A Brief Assessment of Social Entrepreneurs and Social Entrepreneurship: A New Wave for Better Humanity with a Case Study of Grameen Bank in Bangladesh
Hasmukh Savlani
JASSATE
Bangalore
[email protected] / [email protected]
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Abstract
In this paper, an attempt has been made to briefly highlight the fast emerging and widely spreading movement of social entrepreneurship (SE) in terms of its clear conception, past nature, present manifestation & popularity, a few examples of social entrepreneurs, the growth of SE organization and, of course, their contribution to our society and humanity at large Subsequently, the above matters are traced out with the support of a well known SE organization, viz, Grameen Bank in Bangladesh, where with sincere but consistent intentions and endeavors, the Bank and its founder Prof.Muhammad Yunus, both Nobel Peace Award winners of 2006, have rendered their excellent social service, which neither governments nor corporate bodies could do, inspite of enough resources at their disposal. With over 2260 branches, the Bank has made its services available in more than 72833 villages (covering more than 86% of villages) during last 30 years through a simple but very strategic economic mechanism, viz, micro-credit or micro finance method. While great economists and bankers confine such method to their seminars, speeches, books, interviews etc, Prof.Yunus brought it to the doors of those needy poorest in the rural areas and improved the quality of lives of millions, over 6.7 millions, of such marginalized population, by providing over $7 billion despite several suspicions, constraints and criticism.
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Prof. Yunus identified one simple problem: People were poor because financial institutions failed to extend credit to them. He sorted out this problem and succeeded to bring happiness and civilized living through the power and practice of social entrepreneurship.
1. Objective Of This Paper :
The only objective of this paper is to attempt to highlight the concept of social entrepreneurship, social entrepreneurs, their organizations, and of course their contribution to the society, in general, followed by an evidence of a case study of world famous social entrepreneurial organization, viz., Grameen Bank of Bangladesh in particular.
2. Entrepreneurship vs. Social Entrepreneurship :
According to Peter Drucker, the term ‘entrepreneur’ was introduced two centuries ago by the French economist Jean-Baptiste Say to characterize a special economic actor – not someone who simply opens a business, but someone who “shifts economic resources out of an area of lower into an area of higher productivity and greater yield. (Peter F. Drucker, 1993) And then the growth economist of the 20th Century, Schumpeter, described the entrepreneur as the source of the ‘creative destruction’ necessary for major economic advances (Joseph Schumpeter, 1984).
The concept of ‘business’ or ‘entrepreneurship’, as we generally know, seems to be very narrow means or vehicle for people to make money and maximize profits. That is how millions of executives and students are being educated and trained every year. However to Prof.Muhammad Yonus, Nobel Peace Award winner, 2006, “human being is much bigger than just a profit making entity I am bringing in another business category— the business to do good to people without any expectation of taking profit. So profit is not why I do business, I do it because it touches peoples’ lives and helps people” (Muhammad Yunus 2006).
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This ‘another business category’ is nothing but social entrepreneurship (SE) or ‘social business’. It combines the passion of a social mission with an image of business – like discipline, innovation and determination commonly associated with, for instance, the high-tech pioneers of Silicon Valley. (J. Gregory Dees, 2001).
Dees has made an intelligent and diligent effort of defining SE. According to him the following definition synthesizes an emphasis of discipline and accountability with the notions of value creation taken from Baptiste Say, innovation and change agents from Schumpeter, pursuit of opportunity from Peter Drucker and resourcefulness from Howard Stevenson. In brief, this definition can be as under: (J. Gregory Dees, 2001)
“Social entrepreneurs play the role of change agents in the social sector, by:
adopting a mission to create and sustain value (not just private value).
recognizing and relentlessly pursuing new opportunities to serve that mission,
engaging in a process of continuous innovation, adaptation and learning.
acting boldly without being limited by resources currently in hand, and
exhibiting heightened accountability to the constituencies served and for the outcomes created.”
Dees has fully explained each element in the above definition.
The term SE has emerged recently and has been first coined by Bill Drayton, but the phenomenon is not new. It, has remained in several social reformers and missionary individuals and their institutions. However the concept of SE is gaining some serious popularity in the recent times. SE means different things to different people. Some associate SE exclusively with not-for-profit, organizations, while others refer it to the business owners (SErs), who integrate social responsibility and social welfare into their operations.
3. Social Entrepreneurs (SErs)
Enthused and fired by a profound desire to satisfy the needs of several marginalized members in the society, SErs are the well-springs of our better future seeking solutions for difficult social problems and improving the lives of innumerable individuals and social system, too. Among them a few popular names can be mentioned like Florence Nightangle, Mother Teresa, Bill Drayton Maria Montessoria, Fabio Rosa, Ela Bhat, Jeroo Bilimoria, Nalini Nayak, Ravi Agarwal, Tara Srinivasan, Anil Chitrakar, Nanaji Deshmukh, Javed Abidi, Amitabh Sadangi—– and the list goes quite lengthy; of course we can not forget the recent popular SEr, Prof. Muhammad Yunus. In addition, there are many silent SErs who work without publicity or limelight in several parts of the world. An impressive map of several such SErs, throughout globe along with their place, and the brief activity is beautifully designed by David Bonstein in Appendix – I.
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SErs are neither industrialists nor politicians, but most of them are engineers, doctors, teachers, trainers, lawyers, researchers economists, sociologists, philanthropists and religious pleaders. They are scattered far and wide in the urban and rural areas of Bangladesh, Brazil, Hungary, India Poland, S.Africa, the US …… What unites them is their role as social innovators with powerful ideas and projects for human development. They have a lasting impact on society, yet their valuable contributions remain inadequately understood and appreciated. These individual SErs and their institutions share a commitment to effecting changes that reshape the society and benefit the humanity. Thus SErs change the performance capacity of our society and improve the quality of its life. In brief, the SErs are the front-line drivers of positive social change in the present world.
David Bornstein (2004) has widely described and illustrated six qualities of the successful SErs as under :
Willingness to self-correct
Willingness to share credit
Willingness to break free of established structure.
Willingness’ to cross disciplinary boundaries
Willingness to work quietly and
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Strong ethical impetus.
4. Growth of SE organizations :
Historically, these organizations have been known in negative – as non profit or non governmental organization. Today, they are understood to comprise a new sector dubbed either as independent sector, not for profit sector, third sector, or the citizen sector. Some specialty is there that SE is becoming as a vocation and a main stream area of inquiry, not only in the US, Canada and Europe but increasingly in Asia, Africa and Latin America, too. There have been millions of new citizen organizations across the world over the past three decades. A good account of these organizations, in different countries, has been presented by David Bornstein (2004) in his popular book titled “How to change the world – social entrepreneurs.
Accordingly, for example, in New York city, during 1990s, while overall employment grew by only 4%, employment in the citizen sector grew by 25%. Similarly a John Hopkins study (1999) of eight developed countries found that during 1990-1995, employment in this sector grew 2.5 times faster than for the overall economy. Peter Drucker has identified this sector as America’s leading growth industry (David Bornstein, 2004)
5. A few examples of SE organizations in action:
More recently there have been plenty of examples of group setting up major organizations with social rather than profit motives. Green peace, for example, has excelled in marketing their environmental message while Oxfam, has developed new ways of raising funds for charity and new policies to promote the long term development of areas facing famine. Indeed the best hospitals and universities in the US and elsewhere employ SErs. These organizations are major employers and businesses, with large turnover, which remain wedded to their wider social goals and their commitments to the core social values. (Keith S Glancey and Ronald W Mc.Quaid, 2000).
Peter Drucker (1985) observed that there was no better text for the history of entrepreneurship than the creation and development of the modern university. He used an example of Humboldt University in Berlin, developed in 1890 to help give Germany and its industry scientific and intellectual leadership. By the end of that century, US universities developed leadership in research and scholarship in many areas. The educational entrepreneur has also risen to greater prominence in the last decade.
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A brief list of several such organizations of providing. Direct Support and doing Research is exhibited in Appendix – II.
6. GRAMEEN BANK – A CASE STUDY OF DEFINING SOCIAL ENTREPRENEURSHIP :
The Norwegian Nobel Committee has handed over the Nobel Award for Peace, 2006, to Prof. Muhammad Yunus and his Grameen Bank- model of ‘micro–credit’, in Bangladesh. The term micro–credit has recently become common in development economics. It implies the lending of small amounts of money to people with smaller assets or none at all. Conventional financial institutions lend to the borrowers against secured assets. Addressed specifically to the needs of the very poor, micro credit schemes do away with this traditional tenet or practice.
a. Brief History of Grameen Bank (GB)
Back in the 1970s, an idealistic young man Muhammad Yunus, returned to his newly independent country Bangladesh armed with a Ph.D. in Economics from the U.S. While teaching at Chittagong University, he realized that all his knowledge was of little practical use in ending the poverty around him. One day, while talking to a poor woman, who made bamboo stools, he knew that she had to give up more than 90% of her profits to middleman, simply because she did not have the money to buy the bamboo on her own. She had to borrow from the trader, who insisted that, in return, she needed to sell the finished stools to him at a price determined by him (trader).
Yunus realized the simple problem: People were poor because financial institutions had failed to extend credit to them.
As a first step, he himself lent $27 out of his own pocket to a group of 42 poor women in a village in 1976. Thus was born micro-credit-the vision of Muhammad Yunus and the GB, too. What began as a modest $ 27-initiative of a single individual then is now a $ 7-billion movement spanning the globe (Gargi Banerjee, 2006).
Working as economics professor at the regional university, he was trying to alleviate the dire indebtedness of these women at the hands of local loan sharks. The bank and other financial institutions insisted that Yunus should arrange for a guarantee / collateral before the matter could be considered. Yunus adamantly set out to prove that a credit system could work for the poor even while obviating the need for collateral. Thus the GB was born in 1976, that gave tiny business loan to the poor, especially women. Over the subsequent years, it has become a life-line for millions of poor in Bangladesh.
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The bank advances very small loans ranging between $150 – 200 to start small income generative enterprise. The need of collateral is overcome by organizing borrowers into small self-help groups, who render peer vigilance and support for each other’s borrowing. Borrowers are also required to regularly save a small portion of their income. Through such means – and – ways, the GB has made a difference to the quality of life of a large number of impoverished people in Bangladesh. GB deserves to be key factor in the steady progress made by Bangladesh over the past two decades on human development front.
b. GB Project
Prof. Yunus, Head of the Rural Economics Program at the University of Chittagong in 1976 launched an action research project to examine the possibility of designing a credit delivery system to provide banking services targeted at the rural poor. The Grameen Bank Project (GBP) came into operation with the following objectives:
extend banking facilities to poor men and women;
eliminate the exploitation of the poor by money lenders;
create opportunities for self-employment for the vast multitude of unemployed people in rural Bangladesh;
bring the disadvantaged, mostly the women from the poorest households, within the fold of an organizational format which they can understand and manage by themselves; and
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, and more income”.
The action research demonstrated its strength in Jobra (a village adjacent to Chittagong University) and some of the neighbouring villages during 1976-79. With the sponsorship of the central bank of the country and support of the nationalized commercial banks, the project was extended to Tangail district (a district north of Dhaka, the capital city of Bangladesh) in 1979. With the success in Tangail, the project was extended to several other districts in the country. In October 1983, the GBP was transformed into an independent bank by government legislation. Today GB is owned by the rural poor whom it serves. Borrowers of the Bank own 90% of its share, while the remaining 10% is owned by the government.
c. Impact of GB
GB has reversed conventional banking practice by removing the need for collateral and created a banking system based on mutual trust, provides credit to the poorest of the poor in rural Bangladesh, without any collateral. At GB, credit is a cost effective weapon to fight poverty and it serves as a catalyst in the over all development of socio-economic conditions of the poor who had been kept outside the banking orbit on the ground that they were poor, hence not bankable. Prof. Yunus reasoned that if financial resources can be made available to these poor people on terms and conditions that are appropriate and reasonable, the millions of small people with their millions of small pursuits can add up to create the biggest Development wonders.
As of May, 2006, it has 6.7 million borrowers, 97 % of whom are women. With 2259 branches, GB provides services in 72,833 villages, covering more than 86% of the total villages in Bangladesh.
GB’s positive impact on its poor and formerly poor borrowers has been documented in many independent studies carried out by external agencies including the World Bank, the International Food Research Policy Institute (IFPRI) and the Bangladesh Institute of development Studies (BIDS).
d. Breaking the vicious cycle of poverty through micro credit.
The GB is based on the voluntary formation of small groups of five people to provide mutual, morally binding group guarantees in lieu of the collateral required by conventional banks. At first, only two members of a group are allowed to apply for a loan. Depending on their performance in repayment, the next two borrowers can then apply and, subsequently, the fifth member as well.
The assumption is that if individual borrowers are given access to credit, they will be able to identify and engage in viable income-generating activities like processing of paddy husking, lime-making, and manufacturing such as pottery, weaving, and garment sewing, storage, marketing and transport services. Women were initially given equal access to the schemes, and they proved not only reliable borrowers but astute entrepreneurs too. As a result, they have raised their status, lessened their dependency on their husbands and improved their homes and the nutritional standards of their children. Today over 90 % of borrowers are women.
Intensive discipline, supervision, and servicing characterize the operations of GB which are carried out by “Bicycle bankers” in branch units with considerable delegated authority. The rigorous selection of borrowers and their projects by these bank workers, the powerful peer pressure exerted on these individuals by the groups, and the repayment scheme based on 50 weekly installments, contribute to operational viability to the rural banking system designed for the poor. Savings have also been encouraged. Under the scheme, there is a provision for 5 % of loans to be credited to a group and Taka 5 is credited every week to the fund.
e. Success of GB despite suspicions:
The success of this initiative shows that a number of objections to lending to the poor can be overcome if careful supervision and management are provided. For example, it had earlier been thought that the poor would not be able to find remunerative occupations. In fact, Grameen borrowers have successfully done so. It was thought that the poor would not be able to repay; while in fact, repayment rates reached 97 %. It was thought that poor rural women in particular were not bankable; in fact, they accounted for 94 % of borrowers in early 1992. It was also thought that the poor can not save; in fact, group savings have proven as successful as group lending. It was thought that rural power structures would make sure that such a bank failed; but the GB has been able to expand rapidly. Indeed, from fewer than 15,000 borrowers in 1980, the membership grew to nearly 100,000 by mid-1984. By the end of 1998, the number of branches in operation was 1128, with 2.34 million members (2.24 million of them women) in 38,957 villages. There were 66,581 centers of groups, of which 33,126 were women. Group savings reached 7,853 million taka (approximately USD 162 million), out of which 7300 million taka (approximately USD 152 million) were saved by women.
f. Method of action: Principles:
The GB’s method of action can be illustrated by the following principles:
o Start with the problem rather than the solution: a credit system must be based on a survey of the social background rather than on a pre-established banking technique.
o Adopt a progressive attitude: development is a long – term process which dependent on the aspirations and commitment of the economic operators.
o Make sure that the credit system serves the poor, and not vice-versa; credit officers visit the villages, enabling them to get to know the borrowers.
o Establish priorities for action vis-à-vis to the target population: serve the most poverty-sticken people needing investment resources, who have no access to credit.
o At the beginning, restrict credit to income-generating production operations, freely selected by the borrower. Make it possible for the borrower to be able to repay the loan.
o Lean on solidarity groups: small information groups consisting of co-opted members coming from the same background and trusting each other.
o Associate savings with credit without it being necessarily a prerequisite.
o Combine close monitoring of borrowers with procedures which are simple and standardized as possible.
o Do everything possible to ensure the system’s financial balance.
o Invest in human resources: training leaders will provide them with real development ethics based on rigiour, creativity, understanding and respect for the rural environment.
g. Grameen Bank is Different From Conventional Banks :
· GB methodology is almost the reverse of the conventional banking methodology. Conventional banking is based on the principle that the more you have the more you can get. In other words, if one has little or nothing, one gets nothing. As a result more than half the population of the world is deprived of the financial services of the conventional banks. Conventional banking is based on collateral. Grameen system is collateral – free.
· GB starts with the belief that credit should be accepted as a human right, and builds a system, where one who does not possess anything gets the highest priority in getting a loan. Grameen methodology is not based on assessing the material possession of a person, it is based on the potential of a person. Grameen believes that all human beings, including the poorest, are endowed with endless potential.
· Conventional banks look at what has already been acquired by a person. Grameen looks at the potential that is waiting to be unleashed in a person.
· Conventional banks are owned by the rich, generally men GB is owned by poor women.
· Overarching objective of the conventional banks is to maximize profits. GB’s objective is to bring financial services to the poor,
particularly women and the poorest ¾ to help them fight poverty, stay profitable and financially sound. It is a composite objective, coming out of social and economic visions.
· Conventional bank focuses on men, Grameen gives high priority of women. 96 per cent of GB’s borrowers are women. GB works to raise the status of poor women in their families by giving them ownership of assets. It makes sure that the ownership of the houses built with GB’s loans remains with the borrowers, i.e., the women.
· GB branches are located in the rural areas, unlike the branches of conventional banks which try to locate themselves as close as possible to the business districts and urban centers. First principle of Grameen banking is that the clients should not go to the bank, it is the bank which should go to the people instead GB’s 18,795 staff meets 6.74 million borrowers at their door-step in over 71,371 villages spread out all over Bangladesh, every week, and render bank’s services. Repayment of Grameen loans is also made very easy by splitting the loan amount in tiny weekly installments. Doing business this way means a lot of work for the bank, but it is a lot convenient for the borrowers.
h. Global recognition and contribution:
Since 1990s, Yunus and the GB began to attract global recognition. Micro-credit and micro-finance are universally advocated as very effective instruments of alleviating poverty – a most serious problem over the world. Today more than 100 countries including the developed ones like the US and those in West Europe have put, in one or other form, the micro credit schemes to work. These are estimated to cover more than 100 million people helping themselves to reduce their deprivation.
In February 1997 at the Global Micro Credit Summit, Washington, the gathering took upon itself the goal “to launch a global movement to reach 100 million of the world’s poorest families, especially the women of these families, with credit for self-employment and other financial and business services by the year 2005” (Business India, 2006).
While the new millennium began with a dream to cut poverty in half by 2015, as agreed by the world leaders in the UN millennium goals in 2000. (Muhammad Yunus 2006).
In its citation the Nobel Committee states, “lasting peace can not be achieved unless large population groups find ways, in which to breakout of poverty. Micro credit is such means……… across cultures and civilizations, Prof. Yunus and Grameen Bank have shown that even poorest of the poor can work to bring about their own development”.
6. EPILOGUE :
From the above brief discussion and details, it appears very clear that the present concept and practice of corporate entrepreneurship or so called ‘business’, which is widely profit – oriented, can’t solve the world’s social problems like in equal distribution of wealth, unemployment, crimes, corruption, diseases, poverty and so on. We have recently come across the surprising news that one percent richest people have amassed 40% wealth of the world. Keeping in mind the benefits of and contribution made by social entrepreneurs and their organizations, it is essential to encourage and augment the efforts of these enterprises in a big way.
APPENDIX II
1. ORGANIZATIONS PROVIDING DIRECT SUPPORT TO SOCIAL ENTREPRENEURS
i. Acumen Fund : Supports entrepreneurial approaches to solving global poverty by providing a blueprint for building financially sustainable and scalable organizations that deliver affordable, critical goods and services to the poor.
ii. Ashoka : Develops the profession of social entrepreneurship around the world by investing in people.
iii. Draper Richards Foundation : Helps people create wide reaching social change by providing funding and business mentoring to individuals and their non profit organizations.
iv. Echoing Green : Sparks social change by identifying providing startup grants, supporting and connecting social entrepreneurs and their organizations.
v. Global Giving : Enables individuals and companies to find and support social and economic development projects around the world.
vi. Kauffman Foundation: Improves economic welfare and academic achievement of children in low-income families by promoting entrepreneurship–friendly policies and research in technology and education.
vii. The Schwab Foundation : Supports social entrepreneurship as a key element to advance societies and address social problems.
viii. Skoll Foundation : Advances systemic change to benefit communities around the world by investing in, connecting and celebrating social entrepreneurs. The foundation extends its mission through Social Edge, an online resource for the social entrepreneur community.
2. RESEARCH ORGANIZATIONS BASED IN UNIVERSITIES
Skoll Center for Social Entrepreneurship at Oxford University
Social Enterprise Initiative at Harvard Business School
Center for Social Innovation (CSI) at Stanford Graduate School of Business
Center for the Advancement of Social Entrepreneurship at Duke University’s Fuqua School of Business.
Social Enterprise Program.
3. GENERAL RESOURCES FOR RESEARCH ON SOCIAL CHANGE ORGANIZATIONS
One world.net
The Chronicle of Philanthropy – online newspaper
Changemakers.net
Idealist.org
References
1. Business India (2006), Self help economics, Nov.19 Mumbai
2. David Bornstein (2004), How to Change the World – Social Entrepreneurs and the Power of New Ideas, Oxford Uni Press, New York.
3. Gargi Banerjee (2006), Business World The way ahead, Dec 4, Mumbai.
4. J.Gregory Dees (2001) www.indiatimes.com The meaning of social Entrepreneurship.
5. Johns Hopkin University Institute for Policy Studies Center for Civil Society Studies (1999), Baltimore.
6. Joseph A Schumpeter (1984), Capitalism, Socialism and Democracy, Harper Collins, New York.
7. Muhammad Yunus (2006) Interview with Rasheeda Bhagat, The Hindu Business Line, Nov8. Bangalore.
8. Muhammad Yunus, (2006), The New Indian Express, Dec 11, Bangalore. ed.
9. Peter F. Drucker, (1993), Innovation and Entrepreneurship, Harper Business New York.
10. Peter F.Drucker, (1985), Innovation and Entrepreneurship, Heinemann, London.
Websites visited :
www.ashoka.com
www.indiatimes.com
www.schwabfound.org
www.bus.ualberta.ca/ccse
www.gsb.stanford.edu/csi
www.acumenfund.org
