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Grameen Bank

Grameen Bank

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Published by shahin317
Grammen Bank- The mother of social Business.
Grammen Bank- The mother of social Business.

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categoriesTypes, Research
Published by: shahin317 on Nov 21, 2012
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01/03/2014

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Grameen Bank - the mother of social businessWhat is a social business?
In the capitalist system, two extreme types of corporate bodies can be distinguished. On the oneHand, companies can be seen as profit-maximizing businesses, whose purpose is to createshareholder Value. On the other, non-profit organizations exist to fulfill social objectivesitshows how a social business borrows from both these entities: it has to cover its full costs fromits Operations, and its owners are entitled to recover their invested money, but it is more causethan Profit-driven. Its position in the lower right quadrant shows that it has both the potential toact as a change agent for the world, and sufficient business-like characteristics to ensure itSurvives to do so. In organizational structure, this new form of business is basically the same asprofit-maximizing Businesses: it is not a charity, but a business in every sense. The managerialmindset must be the same as in a business: when you are running a social business, you think andwork differently than if you were running a charity, even though your objective is different froma profit-maximizing Company. At the same time as trying to achieve their social objective, socialbusinesses need to recover their full costs so they can be self-sustainable. Their owners neverintend to make profits for themselves (there are no dividends), but they are entitled to get theirmoney back if they wish. Rather than being passed on to investors.Grameen bank, founded in 1976, has both pioneered the development of micro-finance,And created nearly 30 businesses designed to alleviate poverty. The article traces theGradual
development of Grameen’s expertise in formulating social business models, which
 Require new value propositions, value constellations and profit equations, and as such,Resembles business model innovation. The article presents five lessons learned from thisExperience: three are similar to those of conventional business model innovation eChallenging conventional thinking, finding complementary partners and undertaking
 
 Continuous experimentation; two are specific to social business models: recruitingSocial-profit-oriented shareholders and specifying social profit objectives clearly and early.We suggest this new business models e where stakeholders replace shareholdersAs the focus of value maximization e could empower capitalism to address overwhelmingGlobal concerns.The Grameen Group is a network of nearly 30 sister organizations linked to the BangladeshiGrameen Bank, the microcredit pioneer and (together with its founder, Muhammad Yunus, oneOf 
this article’s co
-authors) 2006 Nobel Peace Prize winner. This group was established in 1983With
the creation of the Grameen Bank (‘Grameen’ means village), within the framework of 
 A new law drafted specifically for the purpose. Yunus, then a professor in economics, hadAlready started to lend money to people trapped into poverty by greedy moneylenders. He hadDiscovered that entrepreneurship was by no means a rare quality among poor people e but thatTraditional Banks refused to grant loans without collateral. Grameen Bank now gives loans toOver 7.5 million Poor people-97 percent of who is women e which help the poor lift themselvesOut of poverty:
Social business as business model innovation
The business model concept is currently attracting much attention from researchers, and seemsUseful in offering guidance as how to create social businesses. However, despite ever-growingLiterature On the business model concept, there is no consensus as to its definition. An in-depthAnalysis of Business model components in academic literature shows that, among the plethoraOf Definitions, Three elements are usually distinguished: the product/service proposed to
 
 Customers, The way the Company is organized so as to deliver this product and service to itsCustomers and The revenue Model. Some authors, however, focus on just some of theseComponents: Chesbrough and Rosembloom, for example, focus on the revere venue model,Whereas Zott and Amit focus on transactions between the firm and its external constituents. AndThereby benefit from any dividend payments. Additionally education is a central part of Grameen Bank. Scholarships are awarded every year to the highest performing children of Grameen borrowers
Outlook:
 With its 2,500 branches, Grameen Bank reaches out to almost 85,000 villages in Bangladesh.Grameen Bank impacts lives of more than 40 million people by giving credits to almost 8 millionPeople. The loan recovery rate is higher than 98 percent. 100 percent of loans are financed fromThe Bank's deposits, making it entirely independent of external support. Grameen Bank's impactIs comprehensive and sustainable. 60 percent of the borrowers find their way out of poverty. TheEven more significant effect of the Bank's activities is on the next generation - it achieves 100Percent literacy in the second generation borrowers (Bangladesh average is 47 percent).In 2006, Grameen Bank and its founder Prof. Yunus won the Nobel Peace Prize "for their effortsTo create economic and social development from below".
Need:
 
The poor need fair access to finance to empower them to help themselves. Since conventionalBanking makes lending decisions based on a borrower's existing assets (collateral), those whoHave nothing get nothing. 50 percent of the population of Bangladesh lives on less than USDPer day. If they needed money, they traditionally had to turn to local money lenders who chargedExtremely high interest rates and frequently entrapped the borrowers in a spiral of debt.

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