I'm glad to be writing to you. I have heard you speak in Abu Dhabi and Singapore, and your ideas inspired me to work on international development ever since.
Well, both in Abu Dhabi and Singapore, one of the key ideas you raised was that of establishing a stock exchange for social enterprises, companies which focus not only on their bottom-line but also have a social mission. That set me thinking about how conventional finance could be put to use for social causes and the idea of a social mutual fund occurred to me.
A social mutual fund: A social mutual fund, as I see it, would be a conventional mutual fund in its structure. That is it would be a pool of small units of capital contributed by a large number of investors. However, the fund would make its investments with a social mission in addition to earning monetary returns.
Possible portfolio allocation: The portfolio allocation could therefore be two tiered. The first tier is the basic allocation in equity, bonds, commodities etc. The second tier would be a cause-based allocation, for instance 20% of the funds invested in health care, women’s welfare, education, microfinance and environmental causes each (just an illustration).
How the fund would serve social causes:
There are two ways to structure the fund -
1. Based on what kind of investments the fund makes - One way is to allow the fund to invest in social enterprises that further the pre-determined causes, such as the ones described above. This type of mutual fund would be for investors who would want their money to help grow companies which engage in social causes.
2. Based on how the returns from investments of the fund are used - The other, more useful way to structure the fund would be to govern how its returns or dividends are distributed.
Many people make donations to social causes of their choice, either one time or on a periodic basis. However, these are often isolated and too small to have any major impact. Besides, such small donations are generally depleted in one shot. Instead, if such donations are channeled into a mutual fund, we could accumulate a significantly large amount to invest in financial markets and generate higher returns because of the sheer volume of funds invested. It is again the age-old concept of ‘economies of scale of investment’. These higher returns from such a mutual fund investment could then be systematically channeled to either one cause or to a portfolio of causes.
As opposed to individual investors donating their earnings or part of it to causes of their choice in an isolated and haphazard fashion, this will systematically organize a flow of donations on a larger scale thus ensuring significant impact.
Benefits: This system addresses an important problem faced by several NGOs dependant on donations. It ensures a supply of funds to the beneficiary organizations, which is secure (because the fund would make diversified investments), regular and diversified (in terms of the number of sources, as opposed to a single rich donor). In the absence of such a social mutual fund and this system of donations, such NGOs and charities spend huge amounts of resources on fund-raising every year.
Secondly, donations are being made from money earned, not by depleting an existing pool of wealth or an endowment. Possibly, endowments of large philanthropic foundations are invested in a similar manner.
However, the common man on the street is not able to contribute to these large endowments in small amounts like he could to a mutual fund by buying the number of units as suitable to his pocket. There are millions of simple, middle class people around the world who would still like to contribute to social causes. Through this social mutual fund they could contribute much larger amounts simply because of the ability to reap economies of scale.
I would be grateful if I could seek your views on this idea and to start a dialogue on how this could be made possible.
Wednesday, May 27, 2009
Saturday, October 11, 2008
A Tale of Two NGOs: Bangladesh’s Grameen Bank and BRAC
A Tale of Two NGOs: Bangladesh’s Grameen Bank and BRAC
( This article written for Knowledge@SMU, published in the 4th Feb - 3rd Mar 2008 issue, can also be accessed at http://knowledge.smu.edu.sg/index.cfm?fa=viewfeature&id=1116)
With a population of 144 million people, 50% of whom live below the national poverty line, Bangladesh is ranked 145th out of 208 economies in terms of per capita gross national income, according to the World Bank. Despite the seemingly dismal figures, Bangladesh has actually made impressive strides in human development over the past couple of decades. In 1990, the proportion of its population living in poverty was nearly 10% higher. Steady economic growth of 4-5% annually together with relatively low inflation has helped to ease poverty, mostly in rural areas. The population growth rate declined from 2.5% in the 1980s to 1.7% in the 1990s and into the new millennium. In the education sector, the gains are equally astounding: for example, gross primary enrollment increased from 72% in 1980 to 98% in 2001, and gender disparity in primary and secondary enrollment has been eliminated, thus reaching a Millenium Development Goal.
How has Bangladesh managed to outperform other low-income countries by doubling per capita GDP growth from 1.6% in the 1980s to 3.3% in the period 1990-2004? The World Bank, in explaining this “development conundrum”, cites several key factors including an active civil society and strong partnerships forged by the government with NGOs.
Two visionary leaders of the best-known Bangladeshi grass-roots development organisations, Grameen Bank and BRAC (Building Resources Across Communities), visited Singapore in the second half of 2007 to share their corporate experiences, key learnings and future plans. Social worker, economist and Nobel Peace Laureate, Muhammad Yunus delivered a keynote address at the Institute of Policy Studies, National University of Singapore. Fazle Hasan Abed, founder and chairman of BRAC, winner of a Magsaysay award and the 2007 Clinton Global Citizen Award, delivered the inaugural Lien Foundation Centre Distinguished Lecture at the Singapore Management University.
Common Origins
Both Grameen Bank and BRAC were set up in response to crises in Bangladesh more than three decades ago. In 1972, Abed left a well-paid job in London to join the liberation movement in Bangladesh. Moved by the plight of Bangladeshi refugees pouring across the border with India, he founded BRAC (then known as the Bangladesh Rural Advancement Committee) with the mission of rebuilding the remotest villages which government aid was unable to reach. Although initially motivated by a short term purpose of helping in the post-liberation development, Abed and his team could not walk away from the extreme poverty in their country after independence. They stayed on course and BRAC was transformed from a short term emergency initiative to a long term development organisation which, today, employing over 97,000 people, qualifies as one of the world’s largest NGOs.
During the famine of 1974, Mohammed Yunus, an economics professor recently returned from the US, found himself increasingly disillusioned with the disconnect between book learning and the abject poverty surrounding him in Bangladesh. He took it upon himself to try and make a real difference at the grass-roots level by providing a loan of $27 to a small village community near Chittagong. Grameen Bank, which Yunus began as a university project on microcredit, now has 7.31 million borrowers, 97% of whom are women. Grameen has nearly 2,500 branches and provides services to nearly 80,000 villages, with more than 95% coverage of all villages in the country.
Microfinance and Grameen
Microfinance bridges the gap between the rural poor and the formal financial sector, as the collateral required by commercial banks renders the neediest people in villages unbankable. In order to pull people out of poverty, Yunus realised that there was a need to create a self-sustaining system of lending and borrowing with minimal default. He therefore initiated the idea of collective lending and borrowing in small communities. As poor people cannot provide physical capital or assets as collateral against their loans, Yunus helped to build social capital amongst them to act as a barrier against default.
Based on a great deal of research on the ground, Yunus and his team of students organised groups of women in villages to form loan communities. Rural women would deposit their money with Grameen Bank and could borrow from this fund for entrepreneurial activities. There was collective responsibility to ensure repayment of the loans: the incentive for repayment was knowing the funds were their own, and that defaulting would mean that the entire community would not be able to access such collateral-free loans again. Not surprisingly, repayment rates for Grameen Bank are as high as 97% on average.
While Grameen developed its lending operations to support individuals in income generating activities, it ended up promoting a wave of entrepreneurial activity at the rural level, effectively changing the structure of the Bangladeshi economy.
Healthcare and BRAC
Bangladesh has demonstrated remarkable progress in healthcare and reducing child mortality with BRAC contributing hugely to this area. “One of our goals was to reduce child mortality in Bangladesh by half” said Abed. “In the Bangladesh of 1979, 252 in every thousand children born died before their fifth birthday and 136 of these died before their first. We focused on eradicating diarrhoea, the biggest killer in Bangladesh at that time.”
BRAC volunteers went door-to-door educating mothers about diarrhoea using simple messages and teaching them how to make and administer oral rehydration fluids. The task was immense and thousands of young lives at stake. “There were many challenges such as uncalibrated containers to measure ingredients. Every household had utensils of varying sizes. We solved this problem by making marks on utensils in every household and explaining to the mothers how much of each ingredient had to be mixed. In fact, potable water was another challenge which could potentially make the medicines fatal rather than curative. BRAC painstakingly taught every mother to use only boiled water for these purposes.”
In order to gain the trust of the men in households, BRAC created novel incentive schemes and sought the support of religious schools in spreading the healthcare message. Within a decade, BRAC had covered 14 million households in 70,000 villages. Stated Abed, “BRAC went to every household in Bangladesh and that is what gave us the confidence that we could do anything.” Today Bangladesh ranks highest in the use of oral rehydration therapy amongst developing countries.
BRAC also partnered with the government in universal immunisation of children by supporting state-sponsored programmes and also making government procedures more efficient through innovative solutions. A key problem was the poor storage of vaccines which would spoil in the warm climate as refrigerators broke down often and repairs took too long. BRAC therefore trained a brigade of technicians who would cycle from village to village repairing refrigerators. The dramatic decline in child mortality is evidence of the success of this scheme. In Bangladesh today, for every 1000 children born, 78 will not survive beyond the age of five, and 62 will die in their first year, a phenomenal improvement compared with 1979 when 252 in every thousand children born died before their fifth birthdays and 136 of these died before their first.
Social Enterprise
Both Yunus and Abed are strong advocates of social enterprise, for-profit and non-profit organisations with a social mission.
Grameen Enterprises span a wide variety of business sectors from knitwear to software. One of its most innovative programmes is the Village Phone (or Polli Phone in Bangla) started by Grameen Phone in collaboration with the Grameen Bank and Grameen Telecom. Bangladesh has one of the lowest telephone densities worldwide. The fixed-line telephone density is less than 1 per 100 persons and the mobile-cellular telephone density is 13 per 100 persons as of 2006. Most of its villages are not covered by the state telecommunication company’s land lines.
Using their nationwide network, Grameen Telecom and Grameen Phone, the nation’s largest mobile phone provider, have brought radio-telephones and mobile phones to villages of Bangladesh. There are more than 260,000 Village Phone operators in over 50,000 villages in Bangladesh. The Village Phone works as an owner-operated pay phone, providing a good income stream for the operators, mostly poor women who are borrower members of Grameen Bank. Typically, a member takes out a loan to buy a handset and a subscription, and receives training from Grameen Telecom on how to operate the phone. These women set up call centres in their homes which other villagers can use for a small fee. Rather than weaving baskets to repay loans, they are now even making profits
BRAC works in neglected areas such as banking for small and medium enterprises and, more importantly, businesses to support the rural poor. Abed recounted one of their projects: “Some villages had absolutely no opportunity for money creation. So, BRAC set out to create a quarter of a million jobs in silk production. Volunteers leased roadsides for 20 years from the local authorities and planted 25 million mulberry trees. These were then rented out to women in batches of hundred trees each, thus creating a silk industry where there was none.” Today Bangladesh is known globally for its raw silk production. In 2004, there were 7875 silkworm rearers supported by BRAC, and 1.08 million Disease Free Laying (DFL) silkworm eggs were distributed. BRAC has also established dairies, hatcheries, and other businesses to create employment in rural Bangladesh to suit the skills of the villagers. Affirming his faith in the capabilities of poor people, Yunus stated:“Have you seen a bonsai plant? There is no difference between a bonsai plant and its giant version except that the bonsai was deliberately grown in an environment where its growth was stunted. Poor people are like bonsai plants. If they receive the right environment and support, they could be self-reliant giants like us. If they are not educated does not mean they are not intelligent. They are just like us and just as capable and creative”.
With a population of 144 million people, 50% of whom live below the national poverty line, Bangladesh is ranked 145th out of 208 economies in terms of per capita gross national income, according to the World Bank. Despite the seemingly dismal figures, Bangladesh has actually made impressive strides in human development over the past couple of decades. In 1990, the proportion of its population living in poverty was nearly 10% higher. Steady economic growth of 4-5% annually together with relatively low inflation has helped to ease poverty, mostly in rural areas. The population growth rate declined from 2.5% in the 1980s to 1.7% in the 1990s and into the new millennium. In the education sector, the gains are equally astounding: for example, gross primary enrollment increased from 72% in 1980 to 98% in 2001, and gender disparity in primary and secondary enrollment has been eliminated, thus reaching a Millenium Development Goal.
How has Bangladesh managed to outperform other low-income countries by doubling per capita GDP growth from 1.6% in the 1980s to 3.3% in the period 1990-2004? The World Bank, in explaining this “development conundrum”, cites several key factors including an active civil society and strong partnerships forged by the government with NGOs.
Two visionary leaders of the best-known Bangladeshi grass-roots development organisations, Grameen Bank and BRAC (Building Resources Across Communities), visited Singapore in the second half of 2007 to share their corporate experiences, key learnings and future plans. Social worker, economist and Nobel Peace Laureate, Muhammad Yunus delivered a keynote address at the Institute of Policy Studies, National University of Singapore. Fazle Hasan Abed, founder and chairman of BRAC, winner of a Magsaysay award and the 2007 Clinton Global Citizen Award, delivered the inaugural Lien Foundation Centre Distinguished Lecture at the Singapore Management University.
Common Origins
Both Grameen Bank and BRAC were set up in response to crises in Bangladesh more than three decades ago. In 1972, Abed left a well-paid job in London to join the liberation movement in Bangladesh. Moved by the plight of Bangladeshi refugees pouring across the border with India, he founded BRAC (then known as the Bangladesh Rural Advancement Committee) with the mission of rebuilding the remotest villages which government aid was unable to reach. Although initially motivated by a short term purpose of helping in the post-liberation development, Abed and his team could not walk away from the extreme poverty in their country after independence. They stayed on course and BRAC was transformed from a short term emergency initiative to a long term development organisation which, today, employing over 97,000 people, qualifies as one of the world’s largest NGOs.
During the famine of 1974, Mohammed Yunus, an economics professor recently returned from the US, found himself increasingly disillusioned with the disconnect between book learning and the abject poverty surrounding him in Bangladesh. He took it upon himself to try and make a real difference at the grass-roots level by providing a loan of $27 to a small village community near Chittagong. Grameen Bank, which Yunus began as a university project on microcredit, now has 7.31 million borrowers, 97% of whom are women. Grameen has nearly 2,500 branches and provides services to nearly 80,000 villages, with more than 95% coverage of all villages in the country.
Microfinance and Grameen
Microfinance bridges the gap between the rural poor and the formal financial sector, as the collateral required by commercial banks renders the neediest people in villages unbankable. In order to pull people out of poverty, Yunus realised that there was a need to create a self-sustaining system of lending and borrowing with minimal default. He therefore initiated the idea of collective lending and borrowing in small communities. As poor people cannot provide physical capital or assets as collateral against their loans, Yunus helped to build social capital amongst them to act as a barrier against default.
Based on a great deal of research on the ground, Yunus and his team of students organised groups of women in villages to form loan communities. Rural women would deposit their money with Grameen Bank and could borrow from this fund for entrepreneurial activities. There was collective responsibility to ensure repayment of the loans: the incentive for repayment was knowing the funds were their own, and that defaulting would mean that the entire community would not be able to access such collateral-free loans again. Not surprisingly, repayment rates for Grameen Bank are as high as 97% on average.
While Grameen developed its lending operations to support individuals in income generating activities, it ended up promoting a wave of entrepreneurial activity at the rural level, effectively changing the structure of the Bangladeshi economy.
Healthcare and BRAC
Bangladesh has demonstrated remarkable progress in healthcare and reducing child mortality with BRAC contributing hugely to this area. “One of our goals was to reduce child mortality in Bangladesh by half” said Abed. “In the Bangladesh of 1979, 252 in every thousand children born died before their fifth birthday and 136 of these died before their first. We focused on eradicating diarrhoea, the biggest killer in Bangladesh at that time.”
BRAC volunteers went door-to-door educating mothers about diarrhoea using simple messages and teaching them how to make and administer oral rehydration fluids. The task was immense and thousands of young lives at stake. “There were many challenges such as uncalibrated containers to measure ingredients. Every household had utensils of varying sizes. We solved this problem by making marks on utensils in every household and explaining to the mothers how much of each ingredient had to be mixed. In fact, potable water was another challenge which could potentially make the medicines fatal rather than curative. BRAC painstakingly taught every mother to use only boiled water for these purposes.”
In order to gain the trust of the men in households, BRAC created novel incentive schemes and sought the support of religious schools in spreading the healthcare message. Within a decade, BRAC had covered 14 million households in 70,000 villages. Stated Abed, “BRAC went to every household in Bangladesh and that is what gave us the confidence that we could do anything.” Today Bangladesh ranks highest in the use of oral rehydration therapy amongst developing countries.
BRAC also partnered with the government in universal immunisation of children by supporting state-sponsored programmes and also making government procedures more efficient through innovative solutions. A key problem was the poor storage of vaccines which would spoil in the warm climate as refrigerators broke down often and repairs took too long. BRAC therefore trained a brigade of technicians who would cycle from village to village repairing refrigerators. The dramatic decline in child mortality is evidence of the success of this scheme. In Bangladesh today, for every 1000 children born, 78 will not survive beyond the age of five, and 62 will die in their first year, a phenomenal improvement compared with 1979 when 252 in every thousand children born died before their fifth birthdays and 136 of these died before their first.
Social Enterprise
Both Yunus and Abed are strong advocates of social enterprise, for-profit and non-profit organisations with a social mission.
Grameen Enterprises span a wide variety of business sectors from knitwear to software. One of its most innovative programmes is the Village Phone (or Polli Phone in Bangla) started by Grameen Phone in collaboration with the Grameen Bank and Grameen Telecom. Bangladesh has one of the lowest telephone densities worldwide. The fixed-line telephone density is less than 1 per 100 persons and the mobile-cellular telephone density is 13 per 100 persons as of 2006. Most of its villages are not covered by the state telecommunication company’s land lines.
Using their nationwide network, Grameen Telecom and Grameen Phone, the nation’s largest mobile phone provider, have brought radio-telephones and mobile phones to villages of Bangladesh. There are more than 260,000 Village Phone operators in over 50,000 villages in Bangladesh. The Village Phone works as an owner-operated pay phone, providing a good income stream for the operators, mostly poor women who are borrower members of Grameen Bank. Typically, a member takes out a loan to buy a handset and a subscription, and receives training from Grameen Telecom on how to operate the phone. These women set up call centres in their homes which other villagers can use for a small fee. Rather than weaving baskets to repay loans, they are now even making profits
BRAC works in neglected areas such as banking for small and medium enterprises and, more importantly, businesses to support the rural poor. Abed recounted one of their projects: “Some villages had absolutely no opportunity for money creation. So, BRAC set out to create a quarter of a million jobs in silk production. Volunteers leased roadsides for 20 years from the local authorities and planted 25 million mulberry trees. These were then rented out to women in batches of hundred trees each, thus creating a silk industry where there was none.” Today Bangladesh is known globally for its raw silk production. In 2004, there were 7875 silkworm rearers supported by BRAC, and 1.08 million Disease Free Laying (DFL) silkworm eggs were distributed. BRAC has also established dairies, hatcheries, and other businesses to create employment in rural Bangladesh to suit the skills of the villagers. Affirming his faith in the capabilities of poor people, Yunus stated:“Have you seen a bonsai plant? There is no difference between a bonsai plant and its giant version except that the bonsai was deliberately grown in an environment where its growth was stunted. Poor people are like bonsai plants. If they receive the right environment and support, they could be self-reliant giants like us. If they are not educated does not mean they are not intelligent. They are just like us and just as capable and creative”.
Tuesday, October 30, 2007
Adoption psychology - own vs. alien
Loving and raising somebody else’s child as your own may take psychological preparation. We have all been brought up to distinguish between people and things as ours and alien. We claim our parents and expect them to favor us compared to others’ parents. We claim our friends, we claim our toys, our room, our house, everything we can tag as mine. And just by the virtue of calling it our own, we really do attach more affection to those people and things, don't we? Then how difficult could it be to call an innocent little child our own?Saturday, October 27, 2007
Adoption - Care for One More
I have a dream for the world in 2050 - a world where orphanages are history and each child has a family. Every family that has the financial resources could adopt one child in addition to their own. This way more and more children find safe homes and can go to school.
To transform this into a worldwide movement and to promote adoption as a culture and not just a "solution" for childless couples, I have started a community of like-minded people on facebook: Care for One More. This group is a starting point for brainstorming and realizing that ideal.
Children of today will become the world of tomorrow, we cannot secure our own future unless we secure theirs. So come, join us in making our world worthy of its children:
http://smusg.facebook.com/group.php?gid=5547318261
To transform this into a worldwide movement and to promote adoption as a culture and not just a "solution" for childless couples, I have started a community of like-minded people on facebook: Care for One More. This group is a starting point for brainstorming and realizing that ideal.
Children of today will become the world of tomorrow, we cannot secure our own future unless we secure theirs. So come, join us in making our world worthy of its children:
http://smusg.facebook.com/group.php?gid=5547318261
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