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pay the right price
FINANCING SUSTAINABILITY

BANKING FOR THE POOR


website: www.grameen-info.org/bank/moa.html

banking for the poor
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what: the origin of Grameen Bank (Grameen means ‘rural’ or ‘village’ in Bangla language) can be traced back to 1976 when Muhammad Yunus, a professor at the University of Chittagong, launched an action research project to examine the possibility of designing a credit delivery system targeted at the rural poor. The Grameen Bank Project came into operation with the objectives to:
  • create opportunities for self-employment for the vast multitude of unemployed people in rural Bangladesh and


  • reverse the age-old vicious circle of ‘low income, low savings & low investment’, into a virtuous circle of ‘low income, injection of credit, investment, more income, more savings, more investment, more income’.
In 1983, the Grameen Bank Project was transformed into an independent bank. The Grameen Bank Microcredit Programme was initiated as a challenge to conventional banking, which rejected the poor by classifying them as ‘not creditworthy’.

why:the Grameencredit premise was that the poor have skills which remain unutilised or under-utilised. It is definitely not a lack of skills, which makes poor people poor. Poverty is not created by the poor, it is created by the institutions and policies which surround them. Hence, in order to eliminate poverty all we need to do is to make appropriate changes in the institutions and policies, and/or create new ones.

how:almost unknown before the seventies, the word ‘microcredit’ has become a buzz-word amongst development practitioners. In general terms ‘microcredit’ has been defined as the extension of small loans to very poor people, especially women, (too poor to qualify for traditional bank loans) for self-employment projects that generate income, allowing them to provide for themselves and their families.

The Grameencredit is based on the voluntary formation of groups of five people who provide mutual, morally binding group guarantees in lieu of the collateral required by conventional banks. Currently the loan repayment rate is 95% due to group pressure and self-interest, as well as the motivation of borrowers. Loans are small, but sufficient to finance the micro-enterprises undertaken by borrowers: rice-husking, machine repairing, purchase of rickshaws, etc. The assumption is that if individual borrowers are given access to credit, they will be able to identify and engage in viable income-generating activities.

results:when Professor Muhammad Yunus and his colleagues started giving out tiny loans, they never imagined that some day they would be reaching hundreds of thousands, let alone their three million, borrowers (95 percent of whom were women in 2002). With 1,175 branches, Grameen Bank - which is mostly owned by the borrowers themselves -, provides services in 41,000 villages, covering more than 60 percent of all the villages in Bangladesh. What started as an innovative local initiative, ‘a small bubble of hope’, has become an important instrument for poverty alleviation.


contacts


Grameen BankMirpur Two, Dhaka 1216ph/fax: (880)2-803-559Bangladesh or (880)2-806-319g_trust@grameen.net
 
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