MICROCAPITAL STORY: BASF SE and Grameen Healthcare Trust Create Social Business BASF Grameen Ltd.

BASF SE and Grameen Healthcare Trust, a member of the Grameen Family that helps build new microfinance institutions (MFIs) around the world, have announced the establishment of BASF Grameen Ltd. BASF Grameen Ltd is a joint social business venture whose purpose is to improve the health and business opportunities of the poor in Bangladesh. To meet this purpose, the company will start with two products from BASF’s portfolio, a dietary supplement sachet containing vitamins and micronutrients and impregnated mosquito nets that offer protection against insect-borne disease.

Founded in 1865 in Germany, BASF is a global chemical company with posted sales of EUR 58 billion (USD 73.3 billion) in 2007. Alongside an initial investment of EUR 200,000 (USD 250,000), BASF will contribute the funds for one million sachets of vitamins and micronutrients and 100,000 mosquito nets to the joint venture. Grameen’s contribution includes its knowledge of the market, distribution structures, and networks in Bangladesh.

Dr. Jürgen Hambrecht, who is Chairman of the Board of Executive Directors at BASF SE, and Dr. Muhammad Yunus, a Nobel Peace Prize Laureate and the Managing Director of Grameen Bank, signed the agreement in Ludwigshafen to create BASF Grameen Ltd. The social business model is a first for BASF.

According to BASF’s official press release, the idea behind a social business is for the venture to cover its own costs and recoup the partners’ initial investment, as well as provide social benefit. “Our market-oriented joint venture will provide long-term help in addressing social challenges in Bangladesh. In addition, it will allow BASF to explore new markets and customer groups,” claims Hambrecht.

Yunus stresses that BASF Grameen Ltd. is not a charity. BASF Grameen Ltd. combines business objectives with social needs, so any additional profits will be fully reinvested in the company. “In the long term, we can better help these people through a business model that offers them beneficial products and services at affordable prices rather than through charitable donations,” says Yunus.

According to the WHO World Malaria Report 2008, Bangladesh reached an estimated 2.9 million cases of malaria in 2006, and 72 percent of the population is at risk of the malaria. Additionally, according to the UNICEF State of the World’s Children Report 2008, Bangladesh holds some of the highest child and maternal malnutrition rates. To meet this need for adequate health care, BASF Grameen Ltd. will begin operating in Dhaka, Bangladesh with two BASF products, dietary supplements and mosquito nets.

As reported in the press release, the initial stages of the business, the company will focus on larger consumers such as schools and pharmacies. In the medium term, the company will sell directly to end users via established Grameen networks. In the towns, the impregnated mosquito nets will be sold in local stores and pharmacies; in rural areas, agricultural wholesalers will sell the malaria protection nets in association with the Grameen network. Grameen Bank plans to provide microcredit to support both people who wish to set up their own distribution outlets for BASF Grameen Ltd. products and consumers in rural areas who wish to purchase the mosquito nets.

By: Andrea Chu

ADDITIONAL RESOURCES

BASF: “press release”

MicroCapital Story, October 10, 2008: “Mexican Billionaire Carlos Slim Donates $5m and Guarantees $40m for a New Mexican Microfinance Institution, Grameen Carso, Run by the Grameen Trust of Bangladesh”

MicroCapital Story, February 26, 2009: “Grameen Foundation and Oikocredit Offer Progress out of Poverty Index as Cornerstone of Socially Motivated Microfinance Investment Guidelines”

Grameen Foundation: “home”

BASF Group: “home“