Market-Based Solutions for Social Transformation Professor Iqbal Z. Quadir Founder and Director Legatum Center for Development & Entrepreneurship at MIT
BASE Forum 2013 – MedellĂn, Colombia Inter-American Development Bank June 7, 2013
Introduction
Background 1. Dispersion of power is good
In 1975, I moved from Jessore to Dhaka BANGLADESH
‌ because I wanted to go to an American college
Background
American colleges ‌ all over the map.
Background
Background 1. Dispersion of power is good 2. Concentration of power is bad
Collapse of the Soviet Union
Background
My country was failing economically – it too was affected by centralization ‌a general problem in poor countries
Background
Background 1. Dispersion of power is good 2. Concentration of power is bad 3. People want to better their conditions
People want to better their conditions – says technological history
Background
People want to better their conditions – says economic history
Empowerme nt of People
Europe over the last 1,000 years
Background
People want to better their conditions – say intellectuals The natural effort of every individual to better his own condition…is so powerful a principle, that it is alone…capable of carrying on the society to wealth and prosperity….” Adam Smith 1723-1790
Background
People want to better their conditions – say contemporary scholars
Background
People want to better their conditions – according to my own experiences
Background
Background summary 1. Dispersion of power is good 2. Concentration of power is bad 3. People’s desire to improve their lives disperses power
Opportunity
1980s:
Dispersion was happening in front of my eyes
Mainframe computer
Opportunity
Personal computers
Cascading prices of digital technologies allowed further dispersion
Opportunity
Moore’s Law: • Processing power per $ doubles every 18 months & quadruples every 3 years. • Price of computers falls more than 10,000x in a single generation
Connectivity Is Productivity
New York, 1993
Opportunity
Bangladesh , 1971
… and phones would follow Moore’s La
Bangladesh in 1993
70% 20%
•1 phone for 500 people • Virtually no phones in rural areas where 100 million people lived
Opportunity
Cascading prices of digital technologies allowed further dispersion
Opportunity
Moore’s Law: • Processing power per $ doubles every 18 months & quadruples every 3 years. • Price of computers falls more than 10,000x in a single generation
People seek higher productivity, higher income
Opportunity
People seek higher productivity, higher income
Opportunity
Demand side
Supply side
Connectivity is productivity; productivity translates to purchasing power
Prices cascading down
Opportunity
Action
Misconception #1 Poor countries are under-resourced › Poor countries are extremely wasteful
Action
Misconception #2 Poor people lack buying power ›
Productivity tools create buying power
Action
Misconception #3 You need to start with money to make money › Shared-access breaks that vicious cycle
Action
Misconception #4 Inability to meet primary needs
Action
› Income is the ability
Concentration of resources stood in my way
Problem: Lack of Other Infrastructure • No credit checks • A few bank branches to collect bills • Contact points for customer service
Solution:
Partner with Microcredit
Grameen Bank • Branches/offices throughout the rural areas • Each has 2-3 million borrowers • Excellent repayment records • About 95% borrowers are women
Action
The microcredit model Milk
Money
Grameen Bank
Money
Action
Money
The Grameenphone model Service
Money
Grameen Bank
Money
Action
Money
Creation of Grameenphone 12 / 04: Gonofone exits 12 / 00: Move to Harvard to teach
Telenor: know-how
12 / 99: IFC funding
Grameen: distribution
3 / 97: Grameenphone services launched 11/ 96: Grameenphone receives cellular license 11/95: Telenor and Grameen Bank make commitment 9 / 95: Telenor shows interest 5 / 94: Gonofone established 3 / 94: Grameen Bank encouraged
2 / 94: Cellphone is a cow 5 / 93: Met with Muhammad Yunus 2 / 93: Connectivity is Productivity
Action
Total Initial Funding: $120 million
Grameenphone success in Bangladesh • 300,000 retail entrepreneurs and 100 million with access (at one time) • 41 million subscribers • 90 million cell phones in Bangladesh (including phones from other providers) • 1 of 2 people have a phone • Over $4 billion in revenues for industry
Action
Lessons
Mobile phone success is a global phenomenon
Lessons
Countries’ GDP $ billions in infrastructure Company profits
People’s ability to pay People’s productivity
Productivity tool
A win-win-win paradigm
Countries’ GDP
Tools make people more productive, $ billions in infrastructure then:
Company profits
• Businesses win by selling tools • People win by earning more
People’s ability to pay
• Countries win when citizens have more earnings
People’s productivity
Lessons
Productivity tool
Conclusion •
Harness the natural effort of every individual to better her conditions • Technology is an ally in this process • The economic ecology gets dense over time • Microcredit-> Cell Phone distribution • Cell Phones-> Financial services
Lessons
Current Activities
Practice
• 5 million customers • 60,000 agents all over Bangladesh • 15 million transactions a month
Current
Train
Current
Explain
The possibility in forums like today’s
Current