Introduction
Complexity and overwhelming nature of issues to be coped with in some countries of the world calls forth the need to add extra dimensions to state’s combating the issues in terms of implementing its functions, and change existing systems and institutions. Social entrepreneurship represents a process by which citizens can either create or transform institutions to advance solutions to such issues, as poverty, illnesses, environment pollution, corruption and human rights abuses (Bornstein&Davis, 2010, pp.1-2).
One of world-known contemporary social entrepreneurs is Mohammad Yunus, founder and manager of Grameen bank and 2006 Noble prize winner, who is currently successfully designing further business ventures to successfully serve social initiatives. For the purposes of this assignment I would like to briefly characterize Mr.Yunus’ background, refer to the history of Grameen bank in order to explore the way it is different from for-profit banks, and its solutions to poverty in rural regions in Bangladesh, trace the way Grameen family of ventures developed and, finally investigate the way Mohammad Yunus approaches social business, after having been one of its pioneers.
Background of Mohammed Yunus
Mohammed Yunus, the third of nine children in the family, was born in 1940 to a Muslim family in rural area of British Raj (modern Bangladesh). After the family moved to the city Chittagong, Mohammed studied in Chittagong Collegiate School and then Chittagong College. In 1957 future social entrepreneur was enrolled in the Department of Economics, Dhaka University, the oldest higher educational institution in modern Bangladesh. After graduation Mohammed Yunus worked as a lecturer for Chittagong College, and simultaneously established a small for-profit packaging factory. In 1965 he received a Fulbright scholarship to study in a Ph.D program in the USA.
Birth of microcredit idea.
The idea of creating tiny credits at reasonable interest for the poor in rural area of Bangladesh came to the mind of Mohammed Yunus, when he was exposed to the issue of impossibility of getting a small credit at not too high rate in for-profit bank, and understood that these loans are likely to make a great change in the lives of poor people in rural areas. For instance, women, who made their living and supported their families by creating bamboo furniture, could have been granted small loans to buy bamboo, and then repay the debt after having sold the product. While thinking that the poor will not likely repay the money, for-profit banks tended to deny applications by the poor. On the contrary, Mr.Yunus was convinced of the fact that the poor would repay money due to the fact they would be in need of credits in the future.
Early history of Grameen bank project
In December 1976 Mohammed Yunus (at that time he was the Head of the Rural Economics Program at the University of Chittagong) got the loan from the government Janata Bank in order to relend the money to the poor in Jobra. According to the information from the official website of Grameen Bank (the word “grameen” means “rural” or village” in Bengali), the Bank was established in order to, first of all, make banking facilities available for the poor; combat the exploitation of the poor by money lenders; help the multitude of unemployed people in rural Bangladesh get the opportunity for self-employment; provide benefit for the disadvantaged, mostly the women from poorest household in the form they can understand and manage without external help, as well as find the solution for a vicious circle “low income, low savings, low investment” by interjection of the model of credit, which will promote more significant investments into rural economics (Grameen Bank, 2013).
The extension of Mohammed Yunus’ pilot project in Jobra to Tngail district and other areas of rural Bangladesh was a continuous process, supported by central bank of Bangladesh and some nationalized commercial banks. Over the period from 1976 to 1983, the project lacked ban status, while in 1983 it was granted the status of an Independent Bank.
Grameen bank
Grameen bank is being based on four major principles, namely discipline, unity, courage and hard work (Grameen Bank, 2013). With objectives of Grameen bank project’s creation, having been listed in previous subsection of the paper, I would like to suggest that the main goal of Grameen Bank’s activities can be associated with single word – “prosperity”. Thus combating poverty and reaching prosperity are social issues, tackled in terms of social entrepreneurship project under study.
Specific objectives, highlighted by the project as the elements of prosperity included improving housing, growing vegetables not only for food, but for selling the surplus, family planning, educating children, keeping environment clean, ensuring clean drinking water, not inflicting injustice, promoting mutual help. As different visions and definitions of poverty and prosperity may have been worked by different organizations in different countries, for the purposes of his project Mohammed Yunus developed a set of ten indicators to assess whether families have moved out of poverty or stay poor. The indicators connect poverty to such issues as quality of housing, drinking water, sanitary level of latrine, clothing, nutrition, health, as well as savings.
The main tool, being used by Grameen Bank in order to help the poor convert vicious circle of poverty into virtuous circle of wellbeing, is credit delivery system.
The basis of credit delivery system, developed by Grameen Bank, is constituted by microcredit financial tool. Features of Grameencredit are as follows. First of all, it promotes credit being a human right. Secondly, the credit is targeted exclusively for the poorest of the poor with a special focus on disadvantaged and marginalized group. The key peculiarity of the credit lies in the fact that it does not require signing any collateral or legally enforceable contracts, while being solely based on trust. Furthermore, having been developed as a response to conventional banking, Grameencredit does not use the credit methodology, developed in terms of conventional banking, basing its activities on alternative vision. Aiming at directly reaching the target, the developers suggest that people should not go to bank to get a credit, while a credit should be deliverable at door-step basis.
Particular convenience of the loan lies in not refusing from the possibility to simultaneously obtain several loans from Grameen Bank or to receive the loans in continuous sequence. Borrowers are to form groups in order to get loans. Extra benefit lies in the fact that both obligatory and voluntary savings programs are available, along with the loan. Special emphasis is being associated with building social capital-related priority, presuming that poor have skills, which are underutilized, and thus need support to utilize them and thus make their living.
Peculiarities of Grameencredit called forth the need to design credit delivery system, aiming at preserving uniqueness of Grameencredit. Exclusivity of targeting poor of the poorest is ensured by several peculiarities of Grameen credit delivery system. Firstly, clear eligibility criteria have been set to distinguish those, who can apply for a credit, and practical measures are being adopted to screen out applicants, who fail to meet them. Secondly, the priority in delivering credit is being assigned to women. Thirdly, the delivery system is aimed at meeting highly diverse socio-economic need of the poor, acknowledging uniqueness of each applicant’s situation. Maintenance of the system is supported by the fact that borrowers are being organized into small groups of at least five people in order to provide them with the opportunity to build capacity and make micro level decisions in a more reasonable way. These groups are thereafter federated into centres, whose meetings help to solve mutual issues at the local level. Cooperation with Grameen bank in this regard is facilitated by the help that field workers attend centre’s meetings on regularly basis.
Credit delivery system is based on conditions, especially suitable for the poor. These conditions include small amounts of the loans to be given without a collateral, loans being repaid in weakly installments over the period of a year, close supervision of the credit both by the group and bank’s staff, as well as ensuring credit discipline through collective responsibility and influence of the group and securing the credit by the system of obligatory and voluntary savings to be made with the help of the income, being generated thanks to the activity, based on skills an applicant already possess at the moment of being granted a loan.
Focus on providing solution for many social issues, being wide-spread in the rural area, is ensured by the fact that Grameen bank aims at promoting mutual initiatives of the borrowers with regard to capacity-building in solving common issues, raises social and political awareness of newly formed groups and designs special loans programs to meet highly diverse socio-economic needs of the target. Example of these programs may include credits for building sanitary latrines; loans for installation of tubewells and supply of drinking water or loans for leasing equipment (Grameen Bank, 2013).
Structure of the bank is decentralized. Such a mode allows field workers monitor the life in communities. A management of each bank branch is ensured by branch and centre managers. A branch usually provides services for inhabitants of 15-22 villages.
Measuring impact
As I have already mentioned before, impact of Grameen bank’s activities is being measured with the help of ten indicators, which are aimed at assessing such aspects of life of borrowers as housing, water supply, clothing, food, education of children, availability of savings etc. If a family meets the criteria, having been developed by the venture, it means that it had gone out of poverty.
Transferring to figures, I would like to mention that over the period from 1976 to 2009 total amount of loans had grown from 0,001 to 8741.86 million U.S. dollars. If in 1976 only one village was covered by Grameen bank project, in 2009 there have already been 83458 villages covered with 1 253160 small groups in them. As Grameen bank initially aimed at targeting women as most disadvantaged population of villages in Bangladesh, by 2009 97 per cent of people, covered by the program had been women (Grameen Bank, 2013).
Success of the initiative can be proved not only by its continuous expansion and surviving in terms of the world’s crisis, but by its profitability rates. While over the period from 1976 to 1982 Grameen Bank project was totally profitless, in 2009 it reported to have got 5.38 million U.S. dollars income. Nevertheless, this figure is significantly lower than the profit, which was gained by the company in 2006 (20 million U.S. dollars) and 2008 (18.99 million U.S. dollars). As it was stated by Khandker (1996), growth of Grameen bank can be traced in terms of institutions, memberships and finance (pp.65-75).
Nevertheless, as Grameen bank is aimed at helping households in Bangladesh get out of vicious circle of poverty, it is more purpose-oriented to consider impact of the project with regard to the change of livelihood status, which occurred as a result of borrowers having taken part in the program. According to the results of sociological study, which have been conducted by Kuhinur&Rokonuzzaman (2009), the average change of livelihood status after having got Grameen bank credit, was estimated at 13.94/20 (p.381).
Out of eleven basic characteristics, education, credit availability, annual income, communication with Grameen bank’s employees, as well as the attitude towards the program were positively significant, while only age and non-localite behavior were negatively significant with regard to change in livelihood status being a dependent variable (Kuhinur&Rokonuzzaman, 2009, p.381). E
vident positive trait of the microcredit system lies in the fact that it actually promotes the reduction of borrowers’ vulnerability and by-turn prevents them from falling even deeper into poverty. As Grameen bank mostly targets female householders, it is logical to state that the initiative has had a positive impact on the societal position of women in Bangladesh. It can be also noted that personal empowerment of the borrowers is likely to have a positive impact on lots of people, connected to the one, who had received the benefit.
Grameen family of organizations
Success of Grameen bank’s project had led to the diversification of this venture. Nowadays Grameen family of organizations is comprised of 54 organizations. Most well-known of them are Grameen Bank, Grameen Trust, Grameen Fund, Grameen Telecom, Grameenphone, Grameen Solutions Ltd., Grameen Communications, Grameen Fisheries and Livestock Foundation, Grameen Shakti, Grameen Shikha, Grameen Byabosa Bikash and Grameen Danone Foods (a joint venture between Grameen Bank and the French food company called Group Danone).
Grameen Trust is a non-profit non-governmental organization, which follows microcredit-related approach, having been developed by Grameen Bank in order to combat poverty all over the world through Grameen Bank Replication Program (GBRP), which includes dialogue programs for organizations, which can potentially become replicators, providing training and technological assistance for replication projects, as well as funding selected projects and monitoring performance.
Grameen Fund is established in order to use Grameen Bank microcredit approach to promote the development of small and medium-size business in Bangladesh. Its main function lies in providing SMEs (small and medium-size enterprises) with risk capital. Grameen Telecom and Grameephone support spreading GSM-based cellular phones in Bangladesh. Grameen Solutions Ltd. and Grameen Communications are not-for-profit information technologies organizations under the umbrella of Grameen. Different technological solutions,d eveloped by these companies, help to promote information access, communication and IT education in rural areas of Bangladesh.
Grameen Fisheries and Livestock Foundation is specifically targeted to combat poverty among those, involved in the functioning of aquaculture and fishery sectors, as well as to develop modern integrated farming systems in these areas. Grameen Shakti is designed in order to promote and spread renewable energy technologies in rural areas of Bangladesh. Enabling environment is currently being created by Grameen Shakti in order to combat obstacles, preserving renewable energy from solar home systems being popularized. Grameen Shikkha aims at promoting mass education in rural areas, as well as providing monetary support from those, willing to obtain higher education. Moreover, Grameen Shikkha pais special attention to implementing projects, suggesting using IT to reduce illiteracy.
Grameen Byabosa Bikash supplements Grameen Fund project, providing extra services for rural entrepreneurs.
Grameen Danone Foods is currently being busy with creating fortified yoghurt, containing all key nutrients for children, which are usually missing in terms of children’s dieting.
Overall assessment
As a result of his practical activities as social entrepreneur, Mohammed Yunus had not only contributed to combating poverty in Bangladesh and other countries in the world (through Grameen Trust), but developed his own vision of social entrepreneurship, which he reflected in the book “Creating the world without poverty” (2007). I agree with Mohammed Yunus’ thesis that particularly the introduction of social business makes capitalism structure complete (Yunus, 2007, p.21). Furthermore, I respect the approach, which promotes clear division between business and charity, suggesting that, despite broadening the landscape of business, social business remains being business. This difference is still critical, if we study the core idea behind microcredit mechanism.
Great peculiarity of the initiative by Mohammed Yunus lies in the fact that by introducing microcredit he does not provide inhabitants of the rural areas with everything they may need, but empowers each of them to utilize the shkills he/she already possesses to generate income. Thus by example of success of Yunus’ initiative it can be proved that investing in social capital and promoting both individual empowerment and making use of synergy effect in teamwork can significantly reduce existing social risk. Extra plus lies in the development of Grameen family of organizations and launching joint ventures, so that social issues, being faced by the inhabitants of rural areas of Bangladesh, can be managed separately.
Difficulties in assessing the impact of the initiative are associated with the lack of sociological investigations, examining the effectiveness of microcredit program in long-term perspective, as well as the ones, aimed at describing the initiative’s overall impact on political, economic and social environment in Bangladesh.
Criticism can be connected with the usage of archaic mechanism of collective responsibility, aiming at encouraging borrowers to repay their credits, as well as usage of other repression mechanisms, imposing too many obligations on the borrowers. On the other hand, one does not knows whether the initiative could have ever been successful without employing tough mechanisms, ensuring repayable nature of microcredits.
Conclusion
Mohammed Yanus is one of most famous modern social entrepreneur, who had managed to launch Grameen bank project and establish Grameen family of organizations, aiming at combating poverty in Bangladesh. Success of the project has been repeatedly proved by its institutional, participants’ and financial growth rates, as well as positive impact on livelihood status of those, residing in the rural area in Bangladesh. Lots of replication-aimed projects have been designed all over the world to combat poverty. Grameen family of organizations members tend to tackle different social issues, related to poverty.
References
Bornstein, D., Davis, S. (2010). Social entrepreneurship: what everyone needs to know. Oxford: Oxford University Press
Grameen Bank (2013). Official website. Retrieved 10 December 2013 from http://www.grameen-info.org/
Khandker, S. (1996). Grameen Bank: impact, cost and program sustainability. Asian Development Review, 14(1), pp.65-85
Kuhinur, S., Rokonuzzaman, M. (2009). Impact of Grameen bank microcredit on change in livelihood status of women beneficiaries. Journal of Bangladesh Agricultural University, 7(2), pp.381-386
Yunus, M. (2007). Creating a world without poverty. NY: Public Affairs
