Digital CV

Grameen Bank: A Success Story Part 3

Grameen Bank vs Conventional Banks

Grameen Bank

• To bring economic and social change to the poor.
• Based on trust
• Looks at what the borrower can have
• Located in rural areas
• The bank goes to the customer
• Flexible payment scheme
• Most owners and borrowers are poor women
• Loans are for productive activity, not consumption

Conventional Banks

• To make profit
• Based on collateral
• Looks at what the borrower already has
• Located in urban areas
• Customers have to go to the bank
• Strict payment scheme
• Most owners and borrowers are wealthy men
• Loans could be used for consumption or other activities.

Structure of Grameen Bank

How It Functions:

• 5 member group is formed, they must be neighbors but not relatives.
• Group approves all loan requests, but liability lies with the individual.
• 8 Groups to a Center.
• Lending is in the order of 2:2:1 (leader being the last).
• Close supervision of credit by the group as well as the bank staff.
• Group meets once in a week to plan out loan repayment.
• Stress on credit discipline and collective borrower responsibility or peer pressure.
• Very small loans given without any collateral, no legal instrument, no joint group guarantee or joint liability
• Loans repayable in weekly installments spread over a year .
• Eligibility for a subsequent loan depends upon repayment of first loan 
• Loans are given to Individual for quick income generating activities which employ the skills that borrowers already posses
• Interest rate  varies between 15-24 % p.a. on flat basis and on a weekly basis. 

Savings programs:

• It is compulsory for every member to save one Taka per week which is accumulated in the Group Fund. 
• This account is managed by the group on a consensual basis, thus providing the members with an essential experience in the collective management of finances. 
• The amount in the Fund is deposited with Grameen Bank and earns interest.
•  A member can borrow from this fund for  consumption, sickness, social ceremony or even for investment (if allowed by all group members). 

Purpose of Granting Loans

• Average loan size is $120 and must be used for business venture
• Self Employment- Income generating activities.
• Credit for building sanitary latrines 
• Credit for installation of tube wells that supply drinking water and irrigation for kitchen gardens 
• Credit for seasonal cultivation to buy agricultural inputs 
• Loan for leasing equipment / machinery, i.e cell phones purchased by Grameen Bank members 

Indicators for Measuring Social Impact

• Family lives in a house with a tin roof
• Family members drink pure water
• All children in the family over 6 years go to school
• Minimum weekly loan installment in Tk 200 or more
• Family uses sanitary latrine
• Family members have adequate clothing for everyday use
• The borrower maintains an average balance of 5000 Tk 
• Family can take care of health 
• Family has no difficulty having 3 square meals a day
• Family has sources of additional income

Grameen Bank: A Success Story Part 2

Continuing with the previous post lets look in the detailed working and business model of Grameen bank

Concept of Micro Credit:

Micro-credit: programs that extend small loans or wider range of financial services to poor people to foster self-employment and income generations and improve their living standards.

Micro-finance: programs that provide credit for self-employment and other business and financial services, includes both credit and savings aspects of the program.

                                                                

Features of Micro-credit:
Micro-credit generally involves :

• Small loans, for both working capital and assets
• Collateral free, substituted by group guarantee or compensatory savings
• Access to repeat and larger loans
• Intensive supervision and close monitoring
• Loan period generally for one year, may go up to 3 years
• Options available for weekly/monthly installment payment
• Can combine social development with financial inter-mediation 

Architect of Grameen Bank:
Professor Muhammad Yunus, founder of the globally renowned Grameen Bank  and architect of Grameen Model.  Joint winner of 2006 Nobel Prize Winner for Peace

Project Overview:

• extend banking facilities to poor 
• eliminate the exploitation of the poor by money lenders 
• create opportunities for self-employment 
• bring the disadvantaged, mostly the women from the poorest households, within the fold of an organizational format 
• reverse the age-old vicious circle of "low income, low saving & low investment“ into virtuous circle of "low income,injection of credit, investment, more income, more savings, more investment, more income 

Opportunity Identified:

• Designing credit delivery system to provide Banking Services targeted at the rural poor who were capable of self sustenance (initially started with funding women initiatives)‏
• Organizing the un-organized sector largely dominated by the corrupt money lenders
• Bring the disadvantaged, mostly the women from the poorest into the financial umbrella
• Year 1976-79: Started with a pilot project in District Jobara, Bangladesh 
• He made his first loan of $27 to 42 women so that they could expand their bamboo business
• Year 1980-83: Spread across the country with the help of Central Bank and the Nationalized Banks
•  Year 1983: Transformed into an Independent Bank by the Government Legislation

Grameen Bank : A success story Part 1

Today I will be sharing about a revolution which took Capitalism to Poor.I am sharing the Story of Grameen Bank. 

Befitting the goal of poverty alleviation, the setting for this early experiment was a time of great tragedy in Bangladesh, one of the poorest countries in the world.A small country in the Indian subcontinent with a population of 130 million, a gross national product per capita of about $300 and a literacy rate of only 38 percent for those over 15 years of age, 1 Bangladesh experienced drought and famine in 1974 that killed 1.5 million people.

Having recently completed studies as a Fulbright scholar in the United States,Professor Mohammad Yunus was lecturing on economic theory at Chittagong University and growing increasingly frustrated at his inability to ease his neighbors'suffering.

Yunus attributes the origin of his vision to a chance encounter in Jobra with Sufia Begum, a 21-year-old woman who, desperate to support herself, had borrowed about 25 cents from moneylenders charging exorbitant interest rates approaching 10 percent per day. Ms. Begum used the money to make bamboo stools that, as a condition of the loan,she sold back to the moneylenders at a price well below market value for a profit of about of 2 cents.Ms Begum’s desperate position could best be described as bonded labor.

Yunus found 42 people in Jobra in the same poverty trap, and in 1976 he experimented by lending them small amounts of money at reasonable rates. Yunus lent a total of $27-about 62 cents per borrower.To his pleasant surprise, all the borrowers repaid the loans, in the process convincing him that this success could be replicated across Bangladesh.

From these humble efforts emerged a new industry: micro credit-the extension of small loans and other financial and business services to entrepreneurs too poor to qualify for traditional bank loans. Yunus carried his success story to traditional banks and proposed that they could also make uncollateralize loans to society's poorest.In response, the banks asserted that borrowers would never sufficiently organize themselves to repay, that proceeds from such loans were too small to cover administrative costs and that female borrowers would simply hand over the funds to their husbands.

Yunus answered these challenges by founding an institution of his own, Grameen Bank, the name of which derives from gram, the Bengali word for "Village." He did so in the belief that capital is a friend of the poor and that its accumulation by the poor represents their best means of escaping the abject poverty that the welfare state and wasteful, corrupt and incompetent international aid organizations have failed to combat.

Yunus 's vision was of a bank that would address all aspects of rural life and support commercial activities ranging from manufacturing to retail, including even door-to-door sales.The bank would require no collateral and would prove once and for all what Righter later referred to as "The bank ability of the unbankable."

The 3 theory effect: Motivation Theories

"Motivation is the drive to achieve a goal, and can be either intrinsic or 
extrinsic"

Motivated employees are more productive and creative than those who are unmotivated. They enjoy their work more and experience less stress. Managers usually strive to find ways to motivate their staff. Behavioral psychologists have developed various theories about motivation in an attempt to better understand and control human behavior. A basic understanding of three major motivation theories helps us to see how motivation can be applied in the workplace.

What is Motivation?

Stated simply, motivation is the driving force behind all people's actions. Behavioral psychologists have conducted research investigating why people behave the way they do. Entrepreneurs who understand the theories that were developed from this research about what makes people tick learn how to motivate purchasers to buy their products and use their services. Employers also want to find the key that motivates workers to work diligently and productively.

Taylor's Theory of Scientific Management

Frederick Taylor's theory of motivation states that most workers are motivated solely by the pay they receive for the work they do. He postulated that most workers do not enjoy the work they do and only perform when given the direct reward of monetary payment. His ideas were adopted by Henry Ford and other industrialists who paid their factory workers according to the number of items produced. This theory lost favor as workers became frustrated and production was frequently halted due to strikes by disgruntled employees.

Mayo's Theory of Human Relations

Elton Mayo's theory of motivation examined the social needs of the worker. He believed that pay alone was not sufficient to motivate employees to put forth their best effort. He believed that the social needs of the workers should be taken into consideration. He recommended employers treat their workers in a caring and humane fashion that demonstrates an interest in the individual in order to have them produce their best work.

Case Study:  TESCO:

•          At Tesco communication is an important factor in motivating employees. This may be through 1-to-1 discussions with managers, through the company intranet, newsletters or through more formal structures such as appraisals.
•          Line managers hold a daily Team Meeting to update staff on what is happening for the day and to give out Value Awards, which can be given from any member of staff to another as a way of saying “thank you” and celebrating achievements.
•          Tesco also promotes motivation through its many training and development opportunities. Everyone has access to the training they need to do their job well and to leadership training to grow within the company.  Tesco offers strategic career planning to help staff 'achieve the extraordinary'.

This suggests that Tesco follows Mayo’s motivation theories.

Maslow and Herzberg's Theory of Human Needs

Abraham Maslow and Frederick Irving Herzberg believed that psychological forces drive human behavior. Their theory postulated a graduated scale of human needs ranging from basic, physical ones such as hunger and thirst to higher level ones such as the need to be loved and the need for self-fulfillment. They believed employers would see better results from workers if they recognized the various needs of individual workers and if they varied the rewards offered to them.

                                      

A short video on Motivation which can be useful to understand the concepts

"Try to become not a man of success, but try rather to become a man of value".
-Albert Einstein

Crossing River and Team Work

A team comprises a group of people linked in a common purpose. Teams are especially appropriate for conducting tasks that are high in complexity and have many interdependent sub-tasks.
A group in itself does not necessarily constitute a team. Teams normally have members with complementary skills and generate synergy through a coordinated effort which allows each member to maximize his/her strengths and minimize his/her weaknesses. Team members need to learn how to help one another, help other team members realize their true potential, and create an environment that allows everyone to go beyond their limitations. A team becomes more than just a collection of people when a strong sense of mutual commitment creates synergy, thus generating performance greater than the sum of the performance of its individual members.                              
                                                        
                                                

 But to form a team there are various stages, which helps the organization or mangers to form an effective and efficient team.

        FORMING: - the group forms and members learn about each other by exploring each other.

       STORMING: - as the members start to know each other and more comfortable with each other they start to oppose themselves.

       NORMING: - after the dispute or fight gets resolved, group unity emerges.

     PERFORMING: - with understanding and confidence in other members start to redirect their effort to complete the group task.

       ADJOURNING: - now the group moves to achieve high performance with attitude.   

  

                                                            

                                                 

A team that continues to work together will eventually develop an increased level of bonding. This can help people avoid unnecessary conflicts since they have become well acquainted with each other through team work. Team members’ ratings of their satisfaction with a team is correlated with the level of teamwork processes present.

Every team member can offer their unique knowledge and ability to help improve other team members. Through teamwork the sharing of these qualities will allow team members to be more productive in the future.

In the above example despite of valley gap being greater than their normal step they cross it very easily. And the key concept there is team work. Like when of member is in high risk other two support that one and cross the valley.

Steps involved in crossing the valley. 

                                                                              

1.      In step one all are safe.

2.      First person is at half risk

3.      First person is at full risk while other two are safe. Supporting first.

4.      First and second person both are half risk and thirds is safe.

5.      Second person is at full risk, while first and third are safe.

6.      Second and third are at half risk, while first had crossed the river and is safe.

7.      Third is at half risk, while first and second are safe.

8.      All crossed the river successfully and safe.

 

Now the benefit of team work was evidently visible from the above mentioned examples. A single brain can’t bounce different ideas off of each other. Each team member has a responsibility to contribute equally and offer their unique perspective on a problem to arrive at the best possible solution. Teamwork can lead to better decisions, products, or services.

A single person taking on multiple tasks will not be able to perform at a same pace as a team can. When people work together they can complete tasks faster by dividing the work to people of different abilities and knowledge.

Here all three members are equally responsible for the task; they are equally contributor to task. Role of three are similar not the same. Three thousand people can cross the valley using the same concept. It’s like building an organization assigning different task to different member but the overall goal is the same.

Any organization must be designed according to customer demands and then people should be adjusted or assigned work accordingly.

Quoting Michael Jordon "Talent Wins Games but TEAMWORK wins Championships"