On November 7, 1994, Norwegian embassy in Dhaka in a letter marked “not public” to NORAD said, Professor Yunus has come up with a new “boundary-breaking idea”. The “groundbreaking idea” was to create a new “non-profit company” called Grameenphone. The backbone was to be rural women who were to be helped out of poverty: “The women will take out a loan to buy a phone and earn money by renting out the phone for individual calls”.
This letter was the initiative of establishing Grameen Phone with Norwegian aid fund – a massive cash-cow of Muhammad Yunus. Since the launch of Grameen Phone, in party speeches, there is still a lot of talk about the Grameen Phone [Rural Phone] program; about the women in the countryside who, through Grameenphone, were to be helped out of poverty.
The company boasted on its website [the page has now been removed] that the Village Phone program has 270,000 “phone women” in 50,000 villages selling counter steps for them.
Muhammad Yunus himself was full of praise for the program when he gave his speech when he received the Nobel Peace Prize:
“The telephone ladies quickly settled into and innovated the telephone business, which has become the fastest way to get out of poverty and gain the respect of society. Today, there are close to 300,000 telephone ladies offering telephone services in villages around Bangladesh”.
When Yunus launched Grameen Phone with only option of making calls from one Grameen Phone to another, he was charging BDT 7 per minute from the users – which was exorbitantly high and highest in the world. Although Yunus obtained NORAD fund for launching this venture stating it would help rural women in becoming self-reliant by working as operators, the truth is that for many years, there is no longer any women anywhere in Bangladesh who are making their earning from it.
Although Muhammad Yunus launched this mobile phone company as a non-profit with the sole objective of helping rural women in achieving economic prosperity, Norwegian telecom operator Telenor had no hesitation in joining this venture and ultimately become a major stakeholder.
Commenting on Telenor’s enthusiasm in joining GrameenPhone, a western journalist seeking anonymity said, telephone companies throughout the world are aware – due to massive size of population in Asian and African nations, there is much-more prospect of business than any European countries. This is the main reason which had encouraged Telenor in buying shares in Grameen Phone.
According to officials of Grameen Phone, Grameen Telecom, which owns Grameen Phone (also known as GrameenPhone) together with Norwegian telecom giant Telenor, has a record called the Grameen Phone program from the old days, which is listed with 381,000 customers. But this is the sale of SIM cards to ordinary customers, and not to telephone operators who sell calls on to others and make money from it.
The reason, according to the source, is that the sale of mobile phones has exploded in Bangladesh and that people therefore have no need for the mobile “telephone kiosks” that the telephone women previously represented.
“There has been a dramatic decrease in the number of telephone women”, confirms Telenor’s head of information Esben Tuman.
If there are some telephone women who still rent out their mobiles, there is little to suggest that any of them are getting out of poverty through the Grameen Phone program.
Mazharul Hannan, one of the heads of Grameen Telecom, which owns Grameenphone together with Telenor, puts it bluntly in this way in the book
“Why doesn’t microfinance work”, which was published this summer:
“The program (Grameen Phone) is not dead, but is no longer a way out of poverty”.
Telenor also admits that the figures on Grameenphone’s website about 270,000 telephone women do not correspond to reality.
There has been a dramatic decrease in the number of telephone women, says information manager Esben Tuman at Telenor.
He explains this by saying that more and more people in Bangladesh are now buying their own mobiles and therefore have no need to borrow mobiles from the telephone women.
Telenor also points out that the Village Phone program is not run by Grameenphone, but by Telenor’s partner Grameen Telecom.
In addition to the fact that Grameenphone was thus able to benefit from a technology that had been built up with Norad funds, Telenor’s commercial success in Bangladesh also received direct assistance from Norway.
According to figures from Norad, Norfund and Exportfinans, Grameenphone has received a total of NOK 133 million in loans from the three agencies.
As late as 2004, long after profits from Grameenphone had started flowing into Telenor, the company received a loan of almost NOK 60 million (US$10 million) from Norfund.
The company has also received pure gift aid in the form of subsidized interest on a Norad loan, equivalent to NOK 15 million. Grameenphone has also received financial training support of NOK 2 million.
In 1996, 608 million in aid was secretly transferred by Yunus and co from Grameen Bank to a new company (Grameen Kalyan) which had completely different purposes than what the aid was earmarked for.
NOK 50 million had already gone to Grameenphone from the new company when the case officer at the embassy accidentally discovered the transaction in 1997 (link to the Grameen Kalyan case).
The question is whether Grameen Telecom did not use this money for share capital when Grameenphone was established in 1996.
According to Telenor, a share capital of 50 million US dollars was paid in, of which Grameen Telecom’s share was 35 per cent, according to the ownership percentage.
In other words, Yunus and co needed 17.5 million dollars (just over NOK 100 million) when Grameenphone was established. The fact is that SEK 50 million in aid from Grameen Bank was transferred to Grameenphone via Grameen Telecom in 2010.
Milford Bateman, researcher at the Overseas Development Institute in London, believes that there are several reasons for the collapse.
In Bateman’s recently published book “Why doesn’t microfinance work”, Grameenphone and the Grameen Phone program are taken up as separate cases.
According to Bateman, within a couple of years Grameenphone had 50,000 telephone women in its network, usually one or two in each village.
But in the pursuit of profit, Grameen Telecom and Grameenphone, according to the researcher, pushed for as many telephone women as possible in their service.
It quickly led to the villages having their own streets called “telefongata”, where dozens of telephone women stood side by side to sell counter steps for the company.
As a result, income fell for the telephone women, who had problems repaying the loans they had taken out from Grameen Bank to buy mobile phones.
A Grameen Banks loan officer says the following in Bateman’s book about where it all ended:
“Poor women who enter the telephone business today remain poor”.
Grameen Phone’s George Soros connection
Grameenphone was set up in 1997 and is majority owned by the Norwegian company, Telenor. Grameen Telecom, the not-for-profit company which Muhammad Yunus established, became a major shareholder in Grameenphone through a US$10.6 million loan in 1999 from the Soros Economic Development Fund, now part of the Open Society Foundation run by the billionaire philanthropist George Soros.
