A global expert on entrepreneurship and innovation, Iqbal has taught both at MIT and Harvard. But he is best known for founding a company 25 years back that revolutionised the Bangladeshi economy - Grameenphone
In 1993, when a young Iqbal Z Quadir first pitched the idea of setting up a mobile phone company in Bangladesh, the country's per capita GDP was around $340. A GSM mobile phone at the time effectively cost around $500 to make and less than one percent of Americans were actually using a digital mobile phone. The numbers did not make sense at all. On top of that, Iqbal had no background in telecommunications. Everyone thought Iqbal had gone mad.
But Iqbal, then working at a venture capital firm Atrium Capital Corp and plugged into the technological innovations happening around him, was doing a whole different set of calculations.
From Moore's Law to more power
Computer processors were becoming smaller and cheaper by the day and going by Moore's Law, they would keep getting cheaper and smaller. Mobile phones had just begun to get digitalised, meaning that they too would also be subject to Moore's Law. That is, they would become more powerful and cheaper by the day. "They were starting their march to people with low incomes," Iqbal said.
Secondly, a small incident as a child during the Liberation War in 1971 taught him an important lesson about communication. One of his younger siblings had fallen ill and he was sent to fetch medicines for his brother from a doctor who lived around 12 kilometres away. He made the arduous and long journey on foot, only to find the medicine supplier was not around. If he had had access to a communication device through which he could have found out whether the medicines were available, he could have saved time and energy, which he could have used on something else.
He had forgotten this incident until more than two decades later, when there was a computer network breakdown at Atrium Capital Corp, and he had to sit idle for a while until the person called in to fix the system had arrived. "Communication," he realised immediately, "is productivity."
And so Iqbal figured, if a communication device was handed over to a person with low income it could continuously increase his productivity, and as a result his earnings. And so, paying for the mobile phone would no longer be an issue. As long as he or she could earn more, the person could purchase the service through higher earnings. All it needed was to introduce a mechanism where the payment was made out gradually.
"Take for example the Singer Sewing Machine. When it first came out it was not cheap, probably around $125. But the sewing machine had the capacity to empower people to an extraordinary degree and so people were willing to pay for it. In fact, the Singer company's sale of sewing machines was the birth of consumer finance," says Iqbal, now 63, and a Senior Fellow at the Harvard Kennedy School, during a recent visit to Dhaka.
From rural life to American Dream
Born to the late Anwarul Quadir and Shireen Quadir in 1958, Iqbal spent a large part of his childhood in Jessore city. He lost his father at the tender age of 14. In 1971, when his family moved to the villages for safety during the war, Iqbal would be exposed to the vagaries of rural life for the first time and would make many friends in the community. It would have a lasting impression on him and although he would move to the United States in 1976 and was well on course to fulfil the "American Dream'', a part of him would always be thinking about how to lift the suffering millions in Bangladesh out of poverty. In the 1980s, Iqbal and his brother would even design a Bangla word processing programme, but soon realised that computers would have limited use in 1980s' Bangladesh when the literacy rates were low.
Iqbal has an MA in Applied Economics from the Wharton School at University of Pennsylvania and a decade later he would also do an MBA from the same school. During his undergraduate years he concentrated on Computer Engineering and Economics and clearly still has a strong interest in economic theory.
Iqbal got drawn to Adam Smith when he discovered in The Wealth of Nations a description of Bengal and how its "opulence" was built on its inland navigation. But these were stories of yore, and Bangladesh had just been hit by a cyclone in 1991. Reports in international media about the suffering and abject poverty in the country were certainly not helping Iqbal to get people on board with his ideas.
"Over the next few years, I went to a number of mobile phone companies and most of them said 'no'. In fact, one of them told me outright that 'we are not the Red Cross'. Even Telenor initially had a great deal of hesitancy to enter Bangladesh. It started more out of a sense of doing good than doing business," says Iqbal.
The democratising effect of technology
The one other aspect about mobile phones that drew Iqbal in so much was also the "democratising effect" that was inherent to the technology itself. The old-fashioned telephone systems were not just expensive to set up, but because the message travelled on wires, its benefits could only reach people sitting at both ends of the wires. In cellular technology – although it is expensive to set up towers – the radio waves allow a far more efficient use of technology because the same frequency can be used by multiple users.
"It was essentially for everyone. At the same time, virtually everyone can talk. Its use did not have to be confined to those who had a lot of money or those who could read or write. Those who had more money could use it for a longer period and those who had less could use it less or only when absolutely necessary. It could be custom-tailored to different needs of people. Also, one mobile could essentially be used by an entire village and could turn into a source of income for the person who could set up a phone-retailing service," says Iqbal.
"Phone for the masses" is born
Iqbal realised mobile phones would not just empower people, but it would allow them to become empowered at their own locations. This meant it could ease the overcrowding problems that trouble our major city centres. But for Iqbal to be able to reach the large swathes of the rural population that he targeted, he needed an organisation that had presence all around rural Bangladesh–an organisation like Grameen Bank. In 1993, he approached Grameen Bank and pitched his idea that he then called the "Gonofone"—or phones for the masses.
"Grameen Bank initially had a lot of doubts. I had offered to connect their 1,000 offices around the country but by then they had already settled on a decentralised mode of working and were not too keen on rocking that boat," recalls Iqbal.
Iqbal then spent some more time understanding Grameen Bank's business model to figure out how the mobile phone could become a part of their ecosystem.
"Back then, a typical microfinance loan essentially allowed a person, usually a woman, to buy a cow. I realised the mobile phone could be the cow." Iqbal had effectively found an answer to how mobile phones could become affordable to low-income people.
On March 26, 1997, Grameenphone was eventually launched in Bangladesh after years of effort on Iqbal's part to convince the different stakeholders, and involving his New York-based Gonofone Development Corp that he had established in 1994. Iqbal, during interviews, now often jokes that he lost most of his hair during those early years trying to set up the company.
Although mobile technology had been around for a while at that point – and even CityCell was selling services in Bangladesh at a premium price (albeit through analog technology at the time) – Grameenphone was arguably the first time in the world that mobile phones were made available to the masses, including those with low incomes.
"The current Prime Minister Sheikh Hasina, who had just come to power for the first time in 1996 quickly understood the vision and appreciated the benefits it could bring to the whole population. She endorsed the idea of giving a licence to Grameenphone," says Iqbal.
"It's basically like oxygen"
In 1997, when Grameenphone was launched, the country's GDP was a little over $40 billion. Today, 25 years later, the economy is ten times larger, valued at around $400 billion.
"It is hard to measure the impact mobile phones have had on the economy and people's life because the technology is all encompassing. If you are a farmer it has an impact on you, if you are an RMG factory owner it has impacted you, if you are a doctor or teacher, it has impacted you. It is basically like oxygen," says Iqbal, adding with a smile, "But out of the $360 billion that has been added to the economy I would hope you would at least give the mobile technology credit for around $25 billion a year. That is absolutely awesome."
Although instrumental in setting up Grameenphone, Iqbal would largely be absent from GP's growth story as in 2000 he would leave the company to join the Harvard Kennedy School in 2001. For someone with a deep interest in economic theory and history, it was a difficult offer to refuse. He would go on to join MIT in 2005 where, a couple of years later, he set up the Legatum Center where he trained and incubated MIT graduate students looking to set up entrepreneurial ventures in low-income countries. He taught at MIT as a Professor of Practice in Entrepreneurship for nearly a decade. In 2018, he returned to the Harvard Kennedy School and nowadays spends most of his time working on a book.
Although he left GP, he continued his association with the country. In 2005, he set up Emergence Bioenergy to build small power plants for people in areas that had no access to the power grid. Although the project never really took off, in 2011, Iqbal became a director of bKash, founded by his younger brother Kamal Quadir as a subsidiary of Brac Bank.
"Ideas create capital"
"bkash is all Kamal's idea and effort. However, since we are siblings, some of the organising principles may have influenced Kamal's thinking. Serving the masses is an example of those principles" says Iqbal. "Entrepreneurship and innovation can unleash people's potential" is another such principle.
"Let me ask you a question," says Iqbal, sitting in the living room of his brother's house on 25 March morning. "Did Steve Jobs or Bill Gates start their ventures with a huge amount of capital or did they start with an idea that eventually created capital?"
"So, if entrepreneurs in the West create capital starting from small, why are we asked to do it the other way around through the injection of large amounts of capital? You need creators of capital more than capital." Even Grameenphone, Iqbal points out, was built on an initial investment of $120 million and, by 2016, it had invested $3.5 billion on infrastructure. "That means Grameenphone had created far more capital than it had consumed."
Iqbal often speaks eloquently about the power of entrepreneurship to lift people out of poverty and create wealth. He acknowledges that there can be private sector players who take advantage of people's needs to charge higher prices than necessary. But that needs to be addressed by unleashing competition. "It is not an inherent fault of the private sector if there are some businesses who charge more than they should," continued Iqbal.
It's all about the business model
"It is all about how you conceive your business. Some companies, for example Bloomingdale's in the US, like to cater to a high-end market. And then there are others like Walmart who have built a business model to cater to the masses," says Iqbal. The Walmart model is what he had envisioned in the first place, and he believes the latter is more appropriate for Bangladesh.
Iqbal's ideas of entrepreneurship and innovation resonate strongly with the start-up culture that has caught the imagination of Bangladeshi youth over the last decade. Although Iqbal has not been actively following the development of the ecosystem, as someone who had initiated GP and studies start-ups around the world, he has sound advice for young entrepreneurs.
"If you are asking people to spend money on the product or service you are offering, make sure that product or service adds value to the customer's life and multiplies the price he or she is paying several times. Every product or service you offer needs to meet that test, especially when people's income is still low. If someone spends one taka to make a phone call but saves him time and effort to advance him by five takas, you are advancing him by four takas. That is what we need to advance the country rapidly," he says.
Iqbal co-edits a journal called Innovations published by MIT Press, where the latest edition, on "Bangladesh at 50" carried articles by the Prime Minister Sheikh Hasina, Nobel Laureate Amartya Sen, Economist Kaushik Basu, and an engaging piece by Iqbal on an often-ignored period of our history when Bengal's "opulence" helped build the Western World. His recent visit to Dhaka was also to hand over a copy of the issue to the Prime Minister.
While Iqbal continues to grow in the academic world, his brainchild, Grameenphone continues to expand its presence in Bangladesh. In 2020, the company generated revenues worth $1.7 billion and has around 83 million subscribers.
The recent years, however, have been a little patchy for Grameenphone and other big mobile phone companies in the country. Profit numbers are dwindling, there seems to be a constant back and forth between the government and mobile companies over taxes, spectrum price and network expansion. In 2020, The Digital Quality of Life Index by Surfshark put Bangladesh among the bottom 10 countries in terms of internet quality.
"I cannot follow everything that is happening," says Iqbal, adding that "every human struggle has ups and downs. Every piece of progress should not be expected to solve all problems. But we should not lose sight of what mobile phones have been able to achieve in terms of empowering people and helping our economy grow."