Grameen Bank

Today, before coming to class, prof. Mandi had asked us to view videos posted on certain links. Unpretentiously, after dinner, I and my friends started watching the video. And what we saw in the videos amazed us to a great extent. Although I knew about Mohd. Yunus, the exact extent of the work done by him was unknown to me. Before delving into what I learnt in class, I believe a small introduction is required.

The Grameen Bank is a community development bank started in Bangladesh. They give small loans (known as micro credit or "grameencredit”) to poor people without asking for collateral. The system of this bank is based on the idea that the poor have skills but have no chance to use their skills without some money that is their skills are under-utilised. Most of the banks loans go to women.

Muhammad Yusuf with his money lenders

The Grameen Bank was started 1976 when Professor Muhammad Yunus, a Fulbright scholar and Professor at University of Chittagong, researched how to provide banking for the rural poor. In October 1983, the Grameen Bank Project was made into an independent bank by the government. The group and its first member, Muhammad Yunus, were awarded the Nobel Peace Prize in 2006. Grameen Bank is owned by the people who borrow the money, mostly women. The borrowers own 94% of the bank, and the other 6% is owned by the Government of Bangladesh.

   Below is the video we were asked see. Watch it, it's worth your time. It will also give some context to what happened in class and the key learnings we had.

Our class did not focus solely on aspects of social business. Instead – being a Principles of Management class – we focused on the difference in style of management and in delivery of product. We started out by discussing the difference between a traditional banking system and the Grameen micro-credit system. For the sake of simplicity, I am tabulating the differences below:

		TRADITIONAL BANKING	GRAMEEN BANK
1.	Purpose	Maximizing Profit (Profit Motive)	Reducing Poverty
2.	Collateral	Needed. Without which no loans will be given.	No collateral needed
3.	Ownership	Businessmen – Rich People	By the Poor
4.	Loan Amount	Large Amounts	Very Small Amounts
5.	Type of Lending	To individuals	To small groups of people –Solidarity lending
6.	Type of Interest	Usually Interest is compounded	Simple Interest
7.	People Money given to	In most developing countries there seem to be a bias towards men.	Women are the primary focus. In fact women make up 97% of Grameen Bank Customers
8.	Location	Primarily located in urban areas	Primarily located in rural areas

We had earlier discussed about Management by Objective and Organisational Structure. Both these contribute to another phenomenon – Organisational Culture. Basically, it is the behaviour of humans who are part of an organisation and the meanings that the people attach to their actions. Culture includes the organisation values, visions, norms, working language, systems, symbols, beliefs and habits.

Management is like a rainbow/kaleidoscope, which can take different shapes as per the requirements of the organizational culture. Culture, structure values, etc. of different organizations would be different depending upon the purpose and management students should understand this.

The culture at Grameen Bank is to find ways to eradicate poverty. The Managing Director of the bank does not ask, “Why are Profits down?”

Instead he asks, “How many people have you taken out of poverty today?” It is precisely this culture that has allowed the Grameen Bank to achieve so much.

This is the most important take away from this class. It is the Organisational Culture that motivates employees to perform well. It is the Organisation Culture that affects the way people and groups interact with each other, with clients, and with stakeholders.

Leadership and management need to drive the culture and structure of any organization. Just having a roadmap is not enough; you need to drive it.