Showing posts with label Muhammad Yunus. Show all posts
Showing posts with label Muhammad Yunus. Show all posts

Thursday, September 23, 2010

from small beginnings... what makes a social entrepreneur?

Ever since, I got interested in the field of Social Entrepreneurship (which is quite recent in life), I was fascinated by the small beginnings from where some of the life/world-changing social ventures started.

Describing the beginning of SEWA, Ela Bhatt once wrote:

"In 1971, migrant women working as cart-pullers in the city’s cloth market came to me in TLA, where I had started my work life working for textile mill workers of Ahmedabad. The women who lived on the footpath, were seeking help for better living conditions. Next month came the head loader women of the same cloth market, feeling agitated about very low rates of payment (30 paise per trip carrying the bale of cloth from a wholesaler to a retailer). They felt exploited by the traders. Then followed the used garment dealer women in search of credit facility... That was 1971. Some of these urban, poor, self- employed women workers came to the meeting that I called in a public garden where we formed our trade union (1972). We called it the Self Employed Women’s Association, SEWA."

Similarly, David Bornstein described how Grameen Bank was born out of Mohammad Yunus’s chance meeting with Sufiya Khatun who would work hard to make bamboo-stools throughout the day, and yet earn just about 2 cents:

"… When Yunus asked why her profit was so low, she explained that the only person who would lend her money to buy bamboo was the trader who bought her final product - and the price he set barely covered her costs.

(Yunus) wanted to see if there were other villagers in similar circumstances… and compiled a list of forty-two people whose capital requirements, in order to buy materials and work freely, added up to about $26.00.

Through the years he would recount that story hundreds of times… "I felt extremely ashamed of myself being part of a society that could not provide twenty-six dollars to forty-two able, skilled human beings who were trying to make a living."


Likewise...

  • Delhi-based GOONJ, which collects about 40,000 k.g. of garments every month, and reaches them to the needy across 20 states, started in 1998 when its founder Anshu Gupta was struck by the bundle of garments lying unused in his almarah: “Here we are, a young family of two adults, new home-makers for just three years, not wealthy by any means and we have 67 pieces of good, usable garments we don't want any more. Yet, but for the disaster we wouldn't be giving them away."

  • AID (Association for India’s Development), which has 36 chapters in USA and operates more than 100 projects in 18 Indian states, started with a modest proposal by its founder K Ravi to his friends to contribute $10 to start a school in some Indian village.

  • The idea of providing affordable solar electricity to rural poor came to Harish Hande, the Ashden Award winner founder of Selco India, when he visited the Dominican Republic as a part of his Master’s thesis. Today, Selco has more than 30,000 installations and 25 service centers.

  • The Rickshaw Bank was conceived when veterinarian Dr Pradip Kumar Sarmah asked his rickshaw puller how much money he makes, and found that even after 16 years, he did not own the rickshaw, earned a paltry Rs. 25/day, and had to pay half his earning as rent.

  • Child Rights and You (CRY) started when 25-years old Rippan Kapur and 6 of his friends, sitting around his mother’s dining table, contributed Rs.50/- each to create a fund that could “do something for the underprivileged Indian child”. Today, it has grown into one of the largest child rights movement in the country.

    …the list goes on.

    What also puzzled me was that people who started these ventures were ordinary individuals. They had limited means and modest backgrounds. What stimulated them to create/do something significant was also just a commonplace occurrence, similar to myriad situations which we all encounter in our lives.

    And yet, there was “something” they had, which allowed them to transform an everyday experience or act into sustainable ventures which could create major social impact.

    So, what was that “something”?

    As I learned more about such social entrepreneurs (be meeting them and reading), even their field of work may have been different (e.g., tribal and rural development, primary education, women empowerment, micro-credit lending, etc.), five qualities seemed to be common across them:

    a. Belief in possibility of change and human potential
    Underlying their efforts was the optimism that despite adversities and lack of resources/support, it is possible to create large transformations in a social system. This optimism is supported by a belief in the human potential – their own and of those others who are focus of their efforts - to make such changes happen. Ela Bhatt, for instance, was driven by the firm belief that even the poor illiterate women have a vision of personal change, and the capacity to make it happen.

    Similarly, Harish Hande’s vision of reaching solar power to poor communities was based on the conviction that poor can afford, pay for and maintain technology.

    It was this optimism and certainty that allowed them to envision futures that can be created by leveraging on this human potential for self-empowerment.

    b. Inspired Pragmatism
    While the underpinnings of their motivation was an internal need to create ‘social value’, to ‘do something for the marginalised’ or to ‘contribute back to the society’, etc., they did not adopt any charitable model to address the social issues. Their effort was to develop a model of “business” which was sustainable, and therefore, scalable. As Prof Yunus once explained his approach to eradicate poverty:

    ‘…I wanted to give money to people… so that they would be free from the moneylenders to sell their product at the price which the markets gave them …. (I charged interest because) I thought if you do things in a businesslike way, then the project can become as big as you want it to because you are… not dependent on anybody.… This is not charity. This is business: business with a social objective, which is to help people get out of poverty.’

    c. Capacity to Reframe Problems as Opportunities
    Perhaps, what distinguished them from most of us was their opportunity-orientation. Their actions do not start from the decision about how best they can deploy the resources that they have; rather, they start from the issues need to be addressed, and then work backward to identify the resources that are needed to solve those problems, and innovate opportunities for generating those resources.

    Consider, for instance, the Delhi-based Salaam Baalak Trust (SBT), which provides education, meals, boarding facilities, information on basic hygiene, counseling and medical help, and rehabilitation to around 3500 street- and platform- children each year. To partly finance its activities, SBT innovated the “guided street walks”, which are conducted by the street children. Not only this helps in humanizing the interface between the street kids and the social elites, it also provides a source of income to them and SBT.

    d. Heightened Sense of Accountability to Those Served
    The ventures they created were, of course, based on a deeply felt sense of obligation and accountability to the constituencies they served. There was an ethical impetus which guides their actions. But there is another, more important rationale for this sense of accountability.

    Unlike the business entrepreneurs, markets do not work well for social entrepreneurs in providing a feedback on their actions. When one is in the “business” of creating social/environmental value, it is difficult to evaluate – and monitor - the intangibles such as social improvements, public good (or harm), or benefits for the marginalized, etc.

    To offset this inefficiency in the environment in which they operate, they developed mechanisms to assess the needs of the communities which they aim to serve – and the extent to which their efforts and actions make an impact in meeting those needs. Wherever possible, they design market-like feedback mechanisms that reinforce their accountability to their constituencies. SEWA, for instance, developed a unique methodology to monitor its impact by asking 10 questions related to its twin goals of providing ‘full employment’ (including income and social security) and ‘self-reliance’ to its members.

    e. Ability to Work Across Boundaries
    They built not just the organizations, but also a collaborative network across different stakeholders in the issue (e.g., local population, state machinery, technology partners, micro-financial institutions, donors, etc.). Selco India, for instance, tied up with micro-finance agencies to provide credit to their customers/ beneficiaries; Goonj works through more than 100 grass-root organizations across the states to deliver need-based garments; and, CRY works with more hundreds of NGOs to reach the resources to those who need them, etc.

    What perhaps made their ideas and actions sustainable was their ability to collaborate, to create networks, to share ideas, resources and credit with others to increase the sense of ownership in that network.

    After all, as Harry Truman had said long time back:
    “It is amazing what you can achieve if you don’t care who gets the credit”


    *****
  • Wednesday, February 28, 2007

    ...from small beginning

    Like with many established big ventures, it is sometimes difficult to imagine that they had actually started as a small single step.

    Here are two stories of small beginnings:

      "In 1971, migrant women working as cart-pullers in the city’s cloth market came to me in TLA, where I had started my work life working for textile mill workers of Ahmedabad. The women who lived on the footpath, were seeking help for better living conditions. Next month came the head loader women of the same cloth market, feeling agitated about very low rates of payment (30 paise per trip carrying the bale of cloth from a wholesaler to a retailer). They felt exploited by the traders. Then followed the used garment dealer women in search of credit facility... That was 1971. Some of these urban, poor, self- employed women workers came to the meeting that I called in a public garden where we formed our trade union (1972). We called it the Self Employed Women’s Association, SEWA."
    That was the beginning of SEWA

      "Yunus had never met Sufiya Khatun on his many walks through her village. Sufiya, a widow, was trying to support herself by constructing and selling bamboo stools. She earned two cents a day. When Yunus asked why her profit was so low, she explained that the only person who would lend her money to buy bamboo was the trader who bought her final product--and the price he set barely covered her costs.

      Yunus's instinct was to dig into his pocket. But first he wanted to see if there were other villagers in similar circumstances. He and a few students canvassed the village and compiled a list of forty-two people whose capital requirements, in order to buy materials and work freely, added up to about $26.00.

      Through the years he would recount that story hundreds of times. A decade later, testifying before the U.S. Congress Select Committee on Hunger in a hearing devoted to micro-enterprise credit, he recalled what had gone through his mind: "I felt extremely ashamed of myself being part of a society that could not provide twenty-six dollars to forty-two able, skilled human beings who were trying to make a living."
    ...that is how the Grameen story started

    Sunday, October 15, 2006

    The Power of an Idea

    30 years back, a young professor of economics went for a walk in a village adjoing his university in Chittagong (Bangladesh). While there, he met a poor widow, Sufiya Begum, who tried to make a living by constrcting and selling bamboo stools. She worked hard the whole day, and yet her daily net earning was just $0.02 (2 cents).

    Why?... because she had to take a daily loan for buying bamboos from the local moneylender, who charged exhorbitant interest, and whose lending condition was that she sells her produce to him at a price decided by him!!!

    She was poor - not because she lacked skills, or because she was lazy - but becasue she did not have access to her own working capital. All she needed was $0.27 (27cents) to get out of this vicious cycle of:

    Low income => No working capital => High interest loan => Low income

    The professor gave her 27 cents... but then, also went on to find out how many others in the village lived on an income of less than $1/day. To his amazement - and dismay - he found that there were 42 such able-bodied skilled working people, whose cumulative requirement to end their poverty was just $27!

    He gave them that sum as loan, which they could use to break out of the cycle of poverty... and they returned the loan in due course.

    It was such a simple solution to end the poverty. Poverty, the professor realised, is not caused by people; it is caused by the system. Much later, he described his first insight through an analogy:

    "You take the best seed of the tallest tree from the most fertile forest, and plant it in a small flower-pot. The seed does not grow into the tall tree..." not because the seed was bad, but because it got planted in the wrong place.

    Academically, this simple insight had a simple solution. Get the banks to give loans to the poors.

    But the banks refused: how can you give loans to people who have no collaterals to offer? what if they default? and since they own nothing, you can't take back anything from them, can you?

    Failing to convince the regular commercial banks to lend money, the professor decided to become the "guaranteer" for their loans with the bank. If they default, he would pay the banks - but they did not default!

    But this experience led to the second insight:

    The commercial banking system works on a premise that the more you have (i.e., as collaterals), the more you get; the less you have, the less you get... and of course, if you don't happen to own anything, that you are forever condemned out of the banking/credit system.

    ...Like the local moneylender, the commercial banking system imposes its own conditionalities in which the rich become richer - and the poor become poorer.

    And thus the the third insight: Create a bank for the poors!

    This simple idea led to the establishment of Grameen Bank - the "barefoot bank" - in 1983. The professor of economics, you guessed, was Professor Muhammad Yunus, who was awarded the Nobel Peace Prize 2006 this week... The rest, as they say, is history...

    Today, the Grameen Bank:

  • has 6.6mn borrowers ("poorest of the poor" - including beggars), of which 97% are women

  • has 2,226 branches operating in more than 71,000 villages of Bangladesh, supported by a staff of around 18,000.

  • is owned 94% by the borrowers (the rest 6% is with the government)

  • offers loan without any collaterals, legal instrument, group-guarantee or joint liability

  • has provided loans of about $5.7bn since its inception

  • provides loans for micro enterprises, housing, education, scholorships, life insurance and pension funds for the borrowers, disaster loan funds, etc.

  • has remained profitable all through its existance, except for 3 years (1983, 1991 and 1992)

  • does not rely on external funding or donations since 1995 (has paid back its loans since then)

  • has helped about 58% of its borrowers to cross the poverty line

  • and has a loan recovery rate of 98.85% (the other 1.15% constitute the defaulters on deadlines of payment - not on payment itself)

    Perhaps more importantly, the contribution of Prof Yunus was The Power of the Idea:

  • that the poor are "credit-worthy" (or the reverse: the commercial banking establishment is not "people worthy")

  • that poverty eradication does happen by handing out "doles" through the top-down subsidies, donations, grants or investments (by govt/IMF/WB, etc.)... In an article in WSJ (Oct 14,'06), he noted:
    "...one of our most successful tools for rebuilding businesses is not government handouts, but rather, small loans packaged with practical business and social advice.... very little of the cash so generously given ever gets all the way down to the very poor. There are too many "professionals" ahead of them in line, highly skilled at diverting funds into their own pockets. This is particularly regrettable because very poor people need only a little money to set up a business that can make a dramatic difference in the quality of their lives."

    Instead, eradicating poverty requires innovating systems for economic empowerment... By giving the poor that elusive access to the "first dollar that gets you the next dollar."

  • that there is another model of development that is far superior to the "trickle-down" economic model... That perhaps "the rising tide will lift all the boats" is a merely a myth in the minds of the owners of those few boats who have "access rights" to the tide!

    It was this power of idea, that has mobilised a global movement for providing "access to credit" to the poor during last 30 years. There are now:

  • about 3,100 MFIs worldwide

  • who service 92mn clients and

  • about 330mn people from the "poorest of the poor" families

  • across more than 100 nations

    ... and are growing in numbers, and innovating new solutions.

    ----
    Cross-posted at:
    http://alternativeperspective.blogspot.com/