DR. YUNUS CALLS IT 'SOCIAL BUSINESS'

Danone's yogurt strategy for Bangladesh

James Melik

When French dairy food firm Danone ventured outside the troubled business climate of Europe and the US, it was not expecting to start a business that deliberately avoids paying dividends to shareholders. All the ingredients for the yogurt are grown or produced locally. However, a meeting between Danone's Franck Riboud and the founder of Grameen Bank, Nobel Peace Prize winner Muhammad Yunus, led to the opening of a small factory in Bangladesh that does just that.
   Danone made a profit of more than $1bn in 2008 and expects that to rise by 10% this year, despite a downturn in sales in Europe. The company has set its sights on South Asia. But to succeed there, it has to learn how to sell to low-income customers, many of whom live in the countryside.
   In Bangladesh, Danone has teamed up with local experts to build a yogurt factory with a difference - what Professor Yunus calls a social business.
   
   Targeting malnutrition
   The factory, which produces nutritional yogurt for poor people, is a joint venture between Grameen and Danone. Danone's Emmanuel Marchant explains that the enterprise has to make enough money to be sustainable, but it also has a social goal. "With a social business you ask: what are the priorities in terms of social needs?" he says.
   Professor Yunus received the Nobel Peace Prize for lending to the poor. He admits that Danone's priorities would usually concentrate on maximising profits and that any social impact would be of secondary importance. But the factory constructed in Bogra, 200km north of the capital Dhaka, is different.
   Figures show that about 50% of children suffer from malnutrition in Bangladesh. In an effort to alleviate the situation, Grameen's Professor Yunus says his first suggestion was baby food. "We eventually zeroed in on yogurt and agreed that it had to be a very small plant," he says.
   
   Grameen Danone Foods, Bogra
   250,000 pots of yogurt are produced a week. The target for the end of 2009 is 500,000 pots a week; 250 farmers supply milk to the factory, 300 saleswomen take the yogurt around the villages. He maintains that local children, often poor and malnourished, benefit from the products the factory produces.
   The project is further integrated into the rural community through its links with the farmers which serve the factory. The yogurt company always tries to pay them a little more than they would receive from other customers and a farmer can earn about $60 a week - a considerable sum in rural Bangladesh. Milk is brought in every day from local villages by a small three-wheeled delivery vehicle and is mixed with locally-grown sugar and other ingredients.
   It is then poured into a tank, where it is tested to ensure it does not contain any harmful bacteria. Nutrients are added to the yogurt, which is designed to keep fresh for up to a week outside a refrigerator, because few people can afford to chill their food.
   Some of the yogurt is distributed to shops, but the unique point about this enterprise is a network of women who take bags of the yogurt around local villages.
   When visiting villages for the first time, these women are often accompanied by a representative from Danone, who explains the nutritional benefits of the yogurt.
   The yogurt brand is called Shoktidoi, which means energy in Bengali. One cup of yogurt provides 30% of the recommended daily intake of nutrition for children.
   The cartoon lion character used on the packaging has been a hit with children. To drum up extra interest, the yogurt's logo, a lion, also makes an appearance - albeit in costume.
   
   Future vision
   The scheme is not designed to make a profit, but it does have clear benefits for Danone. It is a good way for the company to learn how to market food in South Asia - a valuable lesson as it considers whether to enter the huge and lucrative market of neighbouring India.
   Emmanuel Marchant of Danone is confident the company will keep funding the project, because of the support it has from its investors. "Building a plant which is 100 times smaller than our others is a less risky way of entering a new territory and shareholders understand our vision," he says.
   Prof Yunus believes other companies should start about thinking about how to run a business in a different way.
   Some farmers have bought cows using microcredit loans from Grameen Bank "The world has only one pair of glasses - profit-maximising glasses. You don't see the poor and malnourished people," he says. "When you put on the social business glasses, things change," he asserts, "You don't see the money-making aspect, but how you can help people."
   He is understandably excited about the project and is currently talking to other companies around the world to start up similar joint ventures in Bangladesh.
   Source:http://news.bbc.co.uk/2/hi/business/8100183.stm

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Holiday Report

The operating profit Mutual Trust Bank limited (MTB) grew by 30% during last six months ending on June 30, 2009. The profit after tax notched a 505% growth over January - June 2008.
   This was revealed at the MTB's half yearly business conference head recently at the Pan Pacific Sonargaon Hotel, Dhaka with its Chairman Samson H. Chowdhury attended the inaugural ceremony as the chief guest. MTB Founder Chairman Syed Manzur Elahi and Director M. A. Rouf were present as special guests. The bank's Managing Director & CEO Anis A. Khan, senior management team, Heads and Deputy Heads of Branches, Brokerage Houses and SME Service Centers were all present at the semi-annual business review and planning event.
   Samson H Chowdhury said that the human resources team of the Bank was being rejuvenated, reorganized and provided with the appropriate technical, leadership and motivational training, both at home and abroad. He appreciated the efforts taken by the Management for attaching top priority on building a strong brand image for the Bank. He added that the Board of Directors and senior management team were taking synergistic, well coordinated and dynamic initiatives to instill vigour, vitality, motivation and enthusiasm in the entire organization, which will contribute to MTB's transformation into a world class bank. Syed Mansur Elahi appreciated the efforts taken by the management team in taking the bank forward and pledged the Board's continued support in the future.
   The business and branch heads made presentations on their performance, prospects and problems. The MTB MD & CEO suggested action plans for quick implementation to achieve the budget for 2009. He then unveiled a strategic plan incorporating short, medium and long term mission and goals for MTB, which will be sewn in to a five year strategic plan with action plans.

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Mashiur advises low interest to
promote investment

Holiday Report

Dr. A. K. M. Mashiur Rahman, Advisor to the Prime Minister for Economic Affairs said that bank interest rate is still high and should be lowered to facilitate investment. The advisor was the chief guest at the 'Dialogue on Globalization of Basel II: Its Implementation in Bangladesh' which was organized by International Chamber of Commerce-Bangladesh last Sunday.
   Rahman mentioned that under the Basel II Framework, it is intended to promote a more forward-looking approach to capital supervision that encourages banks to identify the risks they may face, now and in future, and to develop and improve their ability to manage those risks. He said quality of the borrowers is important for proper capital supervision.
   He called upon the businesses to proceed carefully considering the uncertainty and inadequate knowledge about the subject of banking regulation and protection. He also pointed out that the rescheduling of loan distorts the interest rate in the credit market and appreciated the Bangladesh Bank's introduction of quarterly reporting system. He said it may have positive effect on regulating the financial market.
   In the Dialogue ICCB President Mahbubur Rahman said, since the financial crisis that started in mid-2007, an important source of losses and of the build up of leverage occurred in the trading book. He said the current capital framework for market risk does not cover some key risks and to address the weaknesses revealed by the financial market crisis, the Basel Committee has reviewed Basel II as part of its response and has developed a series of proposed enhancements to strengthen the framework.
   Regarding the trading book proposals, the Committee proposes an implementation date for Basel II is no later than 31 December 2010. But according to Financial Stability Institute (FSI) survey in 2004 and a follow-up survey in 2006 on implementation of Basel II in non-Basel Committee member countries, 84 percent of the respondents worldwide intend to adopt Basel II between 2007 and 2015. In Asia, 100 per cent of respondents intend to implement Basel II at some point over 2007-2015. This is quite striking given that a fairly large number of low-income countries are located in Asia, the ICCB President informed.
   Mamun Rashid, Chairman of the ICC Standing Committee on Banking Technique and Practices in his welcome address said that until proper importance and accountability of the stakeholders can be ensured the implementation of Basel II is not possible. Timothy D Rees, Citigroup Basel II Program Director of Asia Pacific Region, Sydney, Australia made the presentation on Globalization of Basel II : Its Implementation in Bangladesh. ATM Nasiruddin, Former Executive director, Bangladesh Bank and Dr, Toufic Ahmed Choudhury, Director, Bangladesh Institute of Bank Management took part in the Dialogue as Panelists. KM Abdul Wadood, Deputy General Manager, Bangladesh Bank and Ahmed Kamal Khan Chowdhury, Deputy Managing Director, Prime Bank Limited participated in the discussion.

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