Type of paper: Essay

Topic: Banking, Organization, Credit, People, Poverty, Community, Sociology, Risk

Pages: 2

Words: 550

Published: 2020/12/07

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Assignment 3
Assignment 3
Introduction
Most companies, non-governmental organizations, corporative societies, and state organization often have specific objectives that they want to achieve upon incorporation. These goals are both long-term and short-term, and they depend on the nature of the business that the organization engages in within a particular environment. Theoretical frameworks come into play to guide the organization as it seeks to achieve the set objectives. Within their working environments, organizations have to work with some legal frameworks stipulated by governments and other local authorities. They must formulate and adopt models that enable them to work well under existing conditions while optimizing their organizational goals. I believe organizational models are flexible, and they can be adjusted to suit specific needs of the market environment, which makes it possible for organizations to emulate models adopted by others.
BRAC used the cost-benefit analysis economic model, where the society had to reimburse the cost incurred by the organization in the provision of the social amenities. Previously, the organization was referred to as the Bangladesh Rural Advancement Committee. The NGO’ mission is to reduce poverty within the community. The organization depended on donors to carry out its operations. It diversified most of its objectives beyond the eradication of poverty. The diversification and additional activities facilitated the achievement of the core objective, poverty reduction (Busenitz & Barney, 1997, p. 2)). With time, BRAC stopped relying on and became self-reliant. The organization’s active involvement in social issues such as education and healthcare enabled it to generate revenue in large amounts, which enabled it to cover the costs incurred in the social services extended to the community. In addition, the active participation in the important aspects of society is part of a corporate framework that must be fulfilled by the organization. It is called corporate social responsibility (CSR). CSR refers to an organizational practice where the society has to derive more important benefits than the revenues accruing back to the organization (Hopkins, 2003, p. 3).
The most important aspect of availing credit to people is the risk (Broll, Schweimayer, & Welzel, 2003, p. 3). Grameen Bank focuses on the provision of credit facilities to the poor and those who are not in a position to access credit. Risk emanates from the possibility that money lent to people will not be recovered. In order to repay a loan granted, a person must repay the loan in full and within the period stated in the contract. The bank embarked on reduction of risk by the through a strategic approach to pooling resources together. The bank established branches in several parts of the country to increase the number of clients. A high number of clients guarantees that the bank has a wide base of capital. As such, it can cushion any losses accruing from the defaulting members who are unable to repay the credit lent to them.
A group of people receiving credit mitigates the risk of inability to repay the credit in full. A group of people has a better capacity to repay the loans rather than an individual. In fact, such loans did not require collateral to attract more applications from people within the group. Moreover, the bank applied the theory of vicious cycles of poverty in economics to improve the financial ability of the society (United States, 2005, p. 3). Since most of them were poor, the bank educated the members to invest the credit received for projects that generate revenue.
In conclusion, BRAC engages in activities that benefit the community to generate revenue while providing necessary social amenities to the people. The organization became more innovative by reducing the reliance on donors and became more self-sufficient. On the other hand, Grameen bank pools resources together by availing credit to groups of poor people in Bangladesh to mitigate the risk of unpaid loans while improving their economic status.

References

Broll, U., Schweimayer, G., & Welzel, P. (2003). Managing Credit Risk with Credit and Macro Derivatives. SSRN Electronic Journal. doi:10.2139/ssrn.467402
Busenitz, L. W., & Barney, J. B. (1997). Differences between entrepreneurs and managers in large organizations: Biases and heuristics in strategic decision-making. Journal of Business Venturing. doi:10.1016/S0883-9026(96)00003-1
Hopkins, M. (2003). The planetary bargain: Corporate social responsibility matters. London: Earthscan Publications.
United States. (2005). College credit mobility: Can transfer of credit policies be improved? : hearing before the Subcommittee on 21st Century Competitiveness of the Committee on Education and the Workforce, U.S. House of Representatives, One Hundred Ninth Congress, first session, May 5, 2005. Washington: U.S. G.P.O.

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