Ello all! Kelly and I once again spent our days traveling from one conference room to another. Today we spoke with Grameen Kalyan (Grameen's healthcare provider), Grameen Shikka (a new effort to enhance education for poor children), and Grameen Fund. To help one of the Japanese students get better quality notes each day, and to help myself keep track of all incoming information, I've begun typing thoughout meetings this week. Just a quick explanation for the sudden outbursts of academically focused blog postings this week! Hopefully it's useful for some folks back home, and I promise it won't always consume my writing.
Also, Kelly and I will be switching off and on with summarizing different models of Grameen's sister companies, so if you are interested in following visit her blog @ http://www.sanmasa.tumblr.com/
Grameen Fund is dedicated to promoting, managing and financing various enterprises, which aim to create wealth for poverty alleviation in the country. It was incorporated in 1994 by Muhammad Yunus as a nonprofit social venture capital finance organization—now seen as the pioneer of venture financing in Bangladesh.
Their main strategy lies in venture capital finance, especially in technology based ventures. It equally lays stress on providing fixed capital and working capital loans to the micro-enterprises run by those who are newly emerging out of poverty. The company places a strong emphasis on financing risky ventures with untested technology/products that are generally denied credit from more traditional lending institutions.
Their two key objectives include providing equity in companies trying to innovate in various sectors that hold promise for future growth with direct or indirect impact on poverty alleviation; in addition to providing loans, equity or both to new or existing companies for balancing, modernization or expansion. Grameen Fund also tries to promote or develop enterprises which have high prospects for export or import substitution that will use indigenous materials, provide employment to rural poor or help upgrade the skills of rural or urban poor.
The fund’s three main activities include venture finance, a microenterprise loan scheme and a deposit loan scheme that is steadily attracting clients.
1. Microenterprise loan scheme—similar to the activities of Grameen Bank. GF finances micro enterprises in the rural areas run by non members of Grameen Bank that require working capital as well as fixed capital for its on-going small-scale enterprises. They are not specifically the poorest of the poor, but people who already have an enterprise and marketing network, or business background. However, if they still need additional capital they can go to any lending institution, Grameen Bank or Grameen Fund.
One key difference from Grameen Bank is that the money goes directly towards an individual’s business, rather than utilizing group lending. The loan amounts are also much larger—typically 50,000-500,000tk, with 20% interest p. a. on declining balance. The repayment schedule can be anywhere from 1 to 3 years, with a grace period that is dependent upon the business’s cash flow.
In selecting micro enterprises, GF gives priority to businesses that create value, which operate in the non-traditional sector, and those that apply local inventions, products or processes. They also try to select enterprises that use indigenous materials, have potential for rapid growth, enhance skills, provide eco-friendly products, and especially those that create social benefits or job opportunities. To date, they have financed over 2,000 different projects with a cumulative loan disbursement of over TK 200 million. Typical sectors financed include fishery, poultry, dairy, agro processing, workshop, small business, service, handicrafts etc….
2. Venture finance: Participation in other people’s relatively larger projects.
Utilizing selection principles similar to the microenterprise loan scheme, GF provides equity financing to over 13 different companies as of 2008, including Grameen Knitwear Limited, Grameen Bitek Limited and Grameen Capital Management Limited. The fund prefers to take 51% of the equity in a project, but will settle for a lower ratio depending upon the company. They also lend substantial amounts of capital to organizations within the Grameen family of enterprises. Grameen Fund may also provide bridge loans, loan guarantees and management assistance.
3. Deposit Loan Scheme: Available for nonmembers of Grameen Bank who hold deposits in the bank. They are able to take loans against their deposits at 80% of their total savings and interest earned.
Grameen Fund has seen a significant rise in the number of clients participating in their deposit loan scheme. However, they tend to go to larger commercial banks when the loan amount exceeds Grameen Fund’s capacity, but for lower amounts they come to the fund because of the lower interest rates and high level of flexibility.
The fund itself got its own financing from Grameen Bank, which gave its loan portfolio from Grameen Bank’s Social Venture Capital Fund. They also received financing from the Calvert Foundation—a US based socially responsible investment organization that supports community development organizations—and UBICO—a UAE-Bangladesh Investment Company.
It is the fund’s responsibility to be cautious as it cannot risk tying up a lot of its money in one unsuccessful project. Therefore their priorities are currently to improve existing relationships, rather than seek new ones, so for the last 2 years they have not invested in new ventures.
Current challenges also include the default rate of the microenterprise loan scheme. For the past 2 years they’ve been modestly profitable, and with that income they’ve been able to diversify their operations and move away from dependence on Grameen Bank. Strengthening their own infrastructure, personnel and finances has been a significant step for the fund in the past 2 years.
Most companies we've been spending our time with give us hard copies of their annual reports, brochures and business cards for future contact and discussions--all of which will hopefully be kept in the Social Enterprise Institute at Northeastern for a more indepth look into the companies and their structures. Tomorrow we finally head back into the field--which I've already missed after spending the past 4 days in Dhaka. We will be visiting various projects of Grameen Shakti--an environmentally conscious energy company that seeks to spread the use of solar panels and biogas ovens throughout the rural areas of Bangladesh. I'm really excited as we've had 2 different meetings with some of their management, but beyond using the branch manager's Shakti oven we have seen little of their operations in the field--where the bulk of the company operates.
ALSO, today our supervisor casually told us that we have a meeting with Professor Yunus this Thursday! He said it so nonchalantly that I had to ask "who!?". And then act cool and calm when he repeated himself. Here I've been plotting my 2 minute elevator pitch for marriage, and now I have to squeeze all of my thoughts into 30 minutes with him. Oh the horror/dream!
Goodnight Boston! I miss you
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