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Grameen Bank - the mother of social business What is a social business?

In the capitalist system, two extreme types of corporate bodies can be distinguished. On the one Hand, companies can be seen as profit-maximizing businesses, whose purpose is to create shareholder Value. On the other, non-profit organizations exist to fulfill social objectives it shows how a social business borrows from both these entities: it has to cover its full costs from its Operations, and its owners are entitled to recover their invested money, but it is more cause than Profit-driven. Its position in the lower right quadrant shows that it has both the potential to act as a change agent for the world, and sufficient business-like characteristics to ensure it Survives to do so. In organizational structure, this new form of business is basically the same as profit-maximizing Businesses: it is not a charity, but a business in every sense. The managerial mindset must be the same as in a business: when you are running a social business, you think and work differently than if you were running a charity, even though your objective is different from a profit-maximizing Company. At the same time as trying to achieve their social objective, social businesses need to recover their full costs so they can be self-sustainable. Their owners never intend to make profits for themselves (there are no dividends), but they are entitled to get their money 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 the Gradual development of Grameens 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 this Experience: three are similar to those of conventional business model innovation e Challenging conventional thinking, finding complementary partners and undertaking

Continuous experimentation; two are specific to social business models: recruiting Social-profit-oriented shareholders and specifying social profit objectives clearly and early. We suggest this new business models e where stakeholders replace shareholders As the focus of value maximization e could empower capitalism to address overwhelming Global concerns. The Grameen Group is a network of nearly 30 sister organizations linked to the Bangladeshi Grameen Bank, the microcredit pioneer and (together with its founder, Muhammad Yunus, one Of this articles co-authors) 2006 Nobel Peace Prize winner. This group was established in 1983 With 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, had Already started to lend money to people trapped into poverty by greedy moneylenders. He had Discovered that entrepreneurship was by no means a rare quality among poor people e but that Traditional Banks refused to grant loans without collateral. Grameen Bank now gives loans to Over 7.5 million Poor people-97 percent of who is women e which help the poor lift themselves Out of poverty:

Social business as business model innovation


The business model concept is currently attracting much attention from researchers, and seems Useful in offering guidance as how to create social businesses. However, despite ever-growing Literature On the business model concept, there is no consensus as to its definition. An in-depth Analysis of Business model components in academic literature shows that, among the plethora Of 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 its Customers and The revenue Model. Some authors, however, focus on just some of these Components: 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. And Thereby 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 million People. The loan recovery rate is higher than 98 percent. 100 percent of loans are financed from The Bank's deposits, making it entirely independent of external support. Grameen Bank's impact Is comprehensive and sustainable. 60 percent of the borrowers find their way out of poverty. The Even more significant effect of the Bank's activities is on the next generation - it achieves 100 Percent 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 efforts To create economic and social development from below". Need: The poor need fair access to finance to empower them to help themselves. Since conventional Banking makes lending decisions based on a borrower's existing assets (collateral), those who Have nothing get nothing. 50 percent of the population of Bangladesh lives on less than USD Per day. If they needed money, they traditionally had to turn to local money lenders who charged Extremely high interest rates and frequently entrapped the borrowers in a spiral of debt.

Social business solution:


In 1976, Prof. Yunus lent USD 27 to 42 people - focusing on the poorest of the poor. This led to The innovation of micro finance and the foundation of the Grameen Bank in 1983. This Bank Lent Money without collateral, at very small amounts and at comparatively low interest rates Almost Exclusively to poor women. Why women? Grameen discovered that women are more Reliable in paying back and that they use the loans more wisely than men. The Grameen Bank is The first Social business. Interestingly, it gives the poor not only access to capital, but allows Them to be the owners of the bank and thereby 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 million People. The loan recovery rate is higher than 98 percent. 100 percent of loans are financed from The Bank's deposits, making it entirely independent of external support. Grameen Bank's impact Is comprehensive and sustainable. 60 percent of the borrowers find their way out of poverty. The Even more significant effect of the Bank's activities is on the next generation - it achieves 100 Percent literacy in the second generation borrowers (Bangladesh average is 47 percent). In 2006, Grameen Bank and its founder Prof. Yunus Won that i Nobel Peace Prize "for their efforts

In organizational structure, this new form of business is basically the same as profit-maximizing Businesses: it is not a charity, but a business in every sense. The managerial mindset must be the Same as in a business: when you are running a social business, you think and work differently Than if you were running a charity, even though your objective is different from a profitMaximizing Company. At the same time as trying to achieve their social objective, social Businesses need to recover their full costs so they can be self-sustainable. Their owners never Intend to make profits for themselves (there are no dividends), but they are entitled to get their Money back if they wish. Rather than being passed on to investors he to create economic and Social development from below". Grameen bank ingenuity has been remarkable. In a country where some 150 million people live on 55,000 square miles, with an annual per capita income of only $430, and 50 percent of the Population below the poverty line, Grameen Bank has revolutionized social business Empowered millions in changing their lives. In Bangladesh, 80 percent of the poor families have Already been reached with micro credit. According to a recent internal survey, 68 per cent of Grameen borrowers families have crossed the poverty line. The remaining families are moving Steadily towards the poverty line from below. The Grameen Bank social business hopes that by 2010, 100 per Cent of the poor families will be reached. The Grameen Bank social business has Always encouraged and supported every conceivable intervention to help the poor fight out of Poverty. They have always advocated micro credit in addition to all other interventions, arguing That micro credit makes those interventions work better. Grameen bank has shown himself to be A leader who has managed to translate visions into practical action for the benefit of millions of People, not only In Bangladesh, but also in many other countries.