The opening ceremony was held at the prime minister's office. Using a Grameen phone, our prime minister, Sheikh Hasina, called the prime minister of Norway, who was enjoying his holiday in the north of Norway. From our end, the prime minister said, "How's the weather up there?"

"It is very cold here. It is 36°C below zero," answered the Norwegian.

"How can you enjoy yourself in weather like that? You'd better come here for your next holiday. We have a pleasant 32°C in Dhaka."

After this international call, a domestic call came in for our prime minister. It was a Grameen borrower, Laily Begum, from the village of Patira, north of Dhaka, who was calling the prime minister from her cellular phone. Laily Begum was Grameen's first telephone lady, and since then she has earned a substantial income by letting others pay to use her phone.

In 1997, Bangladesh had just about the lowest telephone density in the world: one phone per 300 inhabitants. In a country of 120 million people, we had only 400,000 telephones, and these were all centered in cities, mostly in Dhaka. As many as one-quarter of all phones were out of commission at any given time. With such scarcity, working phones became a symbol of power and authority in Bangladesh. People would wait for years to get a telephone. The more telephones people had on their desk, the more important they were thought to be. A cellular phone was an indicator of great wealth. GrameenPhone now has 850,000 cellular phone subscribers in Bangladesh, of which 24,000 are village phones, operated by the village phone ladies. While the number of village phones is small in relation to the total, the air-time usage on village phones represents 17 percent of total air-time use of GrameenPhone. We now offer the cheapest cellular rate in the world, 9 cents per minute for airtime during peak hours and 6.7 cents per minute during off-peak hours.

One challenge to our cellular phone program is the lack of electricity. Many villages in Bangladesh are not connected to the national grid. To introduce cellular phones to those villages, we are bringing in solar energy. We created Grameen Shakti ("Energy"), a nonprofit company dedicated to developing forms of renewable energy. Grameen Shakti is currently experimenting with solar (photovoltaic) home systems, battery stations, wind turbines, and gasifiers. Gasifiers turn wood or agricultural waste into gas, which is used to generate electricity.

Our phone network has also led us to experiment with the Internet. Grameen Cybernet, an Internet service provider, hopes to create international jobs for the children of Grameen borrowers. These boys and girls will be able to serve companies around the world in various capacities from their own village homes or community office spaces. By bringing Internet facilities into distant rural areas, many labor-intensive enterprises can be located in those otherwise isolated rural areas. These enterprises include data entry services, data management businesses, global answering services, typing services, transcription services, secretarial services, accounting services, and so on.

Finally, a nonprofit Internet service provider, Grameen Communications, will make the Internet available to educational and research institutions in Bangladesh. Many of these institutions do not have reliable telephone lines or the budget to afford Internet facilities. Grameen Communications will offer them packages through which they will solve these problems.

By joining the twentieth century late in the game, Grameen borrowers will benefit from the latest innovations without wasting time or money on the earlier, less efficient and more costly technology. If used properly, technology can help break down structural barriers, distances, and cultural differences. It can introduce rapid social change by linking isolated rural women to friends and distant relatives.

Cynics and critics of our ambitious project claim that high tech will be wasted on the stone age mentality of most of our borrowers. The truth is, we are finding quite the opposite. Without the benefit of a telephone, our villagers waste a lot of time, money, and effort getting messages to dispersed family members. Before, in an emergency situation, if they needed to tell a brother or daughter living in Dhaka to come home, they had to send a messenger in person. That messenger would stop working or studying and take a bus, rickshaw, or train to his or her destination. Measured by this ordeal, the cost of not having access to a phone is obviously quite high.

Another criticism we hear is that the rural poor do not need the luxury of a telephone. But to our telephone lady, the telephone is a very real and practical way to earn money. Besides, a telephone helps Grameen borrowers improve their existing businesses by giving them more information and greater flexibility to buy and sell their products. Without a phone, a borrower who needs to buy raw materials must send a messenger to ask the price and delivery date of her goods. She may have to send her messenger to three or four different suppliers. This can take weeks. With a cellular phone, she can make her calls in the space of half an hour, put in her orders, and immediately increase the profitability of her business.

There is no reason to assume that the Grameen telephone lady will limit herself to renting out her telephone. As technology and energy sources evolve, she may become a sort of one-stop communications center, providing her fellow villagers with fax, e-mail, and ATM capabilities. Today, we are working with high-tech companies in the United States and Europe to develop a prototype of a cyber-kiosk that will allow borrowers to keep abreast of new technologies and to provide these services profitably to the people in their community.

One would think that with all these expansions and modernizations, Grameen had solved many of Bangladesh's fundamental problems. Not true. In Grameen, we have noticed that as borrowers' income increases, they spend more and more on combating malnutrition, diseases, infant and maternal mortality, and other health problems. Given the abominable condition of public health services, our borrowers often give in to the temptation to spend all their new money on traditional healers and sham doctors.

If we could persuade our borrowers to take the money they give to traditional healers and give it instead to a Grameen-sponsored health program, we might provide them with modern and effective health services for almost the same amount of money. That process has begun. We are now trying to make health care available to all members of Grameen families and to all villagers who are not Grameen borrowers on a self-financing, cost recovery basis. We ask our borrowers to pay a fixed amount of three dollars per family per year as a premium to a health insurance program.
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Each time they see a doctor, borrowers must pay a nominal amount (less than three cents). Laboratory services and medication are available at a discount. Grameen Health Program is also operating eye camps in the villages, where trained doctors perform, among other services, inter-ocular lens implantation for cataract patients. The cost of the operation is only one thousand taka, which is less than US$20.

During the first three years of operation, the Grameen health program recovered about 60 percent of the cost of providing these medical services. If we can organize a nationwide franchise, we could turn Grameen's health care into a strong, competitive, and sustainable pro-people enterprise.

One reason we are so acutely aware of health problems is that they can destroy even our brightest successes. Morley Safer's
Sixty Minutes
program of 1989 featured one borrower near Chittagong who, thanks to Grameen loans, had risen from being a street beggar to owning seven cows, a large plot of land, a new house, a modern latrine, and a three-wheeled baby taxi for her husband and ensuring a school education for all her children. Morley Safer called her "the picture of contentment and human success," yet when I met her and her husband again in 1996, I could barely recognize them. He had contracted a stomach illness that was never properly diagnosed. To pay for his medical treatment, the couple had sold off their taxi, their land, and their cattle. She was so frail and tired, she did not trust herself to take a new loan. All they had left were four chickens.

I mention this case to indicate how difficult a road we have ahead of us. Grameen is not just a series of success stories. There are constant potholes along the way. Part of our ability to alleviate poverty depends on our willingness to admit failure and to help ensure that the failures do not happen again.

Needless to say, micro-credit cannot solve society's every problem. But it can help to support those who would otherwise fall through the cracks. In our health care expansion, for example, we worried a great deal about how to ensure that Grameen borrowers would build up savings for retirement. We did not want our members to become dependent on their children, the government, Grameen, or businesses that they were no longer able to run. After years of hard work in their micro-businesses, we wanted them to live their final years in dignified retirement. In place of social security, we decided to offer them shares of successful Grameen companies, non-Grameen companies, and Grameen mutual funds. Basically, when a Grameen company such as the Grameen Fisheries Foundation reaches a profitable level, we transform part of it into a for-profit company coowned by Grameen borrowers and the general public through stock options.
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In most cases, shares yield dividends and also appreciate in value. To meet a sudden crisis, borrowers may sell some shares for immediate cash. A new Grameen entity called Grameen Securities Management Company facilitates these financial transactions. Interestingly, the Dhaka office of the now-defunct Hong Kong–based investment company Peregrine asked us to merge with it as an alternative to closing down its Bangladesh operations. We did not go for it, but we interpreted the interest as a powerful statement about the potential strength of our local investment organization. With a base of 2 million families, all involved in micro-business and interested in investing their savings, we have a tremendous untapped market for financial and investment services.