The myth of rural telephony?

Grameen Bank made a folk legend of the poor woman catapulted to prosperity by becoming a telephone-wielding entrepreneur.

By selling minutes on her phone plan (purchased with a Grameen loan) women like her, the story goes, moved markets and brought valuable information to the masses.

Craig McIntosh and Michael Futch set out to test the impact of rural telephones in a totally different setting, Rwanda. Unfortunately, as often happens in randomized trials, reality struck:

The intended design of this study was a randomized controlled trial, in which the phones would be phased in to a group of 380 pre-selected villages in an experimental fashion.

In the end, competitive pressures in the MFI sector as well as operational glitches in the rollout process undermined the randomized structure.

When we returned to do a follow-up study 15 months after the baseline we found that 94 communities had received phones, but that the actual rollout bore little resemblance to the intended design.

For the empirical economist, such glitches are almost inescapable. The candid disclosure, and the honest attempt to still analyze the (non-experimental) impacts, is one of the reasons I like Craig’s work so much.

Unfortunately, the observational analysis bodes ill for rural telephony as a business model in Rwanda:

We see a moderate but significant increase in the percentage of local farmers who report arranging for their own transport to market (from 27% to 40%) and local entrepreneurs are more likely to pass news via cell phone.

However, the community analysis shows absolutely no impact of the phones on trading activity or availability of goods in local markets, and household-level impacts are repressed by the fact that airtime usage in Rwanda is so low as to indicate that few VPOs realize sufficient profits to pay off their six month loans from that source alone.

11 thoughts on “The myth of rural telephony?

  1. Hi Dr. Blattman,

    I am a long time reader of your Blog. “Folk legends” of communication technologies transforming village lives by overcoming information asymmetry are extremely popular in development circles. The e Choupal project in India, Robert Jensen’s study of the role of mobile phones in trade of fishermen of Kerala are some examples of this. I will be very thankful if you can pass on the link of the article about Grammen telecom that you have mentioned in the blog

  2. Chris,

    The link in the post goes to a CCT paper not the telephony paper. I’m happy for the serendipity since I’m very interested in the CCT stuff, but would also like to see the paper you’re referring to.

  3. Grameen telephony worked because the airtime was bought in bulk by Grameen and as a result the cost of using mobile phone was and is lower than commercial operator. In addition, the phone was used for international call to Bangladeshi’s living in the Middle East which is more profitable. Besides, the population density in Bangladesh is a lot higher than rural Rawanda. There is now a good new and a bad new: the cell phone industry became highly competitive and as a result the price of set and airtime dropped dramatically in Bangladesh. Now, the Village Phone Program is no longer attractive. Grameen is working on tuning the phone ladies into Internet ladies. They are also piloting tele-medicine.

    I do not think we should despair. No cell phone companies wanted to come to Bangladesh. Cell phone companies hired international consultant to figure out the the potential market. The consultant examined TV ownership to guess the size of possible market. Clearly, they completely underestimated the size of the market. If you have a TV, your cousin does not need a TV. He can watch TV in your house. However, if you have a cell phone, he needs a cell phone to talk to you. In other words, the consultants completely ignored the interconnectedness.

    I am afraid the researchers went into an emerging and a thin market to examine effectiveness. They should have waited a bit longer. Then they would run into the problem of not finding a control group. The Hyderabad study of microfinance by Banerjee et al. suffer from this defect.

    By the way, the for-profit Grameen Phone is doing an IPO and it will be largest in Bangladesh. Here is the link to the story in the economist
    http://www.economist.com/businessfinance/displaystory.cfm?story_id=14649268

  4. Pingback: The revolution will be…texted? « Garinim

  5. I question the demand-side of this project. McIntosh and Futch write, ““We had to exert some pressure to obtain the desired sample size for the study (400 groups), and in the end fell slightly short of that number. The sample therefore consists of ‘likely’ clients in acceptable microfinance borrowing groups, who had expressed interest in operating a Village Phone at the time of the baseline.” The target group themselves have a better idea of where something like this will work. Projecting it on to a population may have worked or may not have. Another approach would be to first poll for demand in different populations, and then test the impact of introducing phones to areas that clearly want it. This is essentially what private companies do, as Asif Dowla’s comment mentioned. The difference is if it is being done with donor/NGO money their might be a human welfare motivation rather the private profit-driven goal, and phones will make their way into less profitable regions.

  6. Chris,

    A long time developmental economist, now retired, I was and always am struck by the pervasiveness of nonsensical fads in the development business. Your article perceptively alerted me to one real benefit of the cell phone craze, the ability of business people to schedule transport and meetings, the acess to prices has already been touted endlessly. The rest is all social chat, a certain social and physic benefit not at all to be derided but a more limited economic one.

    In my one “empire strikes back” attack on the development profession I reviewed along with my co-author the past use of radio to reach millions of poor people with information on health, supplementary classroom schooling, agriculture, small business, including the famous market prices, civic problems, water, conservation of firewood etc. There is a ream of evaluative literature almost entirely positive. The book Radio: A Post Nine-Eleven Strategy For Reaching The World’s Poor (University Press of America) was greeted with an hours on-air discussion by our local (Washington D.C.) NPR station but met with resounding silence in development circles. Indeed a year later VOA cut back on its use of radio, although for reasons explained in the book they do little enough informational radio that is not news and current events.

    I would be interested in your thoughts on creative informational use of the radio and why we don’t try an expansive program on HIV, swine flu, – – a few things are being done here and the health experts do appear to be the most susceptible to using the media but this is limited in scope and reach – – sanitation, water conservation, agriculture, literacy or other salient problems of developing countries? The fashion is the internet now and most of the poor and much of the developing world will be left out of the loop for a long time absent electricity, literacy and the affordability of a computer on a dollar a day.

    We are donating the proceeds of the book to 4 communication NGOs so I hope I am not self-promoting here but would be happy to do something further if you think the subject is worth pursuing.

    SS

  7. Recently, I traveled to Haiti. I noticed there are hundreds of cell phone towers scattered throughout the country. When I inquired about that, I was told that cell phone companies have been investing heavily in telephony business and are making millions in selling phones and pre-paid phone cards. You can go online, create an account, and put a pre-paid phone card on somebody’s cell phone in Haiti. I noticed also that people spent a considerable amount of money (they cannot afford) on pre-paid phone cards, it is a killer; for some people it is a great progress because it is shrinking the distances and allow people to have access to technology.
    Before the structural adjustment mandated by the IMF took place in Haiti in the early nineties. The government owned the only telephone company and the service was sluggish. People in Haiti, see this as a revolution because there was a time one has to bribe an employee to get a phone line or you would spend at least 7 years on a waiting list for a landline. There are more than 4 different cell phone companies in Haiti and some of them restricted their channel to the other competitors. Some people would own more than three different cell phones to bypass or to solve this problem. These companies do not abide by government regulation that is why the quality of service provided is questionable and unaffordable

  8. I wonder what these phones are used for. We seemingly don’t question the utility of any medium for communications for every person, but what are these vast networks used for? I may be naive, but are these being used to facilitate deliveries, or coordinate government services? If the answer is yes, then I see the utility? But are the massive investments needed to start a cell network in a developing country really seeing returns? What is the nature of the profit? Are they coming from the use of Western investors in the country or by the local population?

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