Grameen Bank
Grameen Bank (GB) | |
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Type | Body Corporate (Bank Ordinance) |
Founded | 1983 |
Headquarters | Dhaka, Bangladesh |
Area served | Bangladesh |
Key people | Muhammad Yunus, founder |
Industry | Finance |
Products | Financial Services Microfinance |
Revenue | 4,746,095,835 M. Taka (2005) |
Operating income | 5,109,093,240 M. Taka (2005) |
Net income | 1,000,441,986 M. Taka (2005) |
Employees | 11,855 (2003) |
Website | http://www.grameen-info.org/bank/ |
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]
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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 would have a positive impact on 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.[4] Its success has inspired similar projects around the world.
Application of microcredit
16 Decisions |
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Grameen Bank is best known for its system of solidarity lending. The Bank also incorporates a set of values embodied in Bangladesh by the Sixteen Decisions.[5]
The system is the basis for the microcredit and the self-help group system now at work in over 43 countries. Although each borrower must belong to a five-member group, the group is not required to give any guarantee for a loan to its member. Repayment responsibility solely rests on the individual borrower, while the group and the centre oversee that everyone behaves in a responsible way and none gets into repayment problem. There is no form of joint liability, i.e. group members are not responsible to pay on behalf of a defaulting member. (Mohammed Yunus) [6]
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 a significant accomplishment. In other areas, Grameen's track record has also been notable, 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.[7] 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 (around 4 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:[8]
- Total number of borrowers is 6.67 million, and 97% of those are women (3,123,802 members in 2003[9])
- 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[9])
- Loan recovery rate is 98.85% (repayment rate was 95% in 1998[10])
- 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."[11]
Related ventures
The Grameen Bank has grown into over two dozen enterprises represented by the Grameen Family of Enterprises. These organizations 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).[12]
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.[13]
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.[14]
Grameen Foundation USA collects donations in a US not-for-profit organization for distribution worldwide to microcredit organizations.[15] Grameen Foundation USA has an A rating from Charity Watch.[16]
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).[17]
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
Sudhirendar Sharma, a development analyst, claims that it has "landed poor communities in a perpetual debt-trap,"[18] and that its ultimate benefit goes to the corporations that sell capital goods and infrastructure to the borrowers.[19] He has also attracted criticism from the former Prime Minister of Bangladesh, Sheikh Hasina, who herself is now in jail under corruption charges, who commented "There is no difference between usurers [Yunus] and corrupt people".[20] The Mises Institute's Jeffrey Tucker has criticized the Grameen Bank,[21] 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.[22] Abdul Barkat of the University of Dhaka claims that instead of alleviating poverty, Grameen Bank has put 80% of the female beneficiaries in debt traps. [23]
Microfinance organisations increasingly rely on commercial money borrowed at interest. However, the proponents of binary economics argue that organisations like Grameen could receive interest-free loans from the Bangladesh central bank and then repay the loans. In this way the borrowers would only be paying for Grameen's administrative costs and so could have a great reduction in the cost of the money they borrow.
See also
- Grameen Foundation, replicating the Grameen Bank model around the world
- Vikram Akula, microfinance institution modelled on Grameen Bank
- Opportunity International
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
- Cockburn, Alexander, "A Nobel Peace Prize for Neoliberalism?" http://www.counterpunch.org/cockburn10202006.html
Notes
- ^ The Nobel Prize for 2006. The Nobel Peace Prize for 2006 (2006-10-13). Retrieved on 2006-10-13.
- ^ Anand Giridharas and Keith Bradsher (2006-10-13). Microloan Pioneer and His Bank Win Nobel Peace Prize. New York Times. Retrieved on 2006-10-13.
- ^ Brandon Glenn (Oct 16, 2006). ShoreBank leaders had hand in Nobel prize. . Retrieved on 2007-05-15.
- ^ http://www.grameen-info.org/bank/GBGlance.htm
- ^ Sixteen Decisions on Grameen Bank Official Site
- ^ [1]
- ^ Patrick Bond (2006-10-19). A Nobel loan shark?. Retrieved on 2006-10-23.
- ^ Grameen Bank At a Glance
- ^ a b Grameen Bank Historical Data Series 2003
- ^ Credit delivery system Grameen Bank
- ^ The Nobel Peace Prize for 2006. The Nobel Peace Prize for 2006 (2006-10-13). Retrieved on 2006-10-13.
- ^ Grameen Family of Enterprises
- ^ Grameen Motsho
- ^ Grameen Bank Audit Report
- ^ Grameen Foundation USA
- ^ Charity Watch
- ^ Grameen Bank at a Glance
- ^ Sharma, Sudhirendar. "Is micro-credit a macro trap?", The Hindu, 2002-09-25. Retrieved on 2006-12-02.
- ^ Sharma, Sudhirendar. "Microcredit: Globalisation unlimited", The Hindu, 2002-01-05. Retrieved on 2006-12-02.
- ^ The Economist: A new party for Bangladesh's fray
- ^ Tucker, Jeffrey. "The Micro-Credit Cult." The Free Market. Mises Institute. November 1995. [2]
- ^ Tucker, Jeffrey. "Microcredit or Macrowelfare: The Myth of Grameen." Mises.org. 8 November 2006. [3]
- ^ [4]
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, Mainsah, E. et al., Chazen Journal of International Business, Columbia Business School, 2004
- 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
- Criticism of Grameen Bank in the Wall Street Journal
- [Muhammad] (2007-07-25). Grameen Bank at glance (English). Grameen Bank. Retrieved on 2007-08-22.
- Grameen Bank History
- Towards Economic and Women’s Liberation Via Grameen Bank
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Kofi Annan / United Nations (2001) • Jimmy Carter (2002) • Shirin Ebadi (2003) • Wangari Maathai (2004) • International Atomic Energy Agency / Mohamed ElBaradei (2005) • Grameen Bank / Muhammad Yunus (2006) |