Grameen Bank
| File:Grameen bank logo.png | |
| Company type | Body Corporate (Bank Ordinance) |
|---|---|
| Industry | financial service activities, except insurance and pension funding  |
| Founded | 1983 |
| Headquarters |  Dhaka, Bangladesh |
Key people | Muhammad Yunus |
| Products | Financial Services Microfinance |
| Revenue |  4,746,095,835 M. Taka (2005) |
| 5,109,093,240 M. Taka (2005) | |
| 1,000,441,986 M. Taka (2005) | |
| Total assets | $678,280,326 M. USD (2005) |
Number of employees | 11,855 (2003) |
| Website | www.grameen-info.org |
The Grameen Bank (Bangla: গ্রামীণ ব্যাংক) is a microfinance organization and community development bank started in Bangladesh that makes small loans (known as microcredit) to the impoverished without requiring collateral. The system is based on the idea that the poor have skills that are under-utilized. The bank also accepts deposits, provides other services, and runs several development-oriented businesses including fabric, telephone and energy companies. The organization and its founder, Muhammad Yunus, were jointly awarded the Nobel Peace Prize in 2006.[1]
History
Muhammad Yunus, the bank's founder, earned a doctorate in economics from Vanderbilt University in the United States. He was inspired during the terrible Bangladesh famine of 1974 to make a small loan of $27 to a group of 42 families so that they could create small items for sale without the burdens of predatory lending.[2] Yunus believed that making such loans available to a wide population could ameliorate the rampant rural poverty in Bangladesh.
The Grameen Bank (literally, "Bank of the Villages", in Bangla) is the outgrowth of Muhammad Yunus' ideas. The bank began as a research project by Yunus and the Rural Economics Project at Bangladesh's University of Chittagong to test his method for providing credit and banking services to the rural poor. In 1976, the village of Jobra and other villages surrounding the University of Chittagong became the first areas eligible for service from Grameen Bank. The Bank was immensely successful and the project, with government support, was introduced in 1979 to the Tangail District (to the north of the capital, Dhaka). The bank's success continued and it soon spread to various other districts of Bangladesh and in 1983 it was transformed into an independent bank by the legislature of Bangladesh. Bankers from ShoreBank, a community development bank in Chicago, helped Yunus with the official incorporation of the bank under a grant from the Ford Foundation.[3] The bank's repayment rate was hit following the 1998 flood of Bangladesh before recovering again in recent years.
The Bank today continues to expand across the nation and still provides small loans to the rural poor. As of mid-2006, Grameen Bank branches number over 2,100.[3] Its success has inspired similar projects around the world.
Application of microcredit
The system incorporates a set of values into the banking system, embodied in Bangladesh by the Sixteen Decisions.
The system is the basis for the microcredit and the self-help group system now at work in over 43 countries. Each group of five individuals are loaned money, but the whole group is denied further credit if one person defaults. This creates economic incentives for the group to act responsibly (such as other members then being able to receive additional loans), increasing Grameen's economic viability.
In a country in which few women may take out loans from large commercial banks, the fact that most (97%) loan recipients are women is an amazing accomplishment. In other areas, Grameen's track record has been equally astonishing, with very high payback rates—over 98 percent. However, according to the Wall Street Journal, a fifth of the bank's loans were more than a year overdue in 2001.[4] More than half of Grameen borrowers in Bangladesh (close to 50 million) have risen out of acute poverty thanks to their loan, as measured by such standards as having all children of school age in school, all household members eating three meals a day, a sanitary toilet, a rainproof house, clean drinking water and the ability to repay a 300 taka-a-week (8 USD) loan.
Regional Information
Grameen Bank currently (as of December 2006) serves the following regions:
- South Asia: Bangladesh, India, Pakistan
- East Asia: China
- Southeast Asia: East Timor, Indonesia, Philippines
- Latin America and Caribbean: Bolivia, Dominican Republic, El Salvador, Haiti, Honduras, Mexico
- Middle East: Saudi Arabia
- North Africa: Egypt, Morocco, Tunisia
- Sub-Saharan Africa: Nigeria, Rwanda, Uganda
Grameen also has a presence in the United States.
Ownership and other facts
One unusual feature of the Grameen Bank is that it is owned by the poor borrowers of the bank, most of whom are women. Of the total equity of the bank, the borrowers own 94%, and the remaining 6% is owned by the Government of Bangladesh. Some other facts about the bank, as of August 2006 are:[5]
- Total number of borrowers is 6.67 million, and 97% of those are women (3,123,802 members in 2003 [6])
- The Bank has 2,247 branches (as of May, 2006) covering 72,096 villages, with a total staff of over 18,795. (43,681 villages in 2003 [6])
- Loan recovery rate is 98.85% (repayment rate was 95% in 1998[7])
- Since inception, total loans distributed amounts to Tk 290.03 billion (US$ 5.72 billion). Out of this, Tk 258.16 billion (US$ 5.07 billion) has been repaid.
Nobel Peace Prize
On 13 October 2006 the Nobel Committee awarded Grameen Bank and founder Muhammad Yunus the 2006 Nobel Peace Prize, "for their efforts to create economic and social development from below."[8]
Related ventures
| Grameen Bank |
|---|
| Grameen Family of Enterprises |
| Grameen Fund |
| Grameen Communications |
| Grameen Shakti/Energy |
| Grameen Shikkha/Education |
| Grameen Telecom |
| Grameen Motsho |
| Grameen Cybernet Ltd |
| Grameen Knitwear Ltd |
The Grameen Bank has grown into over two dozen enterprises represented by the Grameen Family of Enterprises.
By November 2004 it had loaned over US$4.4bn to the poor. Along with bringing energy to rural residents and expanding employment, the Grameen family of enterprises has also branched out into rural pond management by Grameen Motsho or the Fisheries Foundation, seeking to preserve the broad diversity of fish in Bangladesh fisheries ponds.
On July 11, 2005 the Grameen Mutual Fund One, approved by the SEC of Bangladesh, went IPO. One of the first mutual funds of its kind, GMFO will allow the 4+ million Grameen members as well as non-members, to buy into Bangladesh's capital markets. The Bank and its constituents are together worth over US$7 billion.[9]
Grameen Foundation USA collects donations in a US not-for-profit organization for distribution worldwide to microcredit organizations. Grameen Foundation USA has an A rating from Charity Watch.
Social improvement programmes
Besides extending microcredit loans to the poor people, Grameen Bank has taken several innovative programmes for poverty eradication.
Struggling members programme
This programme is focused on distributing small loans to beggars. The existing rules of banking are not applied:
- The loans are completely interest-free.
- The repayment period can be arbitrarily long, for example, a beggar taking a small loan of around 100 taka (about US $1.50) can pay only 2.00 taka (about 3.4 US cents) per week.
- The borrower is covered under life insurance free of cost.
The bank does not force borrowers to give up begging; rather it encourages them to use the loans for generating income by selling low-priced items. As of 2005, around 45,000 beggars have taken loans of about Tk 28.7 million (approx. US$441,538) and repaid Tk. 13.66 million (about US$210,154).[10]
Rural telephone programme
Bangladesh has one of the lowest telephone densities of the world. Of its more than 85,000 villages, many are not covered under the land-phone network offered by the government-owned telecom company. To alleviate this situation, Grameen Bank has taken a programme to bring telephones to distant villages. Grameen Phone, a sister company of the bank, is already the largest mobile telephone provider of the country. Using their nationwide network, Grameen Telecom, another sister company of Grameen Bank, brought radio-telephones and mobile phones to almost half of the villages of Bangladesh. The bank also distributed loans to almost 139,000 poor women in rural areas to pay for the phones. The women set up call centers in their homes where the other villagers can come and pay a small fee for using the phone. This programme is commonly known as Polli Phone (the Village Phone) in Bangladesh.
Criticism
Grameen's approach to development is not without critics. Sudhirendar Sharma, a development analyst, claims that it has "landed poor communities in a perpetual debt-trap,"[11] and that its ultimate benefit goes to the corporations that sell capital goods and infrastructure to the borrowers.[12]
Money donated/contributed to Grameen Bank are placed in Yunus's personal account (collecting millions in interest for his personal expenditure) before they are distributed. Yunus himself enjoys a lavish lifestyle. To which former Prime Minister of Bangladesh, Sheikh Hasina commented "Usurers [Yunus] are more corrupt than politicians". [4]
Former Finance Minister of Bangladesh, Saifur Rahman, commented that giving the poor some money does not make them well off. They are suceptible when larger corporations take over. He also mentioned that Bangladesh's rapid GDP growth had more to do with industrializaiton of large companies (hence giving the poor more jobs) rather than keeping them tied to their agrarian roots with microcredit.[citation needed]
The Mises Institute's Jeffrey Tucker has criticized the Grameen Bank,[13] asserting that the Grameen Bank and others based on the Grameen model are not economically viable and depend on subsidies in order to operate, thus essentially becoming another example of welfare.[14]
See also
- Grameen Foundation, replicating the Grameen Bank model around the world
- Vikram Akula, microfinance institution modelled on Grameen Bank
References
- Bornstein, David. The Price of a Dream: The Story of the Grameen Bank. Oxford University Press, NY: 2005, ISBN 0-19-518749-0
- Counts, Alex, Give Us Credit , Crown, 1996, ISBN 0-8129-2464-9
- Sachs, Jeffrey. "The End of Poverty". Penguin Books, NY: 2005, ISBN 0-14-303658-0
- Yunus, Muhammad (with Alan Jolis), Banker to the Poor: The Autobiography of Muhammad Yunus, Founder of Grameen Bank, Oxford University Press: USA, ISBN 0-19-579537-7
- "Micro Loans for the Very Poor", New York Times, February 16, 1997
Notes
- ^ "The Nobel Peace Prize for 2006". The Nobel Peace Prize for 2006. 2006-10-13. Retrieved 2006-10-13.
- ^ Anand Giridharas and Keith Bradsher (2006-10-13). "Microloan Pioneer and His Bank Win Nobel Peace Prize". New York Times. Retrieved 2006-10-13.
{{cite web}}: Italic or bold markup not allowed in:|publisher=(help) - ^ http://www.grameen-info.org/bank/GBGlance.htm
- ^ Patrick Bond (2006-10-19). "A Nobel loan shark?". Retrieved 2006-10-23.
- ^ Grameen Bank At a Glance grameen-info.org
- ^ a b Grameen Bank Historical Data Series 2003 grameen-info.org
- ^ Credit delivery system Grameen Bank
- ^ "The Nobel Peace Prize for 2006". The Nobel Peace Prize for 2006. 2006-10-13. Retrieved 2006-10-13.
- ^ Grameen Bank Audit Report
- ^ Grameen Bank at a Glance
- ^ Sharma, Sudhirendar (2002-09-25). "Is micro-credit a macro trap?". The Hindu. Retrieved 2006-12-02.
- ^ Sharma, Sudhirendar (2002-01-05). "Microcredit: Globalisation unlimited". The Hindu. Retrieved 2006-12-02.
- ^ Tucker, Jeffrey. "The Micro-Credit Cult." The Free Market. Mises Institute. November 1995. [1]
- ^ Tucker, Jeffrey. "Microcredit or Macrowelfare: The Myth of Grameen." Mises.org. 8 November 2006. [2]
External links
- Grameen Bank Official Site
- Big banks find little loans a Nobel winner, too The Christian Science Monitor
- Grameen Foundation Australia, replicating the Grameen Bank model within South East Asia
- gramBangla, Australian Bangladeshi Community Grameen Support Group
- One World, author Paul Sinclair
- Grameen Bank: Taking Capitalism to the Poor, a study by members of the Columbia Business School
- A video by Muhammad Yunus talking about Grameen Bank [5]
- Measuring the Impact of Microfinance: Taking Stock of What We Know; Nathanael Goldberg, December 2005.
- Business-Social Ventures: Reaching for Major Impact; changemakers.net, Nov 2003
- Grameen II: The First Five Years, 2001-2006; Stuart Rutherford et al for MicroSave, February 2006.
- Criticism: The Mises Institute
- IPS Inter Press Service Reports on the effects of microcredits from the viewpoint of civil society and the individuals who are working their way out of poverty.
- Microcredit and Women's Poverty article critical of Grameen Bank model, in Dollars & Sense magazine
- YUNUS, Muhammad. Grameen Bank at a glance, 2006.
- Paper Citations for Grameen Bank