54 BRAC Annual Report 2011
Enterprises and Investments Surplus for sustainability, profit for the poor The “BRAC model” comprises of a collaborative network of development programmes, enterprises and investments, all of which together serve the comprehensive vision and objective of serving the poor. BRAC’s wide range of development programmes ensure that the organisation’s social and philanthropic missions run as fully funded, non surplus ventures. While BRAC enterprises began as support mechanisms for these development programmes, the surplus generating model of BRAC enterprises allows for 50 per cent of the financial surplus or ‘profit’ from the enterprises to help fund BRAC’s development programmes, often run at high cost. The remaining 50 per cent is reinvested in the enterprises themselves. BRAC investments, meanwhile, consist of financially profitable investments and financial service businesses geared towards generating financial returns while adhering to underlying socially
responsible causes such as low income housing, microfinance, small enterprise loans, information technology and clean development mechanisms. Dividends from BRAC investments support the financial sustenance of both BRAC enterprises and development programmes by acting as a hedge or safety net against future liquidity crises. The synergetic effect of this integrated model has contributed significantly to reducing BRAC’s dependency on donors and external funding.
Bangladesh’s BRAC is perhaps the most fully realised ‘integrated’ provider [of microfinance and related services], offering financial services along with schools, legal training, productive inputs, and help with marketing and business planning. If you are in Dhaka these days, for example, you can buy Aarong brand chocolate milk, which is produced by a BRAC Dairy marketing affiliate. A different BRAC subsidiary produces Aarong brand textiles made by poor weavers, and another subsidiary runs craft shops that sell the goods of microfinance clients The Economics of Microfinance
Beatriz Armendáriz Lecturer in Economics Department of Economics, Harvard University
Jonathan Morduch Professor in Public Policy and Economics Wagner Graduate School of Public Service New York University
NEW INITIATIVE IN 2011 Crafting Hope, Weaving Dreams The fashion retailer Aarong is one of Bangladesh’s biggest chains, and its flagship store in the Uttara district of Dhaka is the largest retail space in the country. Yet this chic brand began as a humble means to an end for a quiet organisation fighting to uphold the dignity of the marginalised. In 1976, when BRAC first began encouraging sericulture for women in Manikganj, their only buyers were a few scattered retailers in Dhaka. Weeks, even months would pass between supply and payment, until BRAC intervened. Aarong was born to ensure these penniless silk farmers were paid on time to feed their families. The artisans of Aarong remain at the cutting edge of social enterprise – an example to the world of how the poor, when organised properly, can generate a financial surplus to support other development work.