Grameen Bank

Voluntary Social Systems in action

 Bangladesh

Population:
145 million
More than half the
population is
Capital: landless
Dhaka (11 million)
 After the war,
returned to
Ph. D. in Bangladesh
Economics
Vanderbilt Univ
Tried working in
Nashville, TN
the Govt, resigned
in two months.
Taught at Tenesse
State and in
Chairman of Dept
Colorado
of Economics,
Chittagong
University
Dr. Mohammed Yunus
 Motivation

“I felt extremely ashamed of myself being part of a society which

could not provide $26 to forty-two able, skilled human beings
who were trying to make a living.”

Dr. Yunus, testifying before the U. S. Congress Select Committee

on Hunger, in a hearing devoted to microcredit
 Target Customers
The Landless

No Collateral
No Guarantee

Customers are never taken to

court for default
 Target Customers
The Landless
Villagers whose
families were
No Collateral
“functionally No Guarantee
landless,” didn’t own
enough land to live off
Customers
for most of the year. are never taken to
0.4 acres upper limit.
court for default
 Ownership

Owned by Borrowers (94%)

Govt (6%)
 Money Disbursed

$5.25 billion Disbursed

$4.64 billion Repaid
$425.15 million in 2005
$585 million Projected in 2006
 Loan Recovery Rate

99.01%

In 1996, Grameen’s repayment rate of 97% was

considered comparable to Chase Manhattan’s rate.
Borrowers

5.58 million
96% women
Rani’s husband: “If the bank lent money to men,
they wouldn’t get it back so conscientously.
Women have the discipline to manage such
things.”

“That’s why the Grameen Bank is made up of

women,” Rani added

“Why?” I asked.

“Because they profit by it.”

 Source of Funds

100% from borrower’s deposits

No Donor Money, No Loans (since 95)
 Profits

Made profit every year except 83, 91 and 92.

Audited by two internationally reputed audit
firms. Audit reports available online.
 Interest Rate
Govt cap at 11% flat rate for microcredit operations.
Amounts to 22% at declining basis.

Grameen’s rate is lower than Govt. rate. 4 types:

1) 20% declining basis (income generating loans)
2) 8% for housing loans
3) 5% for student loans
4) 0% loans for struggling members (beggars)
 Death of Member
In case of death a borrower, all loans are paid off
under Loan Insurance Programme.

Loan Insurance Programme

Insurance fund created by the interest generated
in a savings account created by deposits of the
borrowers made for loan insurance purpose, at the
time of receiving loans. Each time, an amount
equal to 3% is deposited into this account.
 Death of Member
Life Insurance
Total of 81,750 Grameen Bank borrowers have
died so far. Their families collectively received
$3.55 million.

Borrowers are not required to pay any premium

for this life insurance. Borrowers come under this
insurance coverage by being a shareholder of the
bank.
 Pension Fund
Popular program.
Borrowers are required to save $0.86 each month
for a period of 10 years. The depositor gets
almost twice the amount she saved, at the end of
this period.

Dec 2005 balance in this account - $147.66

million
 Telephone Ladies

Provided loans to 187,000 borrowers to buy

mobile phones and provide telecommunications
services in villages.

Telephone ladies generate revenue for Grameen

Phone, the country’s largest telephone company.
 Computerization

Accounting and information management of

nearly all branches computerized (1455 out of
1735). 15 zones out of 21 connected through a
corporate intranet.
 Crossing the
Poverty Line
55% of Grameen borrower
families have crossed the poverty
line. Remaining are moving
steadily up.
 Mechanics

Based on Community
Upto 6 groups of 5 form a center. Each center elects a chief
and deputy.
All loans collected at weekly center meetings
 People Should Not Go to the
Bank
The Bank should go to the people. When a villager is
asked to come to an office, it becomes a symbol of
terror. You are put in a line, you don’t know the
rules. Somebody says, “You go there.” Somebody
else says, “You better go there.” Somebody says,
“Where are your papers?” and, “No, you come
next time.” The people at the bottom are terribly
scared of this kind of situation. They would rather
not deal with you.
Dr. Mohammed Yunus, in a 1991 speech
 Mechanics
“Other banks assume that you are a potential cheat. That’s
how they tie you up [with collateral]. We assume that you are
the best person ever. And there are margins of error in both
cases. But if their repayment is 98 percent and so is ours,
they’re wrong in 98 percent of the cases and we’re right in 98
percent of the cases.”
Dr. Mohammed Yunus
Workshops & Center Schools
In 1980, Grameen began organizing workshops
and center schools, and providing members with
items such as iodized salt, vegetable seeds,
saplings, water-purification crystals, and
textbooks. The bank always charged a small fee
for these items, even if it was just a token
amount, because Yunus was adamant that
Grameen not be perceived by members as another
giveaway program. Bangladesh had far too many.
Social Subtext
Bank meetings are held five days a week, two per
morning. So, at each designated time, about 6,000
centers are gathering, each containing thirty to
forty borrowers. An hour and a half before,
200,000 villagers had assembled, and now another
200,000 were preparing for a second round.

Imagine the range of problems that might arise in

these meetings. Bangladeshi villages are split
along clan, class, religious, and in some cases,
caste lines. The anxiety produced by extreme
poverty leads inevitably to hostile competition
among different factions.
Villagers fight over control of land and
water. It is not uncommon for a family to
split apart over a land feud, or for a strong
brother to steal the inheritance of a weak
one. Centers are by no means insulated
from the tensions in their communities.
Almost every one of the two dozen centers I
visited had at least one major division that
ran through it like a geological fault.
Admirers of the Grameen Bank are fond of
retelling stories about centers that have united to
protest injustices. Indeed, the image of forty
village women confronting a wife beater is
inspiring. But such moments are the exceptions.
More compelling is how well Grameen’s system
operates under normal conditions: how it
compensates for a lack of goodwill, and how its
rules act as a tight web around the center –
ensuring that villagers are brought together
frequently in a setting where they are forced to
answer for their actions before all eyes.
Depsite the great potential for anarchy, most
of the time things do not fall apart. The
center holds – and it holds by means of a
powerful social pressure that was described
two centuries ago by Adam Smith.
“In the middling and inferior stations of life,”
wrote Smith in The Theory of Moral Sentiments,
personal success “almost always depends upon the
favor and good opinion of.. neighbors and equals;
and without a tolerably regular conduct these can
very seldom be obtained. .. in such situations,
therefore, we may generally expect a considerable
degree of virtue; and, fortunately for the good
morals of society, these are the situations of by far
the greater part of mankind.”
Questions?
The Sixteen Decisions
We shall follow and advance the four principles of Grameen
Bank --- Discipline, Unity, Courage and Hard work – in all
walks of our lives.
Prosperity we shall bring to our
families.
We shall not live in dilapidated houses. We shall repair our houses and
work towards constructing new houses at the
earliest.
 We shall grow vegetables all the year
round. We shall eat plenty of them and
sell the surplus.
During the plantation seasons, we
shall plant as many seedlings as
possible.
We shall plan to keep our families small. We
shall minimize our expenditures. We shall
look after our health.
We shall educate our children and ensure
that they can earn to pay for their
education.
 We shall always keep our
children and the environment
clean.
We shall build and use pit-
latrines.
 We shall drink water from tubewells. If it is
not available, we shall boil water or use alum.
 We shall not take any dowry at our sons' weddings, neither
shall we give any dowry at our daughters wedding. We shall
keep our centre free from the curse of dowry. We shall not
practice child marriage.
We shall not inflict any injustice
on anyone, neither shall we allow
anyone to do so.
We shall collectively undertake
bigger investments for higher
incomes.
We shall always be ready to help each other. If anyone
is in difficulty, we shall all help him or her.
If we come to know of any breach of discipline in any centre,

we shall all go there and help restore discipline.

We shall take part in all social
activities collectively.