Management Best Practices: BRAC

Can a Bengali-based Non-Governmental Organization (NGO) teach for and not-for-profit enterprises important lessons on strategy and helping society?  Yes, if it’s the Bangladesh Rehabilitation Committee (BRAC), considered by The Economist magazine to be one the largest, fastest-growing and most business-minded NGOs around.

BRAC was founded serendipitously in 1970 by Sir Fazle Hasan Abed in response to a deadly cyclone.  Its original mandate was to provide credit to the poor farmers and trades people  (who hitherto would never qualify for bank financing) of Bangladesh, one of the World’s poorest countries.  Success in microfinance encouraged BRAC to venture forth into new activities to help the disadvantaged including education and healthcare. Today, BRAC’s global scale is truly impressive with over 7 million microfinance group members, 37,500 non-formal primary schools (BRAC educates 11% of Bangladesh’s children) and more than 70,000 health volunteers.

As the World’s largest NGO, BRAC’s employs 120,000 staff (the majority are women) who regularly and positively impact the lives of 110 million people.  Ian Smillie, who has written a book on BRAC, calls them “undoubtedly the largest and most variegated social experiment in the developing world. The spread of its work dwarfs any other private, government or non-profit enterprise in its impact on development.”

In many ways, BRAC is a unique organization, offering many management lessons for not-for-profit as well as private enterprises:

  1. It’s all about the recipient (or client’s) needs – By thoroughly understanding the beneficiary’s economic and social needs plus the cultural milieu they are a part of, BRAC is able to effectively deliver a variety of different services while leveraging core capabilities.  For example, in addition to operating clinics and schools for the poor, BRAC runs tea plantations, dairies and retail stores that employ, empower and serve their target recipients.
  2. Success is about innovation and execution – Although BRAC was the pioneer in Bengali microfinancing, they did not rest on their laurels when other NGOs joined the fray. Today,  BRAC has grown to become the largest global microlender, disbursing approximately $1B per year. The competencies developed in Bangladesh have been successfully transplanted to other lending programs around the World.
  3. There is potential (and money) in ignored parts of the market –   BRAC’s work is an excellent example of what Clayton Christensen calls Disruptive Innovation.  BRAC devised new, inexpensive ways of getting credit, healthcare and education to needy recipients (especially to disadvantaged groups like Women) in a variety of countries and economic systems. These service and organizational “disruptions” allowed BRAC to grow larger than many Western charities in some countries, despite the latter’s multi-decade head start.
  4. Continuous measurement and learning is a virtue and a necessity – BRAC is a NGO that operates like a performance-driven business.  Given ongoing demands for help and the constant shortage of resources, BRAC relentlessly focuses on results, research and continuous improvement in order to maximize efficiency and effectiveness. For example, where programs can not be sustained from internal funds, they are cancelled.  David Korten, author of “When Corporations Rule the World”, called BRAC “as near to a pure example of a learning organization as one is likely to find.”
  5. Self-funding (read: cash flow) is key – Unlike most NGOs, around 80% of all disbursements are generated internally from operations.  Not only does this free up considerable focus and expense away from fundraising, but it also instills financial discipline and allows for greater strategic and tactical freedom of action.  In particular, BRAC can respond faster to crises as well as experiment with new programs.

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2 comments so far

  1. Fehmeen on

    Informative post. If more MFIs adopt such conservative management practices, I think the microfinance industry will remain insulated from the growing number of defaults by micro borrowers around the world.

    • mitchellosak on

      Thank you. I wholeheartedly agree with your assessment. Cheers….

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