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Grameen Bank
Voluntary Social Systems in action
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Bangladesh
Population:
145 million
Capital:
Dhaka (11 million)
More than half the
population is
landless
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Dr. Mohammed Yunus
Ph. D. inEconomics
Vanderbilt Univ
Nashville, TN
Taught at TenesseState and in
Colorado
After the war,
returned to
Bangladesh
Tried working inthe Govt, resigned
in two months.
Chairman of Dept
of Economics,
ChittagongUniversity
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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 Committeeon Hunger, in a hearing devoted to microcredit
Motivation
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Target Customers
The Landless
No Collateral
No Guarantee
Customers are never taken tocourt for default
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Target Customers
The Landless
No Collateral
No Guarantee
Customers are never taken tocourt for default
Villagers whose
families were
functionallylandless, didnt own
enough land to live off
for most of the year.
0.4 acres upper limit.
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Ownership
Owned by Borrowers (94%)Govt (6%)
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Money Disbursed
$5.25 billion Disbursed
$4.64 billion Repaid$425.15 million in 2005
$585 million Projected in 2006
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Loan Recovery Rate
99.01%
In 1996, Grameens repayment rate of 97% wasconsidered comparable to Chase Manhattans rate.
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Borrowers
5.58 million
96% women
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Ranis husband: If the bank lent money to men,they wouldnt get it back so conscientously.Women have the discipline to manage such
things.
Thats why the Grameen Bank is made up of
women, Rani added
Why? I asked.
Because they profit by it.
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Source of Funds
100% from borrowers deposits
No Donor Money, No Loans (since 95)
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Profits
Made profit every year except 83, 91 and 92.
Audited by two internationally reputed auditfirms. Audit reports available online.
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Interest Rate
Govt cap at 11% flat rate for microcredit operations.
Amounts to 22% at declining basis.
Grameens 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)
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Death of Member
In case of death a borrower, all loans are paid off
under Loan Insurance Programme.
Loan Insurance ProgrammeInsurance fund created by the interest generated
in a savings account created by deposits of the
borrowers made for loan insurance purpose, at thetime of receiving loans. Each time, an amount
equal to 3% is deposited into this account.
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Death of Member
Life Insurance
Total of 81,750 Grameen Bank borrowers havedied so far. Their families collectively received
$3.55 million.
Borrowers are not required to pay any premium
for this life insurance. Borrowers come under thisinsurance coverage by being a shareholder of the
bank.
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Pension Fund
Popular program.
Borrowers are required to save $0.86 each monthfor 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 - $147.66million
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Telephone Ladies
Provided loans to 187,000 borrowers to buymobile phones and provide telecommunications
services in villages.
Telephone ladies generate revenue for Grameen
Phone, the countrys largest telephone company.
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Computerization
Accounting and information management ofnearly all branches computerized (1455 out of
1735). 15 zones out of 21 connected through a
corporate intranet.
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Crossing the
Poverty Line
55% of Grameen borrowerfamilies have crossed the poverty
line. Remaining are movingsteadily up.
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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
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People Should Not Go to the
Bank
The Bank should go to the people. When a villager isasked to come to an office, it becomes a symbol of
terror. You are put in a line, you dont know therules. Somebody says, You go there. Somebodyelse says, You better go there. Somebody says,Where are your papers? and, No, you come
next time. The people at the bottom are terriblyscared of this kind of situation. They would rather
not deal with you.
Dr. Mohammed Yunus, in a 1991 speech
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MechanicsOther banks assume that you are a potential cheat. Thats
how they tie you up [with collateral]. We assume that you arethe best person ever. And there are margins of error in both
cases. But if their repayment is 98 percent and so is ours,
theyre wrongin 98 percent of the cases and were rightin 98percent of the cases.
Dr. Mohammed Yunus
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Workshops & Center Schools
In 1980, Grameen began organizing workshopsand center schools, and providing members with
items such as iodized salt, vegetable seeds,
saplings, water-purification crystals, andtextbooks. The bank always charged a small fee
for these items, even if it was just a token
amount, because Yunus was adamant thatGrameen not be perceived by members as another
giveaway program. Bangladesh had far too many.
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Social Subtext
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Bank meetings are held five days a week, two permorning. So, at each designated time, about 6,000centers are gathering, each containing thirty to
forty borrowers. An hour and a half before,200,000 villagers had assembled, and now another200,000 were preparing for a second round.
Imagine the range of problems that might arise inthese meetings. Bangladeshi villages are splitalong clan, class, religious, and in some cases,caste lines. The anxiety produced by extreme
poverty leads inevitably to hostile competitionamong different factions.
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Villagers fight over control of land andwater. It is not uncommon for a family to
split apart over a land feud, or for a strongbrother to steal the inheritance of a weakone. Centers are by no means insulated
from the tensions in their communities.Almost every one of the two dozen centers Ivisited had at least one major division thatran through it like a geological fault.
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Admirers of the Grameen Bank are fond ofretelling stories about centers that have united to
protest injustices. Indeed, the image of fortyvillage women confronting a wife beater isinspiring. But such moments are the exceptions.More compelling is how well Grameens systemoperates under normal conditions: how itcompensates for a lack of goodwill, and how itsrules act as a tight web around the center ensuring that villagers are brought togetherfrequently in a setting where they are forced toanswer for their actions before all eyes.
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Depsite the great potential for anarchy, most
of the time things do not fall apart. The
center holds and it holds by means of apowerful social pressure that was described
two centuries ago by Adam Smith.
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In the middling and inferior stations of life,wrote Smith in The Theory of Moral Sentiments,
personal success almost always depends upon thefavor and good opinion of.. neighbors and equals;and without a tolerably regular conduct these canvery seldom be obtained. .. in such situations,therefore, we may generally expect a considerabledegree of virtue; and, fortunately for the goodmorals of society, these are the situations of by farthe greater part of mankind.
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Questions?
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The Sixteen Decisions
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We shall follow and advance the four principles of Grameen
Bank --- Discipline, Unity, Courage and Hard work in all
walks of our lives.
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Prosperity we shall bring to our
families.
W h ll li i dil id d h W h ll i h d
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We shall not live in dilapidated houses. We shall repair our houses and
work towards constructing new houses at the
earliest.
We shall gro egetables all the ear
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We shall grow vegetables all the year
round. We shall eat plenty of them and
sell the surplus.
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During the plantation seasons, we
shall plant as many seedlings aspossible.
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We shall plan to keep our families small. We
shall minimize our expenditures. We shalllook after our health.
W h ll d t hild d
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We shall educate our children and ensure
that they can earn to pay for their
education.
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We shall always keep our
children and the environmentclean.
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We shall build and use pit-
latrines.
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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
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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 notpractice child marriage.
We shall not inflict any injustice
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We shall not inflict any injustice
on anyone, neither shall we allowanyone to do so.
We shall collectively undertake
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We shall collectively undertake
bigger investments for higherincomes.
W h ll l b d t h l h th If
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We shall always be ready to help each other. If anyone
is in difficulty, we shall all help him or her.
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If we come to know of any breach of discipline in any centre,
we shall all go there and help restore discipline.
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We shall take part in all social
activities collectively.