Alfanar In Bangladesh: Visiting BRAC and Grameen Bank

 

By Dr. Teresa Chahine, Alfanar's Innovation Advisor

 

What an honor it was to visit BRAC, the largest scale NGO in the world, and Grameen Bank, the winner of the 2006 Nobel Peace Prize. In September, Alfanar’s Egypt and Lebanon teams went on a study mission to Bangladesh, the mothership of social innovation. For us, it was a pilgrimage, to visit the place where microfinance and social business all began.

The purpose of the study mission was to expose our investees to different examples of social enterprise in different settings, foster new ideas, and exchange best practices. For this study mission, we were joined by Future Eve Foundation from Egypt and Women’s Program Association from Lebanon. Both organizations have microloans programs, community development and support programs. They also both aspire to build their own social enterprises, to increase their social impact by creating jobs, and increase their financial sustainability by creating revenue.

We started with a day in the field, visiting BRAC microlenders and BRAC social enterprises. BRAC lenders form groups of 20-40 women, and we were lucky enough to attendthe weekly meeting of one of these groups. One lender showed us her microventure, a dairy production unit where she rears cows, made possible by microloans from BRAC. The next day we met with the management team at BRAC headquarters in Dhaka, who explained to us how they’ve managed this incredible program, which has reached 125 million people. It initially started as an integrated program in the 1970s, focusing holistically on the economic and social development of communities. At a critical turning point, the team was faced with the decision to maintain the in-depth integrated program or scale rapidly to reach more people. After thinking it through extensively, Sir Fazle Abed carefully decided that “small is beautiful, but big is necessary.” He would rather reach every household in Bangladesh, than work on multiple dimensions of community development with a smaller number of people. Therefore, BRAC’s work grew in parallel streams whereby the microfinance program operated separately from other programs such as health, education, labor and human rights, legal support, etc.

One of the factors influencing this depth vs. breadth trade-off was donor organizations, which chose to specialize in certain fields but not others. This is a challenge that Alfanar investees face too! Like our investees, BRAC is working on increasing the financial sustainability and independence of its various programs, through building social enterprise. Its education program is a good example of this. Historically, it began as a free program, building schools in rural areas where public schools were not available. After decades and generations, and with the growth of the public school system, BRAC decided the time has come to close down certain schools, since public schools were not available in these places. But local villagers said that rather than switch to public schools, they were willing to pay for BRAC schools! So now BRAC charges affordable fees, reaching partial cost recovery and aiming to break even, while allowing scholarships for students who cannot afford to pay the fees. This was of particular interest to Women’s Program Association, who aims to open a new children’s center in 2017.

Social enterprise is a relatively new concept at BRAC. It was heartening to know that they are learning while doing, just like us! It was extremely inspiring to learn about their microfinance program, which encompasses so much more than microloans. BRAC facilitates savings, insurance, and other products as well. They use a pyramid structure that encourages lenders to graduate from smaller to larger loans, and from microventures to SMEs. This was of particular interest to Future Eve Foundation, who included a similar approach in the business plan they’ve just completed for 2017-2020.

Last but not least, we had the opportunity to visit one of their social enterprises, Aarong, which has production centers located in the villages near women’s homes, where women work on the hand embroidery behind the famous retail outlet. Alfanar’s team visited the production unit where embroidered items are sent to be further processed. We saw teams working on hand painting, pattern painting, dying, cutting and sewing, packaging, and conducting quality assurance. Then we got to meet with the executive management the next day and get tips from them on pricing and marketing! We eagerly scribbled these down to share with our rapidly expanding embroidery investee, Inaash.

The second portion of our trip consisted of visits to the Yunus Centre and Grameen Bank. We started out with an office visit, to learn about the 7 principles of social business, and the different examples of social businesses Mohammed Yunus has been working on. The day was an intensive training day, because each visit to a different social business felt like a case study assignment, where we had to learn how they made it all work! We visited Grameen Shakti, a social business that supplies renewable energy (solar and biogas) to households. We visited Grameen Caledonian Nursing College, a joint venture that trains young Bangladeshi girls to become nurses rather than enter the cycle of early marriage, early pregnancy, and poverty. We also visited Grameen Veolia, another joint venture that provides clean drinking water in rural settings. While speaking to and learning from the different teams working to make these social businesses viable, we realized that we share many common experiences with them in our work in Egypt and Lebanon. One of the key similarities is that nothing ever turns out the way we think it will! When Grameen Veolia wrote their business plan in 2008, they assumed that 60% of the local population would be interested in buying drinking water from them. Their assumptions turned out to be totally off! (Didn’t they conduct market research? Our investees could have told them that!) They had a much lower uptake rate than expected because people were not accustomed to the idea of paying for water, and were not aware of the health hazards facing them in Bangladesh’s ground water, which had high levels of arsenic. Since launching in 2009, they’ve worked hard to change mindsets in the rural area where their pilot plant is operating, while at the same time launching a new urban project to cross-subsidize their rural work until their pilot plant increases its production volume enough to lower the per unit cost below the price they have set.

Engaging face to face with these examples of social business strengthened our resolve and made us feel better equipped to keep iterating our own social enterprises until they work. The next day, we also visited several groups in the field. We saw Grameen Shakti in action, visiting both a solar powered home in a rural area, and a home with a biogas stove. We met with a group of Grameen Bank members, and talked to them extensively about their microventures and their experience with Grameen Bank. Many have been members for almost 30 years, having taken out multiple cycles of loans, savings, and started multiple microventures. One woman started both a cable business and a tailoring business. Other women work with rice husks, supply construction materials such as wood and bamboo, raise chicken or cows, or run a mobile phones business. What impressed us about Grameen Bank is that it’s not just another development project. Lenders are considered members, and they are the owners of the bank. Non-members can also deposit savings in the bank. Members pay back their loans with interest, and the profit generated is returned to them as dividends. Branch officers visit them in their homes to monitor their practice of the 16 principles, a set of practices aimed at increasing the health, education, and social welfare of households.

Our visits to BRAC and Grameen had a lot in common, and also some noticeable differences. We noticed that both work for sustainable development through economic, social, and environmental growth; and both achieve this by focusing on women as their entry point. The two organizations operate similar microfinance programs, although with different nuances, aimed at helping people climb the ladder out of poverty. The differences we felt were harder to describe, and were mostly tied to the organizational culture. BRAC was founded in 1972, shortly after Bangladesh became an independent nation in 1971. One of our investees remarked that it almost feels like a second government! When we visited their headquarters, we felt like we were visiting the UN or the World Bank. It was huge, and very professionalized. The teams from Future Eve Foundation and Women’s Program Association were impressed with the high level of organization, yet couldn’t help but voice the concern that things were run like a machine and there was not a high level of democracy. (The new BRAC social innovation lab might help address that, it was one of our favorite teams to visit at BRAC!) Yunus Centre and the Grameen social businesses on the other hand had a more start-up feel, and it felt like there were a lot of components that were constantly moving. This was exciting for us, although it took us a while to figure out how everything went together. The main feeling we left with was, we want to go back!

It was a lot to absorb! We will be working with our investees in the coming weeks to integrate new ideas and principles into their work. As always, when learning is happening, one feels there are more questions arising than answers. The main question we are still thinking about after this trip is, what are the considerations we want to make when expanding our social enterprises? Not just how, but how much, do we want to scale? Where is that sweet spot where we can both find growth and retain a nimble, customized approach to social and economic development at a community level? How can we make our social enterprises both more financially sustainable and also more impactful, not just another small business to generate revenue for another NGO? These are the questions we are grappling with after the study mission. Our shared experience in Bangladesh has equipped us to answer them with more confidence, knowing that there will always be trade-offs, and that if we work together we can find the balance that’s right for our investees and the communities they serve.

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