Iqbal Quadir Addresses Students about Grameenphone and the Value of Frugality to Inspire Innovation
Iqbal Quadir, Senior Fellow at the Belfer Center for Science and International Affairs at the Harvard Kennedy School, addressed students at SOM in October 2018 about the role of entrepreneurship in creating prosperity. Quadir was an early visionary who believed mobile phones could be productive tools for Bangladesh’s rural poor. In 1996 he founded Grameenphone, which is now the country’s largest telecom operator and serves 99% of Bangladeshis. The founding of Grameenphone reflects his philosophy that, contrary to popular belief, low-income countries need tools that increase productivity more than they need capital. He stressed that capital constraints can actually encourage creativity and innovation.
Quadir referenced the history of Bangladesh to support this point. He explained that the country once sustained an opulent economy that supported the Mughal Empire. Quoting Adam Smith, he asserted that this was possible without external aid because of the population’s work ethic and the opportunities available to progress. While Bangladesh’s large population is typically framed as a barrier to economic development, Quadir believes that Bangladesh’s people are its primary economic resource. With the right tools, Bangladeshis could be more productive, bolster their purchasing power, grow the economy, and increase the country’s GDP.
Motivated by this belief, Quadir sought opportunities that could transform Bangladesh’s productivity with minimal need for capital. With lessons from his own life, including an experience when the breakdown of a computer network interrupted his work, as well as insights from Adam Smith about inland navigation facilitating economic growth, Quadir realized that connectivity leads to productivity. Connectivity allows markets to grow as people benefit from the efficiencies of division of labor and specialization.
This conclusion allowed Quadir to foresee the power of mobile phones in the early 1990s. At that time, the prices of digital technologies were already falling thanks to technological innovation. Moreover, the mobile phone was cheaper than a computer and did not require users to be literate. With the expectation that further technological advances and economies of scale would continue to reduce costs, Quadir realized that mobile phones could provide the ubiquitous reach and connectivity that Bangladesh needed. He partnered with the Grameen Bank to leverage its network in rural areas and later included the Asian Development Bank, International Finance Corporation, and CDC Group. From its inception, Grameenphone made a deliberate effort to reach the rural poor by allowing people to purchase phones on microcredit and by using labor-intensive rather than capital-intensive operations.
As of 2018, Grameenphone has over 70 million subscribers and generates $4 billion in revenues. Having started with an initial investment of $120 million, it has spent $3.5 billion on telecommunication infrastructure. This, Quadir stated, is like Microsoft and Facebook, which grew into massive corporations from modest capital investments. Between 2000 and 2018, the GDP of Bangladesh grew by over 440% and Quadir believes that people’s increasing connectivity has played a significant role.
Given international expenditure on aid for low-income countries, Quadir’s concept of frugality could seem surprising. Poverty in many low-income countries seems like a trap, in which lack of capital leads to low productivity. Quadir believes capital can be channeled more efficiently to the right stakeholders at the right time. Specifically, he stated aid should be directed towards entrepreneurs and not governments, which could spend inefficiently or indulge in corruption. In this way, innovation and productivity can be incentivized to enable low-income countries to develop.
By Tanya Sharma, MBA ‘20
