TEAM LinG Village Phone Replication Manual I i When we first developed the program, many professionals were skeptical about the capacity of illiterate people to understand and use state-of-the-art telecommunication technology. Today Grameen Bank - which has 150,000 village phone ladies and will have 200,000 by the end of the year -- proved them wrong. The replication in Uganda - still quite small but growing rapidly -- clearly shows that information and communications technology is needed by all, regardless of income status. Village Phone fosters meaningful, lasting change in people's lives. It brings economic benefit to the local entrepreneurs who run the service like a public pay phone system, gives their communities greater access to government services and markets for their products, and connects them with friends and relatives living in other areas. In the continuing march towards globalization, the world's poor must not be left behind. Information and communications technology can dramatically change their fate if we can ensure access. The success of Village Phone replication in Uganda clearly demonstrate that the Village Phone concept can be replicated and customized in other countries where there are willing partners and strong support. In this effort, the microfinance institution has been the critical link. Its deep roots opened these rural communities to telecommunications. In the developed world, many take telephone access for granted. But for those in many developing countries, particularly the rural poor, these communication services are extremely limited or non-existent. The experiences in Bangladesh and Uganda demonstrate how a relatively inexpensive technology can solve many of the problems the poor have faced for decades. These successes have no international boundaries and this replication manual is an excellent guide for introducing the program in new countries. As we celebrate the UN's International Year of Microcredit, I hope the global community will recognize its value and actively use information and communications technology in efforts to end global poverty. Professor Mdammad Yunus Foder and Managhg Director, Grameen Bank This page intentionally left blank Village Phone Replication Manual ) iii REFACE The publication of this book is very timely, for two principal reasons. First, the proven success of the Village Phone, as a multistakeholder project, convincingly dustrates the value of partnership amongst multiple stakeholders having diverse goals. Promoting ICT for development by building partnerships among governments, civil society, the private sector, and international and local organizations has been a primary goal of the Task Force since its inception in 2001. The greatest potential for enhancing the development impact of ICT lies in such partnerships, and the Task Force has been actively forging these relationships, in particular through its regional networks and thematic working groups. Secondly, this "Replication Manual" is an invaluable how-to source for setting up a Village Phone project. It contains a realistic, practical, and detailed set of instructions, templates, and lessons learned, and it is generic enough to be applied in any context where a Village Phone initiative can help empower people and promote development. The insights are based on extensive research and learned practice, and whde local adaptations will always be necessary, this manual provides a head start that will save time and money. It is my hope that this manual will be used and adapted in the many places around the world still untouched by modem communication technology and will thus contribute to the achievement of development goals. As the authors emphasize, a strong partnership between telecommunications providers, microcredit institutions, the Village Phone company and operators is indispensable for the success of Village Phone. By crafting a "win-win" situation for all participants, productive and sustainable operation of the partnership is ensured. Charity or government fiat is not required to bring about social good. Instead, by creating a model in which the phone company wins, the micro-credit organizations win, the vdage phone operator wins, and the villagers themselves win, the model becomes self-sustained. It can be replicated on a national scale, as it has been in Bangladesh and Uganda. Village Phone proves that profitability and development are complementary, not antagonistic. The Village Phone project also highlights the crucial nexus between business, technology, and development, another theme the Task Force has been promoting. We know that entrepreneurship is indispensable for lifting people out of poverty. It empowers them and gives them control over their lives and livelihood. By adding technology - in the form of the humble cellular phone - to the mix, Village Phone succeeded in creating entrepreneurs, connecting a village to the world, and earning a profit while doing so. I strongly believe that Village Phone is an example to be replicated, but the lessons learned go much further than cellular phones and partnership structures. Using a model similar to Village Phone, a whole host of development interventions with diverse services in rural areas are possible. If partnerships and "win-win" solutions have proven to be so successful in the villages of Uganda and Bangladesh, what could not be potentially achieved if we build on this experience and use our creative iv / Village Phone Replication Manual thinking in the broader development realm? We are only limited by our hapation. The principal goal of the ICT Task Force is to promote, through dialogue, such creative thinking and advance the creation of an inclusive information society by bringing together governments, the private sector, civil society, international organizations and, most importantly, citizens around shared objectives. Village Phone is ahead of its time and is leading the way by example. We should learn from this experience, emulate it and find ways to bring the benefits of partnership, cooperation, and communication to the billions so far untouched by the information revolution. Sarbdand Khan Director, Division for ECOSOC Sz~pporat nd Coordination, and Exec~tive Coordinator oftbe Semtariat oftbe United Nations ICT Tmk Force Village Phone Replication Manual I v INTRODUCTION Few things are as central to life today, as the ability to make a phone call. It is somedung most of us take completely for granted-but something that millions of poor people in the villages of the developing world can rarely do. With no access to fixed-line telecommunications infrastructure, they cannot call a doctor when a chdd is sick, determine fair market prices for their crops, or easily contact family members in their capital city. The resulting isolation from today's information-driven economy is a major factor contributing to their poverty and marginahzation. The advent of affordable mobile communications has begun to change all this. In several low-income countries there are now more cell phones in use than installed lines. In the case of Grameen Village Phone, we see how the forces of innovation and the marketplace can widen the impact on this trend even further, improving living standards for large numbers of people by integrating entrepreneurship, microfinance, and mobile communications. It is an important proven model ready for broader replication. This manual is designed to be a tool for doing so, although we must remember that any attempt to reapply this model in a new country will involve its own challenges, requiring careful preparation and planning. Our organizations are ready to assist with that. Bangladesh now has more than 125,000 new Village Phone Operators in place- mostly poor vdlage women. They have seen their incomes and status in the community increase dramatically by selling pooled cell phone time to their peers, using equipment that costs no more than US$250 at start-up. Pioneered by one of the world's best known microfinance organizations, Grarneen Bank, it is a highly successful program, but one that until MTN villagePhone in Uganda had never been replicated in another country. Doing so required extensive and complex efforts. Our three organizations were pleased to support Grameen Foundation USA's work to take this unique model to Uganda, which had only 1.72 phones (both fixed-line and installed) for every 100 people when this project began. Within 12 months of operation, Village Phone operators were selling an average of six times more airtime than was consumed by a typical subscriber of the local cellular provider, MTN Uganda. As in Bangladesh, a business model that combined microfinance and mobile communications proved highly effective in generating consumer demand. vi ) Village Phone Replication Manual Grameen Village Phone is a remarkable case study in development. The process of identifying the critical success factors necessary to take the original Bangladesh example and replicate it under Uganda's vastly different situation has resulted in an important contribution. Ow hope with this manual now is to provide the lessons learned, technical information, and other materials necessary to those others who . may want to carry this work further. Lawence Carter Director, S dand Meditmz Elltetprise Department, World Bank: G* Eiizabeth LittIeJidd Dinctor and CE0 ,C GAP, Most4a Terrab Program Manager, Informationf or Development (infoDev) Village Phone Replication Manual I 1 INTRODUCING THE VILLAGE PHONE REPLICATION MANUAL This document is a guideline for replicating the Village Phone program in a new country. It draws on Grameen's experience in both Bangladesh and Uganda and establishes a template for creating sustainable initiatives that simultaneously bring telecommunications to the rural poor, create viable new businesses for micro- entrepreneurs, and expand the customer base of telecommunications companies. No two implementations of the Village Phone program will be exactly alike. Each country will have unique variables, participants, and environments. However, it is expected that there will be common structures, applications, and processes - all of which are described in detail herein. The information presented in this replication manual is shared in the spirit of international cooperation. Grarneen Foundation USA will continue to act as a clearinghouse for Village Phone Replication information. As people share the lessons from future replication efforts, Grameen Foundation USA will publish updates to reflect additional learning. VILLAGE PHONE The Need for Village Phones Most people in developed countries take for granted their ability to contact others by telephone. However, in developing countries, access to communication services can be extremely challenging, especially for the rural poor. Given the high cost of deploying telecommunications infrastructure, governments and industry have little financial incentive to extend communications networks to rural areas in developing countries. As a result, millions live without the ability to contact people beyond their local village. In rural areas there are often no affordable and accessible telecommunications services. Telecommunications providers are reticent to place public access telephone booths in these locations as the initial investment and ongoing maintenance costs do not make for a viable business proposition. Governments, through their regulators, often place "Universal Access" requirements on telecommunications providers. These requirements result in an infrastructure investment that can make access available to some degree. These services typically operate at a loss and the telecommunications provider maintains them as a duty to their licensing obligation. Why is it such a challenge to provide telecommunications to rural areas? High initial infrastructure investment, relative low call volumes, high maintenance costs due to harsh environments, cash box collection needs, cash security costs (for coin operated phones), card availability (for prepaid airtime systems), technical illiteracy, remote locations, and high transportation costs are just some of the impediments to providing rural telecommunications access. 2 1 Village Phone Replication Manual Village Phone addresses these issues. It provides a profitable new market niche for telecommunications companies, new and profitable micro-enterprises for rural poor Village Phone Operators, and affordable and accessible access for communities. What is Village Phone? Village Phone is a methodology that creates a profitable partnership and a channel to market to Village Phone is a bring telecommunications services to the rural areas methodology that creates a of a developing nation. It offers a framework to profitable partnership and a extend telecommunication service to the rural poor channel to market to bring in countries where an investment has already been telecommunications made in mobile phone infrastructure. Village services to the rural areas of Phone is based on a business model that is a developing nation. I sustainable for all of the participants and enables the poorest of the poor to have access to valuable communication services. Additionally, through this telecommunications service, rural individuals can gain access to information that increases their productivity, earns better prices for the goods they produce, and saves on the direct and opportunity costs of traveling away from home. By leapfrogging fued infrastructure and leveraging existing wireless infrastructure, Village Phones offer a viable strategy for increasing teledensity in developing countries and helping the poor lift themselves out of poverty. How Village Phone Works In many rural villages there are no telecommunications services, no public phone booths, no private subscriber fixed lines, and no individual who owns a mobile handset. People have no option but to physically travel to communicate. Studies have shown that there can be a cost to not making a phone call - up to eight times more expensive than the cost of the actual phone call. The rural poor cannot make telephone calls simply because there is no access, not because they cannot afford to or don't wish to. The cost of developing and maintaining an infrastructure to place telephones in these rural areas The rural poor cannot often prohibits telecommunications operators from make telephone calls entering this market. Another barrier is the lack of a simply because there is - mechanism that allows them to interact with their no access not because customers, selling airtime and making financial they cannot afford to or transactions. What is missing is essentially a 'channel' don't wish to! that would allow Telecom Operators to connect with their potential market. By their very nature, microfinance institutions have deep roots into rural communities. They are trusted institutions with detailed knowledge of the local communities and an existing infrastructure for regularly visiting these communities to Village Phone Replication Manual 1 3 transact financial services with their rural clients. These deep links into the community are essential for introducing new services and the potential contribution of microfinance institutions to new business initiatives targeting rural communities is often undervalued. Here is a 'channel to market' to bring telecommunications services to the rural poor. The microfinance sector is historically missing from telecommunication operators' normal distribution chain. By utilizing microfinance institutions as a channel to market, the telecommunications industries in Bangladesh and Uganda were able to tap a market that was previously inaccessible because of the prohibitively high cost of developing and maintaining a channel to this enormous market. As a member of a microfinance institution (MFI), a potential Village Phone Operator uses a loan to purchase everythmg needed to start their business. The Village Phone starter kit costs approximately US$200-US$250 and includes a mobile phone, prepaid airtime card, external Yagi antenna, charging solution, signage, marketing collateral, and other materials necessary to get started. The Starter Kit is created by the "Village Phone Company", which establishes relationships with microfinance institutions to bring this product to their customers. The Village Phone Company negotiates wholesale airtime rates from the Telecommunications Provider who provides access to existing telecommunications infrastructure for the Village Phone Operators. Individual villagers in rural areas can then visit their local Village Phone Operator and make an affordable phone call. With proceeds from the business, the Village Phone Operator contributes to their loan repayment and also purchases additional prepaid airtime cards. The microfinance institution earns money from the loan and also a percentage of the revenue from airtime sales. The Telecommunications Provider earns money through volume sales of airtime, and the Village Phone Company earns enough money to continue to promote and expand the program. There are no subsidies in this model. It works because it is designed so that all parties in the partnership "win".