Leadership - Dr. Muhammod Yunus


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Leadership - Dr. Muhammod Yunus

  1. 1. [Leadership – Dr. Muhammad Yunus] April 21, 2014 1 Mohaimin Ul Jobair Leadership - Assignment Executive Summary: Professor Dr. Muhammad Yunus is a Bangladeshi banker and economist. He is the developer and founder of the concept of microcredit, the extension of small loans to entrepreneurs too poor to qualify for traditional bank loans. Yunus is also the founder of Grameen Bank. In 2006, they were jointly awarded the Nobel Peace Prize, "for their efforts to create economic and social development from below.‖ The Grameen Bank (in Bengali, Grameen means rural) which Dr. Yunus has built over the last 22 years is today the largest rural bank in Bangladesh. It has over 2 million borrowers and works in 35000 villages in a country of 68000 villages. 94% of its borrowers are women. The bank is based on simple, sensible rules, meticulous organization, imagination and peer pressure among borrowers. The break that Grameen Bank offers is a collateral-free loan, sometimes equivalent to just a few U.S. dollars and rarely more than $100. In rural areas, it makes things happen. 98% of its loans are honored. Thus he has turned into reality a philosophy that the poorest of the poor are the most deserving in the land and that given the opportunity they can lift themselves out of the mire of poverty. His ideas combine capitalism with social responsibility. Micro-credit concept is now being practiced in 58 countries. In the US, it is a success even with the Shifting poor of Chicago's toughest districts. The United States alone has over 500 Grameen spin-offs. Bill Clinton said in his election campaign that Yunus deserved a Nobel Peace Prize and cited the Experiment of Dr. Yunus as a model for rebuilding the inner cities of America. Pilot projects are starting in Britain. The methods are adapted to suit local conditions, but the principle of empowering individuals with their own capital is the same.
  2. 2. [Leadership – Dr. Muhammad Yunus] April 21, 2014 2 Mohaimin Ul Jobair Leadership - Assignment Definition of Leadership: 1. The individuals who are the leaders in an organization, regarded collectively. 2. The activity of leading a group of people or an organization or the ability to do this. Leadership involves establishing a clear vision,sharing that vision with others so that they will follow willingly,providing the information, knowledge and methods to realize that vision, and coordinating and balancing the conflicting interests of all members and stakeholders. A leader steps up in times of crisis, and is able to think and act creatively in difficult situations. Unlike management, leadership cannot be taught, although it may be learned and enhanced through coaching or mentoring. Someone with great leadership skills today is Bill Gates who, despite early failures, with continued passion and innovation has driven Microsoft and the softwareindustry to success. The act of inspiring subordinates to perform and engage in achieving a goal. Types of Leadership:  Autocratic leadership  Bureaucratic leadership  Charismatic leadership  Democratic leadership or participative leadership  Laissez-faire leadership.  People-oriented leadership or relations-oriented leadership  Servant leadership  Task-oriented leadership  Transactional leadership  Transformational leadership
  3. 3. [Leadership – Dr. Muhammad Yunus] April 21, 2014 3 Mohaimin Ul Jobair Leadership - Assignment Seven Principles of Social Business:Grameen Bank: 1. Business objective will be to overcome poverty, or one or more problems (such as education, health, technology access, and environment) which threaten people and society; not profit maximization 2. Financial and economic sustainability 3. Investors get back their investment amount only. No dividend is given beyond investment money 4. When investment amount is paid back, company profit stays with the company for expansion and improvement 5. Environmentally conscious 6. Workforce gets market wage with better working conditions 7. ...do it with joy A successful Leader& Critical Analyze: Dr. Prof. Muhammad Yunus – The Founder of Grameen Bank one most successful entrepreneur and leader of Bangladesh and well known for his micro lending process & implementation in the real world.
  4. 4. [Leadership – Dr. Muhammad Yunus] April 21, 2014 4 Mohaimin Ul Jobair Leadership - Assignment Professor Muhammad Yunus established the Grameen Bank in Bangladesh in 1983, fueled by the belief that credit is a fundamental human right. His objective was to help poor people escape from poverty by providing loans on terms suitable to them and by teaching them a few sound financial principles so they could help themselves. From Dr. Yunus' personal loan of small amounts of money to destitute basket weavers in Bangladesh in the mid-70s, the Grameen Bank has advanced to the forefront of a burgeoning world movement toward eradicating poverty through micro lending. Replicas of the Grameen Bank model operate in more than 100 countries worldwide. Born in 1940 in the seaport city of Chittagong, Professor Yunus studied at Dhaka University in Bangladesh, and then received a Fulbright scholarship to study economics at Vanderbilt University. He received his Ph.D. in economics from Vanderbilt in 1969 and the following year became an assistant professor of economics at Middle Tennessee State University. Returning to Bangladesh, Yunus headed the economics department at Chittagong University. From 1993 to 1995, Professor Yunus was a member of the International Advisory Group for the Fourth World Conference on Women, a post to which he was appointed by the UN secretary general. He has served on the Global Commission of Women's Health, the Advisory Council for Sustainable Economic Development and the UN Expert Group on Women and Finance. Professor Yunus is the recipient of numerous international awards for his ideas and endeavors, including the Mohamed Shabdeen Award for Science (1993), Sri Lanka; Humanitarian Award (1993), CARE, USA; World Food Prize (1994), World Food Prize Foundation, USA; independence Day Award (1987), Bangladesh's highest award; King Hussein Humanitarian Leadership Award (2000), King Hussien Foundation, Jordan; Volvo Environment Prize (2003), Volvo Environment Prize Foundation, Sweden; Nikkei Asia Prize for Regional Growth (2004), Nihon Keizai Shimbun, Japan; Franklin D. Roosevelt Freedom Award (2006), Roosevelt Institute
  5. 5. [Leadership – Dr. Muhammad Yunus] April 21, 2014 5 Mohaimin Ul Jobair Leadership - Assignment of The Netherlands; and the Seoul Peace Prize (2006), Seoul Peace Prize Cultural Foundation, Seoul, Korea. He is a member of the board of the United Nations Foundation. Achievement of Dr. Muhammod Yunus: The most respected achievement that Dr.Professor Muhammad Yunus, was awarded the Nobel Prize for Peace in 2006. Scholarships / fellowships: 1. Awarded Fulbright Fellowship to study in the U.S.A. for 1965-66. 2. Awarded Vanderbilt University research and teaching fellowships during 1966-69. 3. Awarded Eisenhour Exchange Fellowship for 1984. 4. Senior Fellow, The Institute of Mediterranean Studies,Universita della Svizzera Italiana, Lugano, Switzerland (2000 - Present). Professional Experiences: 1962-65 : Lecturer of Economics, Chittagong College, Bangladesh 1969-72 : Assistant Professor of Economics, MTSU, Tennessee, USA 1972 (July-Sept) : Deputy Chief, General Economics Division, Planning Commission,Government of Bangladesh. 1972 - 75 : Associate Professor of Economics and Head of the Department of Economics, Chittagong University, Bangladesh 1975 - 1989 : Professor of Economics, Chittagong University and Director, Rural Economics Program, Chittagong, Bangladesh 1976 - 1983 : Project Director, Grameen Bank Project, Bangladesh 1983 - 2011 : Managing Director, Grameen Bank, Bangladesh 1996 (April-June) : Cabinet Minister (Advisor) in the Caretaker Government of Bangladesh.
  6. 6. [Leadership – Dr. Muhammad Yunus] April 21, 2014 6 Mohaimin Ul Jobair Leadership - Assignment Membership of Committees and Commissions (National): 1981 : Member, National Committee on Population Policy set up by the President of Bangladesh. 1982 : Member, Land Reform Committee, set up by Chief Martial Law Administrator, headed by the Minister of Agriculture. 1987-88 : Member, Education Commission, Government of Bangladesh. 1989-90 : Appointed as the Chairman of the Socio-economic Committee of the National Disaster Prevention Council set up by the President of Bangladesh. 1989 : Member of the Task Force for reviewing the operation of the Nationalized Commercial Banks, Bangladesh. 1991 : Appointed as the Convener of the Task Force on Self-Reliance set up by the Planning Advisor. 2001 : Member of the National ICT Task Force Committee, Ministry of Planning, Bangladesh. A Short History of Grameen Bank created by Dr. Yunus: Grameen Bank (GB) has reversed conventional banking practice by removing the need for collateral and created a banking system based on mutual trust, accountability, participation and creativity. The origin of Grameen Bank can be traced back to 1976 when Professor Muhammad Yunus, Head of the Rural Economics Program at the University of Chittagong, launched an action research project to examine the possibility of designing a credit delivery system to provide banking services targeted at the rural poor. The Grameen Bank Project Grameen means "rural" or "village" in Bangla language came into operation with the following objectives:  extend banking facilities to poor men and women;  eliminate the exploitation of the poor by money lenders;  create opportunities for self-employment for the vast multitude of unemployed people in rural Bangladesh;
  7. 7. [Leadership – Dr. Muhammad Yunus] April 21, 2014 7 Mohaimin Ul Jobair Leadership - Assignment  bring the disadvantaged, mostly the women from the poorest households, within the fold of an organizational format which they can understand and manage by themselves;  reverse the age-old vicious circle of "low income, low saving & low investment", into virtuous circle of "low income, injection of credit, investment, more income, more savings, more investment, more income". As of October, 2011, it has 8.349 million borrowers, 97 percent of whom are women. With 2,565 branches, GB provides services in 81,379 villages, covering more than 97 percent of the total villages in Bangladesh. Grameen Bank's positive impact on its poor and formerly poor borrowers has been documented in many independent studies carried out by external agencies including the World Bank, the International Food Research Policy Institute (IFPRI) and the Bangladesh Institute of Development Studies (BIDS). The action research demonstrated its strength in Jobra (a village adjacent to Chittagong University) and some of the neighboring villages during 1976-1979. With the sponsorship of the central bank of the country and support of the nationalized commercial banks, the project was extended to Tangail district (a district north of Dhaka, the capital city of Bangladesh) in 1979. With the success in Tangail, the project was extended to several other districts in the country. In October 1983, the Grameen Bank Project was transformed into an independent bank by government legislation. Today Grameen Bank is owned by the rural poor whom it serves. Borrowers of the Bank own 90% of its shares, while the remaining 10% is owned by the government. Micro Credit Delivery System ofGrameen Bank by Dr. Yunus: Grameen Bank Credit Delivery means taking credit to the very poor in their villages by means of the essential elements of the Grameen credit delivery system. Grameen Bank credit delivery system has the following features:  There is an exclusive focus on the poorest of the poor.
  8. 8. [Leadership – Dr. Muhammad Yunus] April 21, 2014 8 Mohaimin Ul Jobair Leadership - Assignment  Borrowers are organized into small homogeneous groups.  Special loan conditionality‘s which are particularly suitable for the poor.  Simultaneous undertaking of a social development agenda addressing basic needs of the clientele.  Design and development of organization and management systems capable of delivering program resources to targeted clientele.  Expansion of loan portfolio to meet diverse development needs of the poor. October 13, 2006 was the happiest day for Bangladesh. It was a great moment for the whole nation. Announcement came on that day that Grameen Bank and I received the Nobel Peace Prize, 2006. It was a sudden explosion of pride and joy for every Bangladeshi. All Bangladeshi's felt as if each of them received the Nobel Peace Prize. We were happy that the world has given recognition through this prize, that poverty is a threat to peace. Grameen Bank, and the concept and methodology of micro-credit that it has elaborated through its 30 years of work, have contributed to enhancing the chances of peace by reducing poverty. Bangladesh is happy that it could contribute to the world a concept and an institution which can help bring peace to the world. Owned by the Poor It is owned by the poor borrowers of the bank who are mostly women. It works exclusively for them. Borrowers of Grameen Bank at present own 95 percent of the total equity of the bank. Remaining 5 per cent is owned by the government. No Collateral, No Legal Instrument, No Group-Guarantee or Joint Liability Grameen Bank does not require any collateral against its micro-loans. Since the bank does not wish to take any borrower to the court of law in case of non- repayment, it does not require the borrowers to sign any legal instrument. Although each borrower must belong to a five-member group, the group is not required to give any guarantee for a loan to its member. Repayment responsibility solely rests on the individual borrower, while the group and the center oversee that everyone
  9. 9. [Leadership – Dr. Muhammad Yunus] April 21, 2014 9 Mohaimin Ul Jobair Leadership - Assignment behaves in a responsible way and none gets into repayment problem. There is no form of joint liability, i.e. group members are not responsible to pay on behalf of a defaulting member. 97 per cent Women Total number of borrowers is 8.35 million, 96 per cent of them are women. Branches Grameen Bank has 2,565 branches. It works in 81,379 villages. Total staff is 22,124 Over Tk. 684 billion disbursed Total amount of loan disbursed by Grameen Bank, since inception, is Tk. 684.13 billion (US $ 11.35 billion). Out of this, Tk. 610.81 billion (US $ 10.11 billion) has been repaid. Current amount of outstanding loans stands at TK 73.32 billion (US $ 968.31 million). During the past 12 months (from November‘10 to October'11) Grameen Bank disbursed Tk. 107.30 billion (US $ 1480.53 million). Monthly average loan disbursement over the past 12 month was Tk. 8.94 billion (US $ 123.38 million).Projected disbursement for year 2011 is Tk. 110.00 billion (US$ 1557.63 million), i.e. monthly disbursement of Tk. 9.17 billion (US $ 129.80 million). End of the year outstanding loan is projected to be at Tk. 78.00 billion (US $ 1105 million). Recovery Rate Over 97 per cent Loan recovery rate is 96.67 per cent. 100 per cent Loans Financed From Bank’s Deposits
  10. 10. [Leadership – Dr. Muhammad Yunus] April 21, 2014 10 Mohaimin Ul Jobair Leadership - Assignment Grameen Bank finances 100 per cent of its outstanding loan from its deposits. Over 56 per cent of its deposits come from bank‘s own borrowers. Deposits amount to 145 per cent of the outstanding loans. If we combine both deposits and own resources it becomes 160 per cent of loans outstanding. Borrower-Deposits Keep Growing Besides building financial strength of the poor women by encouraging them to build up significant amount of personal savings, borrower deposit is also a very important element in Grameen Bank. Forty-two per cent of the branches have borrower deposits equal to 75 per cent or more of outstanding loans of the branches. One-fifth of the branches have more borrower-deposits than the amount of loans outstanding. In some branches borrower-deposits are as high as 50 per cent above the outstanding loans. In eight zones, out of forty, borrower deposits are equal or more than the outstanding loans in zones. No Donor Money, No Loans In 1995, Bank decided not to receive any more donor funds. Since then, it has not requested any fresh funds from donors. Last installment of donor fund, which was in the pipeline, was received in 1998. GB does not see any need to take any donor money or even take loans from local or external sources in future. GB's growing amount of deposits will be more than enough to run and expand its credit program and repay its existing loans. Earns Profit Ever since Grameen Bank came into being, it has made profit every year except in 1983, 1991, and 1992. It has published its audited balance-sheet every year, audited by two internationally reputed audit firms of the country.
  11. 11. [Leadership – Dr. Muhammad Yunus] April 21, 2014 11 Mohaimin Ul Jobair Leadership - Assignment Status of Dr. MuhammodYunus Corporate Position: Revenue and Expenditure Total revenue generated by Grameen Bank in 2012 was Tk. 17.74 billion (US $ 252.05 million). Total expenditure was Tk. 16.98 billion (US $ 241.29 million). Interest payment on deposits of Tk. 9.23 billion (US $ 131.09 million) was the largest component of expenditure (54 per cent). Expenditure on salary, allowances, and pension benefits amounted to TK. 4.64 billion (US $ 65.92 million), which was the second largest component of the total expenditure (27 per cent). Grameen Bank made a profit of Tk. 757.24 million (US $ 10.76 million) in 2012. 30% Dividend for 2012 Grameen Bank has declared 30% cash dividend for the year 2010. This is the highest cash dividend declared by any bank in Bangladesh in 2010.Highest record of dividend declared by Grameen Bank was in 2006. It was 100%.The bank has also created a Dividend Equalization Fund to ensure distribution of dividends without much fluctuation in successive year‘s .Receiving of dividends each year greatly inspires our shareholders, 97% of whom are our borrowers. Low Interest Rates Government of Bangladesh has fixed interest rate for government-run microcredit programs at 11 per cent at flat rate. It amounts to about 22 per cent at declining basis. Grameen Bank's interest rate is lower than government rate. There are four interest rates for loans from Grameen Bank: 20% for income
  12. 12. [Leadership – Dr. Muhammad Yunus] April 21, 2014 12 Mohaimin Ul Jobair Leadership - Assignment generating loans, 8% for housingloans, 5% for student loans, and 0% (interest-free) loans for Struggling Members (beggars). All interests are simple interest, calculated on declining balance method. This means, if a borrower takes an income- generating loan of say, Tk. 1,000, and pays back the entire amount within a year in weekly installments, she'll pay a total amount of Tk. 1,100, i.e. Tk. 1,000 as principal, plus Tk. 100 as interest for the year, equivalent to 10% flat rate. Deposit Rates Grameen Bank offers very attractive rates for deposits. Minimum interest offered is 8.5 per cent. Maximum rate is 12 per cent. Beggars as Members Begging is the last resort for survival for a poor person, unless he/she turns into crime or other forms of illegal activities. Among the beggars there are disabled, blind, and retarded people, as well as old people with ill health. Grameen Bank has taken up a special program in 2002, called Struggling Members Program exclusively for the beggars. Over 111,296 beggars have joined the program. Total amount disbursed stands today at Tk. 162.60 million. Of this amount of Tk. 130.89 million (80% of the amount disbursed) has already been paid off. 19,678 beggars have left begging and are making a living as door-to-door sales persons. Among them 10,185 beggars have joined Grameen Bank groups as main- stream borrowers. Beggar‘s members have voluntarily opened their personal savings accounts. Cumulative deposit in these savings accounts amounts to BDT 22.41 million; present balance stands at BDT 8.08 million. Basic features of the program are: 1. Existing rules of Grameen Bank do not apply to beggar members; they make up their own rules.
  13. 13. [Leadership – Dr. Muhammad Yunus] April 21, 2014 13 Mohaimin Ul Jobair Leadership - Assignment 2. All loans are interest-free. Loans can be for very long term, to make repayment installments very small. For example, for a loan to buy a quilt or a mosquito-net, or an umbrella, many borrowers are paying Tk. 2.00 (3.4 cents US) per week. 3. Beggar members are covered under life insurance and loan insurance programs without paying any cost. 4. Groups and centers are encouraged to become patrons of the beggar members. 5. Each member receives an identity badge with Grameen Bank logo. She can display this as she goes about her daily life, to let everybody know that she is a Grameen Bank member and this national institution stands behind her. 6. Members are not required to give up begging, but are encouraged to take up an additional income-generating activity like selling popular consumer items door to door, or at the place of begging. Objective of the program is to provide financial services to the beggars to help them find a dignified livelihood send their children to school and graduate into becoming regular Grameen Bank members. We wish to make sure that no one in the Grameen Bank villages has to beg for survival. Housing for the Poor This program was awarded Aga Khan International Award for Architecture in 1989. Maximum amount given for housing loan is Tk. 25,000 (US $ 354) to be repaid over a period of 5 years in weekly installments. Interest rate is 8 per cent. 690,737 houses have been constructed with the housing loans averaging Tk. 13,059 (US $ 181.50). A total amount of Tk. 9.02 billion (US $ 211.21 million) has been disbursed for housing loans. During the past 12 months (from Nov.'10 to October‘11) 4,482 houses have been built with housing loans amounting to Tk. 52.43 million (US $ 0.69 million). Micro-enterprise Loans
  14. 14. [Leadership – Dr. Muhammad Yunus] April 21, 2014 14 Mohaimin Ul Jobair Leadership - Assignment Many borrowers are moving ahead in businesses faster than others for many favorablereasons, such as, proximity to the market, presence of experienced male members in the family, etc. Grameen Bank provides larger loans, called micro- enterprise loans, for these fast moving members. There is no restriction on the loan size. So far 3,590923 members took micro-enterprise loans. A total of Tk. 105.96 billion (US$ 1540.58 million) has been disbursed under this category of loans. Average loan size is Tk. 29,507 (US $ 389.69), maximum loan taken so far is Tk. 1.6 million (US $ 23,209). This was used in purchasing a truck which is operated by the husband of the borrower. Power-tiller, irrigation pump, transport vehicle, and river-craft for transportation and fishing are popular items for micro-enterprise loans. Scholarships Scholarships are given, every year, to the high performing children of Grameen borrowers, with priority on girl children, to encourage them to stay ahead to their classes. Up to October'11, scholarships amounting to Tk. 205.03 million (US$ 3.00 million) have been awarded to 1, 33031 children. During 2011, US$ 592,849 will be awarded to about 24,611 children, at various levels of school and college education. Education Loans Students who succeed in reaching the tertiary level of education are given higher education loans, covering tuition, maintenance, and other school expenses. By October‘11, 49,588 students received higher education loans, of them 46,885 students are studying at various universities; 577 are studying in medical schools, 894 are studying to become engineers, 1232 are studying in other professional institutions. Growth of GrameenBank &Foundation:
  15. 15. [Leadership – Dr. Muhammad Yunus] April 21, 2014 15 Mohaimin Ul Jobair Leadership - Assignment Grameen Bank does not own any share of the following companies in the Grameen network. Nor has it given any loan or received any loan from any of these companies. They are all independent companies, registered under Companies Act of Bangladesh, with obligation to pay all taxes and duties, just like any other company in the country. 1. Grameen Phone Ltd. (Telenor Bangladesh) 2. Grameen Telecom 3. Grameen Communications 4. Grameen Cybernet Ltd. ( Frist ISP of Bangladesh) 5. Grameen Solutions Ltd. 6. Grameen Information Highways Ltd. 7. Grameen Bitek Ltd. 8. Grameen Krishi Foundation 9. Grameen Motsho (Fisheries) Foundation 10. Grameen Uddog (Enterprise) 11. Grameen Shamogree (Products) 12. Grameen Knitwear Ltd. 13. Grameen Shikkha (Education) 14. Grameen Capital Management Ltd. 15. Grameen Byabosa Bikash (Business Promotion ) 16. Grameen Trust 17. Grameen Health Care Trust 18. Grameen Health Care Service Ltd. 19. Grameen Danone Food Ltd. 20. Grameen Veolia Water Ltd. 21. Grameen Shakti. 22. Grameen IT Park Ltd. 23. Grameen Star Education Ltd. 24. Grameen Employment Services Ltd. 25. Grameen Fabrics and Fashion Ltd. 26. Grameen Distribution Ltd. 27. Grameen Shamogree Purbanchal Ltd.
  16. 16. [Leadership – Dr. Muhammad Yunus] April 21, 2014 16 Mohaimin Ul Jobair Leadership - Assignment 28. Grameen Shamogree Uttaranchal Ltd. 29. BASF Grameen Ltd. As per Grameen Bank reputation build up they create new companies to serve better, to do put responsibility towards to society, to create more employment, to give chance survive & show the talent though workforce. By these ways Grameen Bank does their social responsibility &makes wealth in real world. Establish themselves one of top listed companies in Bangladesh. Rapid growth of Grameen Bank: The successes of the Grameen Bank of Bangladesh have led to rapid growth in funding for microfinance. For the time frame 1983-97, subsidy per person-year of membership in Grameen was about $20, and subsidy per dollar-year borrowed was about $0.22. By measureof consumer surplus for Grameen users, the evidence in the literature suggests that surplus probably exceeds subsidy. Grameen—if not necessarily other micro lenders—was probably a worthwhile social investment. By the following graph we are able see the rapid growth of Grameen Bank since the project starts. From 1976 to 2000 there growing level are increasing every year.
  17. 17. [Leadership – Dr. Muhammad Yunus] April 21, 2014 17 Mohaimin Ul Jobair Leadership - Assignment From Grameen I to Grameen II The problems faced by Grameen Bank in the late 1990s led to its senior staff piloting a number of experiments with new products and new ways of managing service provision. By early 2001 these had been consolidated and Professor Yunus announced the launch of ‗Grameen II‘ – the replacement of the Bank‘s earlier products by a new range on different terms. The components of Grameen II were designed so that (i) they should meet client demand, and (ii) they should be profitable for the Bank. Between March 2001 and August 2002 all Grameen‘s 1,200 branches were shifted from Grameen I to Grameen II products and systems. Accounts of this process and the practice and outcomes of Grameen II are provided by Rutherford et al. (2006) and Dowla et al. (2006). The main elements of Grameen II are: 1. A major focus on savings from members and the public. This includes voluntary savings, term deposits and the Grameen Pension Scheme (GPS) – a long-term savings program.
  18. 18. [Leadership – Dr. Muhammad Yunus] April 21, 2014 18 Mohaimin Ul Jobair Leadership - Assignment 2. The provision of flexible ‗basic loans‘ to members (rather than the standardized Grameen I 12-month loans). These are for variable amounts, can be repaid over three to 36 months, have negotiable repayment schedules and interest rates are determined by loan type (size, length, grace period, etc.). 3. The abandonment of joint liability (and the idea of social collateral). 4. A poverty-focused ‗struggling members‘ program, that provides small, subsidized loans to beggars and encourages them to join Grameen Bank centers. Grameen Bank Tower, Mirpur 2, Dhaka, Bangladesh. The results have been staggering. The Bank has not only been able to stabilize itself but has, in effect, re-launched itself and its trajectory. While it took Grameen 25 years to reach a client base of 2.5 million, it took only three years, from 2001, to recruit the next 2.5 million clients (Rutherford et al., 2006). Over the period 2002 to 2005 the Bank tripled the deposits it held (US$478 million) and doubled its portfolio of outstanding loans. The Bank‘s loans portfolio became smaller than its savings portfolio. It built up a large fund for bad loan provision and profits rose from 60 million Taka in 2002 to 442 million Taka (US$7 million) in 2005. This growth meant
  19. 19. [Leadership – Dr. Muhammad Yunus] April 21, 2014 19 Mohaimin Ul Jobair Leadership - Assignment that physical expansion became essential and the Bank opened 500 new branches, so that it had more than 1,700 branches, by late 2005. While the Bank still proclaims its mission of poverty reduction, my personal observations lead me to believe that its clientele is less economically deprived than was the case in the 1980s and 1990s. This is partly because clients have done well (perhaps through Grameen membership), and partly because of the product redesign and the drive for expansion and profitability. Many of its clients would be classed as non-poor or moderately poor by Bangladesh‘s official poverty line. A much smaller proportion is extremely poor (the targets for Grameen I over 1975 to 2000). The ‗struggling members program‘ is targeted at the extreme poor, but by December 2005 it had only 56,000clients, against more than 25 million extremely poor people in the country. Average loansize for these members was only $6 and their average savings were $1. While many poor and extremely poor people may benefit indirectly fromGrameen II (through employment, increased demand for products, greater availability of local level charity) the struggling members program appears to be either failing ortokenistic. Features of Grameen Bank II  Grameen Fund  Grameen Kalyan  Loans Paid Off At Death  Life Insurance  Deposits  Pension Fund for Borrowers  Loan Loss Reserve  Retirement Benefits Paid Out  Telephone for Ladies  Getting Elected in Local Bodies  Computerized MIS and Accounting System  Policy For Opening New Branches  Crossing the Poverty-Line
  20. 20. [Leadership – Dr. Muhammad Yunus] April 21, 2014 20 Mohaimin Ul Jobair Leadership - Assignment  'Stars' for Achievements Analysis of the Criticism of the Grameen Bank: Initially, it‘s important to point out that the economy perspective, which should be applied in a comparative way. Additionally, the ethnography would have to follow the women over a three to five year or even seven year period to get a full perspective on the effect that micro lending. Finally, it may be that the Grameen Bank has an organizational culture or structures that need to be changed, so the article may not represent a systemic critique of micro lending as a means for positive social change. At Fixes, our focus is typically on implementing new or underutilized ideas to help those in needs. But sometimes it‘s just as important to protect institutions that are already working well. Which is today about the Grameen Bank, the Bangladeshi organization that won the 2006 Nobel Peace Prize, along with its founder Dr. Prof. Muhammad Yunus, for its work extending microloans to some of the world‘s poorest, and has been crucial in global efforts to lift millions of people out of poverty. Both the bank and Yunus, have come under attack by the government of Bangladesh and its prime minister, Sheikh Hasina Wazed. It has taken 35 years of painstaking effort to build Grameen into a world-class institution that serves millions of poor people. That progress could be lost if the country‘s leaders fail to appreciate what makes the Grameen Bank works.
  21. 21. [Leadership – Dr. Muhammad Yunus] April 21, 2014 21 Mohaimin Ul Jobair Leadership - Assignment Anyone who cares about international development, microfinance or social entrepreneurship should pay attention. The Grameen Bank is not just the largest micro lender in the world, with 8.4 million borrowers (most of them women villagers) who received more than $1 billion in loans last year; it is the flagship enterprise in an industry that, in 2009, served 128 million of the world‘s poorest families. It is also a leading example and inspiration for millions of citizen-led organizations that have been established in recent decades to address social problems that governments have failed to solve. Yunus, the founder of the bank, is an entrepreneurial figure cut from the same cloth as Steve Jobs, the founder of Apple. He has devoted himself since the 1970s to demonstrating, institutionalizing and spreading microfinance. Recently, the government issued orders that Yunus is to be removed from his post as managing director of the bank. Yunus has taken the case to Bangladesh‘s Supreme Court. Legally, the government owns 25 percent of Grameen and has the right to appoint a quarter of its board members, including its chairperson. In practical terms, however, the government has little justification to intercede in the bank‘s operations. Today, of the Grameen Bank‘s paid-up share capital, only 3.5 percent comes from the Bangladeshi government. It is the bank‘s borrowers who are its majority owners. They control 75 percent of the board seats and they have supplied 96.5 percent of the paid up share capital. And it‘s the savings of villagers — about $1.5 billion — that now finances the bank‘s activities and growth. Nevertheless, the government is proceeding to remove Yunus against the objections of its majority owners and will probably succeed. The stated reason is hollow: Yunus, who is 70, is over the mandatory retirement age in government banks. An Entrepreneur became threat for local Government:
  22. 22. [Leadership – Dr. Muhammad Yunus] April 21, 2014 22 Mohaimin Ul Jobair Leadership - Assignment What‘s the real reason behind the government‘s attacks on Yunus? The most likely explanation is that Yunus is being punished for criticizing the government and making a bid to start a political party in 2007. This is a threat to be taken seriously — not because the bank will collapse without Yunus. The Grameen Bank is a strong, well-managed institution with 25,000 employees. It could probably withstand his departure. Indeed, given Yunus‘s age, it‘s critical to pave the way for a successor. But if he is replaced in a manner that diminishes confidence, the bank could face problems. When an organization has a founder who is intimately associated with it the leadership transition needs to be handled with great care. This is particularly important because the Grameen Bank depends on unusually high levels of motivation among its staff and high levels of trust among its borrowers. A forced removal of Yunus that is seen as illegitimate, politically-motivated, or vindictive could alienate thousands of employees and trigger a run on savings or loan defaults. Even the perception that it has come under the influence of the governing party, the Awami League the present Government, could cause damage. Bangladesh has a long history of banks and cooperatives being used as political instruments. The state-owned banks have regularly extended loans to elite borrowers (who default at high rates) as a form of patronage. Unlike Grameen Bank, which is financially self- sufficient, the state banks are perpetually in need of cash infusions from the government. Here‘s an example of what could happen: The Prime Minister has made it clear that she believes the interest rates are too high. Her concerns for the poor may be well- intentioned. But historically, subsidized loans have been seen as goodies — and have gone to the most powerful, not to those they were intended for: the poor. Grameen‘s rates are, in fact, considered low among micro lenders, whose administrative costs are far higher than that of traditional banks. However, if a politically-minded managing director decided to cut the interest rate, it could jeopardize the bank‘s solvency.
  23. 23. [Leadership – Dr. Muhammad Yunus] April 21, 2014 23 Mohaimin Ul Jobair Leadership - Assignment Similarly, if the government installed a bureaucratic manager who failed to appreciate the bank‘s entrepreneurial culture, it could suck the life out of the bank. Managing a bank that actually works with poor women in village‘s means, above all, recruiting people who care about the poor and training them in creative ways. Before Grameen Bank workers get hired, for example, they spend close to a year demonstrating their interest in serving the poor. They have to do things like write detailed case studies about the lives of village women to show that they genuinely care about, and understand, their clients. Managing this workforce is nothing like managing a run-of-the-mill bank. In an institution like this, the management needs to be perceived as honest, responsive and open. If corruption, politicization or bureaucratic torpor began to infect it, the disease would be irreversible. The government has tried to maintain the appearance that its attacks are merely about following the law. That is hard to believe. Over the past few months, officials have sought to damage Yunus‘s reputation, claiming without evidence that he has enriched himself at the expense of the poor, intentionally harmed borrowers, and engaged in fraud. The prime minister has called micro lenders loan sharks ―sucking the blood of the poor.‖ Her son circulated a letter which contained a litany of unfounded accusations against Yunus — the most outrageous being that the government created the Grameen Bank, not Yunus. It‘s not as if Bangladesh is lacking real problems that require government attention. There can be no sense in destabilizing the leading institution in an industry that provides financing to more than half of the households in the country. In fact, the field of micro-finance needs solid, innovative leadership today more than ever. There remain questions about its effectiveness in alleviating poverty. It‘s crucial for lenders to make honest appraisals of their impact and experiment with other services to determine how it can be made to work better. Implementation & Evaluate Strategies:
  24. 24. [Leadership – Dr. Muhammad Yunus] April 21, 2014 24 Mohaimin Ul Jobair Leadership - Assignment In Bangladesh, there is also a potentially serious problem of villagers taking loans from multiple lenders and getting overly indebted. For these and other reasons, it is unwise for the government to try to tarnish or marginalize Yunus, whose experience, global recognition and inventiveness are valuable assets for the whole field. On March 15, the Bangladeshi Supreme Court postponed ruling on Yunus‘s case for two weeks. Hopefully, common sense will win the day and a solution will be reached so that this vital institution — and the millions of villagers who depend upon it for their livelihoods — are not jeopardized. Given that Yunus understands Grameen‘s culture better than anyone, he should have a key say in any leadership change. Picture: Muhammad Yunus, center, outside the high court building in Dhaka, Bangladesh, on March 6,2010 where he contested the government‘s decision to remove him from his post in Grameen Bank.
  25. 25. [Leadership – Dr. Muhammad Yunus] April 21, 2014 25 Mohaimin Ul Jobair Leadership - Assignment As we‘ve noted in several previous Fixes columns, the involvement of governments in anti-poverty programs is often essential. Wise governments should view microfinance programs not as adversaries, but as partners in furthering public goals organizations that need to be regulated, but not controlled. Not all do. So it‘s important for leaders of micro-finance organizations to take steps to safeguard their independence well before political attacks come. Foreign governments and multi- lateral institutions have invested hundreds of millions of dollars in the Grameen Bank and other large microfinance organizations in Bangladesh, and elsewhere, with the goal of alleviating poverty. They also need to remember that it‘s not enough to finance development organizations. They need to protect them, too. The future of the Dr. MuhammodYunus’sGrameen Bank: The Grameen Bank looks as though it has a secure future as an MFI in Bangladesh andshould remain a major player in the microfinance market, alongside other big players,such as ASA and BRAC. It also seems set to remain a global icon, although there is realconfusion about the message that the Bank and Professor Yunus project. Internationally, it is still perceived as a micro lending institution, focused on extremelypoor women, despite the fact that it has adopted a market-based, ‗financial systems‘approach since 2001. The confusion could be a cause for concern, but my personal analysis is more positive.Within Bangladesh, Grameen now plays an important role as a substantial MFI thatmeets client needs and helps to promote competition within the financial markets. Itsviability is essential for this internal role, but also very important for its external role. Hadthe Grameen Bank collapsed, then optimism about the feasibility of poverty reductionand international development would have been dented. While the internationalmessage associated with the Bank – microenterprise credit for extremely poor womenlifts them out of poverty – is now inaccurate, the broader thrust of this message – of hardworking poor people using their personal agency to
  26. 26. [Leadership – Dr. Muhammad Yunus] April 21, 2014 26 Mohaimin Ul Jobair Leadership - Assignment overcome the problems they face –is highly appropriate for the public‘s and politicians of rich countries. It helps the citizensof the rich world to understand that poor people are active agents in the processes ofdevelopment and not passive recipients of food aid and humanitarian relief, as the media(in the USA, Europe, Japan and the Middle East) usually stereotype them. The GrameenBank today is a very different organization from what it was 20 years ago, but it stillserves as an inspiration for those trying to help poor and low- income people in their ownefforts to improve their lives. Conclusion: Microcredit is not the cure for everything, but it is a force that can bring about economic, personal, social, and political change. Poverty builds giant walls around people. Grameen does not intend to give people a few nice days within these walls. Grameen wants to give the people the strength to tear down the walls – and ultimately establish an existence above the poverty level. Muhammad Yunus is a man who works for change, an optimist who is genuinely convinced of change for the good. If society would strongly promote self-reliance, poverty would not stand a chance. We must simply make use of human potential. Every person is endowed by nature to support herself or himself. Promoting this potential is the task not only of government but of business. Greed is not the only driver of free enterprise; Social benefit can replace greed as a powerful motor. The business world does not have to be a battlefield of bloodthirsty capitalists. Good people can feel called upon to steer the world sustainably in the right direction.
  27. 27. [Leadership – Dr. Muhammad Yunus] April 21, 2014 27 Mohaimin Ul Jobair Leadership - Assignment References: Gameen Bank & Grameen Foundation web site - www.grameen-info.org Yunus Centre - http://www.muhammadyunus.org Moral Heroes – Muhammad Yunus , Bangladesh, 20th Century, Asia, Economic, Male - http://moralheroes.org/muhammad-yunus Market Mix at Economical Sector - http://www.mixmarket.org/mfi/grameen- bank Hulme,.D and Arun, T.G. (forthcoming 2009) Microfinance: A Reader, London,Routledge. Fuglesang, A. and Chandler, D. (1986). Participation as Process: What Can We Learnfrom the Grameen Bank, Bangladesh. Oslo, Norway: Norwegian Ministry ofDevelopment Corporation. Rutherford, S. with Maniruzzaman, Sinha, S.K. and Acnabin & Co. (2006), ‗GRAMEEN II- The First Five Years: 2001-2006‘, Grameen II Briefing Notes for MicroSave. Onlineresource available at: http://www.microsave.org Dowla, A. and Barua, D. (2006). The Poor Always Pay Back – The Grameen II Story.West Hartford, CT: Kumarian Press. Yunus, M. (1999). Banker to the Poor: Micro lending and the Battle against Poverty.New York: Public Affairs.
  28. 28. [Leadership – Dr. Muhammad Yunus] April 21, 2014 28 Mohaimin Ul Jobair Leadership - Assignment The Daily New York Times (Online Version) http://www.nytimes.com/imagepages/2011/03/22/opinion/22fixesEimg.html