Business & Economic Research Center | Jones College of Business | Middle Tennessee State University

by Steven Sibley (October 26, 2008)

After visiting two older Grameen Bank branches and seeing that many of the members had brought themselves out of poverty, I had expressed interest to Babor in visiting a new branch so that Kathryn and I could see the conditions of villagers soon after the arrival of Grameen Bank. Babor had arranged for us to go to the 18-month-old Prashadpur branch in the Naogaon sub-district. On Sunday, Babor had discussed the plans for the trip. We were set to leave Monday morning. Babor called later that day to say that the plans had been cancelled due to the remoteness of the village. If either of us had health problems, he said, then it would be difficult to get us back to Dhaka to get treatment. We would take several day trips to nearby villages instead. Kathryn and I were both very disappointed.

We arrived Monday morning at the head office to hear that Babor had worked out a way for us to go to the Prashadpur branch after all. I was very relieved, as I feel like overnight trips enable me to really get a sense of the village and the way that it operates. Furthermore, we would have the opportunity to visit the Grameen Eye Care Hospital and the Grameen-Danone factory in Bogra. We were to set out Tuesday morning at 7:00 for Bogra on a business class bus with Babor and our translator, Zaman.

Stowing our bags beneath the bus, Kathryn and I find our seats and get settled. The bus is surprisingly spacious and comfortable with fans and reclining seats. Sitting down, I open my bootlegged copy of The Kite Runner, (purchased from a street vendor for 250 taka, after I had unsuccessfully searched three bookstores for it) and set to reading. Kathryn falls asleep almost immediately.

After several hours on the bus, Babor rouses me from my book to show me the Bangabandhu Jamuna Multipurpose Bridge, the eleventh largest bridge in the world, which spans the Jamuna River. As the monsoon season has come to a close, the river has waned from its maximum height, and, in addition to the large sandy riverbanks, several large islands have formed in the middle of the river. I am surprised to see a multitude of makeshift tents made of blue tarps and several more "advanced" straw huts littering the land revealed as the river subsided. That someone would have to resort to calling such a temporary residence "home" for half of the year saddens me deeply. I return to the comfort of my book.

Two hours later, the bus makes a sharp left turn, and Zaman tells me that we are stopping for a 20-minute break. Exiting the bus, I am surprised to see that, sans the gas tanks, the place where we have stopped resembles an American truck stop. After making a quick visit to the restroom and grabbing a quick bite to eat, the comparison to an American truck stop is complete: dirty restrooms, greasy food, and bad coffee. We climb back onto the bus and resume riding towards Bogra.

After one more hour of riding, I am anxious to exit the bus, as the constant horn honking of our bus driver has given me a mild headache and the reclining seat is no longer very comfortable. Sensing my anxiety, Babor tells me that we will be there in 15 minutes. Arriving at Bogra, we exit the bus and walk the short distance to the Grameen-Danone factory.

Before leaving for Bangladesh, I had read Dr. Yunus's newest book, Creating a World Without Poverty: Social Business and the Future of Capitalism. In the book, he describes a new type of business he has envisioned, called a social business. In particular, he details how Danone, the French yogurt producer, and Grameen had created a joint-venture social business.

By definition, a social business exists not to maximize shareholder wealth but to solve specific social problems. The Grameen-Danone partnership was created to address the malnutrition of the poor children in the rural villages of Bangladesh. The business was conceived to produce vitamin and mineral fortified yogurt, which is sold at cost to the villagers. Grameen and Danone, after a period of time, are to recoup their initial investments but take no profit. In my reading, I found this new concept to be excitingly revolutionary and had looked forward to the opportunity to visit the factory.

Happy to have finally arrived at the Grameen-Danone factory, I am looking forward to touring the facilities and meeting with the director to learn of the success of the business. Kathryn and I are escorted to the office area of the facility, where we sit waiting for the director to finish conducting business with three Danone employees from France. Another employee brings us each a cup of yogurt so that we can sample the product. It is only okay.

After 15 minutes of waiting, Kathryn is getting anxious, as she has no interest in the joint venture and doesn't understand why we are even there. Finally, the director finishes his business, and he shows us a brief PowerPoint slideshow. The presentation describes the function of a social business in general and goes on to describe the Grameen-Danone product. Sold for 5 taka by poor women in a door-to-door marketing process, the yogurt is fortified with 30% of the RDA of four vitamins and minerals. The presentation describes that each factory uses locally produced milk and other ingredients and employs 1,000 local villagers, including the saleswomen. It goes on to describe that, eventually, Grameen-Danone hopes to operate 50 factories throughout Bangladesh. This sounds like a very good thing.

After the PowerPoint presentation, the director answers questions. I am disappointed to learn that after more than two years of operations, this, the only factory yet in operation, is only operating at 10% capacity. The factory can produce 62,000 cups of yogurt daily, while it currently only produces 6,000. Two years ago, when the factory first opened, it produced 4,500 cups daily on average. The director tells me, "Villagers are not habituated to eating yoghurt." Additionally, I learn that Grameen-Danone currently employs only 28 people in the factory and 20 outside as salespeople.

With the grassroots marketing campaign of door-to-door sales by poor village women, the prospects for ever achieving a breakeven point are dismal. Furthermore, the mission of Grameen-Danone is to provide nutrition at cost to poor children in the rural areas of Bangladesh. As a result, while marketing the product in Dhaka or other cities might help the venture progress towards financial sustainability, doing so would conflict with the mission statement. While I had once been very excited about the theoretical prospects of Grameen-Danone, I am thoroughly disappointed to see its operations in practice.

After discussing the operations with the director, he takes us on a tour of the facilities, which are quite impressive. The facilities are clean, the fermentation tanks are massive, and whenever possible, the packaging process utilizes human labor instead of machines. Additionally, the water necessary for producing the yogurt is obtained by a well beneath the factory, purified on-site, and heated using passive solar energy. Furthermore, the dirty effluent water is processed on-site in such a way that, if the plant were operating at capacity, biogas would be produced to power the gaslights that illuminate the facility at night.

With approximately 3 million people in the area around Bogra, there is clearly a large enough population to support a small-scale operation like the Grameen-Danone factory. Only about 2% of the population would have to consume one cup daily in order for the plant to operate at capacity, yet it is only operating at 10% currently. Clearly, the problem lies in Grameen-Danone's marketing strategy. Hopefully, this problem will be addressed, and the factory will be able to achieve the breakeven point in the not-too-distant future. This would enable the Grameen-Danone joint venture to proceed with the opening of additional factories in other areas, providing rural villagers with gainful employment and increasing the demand for locally produced milk and other ingredients.

After saying our goodbyes, we proceed to the Grameen Eye Care Hospital, which is located next door. Another social business, the Eye Care Hospital, aims to provide quality, affordable eye care to rural Bangladeshis. I had been excited to visit Grameen-Danone. The visit to the eye care hospital seemed obligatory, as it is located next door to the yogurt factory.

Surprisingly, the eye care hospital lifted my spirits about the ability of a social business to succeed. The facility had initially been opened in a rented house off the main road in Bogra. Due to its overwhelming success and demand that exceeded its capacity, the hospital was relocated to a brand new facility constructed on the property adjacent to the Grameen-Danone factory.

After a tour of the facility and a complimentary eye examination for Babor, we sat down with the manager of the hospital. He told us that the hospital employed 38 people, including doctors, nurses, maintenance people, receptionists, and IT people. On average, it served 120 people per day in the months of August and September, while the daily average has increased to almost 150 people in the past three weeks.

The hospital uses an ability-to-pay scale for charging customers for its services. The rich people in the area pay slightly higher fees than those charged by the other eye hospital nearby, while the poorest of the poor receive services free of charge. According to the manager, there has been no advertisement, so the increase in customers has thus far been the result of word-of-mouth from satisfied customers. Apparently, the hospital's reputation is so good that people will travel as much as eight kilometers farther to visit Grameen's facility as opposed to its nearest competitors.

The hospital currently covers its costs but is not generating a profit with which it can recuperate its initial capital outlays. However, with continuous increases in its customer base, the hospital will soon achieve such profitability. The manager explains that the hospital has been able to break even by keeping its costs low. For example, Grameen provided educational scholarships for the hospital's doctors and nurses in exchange for an agreement to serve at the eye care hospital for five years at a salary lower than that provided by similar eye care facilities.

While I had by no means been excited by the requisite visit to the eye care hospital, in the end, this visit lifts my spirits considerably and renews my optimism that social businesses can compete and succeed in the market with profit-maximizing businesses. Leaving the facility, I am less than thrilled to be heading back to a bus for an additional two hours in transit.

Babor, Zaman, Kathryn, and I board a CNG to take us to the Bogra bus station. Upon our arrival, the bus to Naogaon is already beginning to accelerate. Babor runs to stop it as Kathryn and I frantically grab our bags and pay the driver. I hand my bag, too big to carry on, to the conductor, who passes it to the baggage handler on top of the bus. While I am concerned about the safety of my camera and camcorder, there is little I can do but trust it with the young boy who rides in the "luggage compartment" atop the bus.

Boarding the bus, Kathryn has taken the last seat, so Babor, Zaman, and I stand. The bus driver hits the gas, and off balance, I stumble into the Burqua-clad woman seated to my right. Babor apologizes for me and assures me that a seat will open up soon. After 15 minutes of loud honking, constant stopping and starting, and zig-zagging through traffic, the bus stops to let some passengers depart. The seat next to Kathryn has opened up.

I sit down in the seat next to Kathryn immediately behind the bus driver. The bus has some sort of metal casing in front of me, right where my left leg should be. I have no choice but to contort my leg in such a way that it rests on top. I soon discover that this casing houses the bus's engine and gives off ungodly amounts of heat. I miss the fans and reclining seats of the business class bus.

Sweating profusely, I notice that what was once only a dull headache is now raging. The bus driver's constant honking does little to ease my pain. The bus's conductor is leaning out the door, banging loudly on the side of the bus, and shouting at the rickshaws and CNGs as we pass. It is difficult to imagine that anyone but the passengers can hear the low din of his shouts over the roar of bus's horn.

Each time the bus stops to let passengers disembark, the conductor, no more than 16 years old, shouts "Naogaon! Naogaon! Naogaon!" to prospective passengers waiting in the crowded bazaars. Kathryn leans over to me and says, "Well, now I have experienced my own personal hell." After more than 10 stops and two hours on the "hell bus," we have finally reached our destination of Naogaon.

Awaiting us at the bus stop with an Isuzu SUV is a Grameen Bank employee, Munjor. Upon climbing in, I am overjoyed to discover that it has air conditioning. Munjor drives us to the Grameen Bank zonal office, where we are introduced to Abdul Wahab, one of Grameen's nine zonal managers. Upon meeting Mr. Wahab, I am initially caught off guard by his bright orange hair and beard. In America, one would expect to see such a bright orange color on a spiked mohawk rather than on the conservative haircut of a respectable bank employee.

The staff at the zonal office immediately serves us bananas, apples, spicy snack mix, and mineral water. Having sweated profusely while my one bottle of water was in my bag on top of the bus, rehydration is delightful. I drink three glasses very quickly. Mr. Wahab welcomes us to the area and tells us that he has been working with Grameen since the early 1980s. Having been the director of the training institute, he is very knowledgeable about Grameen Bank and its practices.

After about an hour of discussion with Mr. Wahab, we ride to the bank branch at Prashadpur. Upon entering the village, I notice throngs of people in the streets. The driver parks the car outside of the Grameen bank office building, and we are introduced to the local government chairman; the Grameen area manager, Mr. Firoge Ahmed; and the branch manager, Ms. Aborna Barui.

I ask about the people gathered in the streets. "Is this the market?"

Babor briefly talks to the chairman in Bangla and translates, "Yes, but the market is not open today. Tomorrow is the market day."

"Why are all these people here?" I ask.

Babor replies, "This village has not seen any foreign visitors. They are here to see you."