Grameen Bank

Grameen Bank has reversed the conventional banking wisdom by removing collateral requirement and created a banking system which is based on mutual trust, strict supervision, accountability, participation and creativity. At GB, credit is the entry point and it serves as a catalyst in the overall development process. GB sees credit as an empowering agent, an enabling element in the development of socio-economic conditions of the poor who have been kept outside the banking orbit on the simple ground that they are poor and hence not bankable.

Professor Muhammad Yunus, the founder of Grameen Bank and its Managing Director reasoned that if financial resources can be made available to the poor people at terms and conditions which are appropriate and reasonable, "these millions of small people with their millions of small pursuits can add up to create the biggest development wonder". This conviction of Professor Yunus had its root in the traditional bank's structure which has been designed in a way that would never help the poor who constitute the largest segment of the society and the ones who are desperately in need of credit.


The origin of Grameen Bank

The origin of Grameen Bank can be traced back about 20 years from now when Dr. Muhammad Yannus, Professor and Head of the Rural Economics Programme in the University of Chittagong, launched an action research programme to examine the possibilities of designing a comprehensive banking framework to provide the banking services to the rural poor.
The action research project which he called the "Grameen Bank Project" (Grameen means rural) came into being with the following objectives in mind:
- To extend the banking facilities to the poor men and women.
- To eliminate the exploitation of the money lenders.
- To create opportunities for self employment for the vast unutilized and under utilized manpower resources.
- To bring the disadvantaged people within the framework of some organizational format which they can understand and operate and can find socio-political and economic strength through mutual support.
- To reverse the age-old vicious circle of "low income, low savings, low investment "into an expanding system of" low income, credit, investment, more income, more credit, more investment, more income".
The project demonstrated its strength in the village Jobra (a village adjacent to the – Chittagong University - the initial site of the action research project) and some of the neighbouring villages during 1976-1979. From there, with the sponsorship of the central bank of the country and support of the nationalized commercial banks, the project was extended to Tangail district (a district north of Dhaka, the capital of Bangladesh). With the success in Tangail the project was extended to several other districts in the country. In October 1983, the Grameen Bank Project was transformed into an independent bank by a Government Ordinance with the name Grameen Bank. The Government provides 10% share capital of the Bank while 90% is held by the borrowers of the Bank.

The founder of the Bank views credit as a powerful weapon He asserts that credit is a fundamental human right. The more credit one can receive, the more resources he can command, the more powerful he is. Credit creates entitlement to resources and is the basis for the economic emancipation of the poor in general and the poor women in particular. The collateral based conventional format denies the right to credit for the poor people which in turn dispossess them in their fight against the economic and other related odds around them. The Grameen approach emphasizes the creation of enabling conditions in which every human being may have the opportunity to carve out dignified ways of living for herself/himself. GB views its loans as means to gain command over resources. With its effective use a poor person converts her/his latent skills in generating an income and creates self-employment without having to be constrained by the limitations of wage employment. Besides, self-chosen economic activities increase the sense of participation and strengthens the base of self-help. Professor Yunus puts it as "creating favourable conditions for making a living through self-employment is a much more dignified way of solving the unemployment than initiating a system of doles and welfare payments".

Grameen Bank in recent years has not only expanded its credit operations which are targeted at the poorest of the poor in rural Bangladesh, it has also rapidly diversified its activities. Grameen today is the focal point of a global network of institutions and individuals who provide micro-credit to fight poverty. Within Bangladesh, the Bank has undertaken major investment initiatives in those sectors where the poor have the comparative advantage in terms of their skills, enterprise and productive capacity. A number of social development oriented companies have been established under the Companies' Law to boost economic growth of vital economic sectors like agriculture, fisheries and rural industries.

Grameen Bank Identity

Grameen Bank has now become a national institution that provides credit to the rural poor in Bangladesh. It is today also owned by the poor, whose paid up share capital amount to Taka 200 million. Credit provided by Grameen in 1994 exceeded the total amount of all other financial institutions and NGOs put together in Bangladesh. Grameen is committed to the goal of alleviation of poverty and empowerment of the rural poor. To fulfill its strategic objective, Grameen has grown institutionally, its credit operations have expanded rapidly and its programmes have become more diversified.

Grameen Bank has a large clientele, comprising over two million of the poorest households in the country. The immediate task is to ensure that they succeed in finally overcoming their poverty and attain further development in a sustainable way. Grameen's modus operandi has clearly demonstrated that poverty can be alleviated within a short time and new opportunities created for self employment, higher incomes, improved housing, better health & nutrition, children's schooling, and altogether a better quality of life. A substantial number of Grameen's clientele, according to some evaluations, have already succeeded in overcoming absolute poverty. It is Grameen's firm conviction that a majority of its borrowers will cross the poverty line in the next five years.