Guest poster Bal K. Joshi is the co-founder and managing director of Thamel Dot Com, Kathmandu, Nepal. He is also a partner in Thamel International.

By Bal K. Joshi
From my perspective, recent public dialogue about the development impact of migrant remittances is a little limited. Traditional cash-to-cash money transfers can lack macroeconomic leverage, especially when the funds are used for consumption rather than investment. However remittances can be more then simply funds transfers. Several years ago, we at Thamel Dot Com (TDC) in Nepal asked ourselves a basic question: Are remittances a "product" or a "platform" for development?

At the time, Thamel Dot Com had launched Nepal's first e-commerce portal and was providing Nepalese diaspora with a suite of products and services, including news and information, money transfer and the ability for people living outside of Nepal to remotely purchase goods and services in Nepal for local delivery. Our money transfer service mirrored that of other money transfer companies—remittances were viewed as a "product". Over time, we came to the conclusion that cash-to-cash money transfer, as a product, is not very interesting...or economically dynamic. We became much more interested in our cash-to-products transactions. This interest came from the fact that the financial margins are better when we "productize" remittances; and also because the economic impact is higher when remittances are directly turned into the value for which they are intended.

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What 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".

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(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.)