Grameen Shakti, for a sustainable future

We spent today at a couple of the sister organisations of the Bank. First, it was a visit to Grameen Shakti, an organisation seeking to provide renewable electricity and energy to the rural poor, largely off the national grid, which is currently 47% of the population. Even those 53% with coverage suffer from almost daily power outages. 

The company has been operating since 1996, and has so far installed solar panels in over a million homes, an incredible feat earning the company numerous international awards. It hopes to reach its second million by 2015, currently installing c.25,000 systems each month. That 46 other organisations have only implemented one million solar panels between them puts this achievement into perspective. 

There are obvious benefits to the provision of renewable energy to rural areas. Namely the improvement of vital services such as healthcare and education. Access to light also extends business hours, a vital aid to the survival of some of Bangladesh’s poorest citizens. Solar power is also used to aid agriculture in controlling irrigation systems, and to power telecommunication towers across the country. 

The operation is also driving real social change in the form of female empowerment. Grameen Technology Centres, responsible for the installation and maintenance of the power supply, are operated by 150 female engineers, with a further 3,000 local female technicians trained. 

There are a number of loans available with differing levels of downpayment, interest rates and repayment periods based on personal situation and the size of the solar panel purchased. Grameen Shakti boasts an incredible 95% recovery rate of these loans, suggesting that the electricity offered is having a real impact upon the successful practice of rural business and agriculture. 

Grameen Shakti also operates two other main projects, one for the provision of biogas, largely made from manure, and the other the provision of Improved Cooking Stoves. To date, the company has provided rural areas with 25,619 biogas plants, each serving different sized groups or families. There are obvious immediate benefits to this for the families, namely a cheaper supply of energy, and certain global benefits, such as reduced demand for non-renewable resources. There is, however, the obvious downside that the methane produced has four times the global warming potential per particle as carbon dioxide. 

The Improved Cooking Stoves offer a cooking solution using less biomass, producing less emissions, and creating a healthier indoor cooking environment, with a pipe to extract smoke produced in cooking. To date, over 261,000 have been installed. 

A recent Environmental Impact Assessment on the collective projects has shown staggering results for carbon emission reduction. Thus far, 124.26 million litres of kerosene have been saved, equating to $109million. The total emission reduction comes in at a cool 293,262 tonnes of C02 per year! The obvious benefit to Bangladesh, though not necessary the environment, is that the country can now sell on any carbon credits saved. 

The operation has amazing opportunities to expand, and even greater opportunities for replication. There seems to be no good reason why such a system cannot operate in more developing countries of a similar climate, the system is a win-win for almost all involved. We were told the project is indeed being replicated, in countries such as Nepal, though seemingly at no great speed. 

The project can (and must, though in perhaps a different form) now spread to urban areas, where the consumption of, and cost of using, non-renewable energy is staggering. The company claim to want to address areas without any energy first, but I’m sure there is no harm in starting to plan an approach to urban areas that can see solar-power and biogas replace alternative forms of energy generation. Indeed, Grameen Shakti has already introduced a huge biogas plant 24km from Dhaka, with agreements in place with various rural municipalities to provide manure.  

The work of Grameen Shakti is amazing and must continue, even broadening to cover other questions of sustainability and environmental degradation. I need to learn more about all of the projects Shakti is undertaking to make a more full analysis, but from what we learnt today there is certainly more that it can do, on a social business and NGO level. A fund for green entrepreneurship, encouraging sustainable small businesses in rural areas, supporting sustainable forestry, tightening protection of national parks and thus wildlife conservation, and improving recycling facilities are all potential projects for the future (though of course based on an imperfect knowledge of current projects).    

Social Business

After a fantastic and relaxing weekend away in Srimangal (north-east of Bangladesh, right on the Indian border, where most of the country’s tea is grown), it was back to the office this morning for a set of presentations on our respective village trips. 

We had an interesting afternoon learning about the Yunus Centre, an effective offshoot of the Grameen Bank. The Yunus Centre exists to promote and develop social business, a term coined by Muhammad Yunus to refer to a business that operates on a non-loss, non-dividend level, existing to address a certain social problem. 

The concept is effectively a merger between a traditional profit maximising business and a charity, where a social business operates with the efficiency and process of the traditional business but with a socially-beneficial motive. For example, the Grameen Family worked with Danone to address the issue of malnutrition in Bangladesh. Research suggested that many rural poor in Bangladesh were missing out on key nutrients, which were put into a special yoghurt and sold in order to recoup operating costs and repay initial investments, so as to become a self-sustaining business. Veolia have a similar operation in Bangladesh with water, Uniqlo with clothes and Intel with software. 

An initial obstacle Danone, and others, encountered was how to make the business profitable (or at least breaking even) whilst reaching the right customers. Danone, and most others, have taken the subsidising approach. The yoghurt is sold to the rural poor for say 4/5 taka, an effective loss for the company, whilst it is (rebranded and) sold at urban supermarkets for say 25 taka, making a profit and thus covering the aforementioned loss. 

The role of the Yunus Centre, then, is to promote this form of business around the world, and help those who want to establish social businesses. The Centre is very often approached by such entrepreneurial individuals with ideas, and it can help by researching the project and the feasibility of taking it to market. To date, the centre has helped 150 companies in over 40 countries. 

In terms of raising awareness for social business as an alternative to charity, the Centres is driving the creation of Social Business Cities, defined as a city with three social business operating, and one university performing relevant research. The Centre works with such universities to aid their own research, often putting potential business models to the test. 

The Yunus Centre also works on the development of Social Business Funds, effectively pools of money that anyone can borrow from (once a business plan has been fully approved) to be repaid with only a little bit of interest to cover administration costs. The Fund is supported by individuals and companies, with the Centre asking for some of the CSR budget of certain large companies. The Centre is also looking to, in the future, develop a more efficient social business indicator, social business courses at universities, social business certification and perhaps even a social business stock exchange. 

For me, the notion of social business was the thing that really grabbed me whilst reading Banker to the Poor (chapter 27). The concept is still in its infancy, having been nurtured here in Bangladesh for only 5-6 years, but I believe it is one that has an exponentially influential future in the development of our economic and social future. The 2008 financial crash made it apparent that economists and politician seem to have only one model of economic growth, supported by the traditional profit-maximising companies. As Western nations look to redraw their economies, and ponder the question of reconciling economic growth with social and welfare support, the concept of social business should be one entertained at the highest level. I was saddened to hear that so far only Glasgow University has really got behind the concept in the UK, hopefully this can change in the near future. 

Back from the village!

I’ve just returned from the village - what an amazing experience, and throughly a relief to get out of Dhaka (after only two days here!).

We stayed at a Grameen Bank Branch in the village of Norshindhi, about two hours north of Dhaka. The Branch boasted 5,302 current loanees, and a phenomenal recovery rate of 99.12%. The Branch houses the operating bank downstairs, photos below, and upstairs bedrooms, a kitchen and a living area. The bedrooms were very simple (see photos), electricity constantly went out, and there were mosquitos everywhere, but despite all of that the fact that almost all of the branch staff lived upstairs, along with one’s wife and two children, gave the place a real homely and fun feel. We were even invited to break the fast with the staff and their families, a photo is below of us eating Iftar. 

We spent the three days in the village with our translator Younus (pictured below with the branch manager) visiting numerous borrowers and also centre meetings. Many borrowers stories followed a familiar pattern. We first visited a young man who was running his mother’s phone shop with his brother. His mother was a loanee and also the first Grameen telephone lady in her village, a project ran by Grameenphone a number of years ago. She has since expanded the business to sell sim cards, some handsets and provide internet use on one computer. Next step, I presume, is to turn her shop into a cybercafe to give the village access to the internet. Another similar story was that of the most successful borrower at the second centre meeting. She had started with a 500tk loan (roughly £4) to buy a calf. Through successful repayments, her current loan is for 100,000tk, and she has used her recent successes to send her son to Saudi Arabia to work and send back money whilst she has grown her clothes-making business in the village.

We also met a fantastically well educated Higher Education Loanee, who was studying English Literature at a university in Dhaka. His vocabulary was much more diverse than mine, and I’m not surprised given that he claimed to read Shakespeare outside of his course (which included Thomas Hardy and John Milton). He claimed to have finished school and been stumped as to how he could pay for a university education, before the ‘guardian’ that was the Grameen Bank stepped in. His university education has enabled him to offer private tuition to pay his younger brother’s way through the ‘best university in Bangladesh’, and he plans to seek a job as a professor or in the civil service when he graduates, given the honour and wages bestowed upon both. Interestingly, we also spoke about the state of women’s education in Bangladesh. He stated that they have equal, even occasionally preferential, treatment within the educational system, and that as this new generation graduate from university and take important jobs, society will be much changed. 

We also met a lovely old lady called Ruisa, who was benefitting from the Struggling Members Loan, a small amount offered to those who survive by begging. Ruisa said she got to an age where she was too old to work, her husband had died and her two sons were unable to support her, so she started begging. She was recommended the Grameen Bank by a friend, and initially took a 500tk loan. She used her loan to buy saris at a local market, and sell them in the village, and has been so successful that she is now on her sixth loan of 3000tk. The Struggling Members Loan, however, means that there is no deadline for repayment nor a fixed repayment schedule, one can simply repay it when they are able to. She would love to take a Basic Loan, she claimed, but would struggle to make the fixed repayment schedule. It seems there needs to be some form of institutional bridge between the Struggling Members Loan and Basic Loan, otherwise, as Ruisa admitted herself, many will need to continue begging to survive. I was touched by the story of Ruisa and how hard she was working at her age to raise herself out of destitution and poverty, and decided I would support her by buying a beautiful sari from her. 

The most striking thing about the trip was simply seeing in the flesh a process and institution that I had read so much about. Sitting in the Branch Office as borrowers came in to take out new loans, or in a Centre Meeting (collection of 10 or so groups of borrowers) where women came to repay their weekly installments or pay into their savings or pension schemes with the Bank. Previously the system was just a story in a book, written about a faraway land, yet this week has made it so apparent the amazing work the Bank is doing. Driving through the village it was incredibly apparent that it was a hub of activity and enterprise. 

There were, however, some elements of the trip that proved a disappointment since reading Banker to the Poor and arriving with such high and in reality unrealistic expectations. The position of women, for example, seemed not to have shifted as much as I thought it may have. It seemed to be the case that the wife would take the loan, and simply give it to the husband for the family business, that generally the husband would lead. Maybe this is an exaggeration, but observations definitely showed a village centre of 90% men, whilst the only women we really saw were near or in their houses. Of course they were often working, making clothes or bags for example, but these activities were very much house-bound. 

Most members seemed to suggest an inadequate provision of healthcare and education also. We were told when we visited the Area Office (looks after 10 or so Branches) that only one Branch benefits from Grameen Healthcare, and whilst other NGOs such as BRAC are doing a lot to provide healthcare, there is still some way to go. We were also told there that in the past Grameen provided and supported schools much more than it does now. The most pressing concern seemed to be with high schools, though the primary school we visited (below) had around 700 pupils to 11 teachers.

We were told that the village visit will be the highlight of our trip, and I’m sure that will turn out to be true. As lovely as it was to get out of Dhaka, seeing real lives changed by such a simple process of support that I’d read so much about was both rewarding and inspiring. Whilst the Bank has done an amazing service to Bangladesh thus far, however, there is still more that can be done to help the lives of those who are willing to work so hard on their own initiative. 

First Day at the Office

After arriving last night, today was my first day at the Grameen Headquarters in Dhaka.

Without much chance to get used to living in Dhaka, and believe me it takes getting used to, myself and three other interns were launched into an induction about the bank. Much of the information given, I already knew through reading Banker to the Poor and researching the bank online.

A couple of things caught my attention, however. The most recent figures claim that the bank has 8.4million borrowers throughout Bangladesh. These borrowers are organised into groups of between 5-10 members, with the criteria being that whilst everyone in the group must know eachother well, they cannot be immediate family. If we multiply the number of borrowers then by a (plucked from the air) average family size of 5, the Grameen Bank is helping 42million people in a country of roughly 150million. Amazing. It is no wonder that in recent years the Bank has slowed its growth, with our co-ordinator claiming its infrastructure effectively covers the whole country, and is instead focusing on improving the products it offers. 

After learning about the structural organisation of the bank (groups are organised into centres, centres into a branch office, branch offices into an area office and area offices into a zonal office with the head office at the top), we looked at the types of loan offered by the Grameen Bank. The most common is the Basic Loan: a small amount of money, that can increase when the first is repaid, that can be used on any legal profit-making venture. For those wanting to invest in more expensive capital, the Micro-enterprise Loan exists. Both of these can be converted into Flexible Loans, with kinder repayment rates, should natural or personal disaster strike. The Bank also offers Housing Loans, for the improvement of one's home, which has led to the building of 500,000 houses since its establishment. Lastly, the Higher Education Loan (an amazing thing) exists to pay the child of a borrower through university, with repayment only upon graduation. In this way, and a million others, the Bank is instituting real development and social change. 

More recently, the Grameen Bank has offered savings accounts. These encouraged good habits amongst borrowers, to save what money is earned, and also provide important capital to the Bank so that it can serve more borrowers. Again, there are a number of different savings accounts here, from a basic current account, to a 'double your money in 7 years', and all forms of terms/interest rates in between. Such savings accounts have not just made the Bank sustainable, but it is even now in profit, meaning it can lend money to other banks in order to generate yet more profit and better serve the poor in the future. 

We went into a lot more depth as to how the accounts worked than is shown above. What struck me is the sheer weight of administration. With borrowers depositing maybe 50 taka (not even 50p) each week, it must take a lot of staff/effort to keep on top of everything. Perhaps if the Grameen-style of microcredit was to be replicated in other countries, higher wages and thus a more efficient form of administration may have to be taken into account. 

Normally interns have a week in the office before visiting a village served by the Bank, but as it is Eid next week, our visit is tomorrow! Supposedly it's the best bit of the trip, I'm just excited to get out of Dhaka!

Is everything okay at the Grameen Bank?

I recently attended a talk, held in Oxford by the Oxford Microfinance Initiative, given by Mr Mosleh Uddin Ahmed entitled ‘Is everything okay at the Grameen Bank?’. Mosleh was a member of the recent Grameen Bank Inquiry Commission, which is about to publish its interim report. Mosleh has also himself worked in microfinance in Bangladesh, India, Pakistan, Nepal and Sri Lanka, working with the Gono-Grameen Bima of Delta Life Insurance in Bangladesh. 

As many will know, in May 2011 Muhammad Yunus was forced to relinquish his role as Managing Director of the Grameen Bank, ceding power to his Deputy Managing Director Mrs Nurjahan Begum. This came as a shock to the international community, given the recent Nobel Peace Prize Yunus had won, and the symbolic and real importance he served at the Bank. As such it was the international community that demanded an independent inquiry, driving the creation of the Grameen Bank Inquiry Commission. 

Mosleh pulled no punches in his analysis of the Bank, with most in the room shocked having only known the idyllic stories of the Bank. In short, he pointed to the creation of the Bank under a Government Ordinance, and not the Companies Act as the fundamental failing. Further down the line, it was a total inability to provide any effective, government or other, regulation of the Bank that led it into trouble. He also pointed his finger at inefficient and even unfair internal elections, and government corruption leading to Yunus’ eventual exit. 

Mosleh opened his talk by stating that the recent removal of Professor Muhammad Yunus may have been valid, but the manner in which it was carried out was shameful. He also stressed that the Grameen Bank Inquiry, did not seek to ask why he was removed, merely to investigate the current health of the Bank. It was stressed, however, that Yunus was let down by not being an administrator and the failure of governance, regulation and directorship at the Bangladesh Bank. Molseh pointed, in part, to the nine landless, poor women on the Grameen board, who simply didn’t know enough, had no constructive input, and shouldn’t have been at the top. 

Mosleh stressed that the creation of the Grameen Bank was the fundamental instability of its existence. The Bank was set up under a Government Ordinance, with the government as ultimate owners, a defective statute which made it the only non-private microfinance in the world. All problems stemmed from the fact that it should have been set up as a private institution. 

The government, in the Bank’s creation, gave 100% of the capital to set it up, with 40% of this as a loan. When the Bank’s capital increased, and the pattern of shareholding changed as a result, the government failed to change the Ordinance. This, argued Mosleh, was a failure on the part of the government, as this was their duty. Further, in 1994 they still hadn’t even paid for their shares. 

Thus, the dispute of the legal status of the Grameen Bank underpinned much of its recent turbulence. Where Yunus claimed that it was a private institution, the government asserted their ownership. In a technical sense, the government’s position was correct: the Grameen Bank had not been created under the Companies Act. It was, Mosleh believes, a mistake to not make it part of the 1961 Banking Act, which would exclude it from such government regulation. At this point, Mosleh even suggested this could have been intentional, with potential bribery behind the decision. 

Mosleh also pointed his finger at the courts. When Yunus took this issue of ownership to court, the Bank’s status was not changed and it remained government owned. Here, Mosleh argued, the Chief Justice should have seen the mistake in the Bank’s creation, and allowed the Bank to change its status to that of a private institution. 

Thus, when the Grameen Bank began making multimillion pound investments, with the poor women of Bangladesh as the long-term, indirect beneficiaries, as the Bank was created to do, it was technically prohibited from doing this by its government status. The government, however, did not behave as if its duty was to regulate the Bank: when the Bank was slow in receiving dividends back from its $6.6million dollar investment in Grameen Telecom, the government failed to step in. 

This failure of regulation was systemic. Between 1995 and 2012, the Bangladesh Bank investigated the Grameen Bank twelve times, and every year the auditors failed to indicate that anything was going wrong.

Further, upon the establishment of the Grameen Bank, the status of the borrower-shareholder was not defined enough within the Ordinance, a seemingly glaring and fatal mistake given that they could not simply lean upon definitions within the Companies Act. The Ordinance, then, allowed for the distribution of profit as the directors saw fit, when it should have gone to the poor women. Though, there is no evidence of misspending. 

Mosleh also highlighted the structure of governance and system of democracy within the Bank as an undermining factor. To become a shareholder of the Grameen Bank, an individual first needed to be approved as a borrower, and then as a saver. Elections, however, went awry as all borrowers were allowed to vote, not just the savers as set out in the Ordinance. Mosleh described this as ‘ultra virus’. Further, the women on the board were not elected, but appointed.

In conclusion, Mosleh stated that the government must appoint a new Managing Director with immediate effect. The new MD’s first priority must then be to change the rules for the election to the board of directors, with the current nine directors replaced with better educated and qualified individuals. The three directors from the government should also be removed and replaced by nominated individuals from NGOs and civil society.

In relation to the failure of regulation, Mosleh suggested that the regulators and supervisors should pay more attention to the affairs of the Grameen Bank, instead of letting it float in a  quasi-private, quasi-government sphere. 

It is a crying shame that the future of the Grameen Bank seems to lie so heavily in the current government’s hands. With elections set for December of this year, there is a strong chance that the current government will be thrown out. Should a new government come into replace it, there is a strong likelihood that Yunus will be allowed to return to the Bank.

This political squabbling, Mosleh claimed, traces itself back to 2001, when a caretaker government (traditionally in power for three months to oversee elections) remained, illegally, in power for two years. In this time, it tried to bring in a third party, which Yunus volunteered to lead. In a tremendous fall out with the two principal parties, Yunus was called a ‘loan shark’ and retorted that the government were corrupt. The grudge, it appears, was upheld when the current government sought to oust Yunus on the basis that he was legally too old to be a public Managing Director. 

On one level, Mosleh seemed to suggest that there was a basic miscommunication between the Bank and the Government: that Yunus simply believed the Bank was private and ran it as such. It was somewhat saddening, however, to listen to Mosleh’s personal attacks on Yunus, for his debilitating cult of personality, leaving the Bank with no succession plans, and his ability to influence government to overlook certain factors and trust him on others, in an empire-building manner. 

Such issues must not be allowed to undermine the fantastic work the Bank has done over the last few decades, but of course they must be addressed to improve efficiency and thus the benefit the poor women of Bangladesh are attaining from the Bank. My visit comes at an incredibly important time for the future of the Bank, and I hope I can learn more about the changes that are ongoing and the path the Bank is set to take in the future. 

The full report by the Grameen Bank Inquiry Commission has been delayed, but is set to be published in early August. 

Introductions

On Saturday 27th July, I will fly to Dhaka, Bangladesh, to begin a month-long internship with the Grameen Bank. 

The Grameen Bank is a Noble-Peace Prize winning, microfinance initiative established by Professor Muhammad Yunus in 1976. The Bank established itself to lend small amounts of money to the poorest women in Bangaldesh, without requiring collateral, in order to enable them to invest in their farms or small enterprises, and raise themselves out of poverty. Lending works on a collective repayment method, whereby a group of women is lent the money collectively, and should one woman default the ability of the group to borrow in the future is inhibited. This method has proved incredibly successful, with a 98% repayment rate compared to a more traditional 60% figure. In his book, Banker to the Poor, Yunus states that the poor women that are being lent the money know that their only collateral is their life, that if they fail to repay the loan, their income and thus very existence is called into question. As such, the determination to work to repay the loan and gradually drag themselves out of poverty is amazing. 

The Bank has developed rapidly since its creation, with it now accepting deposits, running a Low Cost Housing Program as well as telephone and energy companies. The Bank currently employs over 20,000 people, with operating revenues of $176million. For anyone who has read Banker to the Poor, and knows how Yunus' idea began with the $27 he lent to 42 women in Jobra, this growth is truly phenomenal and inspirational. 

I am incredibly drawn to this idea of social enterprise. Instead of operating as a charity, the Grameen Bank gives its borrowers the pride and satisfaction of working their way out of poverty in a sustainable manner. I hope this month will give me an idea of how such social entrepreneurship projects can be established and grown successfully in the future. 

I would like to thank the Old Members' Trust at University College, Oxford for their kind support of my trip to Bangladesh.