Rob Katz

Village Phone Direct: Franchising the “Phone Lady” Model

Village Phone WomanWhat do cows and cell phones have in common? Until the advent of microfinance, the answer was not much. Over the past twenty or so years, small loans have enabled thousands of low-income clients to purchase a cow–a story we’ve all heard before. The client sells milk, making money to re-pay the loan and maintain a steady income. In recent years, microfinance clients in Bangladesh, Rwanda, Uganda, and the Philippines have used their loans to purchase cell phones and service through a project called Grameen (now Village) Phone. These entrepreneurs then re-sell minutes on their phone at a slight mark-up to fellow villagers–just like their predecessors sold (and still sell) milk to generate money.

Grameen/Village Phone–combining innovative technology with microfinance and a good business model–has always been one of my favorite base of the pyramid success stories (WRI published an excellent business case study on GrameenPhone way back in 2001). Despite the project’s strength, it hasn’t grown much beyond its roots in four countries. Even when you have a good, proven idea, it’s hard to expand quickly without local offices and staff in new markets. For Village Phone to work, you need to be able to evaluate clients, manage loans, interface with local phone companies, and keep the phones charged and running. The Grameen Foundation has the staff and expertise to do all this in their four operational countries–but why limit such a good model because of a lack of staff?Grameen Foundation announced today that it will push its own limits: GF will launch Village Phone in new markets worldwide through a sister product called Village Phone Direct. Rather than establish hundreds of field offices, Grameen plans to partner with established microfinance institutions, who have the staff and expertise to manage the program (at least from a financial point of view). To help these MFIs run the technology side, GF has partnered with Nokia to create a Village Phone Equipment Kit. The kit includes a Nokia mobile phone, booster antenna, recharging solution and custom-designed cables to connect all of the components. Local customization allows for MFIs to select the telecommunications provider and local marketing strategy that suits their particular needs. Microfinance clients will purchase the Village Phone Equipment Kit directly through their MFI; as they sell airtime, proceeds will go towards loan repayment and personal income. The program’s simplicity offers “phone operator” as another option for microfinance clients–along with “cow”.

Village Phone Direct is still in the pilot stages, but I bet it will work, mostly because of the smart partnership strategy in play here. Rather than keeping their model closed, the Grameen Foundation looked for the right partners (microfinance institutions and Nokia) whose existing products and services could be tweaked to enable large-scale rollout. In their 4 operating countries, Village Phone works for everyone–Grameen and the MFIs get paid back, Nokia sells equipment, clients develop a new business, and villages get served. With Village Phone Direct, the Grameen Foundation has literally boxed up a working BOP model and is poised to send it worldwide through an existing network of MFIs. Simply put, going Direct is franchising Village Phone.

(Clarification: I just spoke with Liselle Yorke of the Grameen Foundation about the nuanced differences between the Foundation and Grameen Bank/Grameen Phone. It’s important to know that the non-profit Grameen Foundation runs the program in Uganda, Rwanda, and the Philippines; the Bangladesh program is managed by the non-profit Grameen Telecom. The Foundation is running Village Phone Direct, with the idea of scaling the model pioneered by Telecom through a network of MFIs. Grameen Phone, the for-profit arm associated with the original Grameen Bank, is not directly involved in this project.)

Microfinance works. Re-selling minutes works. Low-cost, pay-per-use phones work. Franchising works. Why not combine all four elements into one? Other BOP success stories could learn from Grameen, which exemplifies what it means to be entrepreneurial at the BOP–creative, willing to take risks, thinks outside the box. Who will be next?