BRANDING IN BOTTOM OF PYRAMID (BOP): CASE OF GRAMEEN BANK (GB)

Transcription

1 BRANDING IN BOTTOM OF PYRAMID (BOP): CASE OF GRAMEEN BANK (GB) 1. PRELUDE -Dr. Mohammad Solaiman Recent years have witnessed a renewed academic and professional interest in the subject of branding in BOP and its association with organizational performance (Arnould & Jakki: 2005). The resurgence of interest is not surprising since the model of branding in BOP is a cornerstone of both organization and economic development of a country in general and in developing country, in particular. Further, in the line of thinking of Arnould & Jakki, Prahalad (2005) introduced a new concept into the discussion of developing countries and markets bottom-of-the pyramid markets (BOPMs)-consisting of the 4 billion people across the globe with annual income of less than $1200. These markets are not necessarily defined by national borders, but rather the pockets of poverty across countries. The 4 billion consumers are, of course, most often concentrated in the LDCs and LLDCs defined in UN classification scheme (World Bank, 2005). Despite research interest of branding in BOP more than decades, only recently Arnould and Jakki (2005) have developed an operational definition of branding in BOP. It represents the ingredients and processes involved in establishing a viable industry in LLDCs. Craftsmen must network and collaborate to attain efficiencies in production, domestic and international distribution (Bhagwats, 2004) and other marketing activities. It involves activities of production, distribution, consumption and eventual expansion of marketing activities which generate income opportunities for the poor people of the bottom at pyramid. Key to the vibrancy of the industry cluster will be a series of cluster characteristics, external inputs (Daniszewski, 2005) and macro environment factors (Cateora et. al 2008). Entrepreneurial activities that are networked appeared to be, perhaps, the best way to stimulate economic development and growth from within (Talukdar et. al, 2005) developing countries (Patric of, 2005) in general and Bangladesh in particular. In the light of the above considerations, the present paper will empirically examine the extent to which Grameen Bank (GB) of Bangladesh is faring with branding in BOP. The dual vision of offering a banking service to the poor and of poverty alleviation is accurately captured by the list of objectives of GB, such as (i) extend banking facilities for the poor; (ii) eliminate exploitation by money lenders; (iii) create small enterprise opportunities for the unemployed and underemployed (iv) bring unprivileged people within the fold of some organizational format which they can understand, operate and can find some socio-political and economic strength BRANDING IN BOTTOM OF PYRAMID (BOP): CASE OF GRAMEEN BANK (GB) 27

2 through mutual support (v) reverse the age old (poverty) cycle of low income, low savings, low investment, low income into an expanding system of low income, credit, more income, more credit, more investment, more income. Thus the framework of poverty alleviation will be based on recognizing poor as creative entrepreneurs and value conscious consumers. Entrepreneurship on a massive scale is the key to creating win-win opportunities between the organization and the poor in general, women in particular. Novel laureate Professor Mohammed Yunous argued that the conventional banking system is anti-poor, antiwomen and anti-illiterate and thus has contributed to maintaining the status quo between the rich and the poor. Grameen replicates in the USA, Europe, Africa, Latin America and different parts of Asia (Wall Streef Journal, 1998). Finally, Professor Mohammed Yonous and Grameen Bank received The Nobel Peace Prize on October 13, 2006 for enhancing the chances of peace by reducing poverty. It was the happiest day for Bangladesh, that poverty is a threat to peace has been recognized by the awarding of this prestigious prize to Professor Yunus. 2. OBJECTIVES The main theme of this paper is to highlight the idea that the poor must become active, informed, innovative, creative, challenging and involve consumes. The paper argues that the conversion of the BOP into an active market is essentially a developmental approach. It is not about serving an existing market efficiently as well as effectively; moreover innovative processes are essential to convert poverty into an opportunity for all stakeholders in one hand and stockholders, on the other. It appears that this task is challenging and it is in this context that we investigate in this paper. 3. METHODOLOGY Both primary and secondary data have been used for the preparation of this paper. Books, journals, research reports have been extensively studied for generating new ideas on the subject. Besides, quantitative and qualitative research tools have been used for creating new thinking, approaches in order to make the study informative, valuable and interesting to the readers. Moreover, depth interview, observation and focus group study have been conducted for the branding purpose. The main focus of the paper is to highlight the Grameen Bank as a brand in BOP. 4. THE CONCEPT OF BOP According to C.K. Prahalad (2005) If we stop thinking of the poor as victims or as a burden and start recognizing them as resilient and creative entrepreneurs and value conscious consumers, a whole new world of opportunity will open up. The BOP argument, originally developed by C.K. Prahalad, affirms that businesses can be competitive and therefore sustain profitability by targeting the poor 28 IJHPD VOL. 3 NO. 2 JULY - DEC 2014

3 at the bottom of the economic pyramid (UN-HABITAT, 2005). By expanding the global market system to include over 4.5 billion people who live in relative poverty would have the result of direct benefits and expanded opportunities for poor communities, while at the same time providing new profits centers for the private sectors (Prahalad & Hart, 2002). Market development at the BOP will create millions of new entrepreneurs at the grass roots level from women working as distributors and entrepreneurs to village-level micro enterprises in developing world in general and in rural Bangladesh in particular. These micro enterprises will be an integral part of the market-based ecosystem. The interconnectedness of the approach to economic development and social transformation has been shown as follows: Private enterprise Civil society organizations and local government Economic development and social transformation Development and aid agencies BOP consumers BOP entrepreneurs [Source: Prahalad & Stuart] 5. BRANDING Technically speaking, wherever an entrepreneur creates a new name, logo, or symbol for a new product, he or she has created a brand (Keller, 2008). The task of branding is to carry the promise that a product/service has the required characteristics which makes it different/unique to its target audiences (Bergstrom et. al, 2002). Zhang & Schmitt (2001) identify five factors and reational as the key to enduring brand leadership, such as vision of the mass market, managerial persistence, financial commitment, relentless innovation and asset leverage. 6. GRAMEEN BANK (GB) MODEL In 1976, GB was initiated in the village of Jobra near the University of Chittagong of Bangladesh. In 1983, it was converted into a formal bank and it is owned by the poor borrowers of the bank, who are mostly women. Borrowers of the bank are the owners of 95% of the total equity of the bank and the remaining 5% is owned by the government of Bangladesh. The GB is based on the voluntary BRANDING IN BOTTOM OF PYRAMID (BOP): CASE OF GRAMEEN BANK (GB) 29

4 formation of small groups of five women to provide mutual, morally binding group in lieu of the collateral required by conventional banks of Bangladesh. 7. GRAMEEN BANK COVERAGE The GB was the brainchild of Professor Mohammed Yunus. Having completed studies as a Fulbright scholar in the United States, Professor Yunus was lecturing economic theory at Chittagong University and he attributes his vision to a chance encounter in Jobra with Sufia, a -20 year old woman who borrowed money from local money lenders at an interest rate of 10 percent per day. She used the money to make bamboo stools and the condition of the loan was sold back to the moneylenders at a price well below market value of the products. Professor Yunus found 42 people in the Jobra Village in same poverty trap. In 1976, Professor Yunus lent a total of $27 about 62 cents per borrower. All the borrowers repaid the loans and thus, Professor Yunus was convinced that this success could be replicated across Bangladesh (Beim, 2003). It has been reported that total numbers of borrowers are 8.35 million and 96% of them are women. The GB has 2565 branches and it works in villages and its total employees are The total amount of loan disbursed by Grameen Bank, since inception, is TK billion (US $ billion). Out of this, Tk billion (US $ billion) has been repaid. Current amount of outstanding loans stands at Tk billion (US $ million). During the past 12 months (from November 10 to October 11) Grameen Bank disbursed Tk billion (US $ million). Monthly average loan disbursement over the past 12 months was Tk 8.94 billion (US $ million). 8. GRAMEEN BANK AND BOP MODEL The BOP model is built around three components such as availability, accessibility, and affordability. Rural development presents the possibility of concentrated BOP population. Therefore, it has created possibility of structuring the BOP for marketing purposes. The BOP model pursues the creation of viable rural economics through the development of micro enterprises and entrepreneurs that are inclusive, responsible to society. The model focuses on alleviating poverty and inhuman existence through the use of market economics. The availability, accessibility and affordability of goods and services of private sectors are bound to change the situation of the rural poor and in term these address some of the challenges faced by rural areas. By expanding the global market system to include the rural poor would provide new markets for the private sector and at the same time create opportunities for rural poor communities. The BOP model can be exhibited as follows: 30 IJHPD VOL. 3 NO. 2 JULY - DEC 2014

5 Availability Grameen Bank targets the poorest of the poor, with a particular emphasis on women, who receive 95 percent of the bank s loans. Women represent a suitable clientele because they have less access to alternatives, such as traditional credit lines and salaries; they are more likely to be credit constrained and they have an inequal share of power in household decision making. Lending to women also generates considerable secondary effects, including empowerment of a marginalized segment of society (Yunus, 2004). Each of Grameen s 1178 branches (as of December 2003) is run by a branch manager and several center managers, who cover an area of 15 to 22 villages. Together they learn their local area of operations intimately in order to identify and develop strong relationships with prospective clients. This effort to get close to the community is reflected in the program s costs. Women enter the system through a self-selected lending group of between 5 and 10 members. Participants rank their fellow group members according to financial strength and use this ranking to determine the order in which members receive their loans, with the neediest members receiving loans first. The members of the group elect a chairperson, who receives her loan only after the neediest members of the group have met the terms of their loans, including the weekly schedule for repayments. Once a year, Grameen Bank rates its branches according to a five-star system designed to promote core Grameen values, notably savings, prudence and education. Branches are awarded stars of different colors based on their achievements against the following five benchmarks: (i) Green Star (ii) Blue Star (iii) Violet Star (iv) Brown Star (v) Red Star. Grameen Bank claims that percent of borrowers have already crossed the poverty line. In order to qualify for this designation, each borrower needs to pass 10 tests that include having a roof over her head, sleeping in a bed, access to safe drinking water, access to warm clothing and having the BRANDING IN BOTTOM OF PYRAMID (BOP): CASE OF GRAMEEN BANK (GB) 31

6 ability to send all children to school. Grameen has recently experimented with a system in which new braches get no money. The new branches start off by going to the local villages, marketing their services and encouraging people to bring deposits. Accessibility There is a clear eligibility criterion for the selection of target group and adopting practical screening techniques to exclude those who do not qualify. Women are given priority since their empowerment has a greater positive impact on the family and they have proved to be disciplined and astute entrepreneurs. The delivery system is geared to meet the needs of the diverse socio-economic development of their housing, education, nutrition, family planning, economic development etc. It is a policy of replacing traditional collateral with social collateral, by making a group of five borrowers responsible for each other s loans. Group pressure forces the members to conform to the payment agreements. Affordability The key to GB s success was the achievement of a simple loan mechanism that all borrowers understand almost immediately, such as (i) a very small amount of loan given without any collateral (ii) loans are payable in small 5o weekly installments spread over a year (iii) access to larger subsequent loans dependent on repayment history (iv) individual, self chosen, rapid income generating activities, employment skills that the borrower is already equipped with (v) close supervision of credit utilization by the group as well as the bank staff (vi) stress on credit discipline and collective borrower responsibility (peer pressure) (vii) the adaptation of financial services to suit local demand through regular door-to-door banking (viii) compulsory (borrowers are compelled to save a minimum of 67 cents in SA currency per week) and voluntary saving schemes to minimize income fluctuation risks that are usually confronted by the poor. Savings implies that borrowers are paying a higher effective interest rate thus allowing the GB to charge only 20% on micro enterprise loans (ix) transparency in all bank transactions most of which occurs at centre meetings (x) market related interest rates that cover costs, GB charges 20% interest pa., of which 5% is contributed toward a group fund to cover risks. 9. DIVERSIFYING GRAMEEN BANK Grameen Bank has also helped establish a number of related organizations to support its mission, although it has chosen to support them with debt financing rather than assuming equity stakes. These organizations are separate legal entities that began as projects and were later spun off. Grameen Bank made loans into a 32 IJHPD VOL. 3 NO. 2 JULY - DEC 2014

7 trust fund (the Grameen Fund) from which disbursements were made to the companies. The companies were then expected to pay back the loans at a later stage. One of the organizations that expanded and diversified the bank s activities was the Greameen Krishi Foundation (GKF), which focuses on agriculture and provides loans to groups of farmers owning between 0.5 and 3 acres of land. Grameen Bank itself does not loan money for agricultural production, though it is able to do so. The sister organizations of Grameen Bank are (i) Grameen phone ltd (ii) Grameen Telecom (iii) Grameen Communications (iv) Grameen Cybernet Ltd (v) Grameen Solutions Ltd (vi) Grameen Information Highways Ltd (vii) Grameen Bitek Ltd (viii) Grameen Krishi Foundation (ix) Grameen Mostsho (Fisheries) Foundation (x) Grameen Uddog (Enterprise) (xi) Grameen Shamogree (Products) (xii) Grameen Knitwear Ltd. (xiii) Grameen Shikkha (Education) (xiv) Grameen Capital Management Ltd. (xv) Grameen Byabosa Bikash (Business Promotion) (xvi) Grameen Trust (xvii) Grameen Health Care Trust (xviii) Grameen Health Care Service Ltd. (xix) Grameen Danone Food Ltd. (xx) Grameen Veolia Water Ltd. (xxi) Grameen Shakti (xxii) Grameen IT Park Ltd. (xxiii) Grameen Star Education Ltd. (xxiv) Grameen Employment Services Ltd. (xxv) Grameen Fabrics and Fashion Ltd. (xxvi) Grameen Distribution Ltd. (xxvi) Grameen Shmogree Purbanchal Ltd. (xxvii) Grameen Shamogree Uttarachal Ltd. (xxviii) BASF Grameen Ltd. 10. ECONOMIC GROWTH AND SOCIAL TRANSFORMATION: A SUCCESS STORY OF GB Mrs. Ayesha is a rural woman. She is 35 years old. She read up to class VIII. Mrs. Ayesha s family has five members her husband, one son and two daughters. Three of her children are reading in class nine, eight and seven respectively in rural schools. Ayesha is an inhabitant of the village of Magadia in Mirsari thana under the Chittagong district. She was married to a man who was born in Satkania thana, a renown place of businessmen of Bangladesh. After marriage, her husband emigrated to Mirsari and settled in Magadia village at Mirsari, Chittagong. Ayesha s husband worked in a garments factory in the city of Dhaka. She stayed in Dhaka while her husband was working in the same factory in the city. Her husband used to train her how to make different types of garments during his leisure time. She also took interest in it and gradually learnt the skill. Later on, she received training on garments from an NGO in the city. After that, she started making clothes of women and babies on experimental basis. She used to earn some money by her works while living in Dhaka city. Five years ago, her husband died and she had to take responsibility of her three children. She left the city and started BRANDING IN BOTTOM OF PYRAMID (BOP): CASE OF GRAMEEN BANK (GB) 33

8 to live in her village home. Having no alternative to survive, she engaged herself in tailoring work at her household. She saved taka from the tailoring work during the period of her urban life. She combined her acquired knowledge and skill with a cash capital of taka for her tailoring work. Nargis, a poor neighbour of Ayesha helped her in various activities of tailoring. Generally, Ayesha took the service of Nargis in the evening and she offered cash money to Nargis for her service. Nargis and her family members were very happy with Ayesha because she created new income opportunities for Nargis family. Nargis is a student of local girls college in science group and she helped Ayesha in designing of Blouze for smart rural women. Ayesha consulted with Nargis regarding design, color combination and other distinctive features of her products. Ayesha believed that innovative thinking might play a significant role in the success of business enterprise. This made her products distinctive in the market. It was the competitive advantage of her products and due to this, she did not face any strong competition in marketing for her products at local markets. Her target market segments were rural women of her village. But the success of an enterprise depends on customer satisfaction to a great extent. Again, the slogan of new millennium business enterprise is to create sustainable consumption. The average monthly revenue of Ayesha s tailoring shop was taka 15,000. Ayesha enjoys market margins of 20% of her sales in value. Besides her own saving of taka , she borrowed taka from Grameen Bank and the rate of interest of this borrowed capital is taka 22% p.a. Ayesha believes that she would not need to go to financial institutions as she was afraid of lengthy and cumbersome procedure of loan sanctioning system of commercial bank of Bangladesh. Grameen bank offers loan to rural poor woman by grouping method. They form a group with 5 to 7 women and loan is sanctioned to a group. The members of the group enjoy the benefits of loan but all members are liable to the payment of loan money both individually and collectively. Ayesha s family was fully dependent on her income of tailoring shop and she had no other alternative to survive with her children. BSCIC has some financial products for financing small promising entrepreneurs. Customer oriented differential credit management system may help in the development of small entrepreneurs in rural areas. Nafisa, a poor neighbor of Ayesha helped her in the various stages of her tailoring work. She offered cash money to Nafisa and motivated to learn the skill of tailoring. Ayesha hoped that Nafisa also might emerge as a rural woman entrepreneur in near future. Nafisa s main goal was to learn the skill of tailoring from Ayesha. Her target was to do 34 IJHPD VOL. 3 NO. 2 JULY - DEC 2014

9 something for herself and her family. She believed that Ayesha could help her a lot in this direction. Nargis and Nafisa both were working with Ayesha in her tailoring shop. Thus, the technology transferred from one person to another. Thus, the poor women are transforming valuable resources in rural Bangladesh through the contribution of GB. Ayesha was happy because her children were living in better house, getting education and enjoying quality of life. She thought that NGO and Voluntary organizations could organize trade fair in rural Bangladesh so that more women might be motivated to involve in self-employment activities. Thus, this self-employment may ensure women empowerment as well as open new small businesses for creating new entrepreneurs. As such poor women may emerge as entrepreneurs in one hand and consumers on the other in a developing country like Bangladesh. REFERENCES: Arnould, Eric and Jakki J. Molr (2005), Dynamic Transformation for Base of the Pyramid Market Clusters, Journal of the Academy of Marketing Science, Vol.33, No.3, July. Bhagwati, Jagadish (2004). The Defense of Globalization, Oxford: Oxford University Press. Beim, David O (2004) Grameen Bank: Taking Capitalism to the Poor, Chazen Web, Journal of International Business, Columbia Business School, Columbia University, New York, spring. Bergstrom, A. et. al (2002) Why Internal Branding Matters: The Case of SAAB, Corporate Reputation Review, 5 (2/3), PP C.K. Parahalad and Allen Hammond (2002), Serving the World s Poor, Profitably Harvard Business Review80. No.9, September, PP Cateora, Philip R. et.al (2008), International Marketing New Delhi: Tata McGraw-Hill Publishing Company Ltd. PP Daniszewski, Johnn (2005), Debtor Nations Freed of Burdens, Los Angels Times, June 12, PP. A1, A6. Keller. K. L (2008) Strategic Brand Management, New Delhi; Prentice-Hall of India, P. 56 Prahalad, C.K. (2005), The Fortunate at the Bottom of the Pyramid, Wharton: Wharton School Publishing p.1 Prahalad C.K. and Stuart L. Hart (2002), The Fortune at the Bottom of the Pyramid, Strategy + Business, Issue 26. Susan, Holcombe (1995) Managing to Empower, London & New Jersey. Talukdar, Debabrate et. al (2005), Customer Orientations in the context of Development Projects; Insights from the World Bank, Journal of Public Policy and Marketing 24, No.1, PP BRANDING IN BOTTOM OF PYRAMID (BOP): CASE OF GRAMEEN BANK (GB) 35

10 UN-HABITAT (2005), Global Report on Human Settlement, p.4 Yunus, M. (2004) Who Can Create a Poverty-Free World in our Life-Time, Grmeen Bank, Dhaka. Zhang, Shi and Bernd H. Schmitt (2001) Creating Local Brands in Multilingual International Markets, Journal of Marketing Research, PP Dr. Mohammad Solaiman Supernumerary Professor Department of Marketing Studies and International Marketing University of Chittagong Mobile: drmsbd@yahoo.com Web site: 36 IJHPD VOL. 3 NO. 2 JULY - DEC 2014