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Grameen Bank

The Grameen Bank is a community development bank started in Bangladesh. They give small loans (known as microcredit or "grameencredit" [1] Archived 2008-04-08 at the Wayback Machine) to poor people without asking for money before the loan is given. The word "Grameen", is made of the word "gram" or "village", and means "of the village". The system of this bank is based on the idea that the poor have skills but have no chance to use their skills without some money. The bank also controls some businesses, such as fabric, telephone and energy companies. Most of the banks loans go to women.

Grameen Bank (GB)
Body Corporate (Bank Ordinance)
IndustryFinance
Founded1983
HeadquartersDhaka, Bangladesh
Area served
Bangladesh
Key people
Muhammad Yunus, founder
ProductsFinancial Services
Microfinance
RevenueIncrease 6,335,566,324 Taka (2006)[1]
Increase 5,959,675,013 Taka (2006)[1]
Increase 1,398,155,030 Taka (2006)[1]
Total assets59,383,621,728 Taka (2006)[2]
Number of employees
24,703 (Oct 2007)[3]
Websitehttp://www.grameen-info.org/

The Grameen Bank was started 1976 when Professor Muhammad Yunus, a Fulbright scholar and Professor at University of Chittagong, researched how to provide banking for the rural poor. In October 1983, the Grameen Bank Project was made into an independent bank by the government. The group and its first member, Muhammad Yunus, were awarded the Nobel Peace Prize in 2006.[4]

Some people have said the banks prices are too expensive and put people in a debt-trap. Some have also said that the bank would not work if people did not give donations. At the same time, it is often seen as a success story in microfinance and as the guide for other groups around the world.

History

 
Nobel Prize winner, Muhammad Yunus, the banks first member

Muhammad Yunus, the banks first member, earned a Ph.D. in economics from Vanderbilt University in the United States. During the Bangladesh famine of 1974 he gave a small loan of USD 27 to a group of 42 families so that they could make small items and sell them without owing too much money.[5] Yunus believed that a lot less people would be poor around Bangladesh if they could find small loans.

The Grameen Bank ("Bank of the Villages", in the Bengali language) is the product of Yunus' ideas. The bank began as a research project by Yunus and the Rural Economics Project at Bangladesh's University of Chittagong. They gave out some small loans and waited to know what would happen. In 1976, the village of Jobra and other villages surrounding the University of Chittagong became the first places where Grameen Bank loaned money to people.[6] The Bank was very successful and with support from the main Bangladesh Bank, gave loans for the Tangail District (to the north of the capital, Dhaka).[6] The bank's success continued and it soon gave loans in many areas of Bangladesh. On 2 October 1983, the project was made into an independent bank, by the Bangladeshi government.[6] Bankers from ShoreBank, a community development bank in Chicago, helped Yunus by making Grameen Bank a part of Shorebank with money from the Ford Foundation.[7] After the 1998 flood of Bangladesh, many people could not pay their debts to Grameen for a few years. By the beginning of 2005, the bank had loaned over USD 4.7 billion to poor people.[8]

Grameen Bank now loans money to poor people all over India. By 2006, India had over 2,100 Grameen Bank branches.[9] Its success has inspired similar projects in more than 40 countries around the world and has made World Bank to take an initiative to finance Grameen-type schemes.[10]

The bank gets help with money. In the mid-1990s, the bank started getting most of its funding from the central bank of Bangladesh. More recently, Grameen has been borrowing money. The Government of Bangladesh guarantees that money borrowed by the Grameen Bank will be repaid.[11]

How the bank works

16 Decisions[12]
  1. We shall follow and advance the four principles of Grameen Bank: Discipline, Unity, Courage and Hard work – in all walks of our lives.
  2. Prosperity we shall bring to our families.
  3. We shall not live in dilapidated houses. We shall repair our houses and work towards constructing new houses at the earliest.
  4. We shall grow vegetables all the year round. We shall eat plenty of them and sell the surplus.
  5. During the plantation seasons, we shall plant as many seedlings as possible.
  6. We shall plan to keep our families small. We shall minimize our expenditures. We shall look after our health.
  7. We shall educate our children and ensure that they can earn to pay for their education.
  8. We shall always keep our children and the environment clean.
  9. We shall build and use pit-latrines.
  10. We shall drink water from tubewells. If it is not available, we shall boil water or use alum.
  11. We shall not take any dowry at our sons' weddings, neither shall we give any dowry at our daughter's wedding. We shall keep our centre free from the curse of dowry. We shall not practice child marriage.
  12. We shall not inflict any injustice on anyone, neither shall we allow anyone to do so.
  13. We shall collectively undertake bigger investments for higher incomes.
  14. We shall always be ready to help each other. If anyone is in difficulty, we shall all help him or her.
  15. If we come to know of any breach of discipline in any centre, we shall all go there and help restore discipline.
  16. We shall take part in all social activities collectively.

Grameen Bank is best known for solidarity lending.[13] The Bank also incorporates a set of values embodied in Bangladesh by the Sixteen Decisions.[14] At every branch of Grameen Bank the borrowers recite these Decisions and vow to follow them.[15]

There is solidarity lending in over 43 countries. Each borrower must belong to a five-member group, the group does not need to give a guarantee for a loan. The loan is made to only one person but the whole group is to make sure that the money is repaid. Each member has to pay for their own loan but if they have problems the group may help them pay because the group would not get any more loans from Grameen if all the groups loans were not paid.[16]

Grameen Bank does not take people to court if they cannot pay, the system works on trust only.[17] Solidarity groups agree with Grameen to save enough for extra payments in case they cannot pay every time.[18]

Not many women in India can have loans from big banks so 97% of Grameens loans go to women.[3] Women get treated very badly in some countries, and groups, such as the World Bank are researching to know if small loans are helping women around the world.[19] Over 98 percent of Grameens loans have been paid back but the Wall Street Journal says that 20% of the loans took more than a year longer than the time agreed to pay the loan back.[20] Grameen says that more than half of its borrowers in Bangladesh (close to 50 million) now: have all children of school age in school, all household members eating three meals a day, a clean toilet, a rainproof house, clean drinking water and can pay 300 taka-a-week (around 4 USD) towards their loans.[21]

Village Phone Program

One of the things Grameen Bank does for poor people is the Village Phone program. Women entrepreneurs can start a business providing a payphone service in rural areas of Bangladesh. The Village Phone Program was awarded the 2004 Petersburg Prize of EUR 100,000 for Technology to Development.[22] The Development Gateway Foundation said:

...Grameen has created a new class of women entrepreneurs who have raised themselves from poverty. Moreover, it has improved the livelihoods of farmers and others who are provided access to critical market information and lifeline communications previously unattainable in some 28,000 villages of Bangladesh. More than 55,000 phones are currently in operation, with more than 80 million people benefiting from access to market information, news from relatives, and more.[22]

Struggling members program

In 2003, Grameen Bank started a new loan program, different from the Solidarity Group, to help the beggars in Bangladesh.[23] This program is made to give small loans to beggars. The loans cost only the amount of the loan and the repayment take a long time, 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 and only repays 100 taka.

The bank does not force the beggars to give up begging but tries to get them selling low-priced items. The Global Microcredit Summit in 2006 by one of the banks managers says that by May 2006, around 73,000 beggars have taken loans of about 58.32 million taka (approx. USD 833,150) and repaid 34.78 million taka (about USD 496,900).[24]

Statistics

Grameen Bank is owned by the people who borrow the money, mostly women. The borrowers own 94% of the bank, and the other 6% is owned by the Government of Bangladesh.[3]

In October 2007, the bank had 7.34 million borrowers, and 97% of those were women.[3] The number of borrowers had more than doubled since 2003, when the bank had only 3.12 million members.[25] In October 2007, the Bank had a staff of over 24,703 employees and 2,468 branches covering 80,257 villages.[3] There were 43,681 villages covered in the year 2003.[25] Since its start, the bank has loaned 347.75 billion taka (USD 6.55 billion). 313.11 billion taka (USD 5.87 billion) has been repaid.[3] The bank says 98.35% of loans are repaid. In 1998, 95% of loans were repaid.[26] However, many critics doubt this recovery rate and the definition that Grameen uses to come up with this rate.[27]

Nobel Peace Prize

Grameen Bank received awards such as, the Bangladesh Independence Day Award, in 1994. The bank got its best known award on 13 October 2006, when the Nobel Committee awarded Grameen Bank and its first member, Muhammad Yunus, the 2006 Nobel Peace Prize "for their efforts to create economic and social development from below."[28] The Nobel Foundation says:

From modest beginnings three decades ago, Yunus has, first and foremost through Grameen Bank, developed micro-credit into an ever more important instrument in the struggle against poverty. Grameen Bank has been a source of ideas and models for the many institutions in the field of micro-credit that have sprung up around the world. [28]

Mosammat Taslima Begum, used her first loan of 16-euro (20-dollar) from the bank in 1992 to buy a goat and subsequently became a successful entrepreneur and one of the elected board members of the bank. She collected the Nobel Prize for Grameen Bank on 10 December 2006, at the prize awarding ceremony in Oslo City Hall.[29]

Grameen Bank is the only business to have won a Nobel Prize. In a speech given at the presentation ceremony, Professor Ole Danbolt Mjøs, Chairman of the Norwegian Nobel Committee, said that, by giving the prize to Grameen Bank and Muhammad Yunus, the Norwegian Nobel Committee wanted to make more contact with the Muslim world, to help women, and on to fight against poverty.[30]

The people in Bangladesh were very happy with the Nobel Prize.[31] Some critics asserted that the award affirms neoliberalism.[19]

Related groups

The Grameen Bank has grown into over two dozen groups called the Grameen Family of Enterprises. These groups include Grameen Trust, Grameen Fund, Grameen Communications, Grameen Shakti (Grameen Energy), Grameen Telecom, Grameen Shikkha (Grameen Education), Grameen Motsho (Grameen Fisheries), Grameen Baybosa Bikash (Grameen Business Development), Grameen Phone, Grameen Software Limited, Grameen CyberNet Limited, Grameen Knitwear Limited, and Grameen Uddog (owner of the brand Grameen Check).[32]

On 11 July 2005 the Grameen Mutual Fund One (GMFO), was listed as an Initial Public Offering. One of the first mutual funds of its kind, GMFO will allow the over four million Grameen bank members, as well as non-members, to buy into Bangladesh's capital markets. The Grameen group is worth over USD 7.4 billion.[33]

The Grameen Foundation was based on the work of Grameen Bank in Bangladesh and they want to share the Grameen ideas and hurry microfinance to the worlds poorest people.[34] Grameen Foundation USA, which has an A- rating from Charity Watch,[35] supports microfinance institutions worldwide with loan guarantees, training, and technology transfer.[36] As of 2006, Grameen Foundation supports microfinance institutions in the following regions:[34]

Some people do not agree with Grameen

Sudhirendar Sharma, a development analyst, says that the Grameen Bank has "landed poor communities in a perpetual debt-trap",[37] and that its ultimate benefit goes to the corporations that sell capital goods and infrastructure to the borrowers.[38] Prime Minister of Bangladesh, Sheikh Hasina, who said, "There is no difference between usurers [Yunus] and corrupt people."[39] Hasina also says the bank wants too much in return for the loans.[40] Loans from Grameen Bank cost more than bigger banks, around 20% interest.[41] The Mises Institute's Jeffrey Tucker says that Grameen Bank is not good enough for Indias economy and is a way of giving money to people who are not working.[42][43]

Grameen Bank Media

Notes

  • 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, 16 February 1997
  • Cockburn, Alexander, "A Nobel Peace Prize for Neoliberalism?" http://www.counterpunch.org/cockburn10202006.html Archived 2007-05-05 at the Wayback Machine

References

  1. ↑ 1.0 1.1 1.2 Ahmed & Ahmed (Chartered Accountants) (2007-08-01). "GRAMEEN BANK Profit and Loss Account, for the year ended 31 December 2006" (PDF). Auditors’ Report and Financial Statements Of Grameen Bank. Grameen Communications. Archived from the original (PDF) on 2008-02-26. Retrieved 2008-01-17.
  2. ↑ Ahmed & Ahmed (Chartered Accountants) (2007-08-01). "GRAMEEN BANK Balance Sheet, As at 31 December 2006" (PDF). Auditors’ Report and Financial Statements OF Grameen Bank. Grameen Communications. Archived from the original (PDF) on 2008-02-26. Retrieved 2008-01-17.
  3. ↑ 3.0 3.1 3.2 3.3 3.4 3.5 "Grameen Bank At a Glance". Grameen Communications. October 2007. Archived from the original on 2007-07-06. Retrieved 2008-01-17.
  4. ↑ "The Nobel Prize for 2006". The Nobel Peace Prize for 2006. 2006-10-13. Retrieved 2006-10-13.
  5. ↑ Anand Giridharas and Keith Bradsher (2006-10-13). Microloan Pioneer and His Bank Win Nobel Peace Prize. https://www.nytimes.com/2006/10/13/business/14nobelcnd.html. Retrieved 2006-10-13. 
  6. ↑ 6.0 6.1 6.2 Rahman, Aminur (2001). Women and Microcredit in Rural Bangladesh: Anthropological Study of Grameen Bank Lending. Boulder, Colorado: Westview Press. pp. 4. ISBN 0-8133-3930-8.
  7. ↑ Brandon Glenn (2006-10-16). "ShoreBank leaders had hand in Nobel prize". Chicago Business News. Retrieved 2007-05-15.
  8. ↑ Papa, Michael J.; Arvind Singhal and Wendy H. Papa (2006). Organizing for Social Change: A Dialectic Journey of Theory and Praxis. Sage Publications. pp. 72. ISBN 0-76193-435-9.
  9. ↑ Bangladeshi banker wins Nobel Peace Prize. United Press International. 2006-10-13. 
  10. ↑ Khandker, Shahidur R.; Baqui, M.A. & Khan Z.H. (1995). Grameen Bank: Performance and Sustainability. World Bank Publications. p. vi. ISBN 0-82133-463-8. Retrieved 2008-01-16.
  11. ↑ Morduch, Jonathan (October 1999). "The role of subsidies in microfinance: evidence from the Grameen Bank" (PDF). Journal of Development Economics. Elsevier. 60 (1): 240. doi:10.1016/S0304-3878(99)00042-5. Retrieved 2008-01-16.
  12. ↑ Sherraden, Margaret S. (1998). Community Economic Development and Social Work. Binghampton, New York: Haworth Press. pp. 113–114. ISBN 0-7890-0506-9.
  13. ↑ Khandker, Shahidur R.; Baqui, M.A. & Khan Z.H. (1995). Grameen Bank: Performance and Sustainability. World Bank Publications. p. xi. ISBN 0-82133-463-8. Retrieved 2008-01-16.
  14. ↑ Siddiqui, Kamal. An Evaluation of the Grameen Bank Operation (Dhaka: National Institute of Local Government, 1984)
  15. ↑ Ghista, Garda (2004). "Bangladesh:Towards Economic and Women's Liberation Via Grameen Bank". ProutWorld. Archived from the original on 2007-10-18. Retrieved 2008-02-04.
  16. ↑ Hossain, Mahabub (Feb 1988). Credit for Alleviation of Rural Poverty: The Grameen Bank in Bangladesh. Int Food Policy Res Inst IFPRI. p. 7. ISBN 0-89629-067-0. Retrieved 2008-01-16.
  17. ↑ Sinclair, Paul (2007-12-22). "Grameen Micro-Credit & How to End Poverty from the Roots Up". One World One People. Retrieved 2008-02-04.
  18. ↑ Khandker, Shahidur R.; Baqui, M.A. & Khan Z.H. (1995). Grameen Bank: Performance and Sustainability. World Bank Publications. p. x. ISBN 0-82133-463-8. Retrieved 2008-01-16.
  19. ↑ 19.0 19.1 Feiner, Susan F.; Barker, Drucilla K. (Nov–Dec 2006), "Microcredit and Women's Poverty", Dollar & Sense, The magazine of Economic Justice, Boston, USA: Economic Affairs Bureau, Inc.
  20. ↑ Daniel Perl, Michael M. Phillips (2001-11-27). "Grameen Bank, Which Pioneered Loans For the Poor, Has Hit a Repayment Snag". Wall Street Journal. Retrieved 2008-03-25.
  21. ↑ Fraser, Ian (2007-08-03). "Microfinance comes of age". Cover Story. Scottish Banker magazine. Archived from the original on 2007-10-07. Retrieved 2008-01-30.
  22. ↑ 22.0 22.1 "Grameen Bank-Village Phone Wins Global Competition for Contribution of Technology to Development" (PDF). Development Gateway Foundation (Washington, DC). 2004-07-27. Archived from the original (PDF) on 2008-02-26. Retrieved 2008-01-31.
  23. ↑ Yunus, Muhammad (July 2005). "Grameen Bank's Struggling (Beggar) Members Programme". Grameen Communications. Archived from the original on 2008-01-25. Retrieved 2008-01-31.
  24. ↑ Barua, D. C. (2006-11-12). "Five Cents a Day: Innovative Programs for Reaching the Destitute with Microcredit, No-interest Loans, and other Instruments: The Experience of Grameen Bank". .  Accessed 2008-01-20.
  25. ↑ 25.0 25.1 "Grameen Bank Historical Data Series 2003". Grameen Communications. 2004-07-21. Archived from the original on 2008-01-15. Retrieved 2008-01-17.
  26. ↑ "Credit delivery system". Grameen Communications. 2002-09-18. Archived from the original on 2008-01-17. Retrieved 2008-01-17.
  27. ↑ Pearl, Daniel; Phillips, Michael M. (2001-11-27). Grameen Bank, Which Pioneered Loans For the Poor, Has Hit a Repayment Snag. The Wall Street Journal. http://online.wsj.com/public/resources/documents/pearl112701.htm. Retrieved 2008-02-04. 
  28. ↑ 28.0 28.1 "The Nobel Peace Prize for 2006". The Nobel Peace Prize for 2006. 2006-10-13. Retrieved 2006-10-13.
  29. ↑ "Yunus unveils vision to end global poverty". The Daily Star. 2006-12-11. Vol 5 Num 903. http://www.thedailystar.net/2006/12/11/d6121101011.htm. Retrieved 2008-01-31. 
  30. ↑ Mjøs, Ole Danbolt (2006-10-13). "The Nobel Peace Prize for 2006: Presentation Speech". The Nobel Peace Prize for 2006. Retrieved 2008-02-04.
  31. ↑ (in English) Nation parties on Nobel win. The Daily Star. 2006-10-15. Vol 5 Num 850. http://www.thedailystar.net/2006/10/15/d6101501011.htm. Retrieved 2008-02-04. 
  32. ↑ "Grameen Family of Enterprises". Grameen Website. Grameen Communications. 2007-11-28. Archived from the original on 2007-08-12. Retrieved 2008-01-17.
  33. ↑ "Credit where credit is due: The banker who changed the world". The Independent. 2006-10-14. http://news.independent.co.uk/world/asia/article1870835.ece. Retrieved 2008-01-17. 
  34. ↑ 34.0 34.1 "Grameen Foundation Annual Report 2006" (PDF). Grameen Foundation, Washington, DC, USA. 2007-08-01. Archived from the original (PDF) on 2008-02-26. Retrieved 2008-01-31.
  35. ↑ "Top Rated Charities". charitywatch.org. American Institute of Philanthropy. 2008-01-15. Retrieved 2008-01-17.
  36. ↑ "Grameen Foundation USA". 25 entrepreneurs who are changing the world. Fast Company Monitor Group. Archived from the original on 2008-12-01. Retrieved 2008-01-29.
  37. ↑ Sharma, Sudhirendar (2002-09-25). "Is micro-credit a macro trap?". The Hindu. http://www.hinduonnet.com/businessline/2002/09/25/stories/2002092500810900.htm. Retrieved 2006-12-02. 
  38. ↑ Sharma, Sudhirendar (2002-01-05). "Microcredit: Globalisation unlimited". The Hindu. http://www.thehindubusinessline.com/2002/01/05/stories/2002010500111200.htm. Retrieved 2006-12-02. 
  39. ↑ "A new party for Bangladesh's fray". Economist. 2007-02-22. Archived from the original on 2007-11-12. Retrieved 2008-01-31.
  40. ↑ IANS (2007-02-18). "Sheikh Hasina sneers at Nobel winner Yunus's bid to enter politics". Webindia123.com. Retrieved 2008-02-02.
  41. ↑ Fernando, Nimal A. (May 2006). Understanding and Dealing with High Interest Rates on Microcredit - A Note to Policy Makers in the Asia and Pacific Region (PDF). Manila, Philippines: ADB. p. 8.
  42. ↑ Tucker, Jeffrey (November 1995). "The Micro-Credit Cult. The Free Market". Mises Institute. Archived from the original on 2005-11-18. Retrieved 2008-04-06.
  43. ↑ Tucker, Jeffrey (2006-11-08). "Microcredit or Macrowelfare: The Myth of Grameen". Mises Institute.

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