Critical changes that become turning points in world history may not always occur from the government or the private sector, but may happen through the work of civil society organizations. This was especially so in the case of the Grameen Bank and the Bangladesh Rural Advancement Committee (BRAC), both of which have made financial systems at the micro level, or “microfinance”, become a global industry.
These organizations have made Bangladesh, which is one of the poorest countries in the world, become a model country for social entrepreneurship and the development of social innovations. Over the past 20 years, many specialists from various fields in many countries have come to see these activities, get experience and look for new challenges.
BRAC was founded in 1972 by former Shell executive, Fazle Hasan Abed. BRAC is a civil society organization working in rural education, primary public health, microfinance and economic and social development. The organization’s main income comes from their own “social enterprises” and their aim is to solve the problem of poverty by focusing on creating an enabling environment and giving opportunities to the poor to develop and use their potential in the capitalist economy.
Initially, support for BRAC’s activities was based entirely on donations, but in 2013 the dependence on donations dropped to only 23 percent (even despite having doubled the donations received, the income from their own activities still had a higher rate of growth). As of the year 2013, the BRAC network employs people in 119,000 positions in Bangladesh.
NGO Advisor, an independent media organization in Geneva, ranked BRAC as the best civil society organization in the world for 4 consecutive years (2015-2018), based on criteria of innovation, impact creation and good governance. BRAC did well in pioneering, initiatives, creativity, effective cost management and reaching out to volunteers. At present, BRAC has a large team and more than 110 million participants worldwide.
The issues to which BRAC gives priority are microfinance, education, health, legal rights, women’s rights and agriculture, which are conducted in the form of businesses for profit as well as non-profit social entrepreneurship, such as banks, universities, and “bKash 1”, the largest mobile money platform in the world.
Another organization, the Grameen Bank, was founded in 1976 by Muhammad Yunus. Grameen Bank aims to help the poor by creating a system that gives them special privileges to money loans – no contract or collateral is required.
Grameen Bank has designed a group of individual loans for 5 – 6 people without guaranteeing each other but encouraging each other to take care of each other, whether there are any problems or not. If anyone in the group defaults, however, the rest of the group will not be eligible for the next loan.
Between 1976 and 2008, the Grameen Bank provided loans totalling 1.8 billion baht to 4.4 million poor families in Bangladesh’s rural areas, with a non-performing loan rate of less than 2 percent, which is a level that the international banking industry considers to be “very good”
Even though the Grameen Bank is more recognized in Thailand than BRAC, because it is more discussed, both organizations are considered world-class civil society organizations. Both organizations originated in the same country and started at the same time, and both have worked to solve poverty successfully at some level. For this reason, I would like to share the following lessons from these two global civil society organizations:
First, mainly using the potential of people in the nation. They create jobs for people in the community instead of giving donations to poor families. Both organizations choose to use domestic labor as the basis for social enterprises.
Second, design an excellent management system. These organizations allow officials to innovate and propose new ideas and approaches including sharing what they have learnt within each organization. Not only this, they allow continuous experimentation with new things to maintain quality control and seriously seek ways to solve the country’s poverty problem.
In addition, both organizations emphasize concrete measurement of results at all stages of operations, such as designing a loan measurement system, recording the number of children who have received education, careful recording of distribution of food, beverages or utensils, comparison of salary and wages with work efficiency in each business etc.
Third, expand the scope of work throughout the country and abroad. The Grameen Bank has more than 1,400 branches nationwide, serving over 51,000 villages (3 out of 4 villages nationwide) and the success of the Grameen Bank has become the inspiration for over 250 banks for the poor in more than 100 countries worldwide.
BRAC has a network of 17 social enterprises in Bangladesh, covering a variety of products such as milk, daily necessities, clothing, handicrafts and the Aarong stores, etc. The BRAC concept has also been extended to 11 other countries: Afghanistan, Sri Lanka, Pakistan, Tanzania, Uganda, South Sudan, Liberia, Sierra Leone, Haiti and the Philippines.
Fourth: Standing up for sustainability. Standing up for ideology and achieving clear goals. The Grameen Bank and BRAC work together under the premise that Bangladeshis have ability, and paying more attention to human dignity than materialism. Both organizations therefore have the same standpoint of earning with their own money and from their own people in the country.
In the beginning, both organizations avoided donations that were made with the purpose of political gain in the country and would accept only real donations. After taking this standpoint for more than 30 years, most BRAC projects now have their own funds. Even though worldwide costs are more than 1 billion US dollars per year, more than 75 percent of their budget comes from social enterprises. This is the key to the organization achieving the best ranking in the world.
I hope that these lessons will be useful for the development of Thai civil society organizations, so that this sector has the potential of becoming a strong power in building our nation.
ISSUE 0143 (November – December 19)
Senior Fellow at Harvard University’s Center of Business and Government.