Is Leadership a Vital element in Grameen Bank Successful Replication - Example

GRAMEEN BANK Name: Institution: Course: Date of Submission: Is Leadership a Vital element in Grameen Bank Successful Replication? A replication program was launched by Grameen Bank in 1989 with an aim of contributing to and participating in the global crusade against poverty[Sha94]. Due to the reported success of Grameen bank, more than 100 replications have been created worldwide with widespread financial support from donor agencies[Sha94]. Leadership has played a major role in the early stages of the replication program design and in its development process. Successful replication depends directly on the commitment and creativity of the leadership and its ability to carve out a market niche. Grameen Bank replication is a very crucial program since it will help in alleviating poverty through the targeted credit. Grameen’s Bank expansion in approximately 50% of all villages in Bangladesh is a good example of its wide replication[Abu01]. Leadership has played a great part in Grameen’s expansion and inception. Leadership whether individual or group, is believed to be the most important aspect of success of social entrepreneurial ventures[Sar10]. The structure of control in Grameen Bank is basically participative, decentralized and democratic. It does not emerge from the organization higher echelon, but from the combined actions of members, based on the values, philosophy or corporate vision provided by the top management[Abu01]. The organization structure of Grameen Bank is highly decentralized. Actually, the authority is delegated to the field level where planning and implementation of the actual work takes place. The decentralized structure has been developed over the years through a trial and error method responding to the needs of the clients[Abu01]. The rapid expansion of the bank is attributed to its decentralized management process. However, decentralization process was not initiated by the bank, but it evolved as a part of its growth process. Grameen Bank has a decentralized, pyramidal banking structure including zonal offices, area offices, branch offices, centers, lending units, and a head office in Dhaka[MYu09]. The principle lending units at the village level are the solidarity groups. The management and decision making functions powers have been delegated to lower levels through decentralization. Democratic leadership practices are in place within the rotation among members of centre and group leadership. Grameen bank has established a unique management culture, based on people’s innovation and learning, capacities, honesty, openness and transparency etc. [SHH95]. This culture has created a framework through which regulation of organizational activities takes place. The bank managerial structure is well-knit making it very adaptive and flexible. All management processes are practiced contingently including leadership, communication and decision making. A unique feature of the bank’s management structure is the high level of autonomy given to the field offices. Since many decision making roles are devolved to the field offices, the head office has the capability of focusing on broader issues of policy and development without worrying on minor decision processes[Abu01]. According to Sarker (2001), the main factor that has contributed to the success of the Grameen Bank is the way it is organized and managed. Its organizational system has evolved over the years in accordance to the specific developmental needs of the targeted group [MKS92]. The chief executive of the bank is the managing director. The major responsibility of the managing director is the overall implementation of the policies as well as maintaining close contact with departmental heads and zonal managers to assist in formulating and changing policies. Unlike other banks where clients have to go for services, Grameen Bank officials go to the clients. Clients are encouraged to form groups before they receive services from the bank. When a group is formed, it is monitored by a bank official to ensure that its members are adhering to the rules and norms set by the bank. Group members are also trained for at least seven days by the bank officials. Through the training they are they are introduced to the rules and regulations of the bank, and social development activities. How is the Grameen Bank Depending on Professor Muhammad Yunus Leadership? Professor Yunus is the person who started Grameen Bank after observing that conventional banking practices had inherent limitations and were only targeting the rich. Professor Muhammad Yunus committed leadership has contributed a lot to the development and success of Grameen Bank[Sha94]. His model of financial assistance is growing rapidly and it has spread throughout the world. He managed to expand the bank steadily through Bangladesh. For instance, in 1983 it had 58,000 borrowers and 86 branches; by the year 2010 it had more than 7 million borrowers and 2,800 branches[MYu10]. Professor Yunus was aware that communication plays a critical role in success attainment[DBo96]. He institutionalized the communication vehicles as from the first years of the bank some of which the bank is still relying on. Examples of communication vehicles which he institutionalized and are still in use include training programs, seminars for outside visitors, manager’s meetings, and external and internal newsletters[DBo96]. The bank has relied on his strategies and tactics which he used to change from time to time in order to sustain the operations of the bank. For instance, he declined any aid or grants from donors with an aim of demonstrating that the bank can sustain itself[Ivy111]. He used to change his short-term goals as well as strategies and tactics in order to ensure a long-term survival. Professor Muhammad Yunus understands the Grameen Bank culture more than anyone else and thus, his successors will definitely depend on his leadership skills and abilities. Professor Yunus leadership can therefore be taken as a terminus a quo for crafting a model for leading long term change. His model highlights the importance of communication, branding, flexibility, and holding to the vision[Kat11]. Grameen bank can rely on Yunus strategies of not only focusing on short term change, as many organizations do, but focusing on both short and long term changes[Kat11]. Short term changes should help the bank to achieve its long term goal; that is, alleviating poverty among the poor. Muhammad Yunus offered a transformational leadership which significantly led to the achievements of the Grameen bank. He had approached the organization objectives based on the people, especially the village poor. Structure of Grameen Bank The structure of control in Grameen Bank is basically participative, decentralized and democratic. It does not emerge from the organization higher echelon, but from the combined actions of members, based on the values, philosophy or corporate vision provided by the top management (Sarker, 2001). Democratic leadership practices appear evident in the approach by Yunis and Gareem Bank. This is sustained by certain processes are generally put in place, such as with rotation among group leadership and members of the Centre. In effect, the classical hierarchical (top down) approach principle in Grameen organization system has been substituted by the modern team approach. The structure of the bank from the highest office to village members is as follows: Head office Zonal office Area office Branch office Centres Groups Members From Zonal offices to the lower level, each level should handle a certain number of operation offices. The breakdown of how many offices each level should handle is as explain in the following statement. One Zonal office handles eight Area offices, one Area office handles ten to twelve Branches, one Branch handles fifty to sixty Centres, One Centre handles six to eight Groups, and each Group should contain five Members. Government control over Grameen bank affects its structure[Bad07]. For instance, due to government intervention, the following changes have been initiated the structure of Grameen bank: branches were opened in urban areas; they could only open branches in the rural areas before the intervention; Government stake has been reduced from 25% to 15%; number of nominated directors by the Government were cut down from 3 to 2; and board was mandated to appoint the chairman of the bank instead of Government nomination[Bad07]. The main governing body of the bank is the Board of Directors. It contains thirteen members of which ten members are from the Members shareholders, two Government nominees, and one Managing Director. The organizational chart of the bank is as depicted by the following figure: Source: http://www.grameen-info.org/annualreport/annualreport2002/chart.html Fig 1.0: Grameen Bank Organizational Chart Reference List Sha94: , (Khandker, 1994), Abu01: , (Sarker, 2001), Sar10: , (Alvord, 2010), MYu09: , (Yunus, 2009), SHH95: , (Holcombe, 1995), MKS92: , (Shams, 19992), MYu10: , (Yunus, 2010), DBo96: , (Bornstein, 1996), Ivy111: , (Mungcal, 2011), Kat11: , (Esty, 2011), Bad07: , (Seshadri, 2007), Read More