Infrastructure and rural development: insights from a Grameen Bank village phone initiative in Bangladesh

TL;DR: In this paper, the authors evaluate the role of telecommunications within the contexts of rural development in general and of poverty reduction in particular, and find that pursuance of pragmatic policies can turn telephones into production goods, especially through lowering transaction costs, and the services originating from telephones in villages are likely to deliver (even) more benefits to the poor than to the non-poor.

About: This article is published in Agricultural Economics.The article was published on 2001-09-01 and is currently open access. It has received 114 citations till now. The article focuses on the topics: Microfinance & Telecom infrastructure sharing.

Summary

1. Introduction

• The paper is organised as follows: Section 2 outlines the data sources employed.
• Basic information on rural phone users are provided in Section 3, while the effects of phones are discussed in Section 4.
• Finally, policy conclusions are drawn in Section 5.

2. Research approach and data sources

• This study uses both primary and secondary data.
• The primary data were collected through a field survey conducted in the months of June through August 1998.
• Focus-group discussions were held, and GB branch managers and local people were requested to provide additional input regarding their impressions of the potential and actual effects of VPPs.
• Furthermore, case studies of these effects were developed, which required intensive analysis.
• For its secondary data, the study relies on various published and unpublished documents from the government of Bangladesh and GB.

3.1. Economic status of users

• Using the FAO's definition of 'poor', as discussed at length in the original research report (Bayes et al., 1999) , 15% of the phone users in the sample could be categorised as poor (extremely poor 5%, and moderately poor about 10% ).
• The majmity of the users -over four-fifths-fell into the non-poor group.
• Of the owner/users group, 14% were moderately poor and 86% were categorised as non-poor.
• Of the villagers, 6, 9 and about 85% fell into the extremely poor, moderately poor and non-poor groups, respectively.

3.2. Phone calls according to economic status

• During the week preceding the survey, the phone users in the sample are reported to have made 1060 phone calls (Table 2 ).
• The combined groups of the poor made 268 calls and, thus, accounted for one-fourth of all phone calls.
• On the other hand, the non-poor made 792 calls, which constituted about three-fourths of the total.
• Within the owner/user group, the share of calls made by the poor and the non-poor appear to be more or less evenly distributed (45 versus 55%), while among the villagers, most phone calls were found to have been made by non-poor households (roughly 78% ).

3.3. Phone use according to gender

• For the sample as a whole, 65% of all calls are reported to have been made by men, and 35% by women.
• Thus, it appears that VPPs provide rural women with the opportunity to use this modern communications technology.

3.5. Importance of phone calls

• It appears that 85% of the phone calls made by the sample users are 'important' calls.
• 'Less important' calls constitute about 12% and 'could be avoided' calls 3%.
• The last two types of calls are usually made by the moderately poor and non-poor groups.
• The extremely poor group seems to make no unnecessary calls, even though their share of 'less important calls' remains more or less the same as that of other groups.

3.6. Purposes of phone calls

• The non-poor group, on the other hand, makes relatively more phone calls for family/personal considerations (35 versus 32% ), remittances ( 4 versus 1%) and business-related purposes (25 versus 12%).
• That the non-poor devote more of their calls to business-related purposes is not surprising, given the fact that most of the business activities in rural areas are carried out by persons falling into the non-poor group.
• Even the extremely poor group indicates that about 21% of their calls are made for business-related purposes.
• This goes to show that even the poorest, who are involved in petty production of eggs, vegetables, puffed rice, poultry rearing, etc. make phone calls in order to keep informed about the business environment.
• The lion's share of the phone calls made by the poor group deal with economic and health considerations.

4.1.1. Net profit ofVPP owners

• The VPP owners earn an average net profit of 277 Tk. per week.
• The profits accruing from phone services constitute from about one-fifth to one-fourth of the total income of the sample households.

4.1.2. Alternative means of communication

• The most frequently mentioned alternative is that one would either go, or hire a person to go to the place concerned.
• The range of options across income groups is worth mentioning.
• Among the extremely poor group, 68% would have required physical mobility (involving time and transport).
• In other words, if no VPPs had been available, the poor would have required greater additional physical mobility than the non-poor.

4.1.3. Consumer surplus

• This compares with household income of 1500 Tk. per week.
• That the poor would reap the maximum CS following the advent of VPPs is apparent.
• The poor usually do not have much in the way of alternatives to communicate with the outside world, neither relatives to help with a phone call, nor relatives to provide a ride to the destination.

4.1.4. Prices ofproducts and input supplies

• The supply of agricultural inputs such as diesel and fertiliser is reported to be smoother and more stable in target villages than in control villages.
• According to dealers who do business with these inputs, VPPs have made it possible to develop an impression of the supply situation throughout the year, making it possible to guard against unforeseen contingencies.
• On the other hand, the lack of such communication facilities in control villages has been reported to promote occasional shortages and price hikes, adding to producers' cash burden at the margin.
• Another example involves market transparency regarding the rate of exchange between Taka and Saudi Ryal at the village level.

4.2. Poverty and food situation effects

• Table 10 indicates that none of the households reported any deterioration in the situation during the relevant periods, although 14% reported the same situation as before.
• One-fourth of the respondents reported that their food situation had improved by 3 months (i.e. these households reported that they can now 'eat well' in three more months than they could earlier), and one-fifth of the households responded that their food situation had improved by >3 months.
• In all, 86% of the phone-owning households reported that their food situation had improved.

4.2.1. Dealing with disasters

• One major benefit of VPPs was seen in July-September 1998, when Bangladesh was hit by the worst flood in modern history and two-thirds of the country's area remained submerged for >2 months.
• People and transport began to get stuck en route.
• When people got stuck in or near target villages, mobile phones proved to be invaluable for sending messages to worried relatives or informing employers or calling relief agencies.
• During field visits that took place after the floodwater receded, it was learned that bills for VPPs rose during the flood months to substantially higher averages than in earlier months due to the increased demand for phone services.
• On the other hand, local government officials informed us that the availability of VPPs enabled them to take stock of the situation quickly during the flood.

4.3.1. Law and order situation

• In the event of any burglary or theft, villagers in target villages were able to inform law-enforcement agencies rapidly by phone.
• In addition, law enforcement agencies in the vicinity also reported that fast communication with target villages contributed to decreasing crimes rates.

4.3.2. Overseas communication

• Many of them belong to poor families who sold land and other assets to pay for their travel.
• The inhabitants of target villages informed us that communication with the outside world had become very fast and regular following the arrival of VPPs in villages.

4.3.3. Health

• It was pointed out earlier that roughly one-tenth of all calls deal with health-related matters, especially among poor people.
• During discussions with focus groups and interactions with the local elite and social workers, it was revealed that the greatest benefit brought about by VPPs was the capability to call doctors and clinics rapidly.
• In a country where the infant mortality rate is 91 per 1000 live births and the maternal mortality rate is also very high, VPPs' contribution to saving lives can hardly be exaggerated.

4.3.4. Empowerment of women

• Two additional aspects of the mobility issue should be mentioned.
• First, women in the village come to the owner's house to make phone calls, and second, sample women reported that the mobile phones expanded the scope of their mobility even beyond the local markets.
• Whenever they decided to visit relatives far away from their villages, they could contact their families by phone and inform them of their time of arrival, which reduces family tensions and conflicts.

4.3.5. Changes in social equilibrium and status

• The women in control of cellular mobile phones are proud of their present business.
• According to them, it has not only helped them earn additional income, but ownership has also conferred on them a certain amount of fame.
• Everyone in their village and in adjacent villages now knows them and identifies their 'bari' (cluster of houses) by the name of the technology they own, e.g. Phone Bari (house of the phone) or by the name of the owner (e.g. Nurjahan's bari).
• This was not the case when the same women used to undertake traditional activities such as poultry rearing, rice husking or grocery selling.
• Their social status is further enhanced by the increased income that seems to be raising their household's standard of living.

4.3.6. Knowledge and confidence

• Discussions with phone owners indicate that phone ownership provides not only weekly income, but also knowledge about many things which used to be virtually unknown to sample women.
• Sometimes owners are told about the currency or the socio-economic conditions in that particular country.
• Mobile phone ownership has given these women confidence.
• The fact that they are reaping the rewards of their good records of repayment and the fulfilment of other criteria required by GB contributes to this confidence.
• Once they assumed that they would have to sell eggs, puffed rice or cow milk throughout their lives in order to eke out a living.

4.3. 7. Strengthening kinship networks

• Another important effect of VPPs can be seen in the strengthening of kinship networks.
• The advent of VPPs has enabled villagers to stay in touch with relatives living outside the village.
• In typical Bangladeshi society, collecting news about immediate family members and other relations in far places is a perennial concern.
• In the past, it was not possible to main-tain a level of kinship interaction comparable to that which VPPs now allow at such low transaction costs.
• In the absence of VPPs, efforts to maintain kinship networks were not only expensive, but also relatively ineffective.

5. Conclusions and policy implications

• The availability of village pay phones results in substantial socio-cultural benefits in rural areas.
• The ownership of the phones by relatively poor households tends to raise their social status and pave the way for change in the social equilibrium.
• Mobile phones make women more mobile both within and outside their villages.
• Villages with phones also report that they are very useful in coping with natural calamities and improving law-enforcement.
• Given these multi-dimensional benefits of village phones, the study arrives at the following general conclusions and policy implications.

Figures

Table 4 Phone calls according to degree of necessity (% of calls made)"

Table 7 Communication alternatives to VPPs (% of respondents)•

Table 8 Estimates of consumer surplus (Tk. per phone call)a

Table 12 Partial social change (number, % in brackets)•

Table 2 Phone use according to economic status (number of calls, % in brackets)a

Table 3 Phone use according to gender (numbers of calls, % in brackets)"

Table 10 Change in the food-consumption situation of phone-owning families a

Table 5

Table 6 Net profits from selling phone services (number of owners, % in brackets)"