Grameen Bank

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Grameen Bank (Bengali: It makes a small loan (known as a micro credit or "grameencredit") to the poor without any guarantee.

Grameen Bank originated in 1976, in the work of Professor Muhammad Yunus at Chittagong University, who launched a research project to learn how to design a credit distribution system to provide banking services for the rural poor. In October 1983 Grameen Bank was authorized by national law to operate as an independent bank.

Banks grew significantly between 2003 and 2007. In January 2011, total borrowers from banks numbered 8.4 million, and 97% of them were women. In 1998, the "Low Cost Housing Program" won the World Habitat Award. In 2006, the bank and its founder, Muhammad Yunus, were jointly awarded the Nobel Peace Prize.

Video Grameen Bank

Histori

Muhammad Yunus was inspired during Bangladesh's 1974 famine to make small loans of US $ 27 to a group of 42 families as initial money so they could make goods for sale, without high interest charges under predatory lending. Yunus believes that making such loans available to larger populations can stimulate business and reduce widespread rural poverty in Bangladesh.

Yunus developed the Grameen Bank principles from his research and experience. Grameen Bank is Bengali for "Rural" or "Village" Bank. He began extending microcredit as a joint research project with the Rural Economic Project at Chittagong University in Bangladesh to test his method of providing credit and banking services to the rural poor. In 1976, Jobra village and other villages near Chittagong University became the first area to be eligible for service from Grameen Bank. Proving success, the Bank project, with support from Bangladesh Bank, was extended in 1979 to the Tangail District (north of the capital, Dhaka). The bank's success continues and its services are extended to other districts of Bangladesh.

By Bangladesh government regulation on October 2, 1983, the project was approved and established as an independent bank. Bankers Ron Grzywinski and Mary Houghton from ShoreBank, a community development bank in Chicago, assisted Yunus with the bank's official incorporation under a grant from the Ford Foundation. The level of bank payments suffered economic disruption after the 1998 floods in Bangladesh, but recovered in the following years. At the beginning of 2005, the bank has lent more than USD 4.7 billion and at the end of 2008, USD 7.6 billion for the poor.

In 2011, the Bangladesh Government forced Yunus to resign from Grameen Bank, saying that at the age of 72, he was beyond the legal limit for that position.

By 2017, the Bank has approximately 2,600 branches and nine million debtors, with a repayment rate of 99.6%. 97% of borrowers are women. Bank has been active in 97% of villages in Bangladesh. Its success has inspired similar projects in more than 40 countries around the world, including World Bank initiatives to finance Grameen type schemes.

Grameen Bank now flourishes to rich countries as well. In 2017, Grameen America has 19 branches in eleven cities in the US. Nearly 100,000 borrowers are all women.

Maps Grameen Bank

Funding

The Bank has obtained funding from various sources, and major contributors have shifted over time. In the early years, donors were used to provide most of the capital at a low price. In the mid-1990s, banks began to get most of their funding from Bangladesh's central bank. Recently, Grameen has started selling bonds as a financial source. Bonds are implicitly subsidized, as guaranteed by the Government of Bangladesh, and still sold above the bank level. In 2013, the Bangladesh parliament passed the 'Grameen Bank Act' which replaced the Grameen Bank Ordinance, 1983, which authorizes the government to draft rules for every aspect of bank management.

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Microcredit app

Grameen Bank was founded on the principle that loans are better than charities to disrupt poverty: they offer people the opportunity to take initiatives in business or agriculture, which provide income and enable them to pay off debts.

The bank is founded on the belief that people have unlimited potential, and release their creativity and initiative to help them end poverty. Grameen has offered credit to previously underserved classes: the poor, women, illiterate, and unemployed. Access to credit is based on reasonable provisions, such as group loan systems and weekly installment payments, with long loan terms, allowing the poor to build their existing skills to earn better income in each loan cycle.

Grameen's goal was to promote financial independence among the poor. Yunus encourages all borrowers to become savers, so that their local capital can be converted into new loans to others. Since 1995, Grameen has financed 90 percent of its loans with interest income and collected savings, aligning the interests of new borrowers and depositors' shareholders. Grameen changed the deposits made in the village into loans for the more needy in the villages (Yunus and Jolis 1998).

It targets the poorest of the poor, with special emphasis on women, who receive 95 percent of bank loans. Women have traditionally had less access to financial alternatives from credit lines and regular income. They seem to have an unfair share of power in household decision making. Yunus and others have found that lending to women produces a large secondary effect, including the empowerment of marginalized segments of society (Yunus and Jolis 1998), who share income improvements with their children, unlike many men. Yunus claims that in 2004, women still struggled to get loans; they consist of less than 1 percent of borrowers from commercial banks (Yunus 2004). Interest rates imposed by microfinance institutions including Grameen Bank are high compared to traditional banks; Grameen interest (reducing the base balance) on the main credit product is about 20%.

Grameen has diversified the type of loan it makes. He supports wells and hand-powered loans to support the companies of close members of the Grameen family. It has been found that seasonal agricultural loans and lease-of-own agreements for equipment and livestock help poor communities build better farms. The Bank has set a new goal: to make each of its branch locations free of poverty, as defined by benchmarks such as having enough food and access to clean water and latrines.

Grameen Bank is renowned for its solidarity lending system. The Bank also incorporates a set of values ​​embodied in Bangladesh by Sixteen Decisions . At every branch of Grameen Bank, borrowers read out this Decree and vow to follow them. As a result of the Sixteen Decisions, Grameen borrowers have been encouraged to adopt positive social habits. One such habit includes educating children by sending them to school. Because Grameen Bank received Sixteen Decisions, almost all Grameen borrowers have school-age children enrolled in regular classes. This in turn helps bring about social change, and educates the next generation.

Loan solidarity is the cornerstone of microcredit, and the system is now used in more than 43 countries. Although each borrower must be a member of a five-member group, the group is not required to provide collateral for the loan to its members. Payment of liability depends solely on individual borrowers. Groups and centers watch that everyone behaves responsibly and there are no payment problems. There is no formal joint liability, ie group members are not obliged to pay on behalf of a failed member. However, in practice group members often contribute to the number of fails in order to raise money from a failed member the next time. Such behavior is encouraged because Grameen does not extend further credits to groups where members default.

There is no legal instrument (ie no written contract) made between Grameen Bank and its borrowers; the system works based on trust. To complete the loan, Grameen Bank requires borrower members to deposit very small amounts regularly in funds, devoted to emergencies, groups, etc. These savings help serve as insurance against contingencies.

In a country where some women can take loans from major commercial banks, Grameen has focused on women borrowers; 97% of its members are women. While a World Bank study has concluded that women's access to microcredit empowers them through greater access to resources and control over decision making, some other economists argue that the relationship between microcredit and women's empowerment is less clear.

In other areas, Grameen has a very high rate of return - more than 98 percent. However, according to Wall Street Journal , in 2001 one fifth of bank loans over one year had passed. Grameen says that more than half of its borrowers in Bangladesh (nearly 50 million) have risen from acute poverty thanks to their loans, as measured by standards such as having all school-aged children in school, all household members eating three meals a day, sanitary toilet, rainproof, clean drinking water, and the ability to pay 300-taka loans a week (about 4 USD).

The bank is also engaged in social business and entrepreneurship. In 2009, the Grameen Creative Lab worked with the Yunus Center to create the Global Social Business Summit. The meeting has become a major platform for social businesses around the world to encourage discussion, action, and collaboration to develop effective solutions to the most pressing problems that hit the world.

Village phone program

The Bank has diversified among different microcredit applications. In the Village Phone program, women entrepreneurs can start businesses to provide wireless public telephone services in rural areas. The program resulted in the 2004 Petersburg Government bank valued at EUR 100,000, for its contribution from Technology to Development. In a press release announcing the prize, the Gateway Development Foundation notes that through this program:

... Grameen has created a new entrepreneurial class of women who have elevated themselves from poverty. In addition, it has improved the livelihoods of farmers and others given access to critical market information and lifelong communication that was previously unachievable in some 28,000 villages in Bangladesh. More than 55,000 phones currently operate, with more than 80 million people benefiting from access to market information, news from relatives, and more.

Disputed member program

In 2003, Grameen Bank started a new program, different from its traditional group-based lending, which is exclusively targeted to beggars in Bangladesh. The program is focused on distributing small loans to beggars. These loans are completely interest-free, the term of payment can be arbitrarily long, and the borrower is included in the life insurance free of charge. For example, a beggar who takes a small loan of about 100 taka (about US $ 1.50) can pay back just 2.00 takas (about 3.4 US cents) per week.

Housing loans

In 1984, Grameen appealed to the Central Bank to help prepare a housing loan program for its borrowers. Their application was rejected on the grounds that the proposed $ 125 loan was impossible to build a suitable life structure. So, Grameen instead proposed the idea of ​​"housing loan". They are once again rejected, this time on the grounds that their borrowers are unable to repay loans that do not generate income. Grameen changed tactics and applied a third time, this time to make a "factory loan", the explanation is that borrowers work from home, so the house is also a factory that allows borrowers to earn an income. Grameen was rejected for the third time.

After this third refusal, Yunus, the founder of the bank, met personally with the governor of the Central Bank to request their request. When asked if he thinks the borrower will repay the loan, he replied, "Yes, they will do it.they are not.In contrast to the rich, the poor can not risk not paying.This is the only chance they have." Grameen was later allowed to increase housing loans for their various services.

In 1999, Grameen had made a $ 190 million housing loan to build more than 560,000 homes with near-perfect payments. In 1989, their average housing loan has grown to $ 300. That year, Grameen housing program received the Aga Khan International Award for Architecture.

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Grameen_Bank.27s_perception_of_people_with_economic_disadvantages "> Grameen Bank's perception of people with economic losses

When Muhammad Yunus took the first step to found Grameen Bank in Bangladesh and began lending microcredit to those living in poverty in the rural areas around Jobra, he adopted and defended two basic premises. First, credit is a human right; second, that the poor are the ones who know best how to improve their own situation.

In his book Banker to the Poor: Micro Loans and the Fight against World Poverty, Muhammad Yunus shows the view behind why Grameen Bank goes like that, saying, "When you hold the world in the palm of your hand and examine it only from the Bird's eye view, you tend be arrogant, you do not realize things are blurred when viewed from a great distance I choose to "worm eye sight"... The poor teach me a whole new economy I learn about the problems they face from their own perspective. "Here we see his willingness to immerse himself with the people he addresses to help. We get our first view of Muhammad Yunus's perception of the absolute poor when he meets Sufiya Begum, a bamboo stool maker trapped in a vicious circle of poverty for a lack of 27 cents. That's where we discover that what will become a Grameen bank, established on the heart of one person for them that the public and big companies can or will not help. Taking productive action, Yunus works with banks and surrounding communities to empower people like Sufiya to apply for credit, and use it in the best and most productive way he knows how in his unique situation. Grameen Bank will need to become an unusual standard bank. It should, as Jonah says, "an institution that will lend to those who have nothing." Then, over time, more situations arise, such as fighting for landless people, or small farmers like those in Jobra who can not use the deep tube wells available to them.

When the Grameen bank has evolved and expanded in the years since its inception, the bank continues to operate on the same two principles. Today, Grameen banks still assume that when individuals are given credit, they will be able to start upward social mobility for themselves through entrepreneurial ventures. Consequently, Grameen differs from many other social justice efforts because it does not include intensive rehabilitation training programs for the less fortunate people it serves. Instead, Grameen gives its borrower the freedom to pursue a better future by using the skills they already have in the best way they can with membership in a five-person support group being the only requirement.

Grameen Bank encourages its members to create a positive impact by being actively involved in the politics of their country. According to Muhammad Yunus's book, Banker to the Poor, Yunus commissioned his bank staff to encourage Grameen borrowers to vote; however, the staff did not influence the voters' decision in which the political party supported. While all Grameen groups were asked to show democratic forms (such as choosing a chairman and secretary), Grameen staff was surprised to find that borrowers were pleased with the opportunity to showcase their voting rights as Bangladeshi citizens in the 1991 national elections. The work of Grameen staff started a sharp increase in political activity that continued into the 1992, 1996 and 1997 elections. As Grameen Bank served women, the 1996 election received more women voters than men, leading to the abolition of opposing political parties women's rights. Not only do more women participate in political activism, but more than 1,750 Grameen members, 268 men and 1,485 women, were elected to local offices in 1997.

In an interview with PBS in 2006, (after sixteen years of experience with Grameen Bank as a social business) Yunus expressed satisfaction in Grameen bank's microcredit system as a motivation and opportunity for the poor to improve their own situation. He stressed that he had observed that Grameen borrowers attain confidence and independence when they repay their loans from Grameen banks. Being careful not to criticize the place of charity, he added that charity prize takers do not experience long-term emotional benefits in the same way.

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Operational statistics

Grameen Bank is owned by bank borrowers, most of whom are poor women. Of the total bank equity, the borrower has 94%, and the remaining 6% is owned by the government of Bangladesh.

Banks grew significantly between 2003 and 2007. In January 2011, total borrowers from banks numbered 8.4 million, and 97% of them were women. The number of borrowers has more than doubled since 2003, when banks have 3.12 million members. Similar growth can be observed in a number of villages covered. As of October 2007, the Bank had more than 24,703 employees; 2,468 branches provide services to 80,257 villages, up from 43,681 villages covered in 2003.

The Bank has distributed BDT 1.437 trillion (USD 20.92 billion) in loans, of which BDT 1.317 trillion (USD 19.02 billion) has been repaid. The bank claims a 96.67% loan recovery rate, up from the 95% claimed recovery rate in 1998. David Roodman has criticized the accounting practices used by Grameen to determine this level.

The global number of potential micro-borrowers is estimated at 1 billion, with total loan demand of $ 250 billion. The microfinance model currently serves 100 million people with $ 25 billion in loans. Grameen Bank is 95% owned by the local poor and 5% by the government.

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Staff training

Grameen Bank staff often work in difficult conditions. Employees receive job training for 6 months while overshadowing qualified and experienced people from various branches in Grameen. The purpose of this training is to enable trainees to "appreciate the unexplored potential of the poor" and to find new ways to solve problems that arise in Grameen branches. After completing the 6 month period, the trainees returned to the Dhaka headquarters for review and criticism before being appointed to a bank branch.

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Awards

• 1994, Grameen Bank received the Independence Day Award in 1994, which is the highest government award.
• October 13, 2006, the Nobel Committee awarded Grameen Bank and its founder, Muhammad Yunus, 2006 Nobel Peace Prize "for their efforts to create economic and social development from below." The award announcement also mentions that:

From a humble beginning three decades ago, Yunus, first and foremost through Grameen Bank, developed microcredit into a more important instrument in the struggle against poverty. Grameen Bank has been the source of ideas and models for many micro-credit institutions emerging around the world.

On December 10, 2006, Mosammat Taslima Begum, who used his first 16 euro (20 dollars) loan from a bank in 1992 to buy a goat and later became a successful businessman and one of the elected board members of the bank, received a Nobel Prize on behalf of the investor and Grameen Bank borrowers at a gift-giving ceremony held at Oslo City Hall.

Grameen Bank is the only business company that won the Nobel Prize. Professor Ole Danbolt MjÃÆ'¸s, Chairman of the Norwegian Nobel Committee, in his speech said that, by giving prizes to Grameen Bank and Muhammad Yunus, the Norwegian Nobel Committee wants to push attention to the achievement of the Muslim world, on women's perspective, and in the fight against poverty.

Bangladeshis celebrated the prize. Some critics say that the award affirms neoliberalism.

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Related Ventures

Grameen Family of Enterprises by Bank Grameen Grameen Trust, Grameen Communications, Grameen Telecom, Grameen Education, Grameen Fisheries, Grameen Business Development, Grameen Phone, Grameen Foundation, Grameen Software Terbatas, Grameen CyberNet Limited, Grameen Knitwear Limited, and Grameen Uddog (Pamilik Ikh Grameen Check).

On July 11, 2005, Grameen Mutual Fund One (GMFO), approved by the Securities and Exchange Commission of Bangladesh, is listed as an Initial Public Offering. One of the first mutual funds of its kind, GMFO will allow more than four million members of Grameen banks, as well as non-members, to buy into the Bangladeshi capital market. The Bank and its constituents are together worth more than USD 7.4 billion.

The Grameen Foundation was developed to share the Grameen philosophy and expand the benefits of microfinance for the world's poorest people. The Grameen Foundation, which has a rating of A from [Charity Watch], provides microfinance in the US (the only developed country where this is done), and supports microfinance institutions around the world with loan guarantees, training and technology transfer. In 2008, the Grameen Foundation supported microfinance institutions in the following areas:

• Asia-Pacific : Bangladesh, China, East Timor, Indonesia, India, Lebanon, Pakistan, Philippines, Saudi Arabia, Yemen
• American Continent : Bolivia, Dominican Republic, El Salvador, Haiti, Honduras, Mexico, Peru, USA
• Africa : Cameroon, Egypt, Ethiopia, Ghana, Morocco, Nigeria, Rwanda, Tunisia, Uganda

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Criticism

Some analysts argue that microcredit can bring people into debt they can not avoid. Researchers have noted instances when microloans from Grameen Bank are associated with exploitation and pressure on poor families to sell their goods, leading to extreme cases of humiliation and eventually suicide.

Jeffrey Tucker of the Mises Institute shows that microcredit banks rely on subsidies to operate, thus acting as another example of wellbeing. Yunus believes that he works against the subsidized economy, giving borrowers an opportunity to create business. Some of Tucker's criticisms are based on his interpretation of Grameen's "16 decisions", seen as indoctrination, regardless of what they mean in the context of illiterate poor peasants.

Maulana Ibrahim, a priest in Bangladesh, spoke against Grameen Bank in 1993 for building "non-Islamic ways." He accused the promise of lenders to demand women to say that they would not abide by their husbands and would not live in poverty anymore.

The Norwegian documentary, Caught in Microfinance, says that Grameen evaded taxes. The Spanish documentary, Microcredit, also recommends this. The allegations are based on an unlicensed transfer of approximately US $ 100 million, contributed by the Norwegian Agency for Development Cooperation (NORAD), from one Grameen entity to another in 1996, before the expiration of the Grameen Bank tax exemption. However, NORAD published a statement in December 2010 clearing Yunus and Bank of any error at this point, following a comprehensive review of NORAD support commissioned by the International Development Minister.

Jonah denies that this is tax evasion:

There is no question about tax evasion here. The government has provided organizations with opportunities; we have taken advantage of these opportunities with the aim of benefiting our shareholders who are rural poor women in Bangladesh.

David Roodman and Jonathan Morduch questioned the statistical validity of the study of the effect of microcredit on poverty, noting the complexity of the situations involved. Yoolim Lee and Ruth David discuss how microfinance and Grameen models in South India have in recent years been distorted by venture capitalism and profit-makers. In some cases, poor rural families have experienced debt spirals, harassment by microfinance debt collectors, and in some cases committed suicide.

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Representation in other media

• Movie To Catch a Dollar (2010) documents the Grameen America programming process in Queens, New York in 2008. The film premiered at the 2010 Sundance Film Festival.
• The documentary Living on One Dollar (2010) includes Grameen Bank providing microcredit to start a small home business in a rural village of Guatemala. The documentary is available directly from the organization "Living on One" [2], and on Netflix [3].

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See also

• Accion International
• AcciÃÆ'³n Emprendedora
• Accion USA
• Cooperative banking
• Count Me In
• Flat rate (financial)
• Grama Vidiyal, Indian Microfinance Bank
• Islamic banking
• Kiva
• Microcredit for water supply and sanitation
• Microgrant
• International Opportunities
• Company Project

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Note

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References

Yunus, Muhammad (2007) [first published 1999]. Banker for the Poor: Micro Loans and Fight against World Poverty . with Alan Jolis. New York: Public Affairs. ISBN: 978-1-58648-198-8.

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Further reading

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External links

• Grameen.comZ: the official Grameen Bank website
• Grameen-info.org: Grameen Bank - old website
• GramBangla.com: Grameen Support Group Bangladesh Community Australia
• Grameen Bank: Taking Capitalism to the Poor, Mainsah, E. et al., Journal of Chazen International Business, Columbia Business School, 2004
• "Ending Global Poverty". MIT World. Archived from the original on January 5, 2006. Ã, Video by Muhammad Yunus talking about Grameen Bank
• Rutherford, Stuart; Maniruzzaman, Md; Sinha, S K; Acnabin & amp; Co. (February 2006). "Grameen II: First Five Year, 2001-2005" (PDF) . MicroSave .
• History of Grameen Bank
• The devastating burden of the F24 microfinance international report
• Grameen America - Grameen microfinance operations in the US

Source of the article : Wikipedia