Microfinance as Social Business -- Parveen Mahmud
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Transcript of Microfinance as Social Business -- Parveen Mahmud
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17TH MICROCREDIT SUMMITGENERATION NEXT: INNOVATIONS IN MICROFINANCE
Title
Text here
Building Social Business…
“Microfinance as Social Business”
Ms. Parveen MahmudManaging Director
Workshop 1
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Just like the implementation of Micro Finance Bangladesh is also the pioneer in Social Business
The UN declared 2005 as the Micro Credit Year and also adopted Social Business Concept for achieving the Millennium Development Goal
(MDGs) in 2012
Nobel Laureate for Peace Professor Muhammad Yunus, founder of the Grameen Bank and the pioneer of Micro Credit introduced the Social
Business concept globally
Introduction:
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Micro Credit is collateral free credit to the poor to generate self-employment through income generating activities to overcome poverty. Presently in it’ s wider dimension microcredit is known as Micro Finance, which includes, "the provision of a broad range of financial services such as deposits, loans, payment services, money transfers, and insurance to the poor and low income households and microenterprises.”
Definition of Micro Finance and Social Business:
Social business… is one whose owners are motivated by solving a social problem, often unemployment, rather than making money for themselves.
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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
Financial and economic sustainability
When investment amount is paid back, company profit stays with the company for expansion and improvement
Environmentally conscious
Seven Principles of Social Business
Investors get back their investment amount only. No dividend is given beyond investment money
Workforce gets market wage with better working conditions
…do it with joy
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… different from the non-profit charitable model which has an inherent weakness — its reliance for survival on donations
Profit making, which makes it sustainable…Its revenues cover its costs, or there is a clear business plan to reach break-even within a reasonable timeframe; can be financed by investment, rather than depending on donations.
…but it does not pay dividendsAny income remains with the company to be reinvested. An owner can take out their original investment but no more.
Difference between social business and other development model
Difference between social business and regular businessA conventional business goes out only to make money, and creates jobs as a byproduct. In a social business for example, the main objective is to generate employment.
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Dimensions of social business:
TYPE 1:Any business focused on providing a product and/or service with a specific social, ethical or environmental goal.
TYPE 2:Any profitable business that is owned by the poor and disadvantaged
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Social Business is a much broader concept includes microcredit
Micro Finance and Social Business:
It makes a fundamental change, where Business is built on the selfless part of human nature; doing business for the benefits of society – except the investor(s) get’s the pleasure of serving humanity. It is a selfless business whose purpose is to bring an end to a social problem.
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Designing each small social business is like developing a seed. Once the seed is developed, any body can plant it with appropriate soil base and where it is needed. Since each unit should be self sustaining eventually, funding is not expected to be a constrain.
Few probable areas to fetch social business fund are: Philanthropy, Cross Subsidization, Corporate Social Responsibility, Joint Venture, Crowd Funding etc.
Social Business Sources of Funding:
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Grameen Telecom Trust (GTT) was founded in 2010, as the flagship entity responsible for implementing and facilitating Social Business ideas.
GTT has identified healthcare, education, technology and entrepreneurship development as key areas of Social Business.
Transforming Ideas into Realities: Implementation in Bangladesh
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Core programs of Grameen Telecom Trust
1. Nobin Udyokta (NU) /New Entrepreneurs
2. Social Business Learning and Innovation Fund (SBLIF)
3. Investments and Joint Ventures
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New Entrepreneurship Program Funding and Incubation for businesses of children of Grameen Bank borrowers
~ Unemployment to Entrepreneurship
Nobin Udyokta Program
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Nobin Udyokta (NU)/ New Entrepreneurs
•Grameen Telecom Trust (GTT) has created a fund to support NU encouraging the idea “We are not job-seekers, we are job-givers”
•The aim of this fund would be to support children of Grameen Bank members to undertake sustainable business and become entrepreneurs.
•At present the size of this fund is BDT 100 million ($ 13 million).
•Presently, besides GTT, Grameen Shakti Samajik Byabosha Ltd, Grameen Trust, Grameen Kalyan & Grameen Byabosha Bikash are implementing NU programs.
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What is Social Business Learning and Innovation Fund (SBLIF):
The Social Business Learning and Innovation Fund (SBLIF) has been created to encourage innovative enterprise to undertake social business ventures. New social business models are often deemed risky to implement, hence, SBLIF initially intends to support such ideas through on a pilot basis. The tested models that attain success are gradually replicated and scaled.
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Characteristics of Innovative Enterprises:
• These enterprise activities should be novel and different from the traditional enterprises.
•These enterprises ought to benefit directly or indirectly the disadvantaged or marginalized communities through financial and social inclusiveness.
• The enterprise must be sustainable.
• Enterprises should create entrepreneurs, encourage job creation.
• Enterprise should encourage value chain process, eliminate middleman and offer best price for products, labour and also addresses specific social problems or issues.
• Enterprises which encourages modality of ownership to be transferred to the producers, enterprise managers gradually is reckoned as innovative.
• The enterprise must be environment friendly.
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Social Business Learning and Innovation Fund (SBLIF) - We invest/partner in social businesses after a thorough due diligence process
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SBLIF Process Flow
1. Application for Social Business Learning and Innovation Fund through project proposal
2. Detailed assessment by Review/ Screening Committee
3. Presentation of the project proposal to the Social Business Design Lab
4. An 'assessment team' from GTT visits the field
5. MoU and other documents are prepared and signed by the parties
6. Initiative comes into operation, GTT plays its part in operational management, regular MIS and AIS reporting and offline and online monitoring
7.Subject to the returns and impact of the initiatives, projects are turned into social business companies, while existing companies are scaled up
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SDRS Crafts Social Business Revenue-generation for poor women through the manufacture and export of embroidered products
Ongoing Projects under SBLIF
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SKS Social Business Income generation and asset building for poor households by promoting sheep rearing
Ongoing Projects under SBLIF
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Aroni LimitedProduction and sales of local mustard oil by engaging the indigenous community
Ongoing Projects under SBLIF
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Mobile Plant Nursery and ClinicMobile plant nursery which provides agricultural extension services and undertake sale of fresh produce
Ongoing Projects under SBLIF
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A BRIEF ON GTT'S INVESTMENT IN SOCIAL BUSINESS COMPANIES
SN Name of Social Business Companies
GTT's Investment in Equity
Major Objectives (Activities) Main ProductsShare (%) Amount
(BDT) Amount
(USD)
1 Grameen Distribution Limited (GDL) 95.00% 142,500,000 $ 1,841,085
To promote sales and distribution of products to the target group through underprivileged rural women.
Mobile handsets & accessories, energy efficient products, healthcare products and some general consumer goods etc.
2 Grameen Fabrics & Fashion Limited (GFFL) 99.93% 389,900,000 $ 5,037,468
To set up an environment friendly RMG industry to encounter specific social problems, to earn foreign currency and to create employment.
Long Lasting Impregnated Mosquito Net (LLIN), Sanitary Napkin (SOFTY), Knitting, Garments etc.
3 Grameen Health Care Services Limited (GHSL) 50.00% 150,000,000 $ 1,937,984 To extend quality health care services to the
low income households.Eye care program, general health care program, child and mother care, oral health care etc.
4 Grameen Danone Foods Limited (GDFL) 31.00% 243,750,000 $ 3,149,225
To provide nutritious dairy & other food products to the children at affordable prices especially for low income families.
Shokti+ Doi, Shokti+ Pocket (Yogurt for nutrition) etc.
Total: 926,150,000 $ 11,965,762
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From Microfinance to Social Business for Sustainability
Poverty has many facets. It has to be approached from many directives, and no approach is significant. In more than one way microfinance and social businesses are intrinsically linked as both seek to empower the entrepreneurial sprit of people to help themselves come out of poverty.
Social business can can trace its roots back to microcredit. In Social Business for sustainability where:
•Grant not encouraged•Producers are offered best price•Ensuring market linkages•Ensuring value added services•Holistic approach to address social causes
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Challenges: Microfinance
In Micro Finance regularly repaying installment by the borrowers considered upgrading ones socio-economic condition. This conclusion may or may not be valid. To verify that it is essential to know how are they paying their installments and what is happening to their socio-economic status.
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Challenges: Social Business
Social Business recognizes that the responsibility for solving a society’s problems is shared between the Government & the citizens. Government should support to strengthen the growth of social business.
Our legal & regulatory system does not currently provide a place for social business. It needs specific rules regarding organizational structure, governance and decision making principles. Now, time for suitably adjusting the legal and tax codes to allow such companies to come into existence more easily.
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Way Forward
• Both microfinance and social business can compliment Governments development work.
•Government will have an important role in promoting both social business and microfinance through enabling healthy regulatory framework.
•It is expected that over a period of time, microfinance and the banking, non-bank large financial sector, emerging social business sector, all will function effectively as the development sector, with strong linkages between them and each playing an important role based on their respective comparative advantage.
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Contact Information:[email protected]
Visit: www.gtctrust.com
Follow:www.facebook.com/gtlctrust.com
Thank you