Difference between revisions of "Grameen Bank" - New World Encyclopedia

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[[Image:Muhammad Yunus in Houston.jpg|right|thumb|300px|Muhammad Yunus speaking in Houston]]
 
The '''Grameen Bank''' ({{lang-bn|গ্রামীণ ব্যাংক}}) is a [[microfinance]] organization and [[community development bank]] started in [[Bangladesh]] that makes small [[loan]]s (known as [[microcredit]] or "grameencredit") to the impoverished without requiring [[collateral (finance)|collateral]]. The word "Grameen," derived from the word "gram" or "village," means "of the [[village]]." The bank's system is based on the idea that the poor have skills that have been under-utilized. A group-based credit approach utilizes the peer-pressure within the group to ensure the borrowers follow credit discipline. The bank also accepts deposits, provides services, and operates several development-oriented businesses including [[fabric]], [[telephone]] and [[energy]] companies. Remarkably, women are a significant majority of borrowers the bank's credit program.
 
 
The origin of Grameen Bank traces to 1976.  [[Muhammad Yunus]], a professor at the [[University of Chittagong]], launched a research project to examine the possibility of designing a credit delivery system to provide banking services targeted to the rural poor. In October 1983, [[Bangladesh|government]] legislation transformed the Grameen Bank Project into an independent bank. The organization and its founder, Yunus, were jointly awarded the [[Nobel Peace Prize]] in 2006.
 
 
The bank has earned well-deserved attention for introducing a novel concept in the area of [[finance]]. Prior to the inauguration of Grameen Bank, financial institutions showed great reluctance in providing loans to the [[Poverty|poor]]. They have little or no collateral to guard against loan default. Compounded, they have little or no training or [[education]] in schools to make them reasonable investment risks. Probably most damaging, a popular [[stereotype]] casting them as lazy, unreliable, and ignorant has prevailed. The Grameen Bank has broken those stereotypes by extending micro-loans that the poor have consistently repaid. The success of Grameen Bank has provided an alternative to governments merely awarding welfare money to the poor by giving the poor incentive to make a profit from their labor and innovation.
 
 
==History==
 
 
{{ infobox company
 
{{ infobox company
 
| company_name    = Grameen Bank (GB) <br/>[[Image:Nobel prize medal.svg|20px]]
 
| company_name    = Grameen Bank (GB) <br/>[[Image:Nobel prize medal.svg|20px]]
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| homepage        = http://www.grameen-info.org/
 
| homepage        = http://www.grameen-info.org/
 
}}
 
}}
[[Muhammad Yunus]], the bank's founder, earned a doctorate in [[economics]] from [[Vanderbilt University]] in the [[United States]]. The terrible [[Bangladesh]] [[famine]] of 1974 prompted him to make a small loan of [[United States dollar|USD]]&nbsp;27 to a group of 42 families so that they could create small items for sale without the burdens of [[predatory lending]].<ref>Anand Giridharas and Keith Bradsher, [http://www.nytimes.com/2006/10/13/business/14nobelcnd.html Microloan Pioneer and His Bank Win Nobel Peace Prize]. ''[[New York Times]]'' 2006-10-13, accessdate 2008-09-02</ref> Yunus believed that making such loans available to a wide population would have a positive impact on the rampant rural poverty in Bangladesh.
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The '''Grameen Bank''' ({{lang-bn|গ্রামীণ ব্যাংক}}) is a [[microfinance]] organization and [[community development bank]] started in [[Bangladesh]] that makes small [[loan]]s (known as [[microcredit]] or "grameencredit") to the impoverished without requiring [[collateral (finance)|collateral]]. The word "Grameen," derived from the word "gram," means "of the [[village]]." The bank's system is based on the idea that the poor have skills that have been under-utilized. A group-based credit approach utilizes the peer-pressure within the group to ensure the borrowers follow credit discipline. The bank also accepts deposits, provides services, and operates several development-oriented businesses including [[fabric]], [[telephone]], and [[energy]] companies. Remarkably, women are a significant majority of borrowers the bank's credit program.
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The origin of Grameen Bank traces back to 1976. [[Muhammad Yunus]], a professor at the [[University of Chittagong]], launched a research project to examine the possibility of designing a credit delivery system to provide banking services targeted to the rural poor. In October 1983, [[Bangladesh|government]] legislation transformed the Grameen Bank Project into an independent bank. The organization and its founder, Yunus, were jointly awarded the [[Nobel Peace Prize]] in 2006. In 2011, the Bangladesh Government forced Yunus to resign from Grameen Bank, saying that at age 72, he was years beyond the legal limit for the position.
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{{toc}}
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The bank has earned well-deserved attention for introducing a novel concept in the area of [[finance]]. Prior to the inauguration of Grameen Bank, financial institutions showed great reluctance in providing loans to the [[Poverty|poor]]. They have little or no collateral to guard against loan default. Compounded, they have little or no training or [[education]] in schools to make them reasonable investment risks. Probably most damaging, a popular [[stereotype]] casting them as lazy, unreliable, and ignorant has prevailed. The Grameen Bank has broken those stereotypes by extending micro-loans that the poor have consistently repaid. The success of Grameen Bank has provided an alternative to governments merely awarding welfare money to the poor by giving the poor incentive to make a profit from their labor and innovation.
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==History==
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[[Image:Muhammad Yunus in Houston.jpg|right|thumb|300px|[[Muhammad Yunus]] speaking in Houston]]
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[[Muhammad Yunus]], the bank's founder, earned a doctorate in [[economics]] from [[Vanderbilt University]] in the [[United States]]. The terrible [[Bangladesh]] [[famine]] of 1974 prompted him to make a small loan of [[United States dollar|USD]]&nbsp;27 to a group of 42 families so that they could create small items for sale without the burdens of [[predatory lending]].<ref>Anand Giridharas and Keith Bradsher, [http://www.nytimes.com/2006/10/13/business/14nobelcnd.html Microloan Pioneer and His Bank Win Nobel Peace Prize,] ''New York Times.'' Retrieved September 2, 2008.</ref> 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 [[Bengali language|Bangla]]) grew out of 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 became immensely successful and the project, with support from the [[central bank|central]] [[Bangladesh Bank]], extended in 1979 to the [[Tangail District]] (to the north of the capital, [[Dhaka]]).  
 
The Grameen Bank (literally, "Bank of the Villages," in [[Bengali language|Bangla]]) grew out of 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 became immensely successful and the project, with support from the [[central bank|central]] [[Bangladesh Bank]], extended in 1979 to the [[Tangail District]] (to the north of the capital, [[Dhaka]]).  
  
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]].<ref>Brandon Glenn [http://www.chicagobusiness.com/cgi-bin/news.pl?id=22455&rel=1 ShoreBank leaders had hand in Nobel prize]. ''Chicago Business News'', 2006-10-16, accessdate 2008-09-02 </ref> The bank's repayment rate suffered following the 1998 flood of Bangladesh before recovering again in subsequent years. By the beginning of 2005, the bank had loaned over USD&nbsp;4.7 billion to the poor.  
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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]].<ref>Brandon Glenn, [http://www.chicagobusiness.com/cgi-bin/news.pl?id=22455&rel=1 ShoreBank leaders had hand in Nobel prize,] ''Chicago Business News.'' Retrieved September 2, 2008.</ref> The bank's repayment rate suffered following the 1998 flood of Bangladesh before recovering again in subsequent years. By the beginning of 2005, the bank had loaned over US$4.7 billion to the poor.  
  
The Bank today continues to expand across the nation and still provides small loans to the rural poor. By 2006, Grameen Bank branches numbered over 2,100. Its success has inspired similar projects in more than 40 countries around the world and became a model for World Bank initiatives to finance Grameen-type schemes.<ref>Shahidur R. Khandker, M. A. Baqui & Z. H. Khan. ''Grameen Bank: Performance and Sustainability.'' (World Bank Publications, 1995. ISBN 0821334638), [http://books.google.com.sg/books?hl=en&lr=&id=rNN3Dfxcc3oC&oi=fnd&pg=PR5&dq=grameen+bank&ots=NWEF1ebHUI&sig=5qYr4t_ewY4jmKa1RmC9oDSYFq0].''books.google''. accessdate 2008-09-02 </ref>
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The Bank today continues to expand across the nation and still provides small loans to the rural poor. By 2006, Grameen Bank branches numbered over 2,100. Its success has inspired similar projects in more than 40 countries around the world and became a model for World Bank initiatives to finance Grameen-type schemes.<ref>Shahidur R. Khandker, M. A. Baqui & Z. H. Khan, ''Grameen Bank: Performance and Sustainability'' (World Bank Publications, 1995, ISBN 0821334638).</ref>
  
The bank gets its funding from different sources, and the main contributors have shifted over time. In the initial years, donor agencies used to provide the bulk of capital at extremely low rates. In the mid-1990s, the bank started to get most of its funding from the central bank of Bangladesh. More recently, Grameen has started bond sales as a source of finance. The bonds implicitly receive subsides as the government of Bangladesh guarantees the loans.<ref>Jonathan Morduch, The role of subsidies in microfinance: evidence from the Grameen Bank, ''Journal of Development Economics'' 60 (1) (October 1999): 240 ''Elsevier'' [http://www.nyu.edu/projects/morduch/documents/microfinance/Role_of_Subsidies.pdf].  accessdate 2008-09-02. Retrieved July 7, 2008.</ref>
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The bank gets its funding from different sources, and the main contributors have shifted over time. In the initial years, donor agencies used to provide the bulk of capital at extremely low rates. In the mid-1990s, the bank started to get most of its funding from the central bank of Bangladesh. More recently, Grameen has started bond sales as a source of finance. The bonds implicitly receive subsides as the government of Bangladesh guarantees the loans.<ref>Jonathan Morduch, The role of subsidies in microfinance: Evidence from the Grameen Bank, ''Journal of Development Economics'' 60 (1) (October 1999): 240.</ref>
  
 
==Application of microcredit ==
 
==Application of microcredit ==
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{| align=right style="margin: 0em 1em 1em 0;  width: 30em; background: #f9f9f9; border: 1px #aaaaaa solid; border-collapse: collapse; font-size: 70%;"
 
 
! style="font-size:140%; background: #ccccff;"| '''16 Decisions'''
 
! style="font-size:140%; background: #ccccff;"| '''16 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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#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.
 
#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 time.
 
#We shall not live in dilapidated houses. We shall repair our houses and work towards constructing new houses at the earliest time.
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#We shall take part in all social activities collectively.
 
#We shall take part in all social activities collectively.
 
|}
 
|}
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Grameen Bank has become best known for its system of [[solidarity lending]].<ref>Khandker, Baqui, & Khan, 1995, xi </ref> The Bank also incorporates a set of values embodied in [[Bangladesh]] by the "Sixteen Decisions." At every branch of Grameen Bank the borrowers recite those Decisions 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. Since the Grameen Bank embraced the Sixteen Decisions, almost all Grameen borrowers have their school-age children enrolled in regular classes. That, in turn, helps foster social change, and educate the next generation.<ref>Garda Ghista, 2004 [http://www.proutworld.org/features/bangldesh.htm Bangladesh: Towards Economic and Women’s Liberation Via Grameen Bank]. ''ProutWorld'' accessdate 2008-09-02 (English)</ref>
 
  
Solidarity lending constitutes a cornerstone of microcredit and the system works in over 43 countries. Although each borrower must belong to a five-member group, the group has discretion on approving loans to its members. Repayment responsibility rests solely with the individual borrower, while the group and the center oversees everyone's responsible behavior, ensuring that none gets into a repayment problem. Although technically the group enjoys freedom from enforced joint liability (i.e., group members obligation to pay on behalf of a defaulting member), in practice the group members often contribute the defaulted amount with an intention of collecting the money from the defaulted member at a later time. Grameen's policy of refusing any further credit to a group in which a member defaults encourages such behavior.<ref>Mahabub Hossain. ''Credit for Alleviation of Rural Poverty: The Grameen Bank in Bangladesh'' (''Int Food Policy Res Inst IFPRI,'' 1988. ISBN 0896290670), 7. [http://books.google.com.sg/books?hl=en&lr=&id=GkrRrt_ao50C&oi=fnd&pg=PA7&dq=grameen+bank&ots=YpRKHvi-x_&sig=zHG-ScV4T9DQnQwuy77WsyGTOHA#PPA29,M1]. ''books.google''. accessdate 2008-09-02</ref>
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Grameen Bank has become best known for its system of [[solidarity lending]].<ref>Khandker, Baqui, & Khan (1995), xi </ref> The Bank also incorporates a set of values embodied in [[Bangladesh]] by the "Sixteen Decisions." At every branch of Grameen Bank the borrowers recite those Decisions 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. Since the Grameen Bank embraced the Sixteen Decisions, almost all Grameen borrowers have their school-age children enrolled in regular classes. That, in turn, helps foster social change, and educate the next generation.<ref>Garda Ghista, 2004, [http://www.proutworld.org/features/bangldesh.htm Bangladesh: Towards Economic and Women’s Liberation Via Grameen Bank,] ''ProutWorld.'' Retrieved September 2, 2008.</ref>
  
Without a legal instrument between Grameen Bank and its borrowers, the system works based entirely on trust.<ref>Paul Sinclair, 2007-12-22, [http://www.oneworldonepeople.org/articles/World%20Poverty/Grameen.htm Grameen Micro-Credit & How to End Poverty from the Roots Up]. ''One World One People'' accessdate 2008-09-02 (in English)</ref> To supplement the lending, Grameen Bank also requires the borrowing members to save small amounts regularly in a number of funds like an emergency fund and a group fund. Those savings help serve as insurance against unexpected contingencies.<ref>Shahidur R. Khandker, M. A. Baqui, & Khan Z. H. ''Grameen Bank: Performance and Sustainability.'' World Bank Publications, 1995. ISBN 0821334638), x. [http://books.google.com.sg/books?hl=en&lr=&id=rNN3Dfxcc3oC&oi=fnd&pg=PR5&dq=grameen+bank&ots=NWEF1ebHUI&sig=5qYr4t_ewY4jmKa1RmC9oDSYFq0].''books.google''. accessdate 2008-09-02 </ref>
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Solidarity lending constitutes a cornerstone of microcredit and the system works in over 43 countries. Although each borrower must belong to a five-member group, the group has discretion on approving loans to its members. Repayment responsibility rests solely with the individual borrower, while the group and the center oversees everyone's responsible behavior, ensuring that none gets into a repayment problem. Although technically the group enjoys freedom from enforced joint liability (that is, group members obligation to pay on behalf of a defaulting member), in practice the group members often contribute the defaulted amount with an intention of collecting the money from the defaulted member at a later time. Grameen's policy of refusing any further credit to a group in which a member defaults encourages such behavior.<ref>Mahabub Hossain, ''Credit for Alleviation of Rural Poverty: The Grameen Bank in Bangladesh'' (Int Food Policy Res Inst IFPRI, 1988, ISBN 0896290670), 7.</ref>
  
In a country in which few women may take out loans from large commercial banks, Grameen has focused on women borrowers as 97 percent of its members are women.<ref>Susan F. Feiner and Drucilla K. Barker, ''Dollar & Sense, The magazine of Economic Justice'' (Nov-Dec 2006)[[Boston]], [http://www.dollarsandsense.org/archives/2006/1106feinerbarker.html Microcredit and Women's Poverty]. ''Economic Affairs Bureau, Inc.'' Retrieved September 2, 2008.</ref> In other areas, Grameen's track record has also been notable, with an extremely high payback rate&mdash;over 98 percent. According to the ''Wall Street Journal,'' a fifth of the bank's loans had been more than a year overdue in 2001.<ref>Daniel Perl, Michael M. Phillips, [http://online.wsj.com/public/resources/documents/pearl112701.htm Grameen Bank, Which Pioneered Loans For the Poor, Has Hit a Repayment Snag]. ''Wall Street Journal'' 2001-11-27  accessdate 2008-09-02</ref> Grameen claims that more than half of its borrowers in Bangladesh (close to 50 million) have risen out of acute [[poverty]] thanks to their loans, 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 four USD) loan.<ref>Ian Fraser, Cover Story, 2007-08-03, [http://www.social-capital.net/articles/view.php?viewid=151 Microfinance comes of age]. ''Scottish Banker magazine'' accessdate 2008-09-02 (in English)</ref>
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Without a legal instrument between Grameen Bank and its borrowers, the system works based entirely on trust.<ref>Paul Sinclair, [http://www.oneworldonepeople.org/articles/World%20Poverty/Grameen.htm Grameen Micro-Credit & How to End Poverty from the Roots Up,] ''One World One People.'' Retrieved September 2, 2008.</ref> To supplement the lending, Grameen Bank also requires the borrowing members to save small amounts regularly in a number of funds like an emergency fund and a group fund. Those savings help serve as insurance against unexpected contingencies.<ref>Shahidur R. Khandker, M. A. Baqui, & Khan Z. H. ''Grameen Bank: Performance and Sustainability'' (World Bank Publications, 1995, ISBN 0821334638), x.</ref>
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In a country in which few women may take out loans from large commercial banks, Grameen has focused on women borrowers, as 97 percent of its members are women.<ref>Susan F. Feiner and Drucilla K. Barker, [http://www.dollarsandsense.org/archives/2006/1106feinerbarker.html Microcredit and Women's Poverty,] ''Economic Affairs Bureau, Inc.'' Retrieved September 2, 2008.</ref> In other areas, Grameen's track record has also been notable, with an extremely high payback rate&mdash;over 98 percent. According to the ''Wall Street Journal,'' a fifth of the bank's loans had been more than a year overdue in 2001.<ref>Daniel Perl, Michael M. Phillips, [http://online.wsj.com/public/resources/documents/pearl112701.htm Grameen Bank, Which Pioneered Loans For the Poor, Has Hit a Repayment Snag,] ''Wall Street Journal.'' Retrieved September 2, 2008.</ref> Grameen claims that more than half of its borrowers in Bangladesh (close to 50 million) have risen out of acute [[poverty]] thanks to their loans, 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 four USD) loan.<ref>Ian Fraser, Cover Story, Microfinance comes of age, ''Scottish Banker Magazine.'' </ref>
  
 
===Village Phone Program===
 
===Village Phone Program===
The Village Phone program, through which women entrepreneurs can start a business providing wireless payphone service in rural areas of Bangladesh, stands out among many different applications of microcredit. That program earned the bank the 2004 Petersberg Prize worth [[EUR]] 100,000/-, for its contribution of Technology to Development.<ref name="PP04"> [http://www.developmentgateway.org/download/249636/Petersberg_winner.pdf Grameen Bank-Village Phone Wins Global Competition for Contribution of Technology to Development]. 2004-07-27 accessdate 2008-09-02 ''Development Gateway Foundation'' (Washington, DC) </ref> In a press release announcing the prize, the Development Gateway Foundation noted that through this program:
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The Village Phone program, through which women entrepreneurs can start a business providing wireless payphone service in rural areas of Bangladesh, stands out among many different applications of microcredit. That program earned the bank the 2004 Petersberg Prize worth [[EUR]] 100,000/-, for its contribution of Technology to Development.<ref name="PP04">''Development Gateway Foundation,'' [http://www.developmentgateway.org/download/249636/Petersberg_winner.pdf Grameen Bank-Village Phone Wins Global Competition for Contribution of Technology to Development.] Retrieved September 2, 2008.</ref> In a press release announcing the prize, the Development Gateway Foundation noted that through this program:
 
<blockquote>Grameen has created a new class of women entrepreneurs who have raised themselves from poverty. Moreover, it has improved the livelihoods of farmers and others who are provided access to critical market information and lifeline communications previously unattainable in some 28,000 villages of Bangladesh. More than 55,000 [[telephone|phones]] are currently in operation, with more than 80 million people benefiting from access to market information, news from relatives, and more.<ref name="PP04"/></blockquote>
 
<blockquote>Grameen has created a new class of women entrepreneurs who have raised themselves from poverty. Moreover, it has improved the livelihoods of farmers and others who are provided access to critical market information and lifeline communications previously unattainable in some 28,000 villages of Bangladesh. More than 55,000 [[telephone|phones]] are currently in operation, with more than 80 million people benefiting from access to market information, news from relatives, and more.<ref name="PP04"/></blockquote>
  
 
===Struggling members program===
 
===Struggling members program===
[[Image:Grameen.JPG|thumb|right|Grameen Bank Building in [[Dhaka]]]]
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[[Image:Grameen.JPG|thumb|right|200px|Grameen Bank Building in [[Dhaka]]]]
In 2003, Grameen Bank started a new program, different from its traditional group-based lending, exclusively targeted to the [[beggars]] in [[Bangladesh]]. That program focuses on distributing small loans to beggars. With the existing rules of banking suspended, the completely interest-free loans can have arbitrarily long repayment periods. 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 and furthermore the borrower receives free life insurance free coverage.  
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In 2003, Grameen Bank started a new program, different from its traditional group-based lending, exclusively targeted to the [[beggars]] in [[Bangladesh]]. That program focuses on distributing small loans to beggars. With the existing rules of banking suspended, the completely interest-free loans can have arbitrarily long repayment periods. 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 U.S. cents) per week and furthermore the borrower receives free life insurance coverage.  
  
The bank allows borrowers to continue begging, encouraging them to use the loans for generating income by selling low-priced items. Based on a paper presented in the Global Microcredit Summit in 2006 by one of the bank's managers, as of May 2006, around 73,000 beggars have taken loans of about Tk 58.32 million (approx. USD&nbsp;833,150) and repaid Tk. 34.78 million (about USD&nbsp;496,900).<ref>D. C. Barua, Five Cents a Day: Innovative Programs for Reaching the Destitute with Microcredit, No-interest Loans, and other Instruments: The Experience of Grameen Bank. (Nova Scotia, Canada: ''Global Microcredit Summit; Nova Scotia, Canada.'' 2006-11-12, [http://www.microcreditsummit.org/papers/Workshops/7_Barua.pdf]. accessdate 2008-09-02</ref>
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The bank allows borrowers to continue begging, encouraging them to use the loans for generating income by selling low-priced items. Based on a paper presented in the Global Microcredit Summit in 2006 by one of the bank's managers, as of May 2006, around 73,000 beggars have taken loans of about Tk 58.32 million (approx. US$833,150) and repaid Tk. 34.78 million (about US$496,900).<ref>D. C. Barua, ''Five Cents a Day: Innovative Programs for Reaching the Destitute with Microcredit, No-interest Loans, and other Instruments: The Experience of Grameen Bank'' (Nova Scotia, Canada: Global Microcredit Summit, 2006).</ref>
  
 
==Operational statistics==
 
==Operational statistics==
Strikingly, the poor borrowers of the bank, most of whom are women own the Grameen Bank. Of the total equity of the bank, the borrowers own 94 percent, and the Government of Bangladesh owns the remaining 6 percent. The bank has grown significantly between 2003 and 2007. As of October 2007, the total borrowers of the bank number 7.34 million, and 97 percent of those are women. [http://www.grameen-info.org/bank/hist2003.html Grameen Bank Historical Data Series 2003]. accessdate 2008-07-05 2004-07-21 ''Grameen Communications'' </ref> Similar growth occurs in all the villages covered. As of October 2007, the Bank has a staff of over 24,703 employees and 2,468 branches covering 80,257 villages,
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Strikingly, the poor borrowers of the bank, most of whom are women, own the Grameen Bank. Of the total equity of the bank, the borrowers own 94 percent, and the Government of Bangladesh owns the remaining 6 percent. The bank has grown significantly between 2003 and 2007. As of October 2007, the total borrowers of the bank number 7.34 million, and 97 percent of those are women.<ref>Grameen Bank, [http://www.grameen-info.org/bank/hist2003.html Historical Data Series 2003.] Retrieved September 2, 2008.</ref> Similar growth occurs in all the villages covered. As of October 2007, the Bank has a staff of over 24,703 employees and 2,468 branches covering 80,257 villages,
  
Since its inception, the bank has distributed Tk 347.75 billion (USD&nbsp;6.55 billion) in loans. Out of that, Tk 313.11  billion (USD&nbsp;5.87  billion) has been repaid.<ref>[http://www.grameen-info.org/bank/cds.html Credit delivery system]. accessdate 2008-09-02  2002-09-18 Grameen Communications </ref> Many critics doubt that recovery rate and the definition that Grameen uses to come up with that rate.
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Since its inception, the bank has distributed Tk 347.75 billion (USD&nbsp;6.55 billion) in loans. Out of that, Tk 313.11  billion (USD&nbsp;5.87  billion) has been repaid.<ref>Grameen Communications, [http://www.grameen-info.org/bank/cds.html Credit delivery system.] Retrieved September 2, 2008.</ref> Many critics doubt that recovery rate and the definition that Grameen uses to come up with that rate.
  
 
==Nobel Peace Prize==
 
==Nobel Peace Prize==
[[Image:Grameen Yunus Dec 04.jpg|thumb|right|150px|Nobel Laureate, Muhammad Yunus, the bank's founder]]
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[[Image:Grameen Yunus Dec 04.jpg|thumb|right|200px|Nobel Laureate, Muhammad Yunus, the bank's founder]]
Grameen Bank received several prestigious awards including the highest civilian award in Bangladesh, the [[Independence Day Award]], in 1994. The greatest recognition of the bank's achievements came on October 13, 2006, when the Nobel Committee awarded Grameen Bank and its founder, Muhammad Yunus, the 2006 [[Nobel Peace Prize]] "for their efforts to create economic and social development from below."<ref name="Nobel">[http://nobelprize.org/nobel_prizes/peace/laureates/2006/press.html The Nobel Peace Prize for 2006]. ''The Nobel Peace Prize for 2006'' 2006-10-13, accessdate 2008-09-02</ref> The award announcement also mentions that: <blockquote>
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Grameen Bank received several prestigious awards including the highest civilian award in Bangladesh, the [[Independence Day Award]], in 1994. The greatest recognition of the bank's achievements came on October 13, 2006, when the Nobel Committee awarded Grameen Bank and its founder, Muhammad Yunus, the 2006 [[Nobel Peace Prize]] "for their efforts to create economic and social development from below."<ref name="Nobel">Nobel Prize, [http://nobelprize.org/nobel_prizes/peace/laureates/2006/press.html The Nobel Peace Prize for 2006.] Retrieved September 2, 2008.</ref> The award announcement also mentions that: <blockquote>
 
From modest beginnings three decades ago, Yunus has, first and foremost through Grameen Bank, developed micro-credit into an ever more important instrument in the struggle against poverty. Grameen Bank has been a source of ideas and models for the many institutions in the field of micro-credit that have sprung up around the world.<ref name="Nobel"/>
 
From modest beginnings three decades ago, Yunus has, first and foremost through Grameen Bank, developed micro-credit into an ever more important instrument in the struggle against poverty. Grameen Bank has been a source of ideas and models for the many institutions in the field of micro-credit that have sprung up around the world.<ref name="Nobel"/>
 
</blockquote>  
 
</blockquote>  
On December 10, 2006, Mosammat Taslima Begum, who used her first 16-euro (20-dollar) loan from the bank in 1992 to buy a [[goat]] and subsequently became a successful entrepreneur and one of the elected board members of the bank, accepted the Nobel Prize on behalf of Grameen Bank's investors and borrowers at the prize awarding ceremony held at [[Oslo]] City Hall.<ref>[[Agence France-Presse|AFP]], [[Oslo]], [http://www.thedailystar.net/2006/12/11/d6121101011.htm Yunus unveils vision to end global poverty]. ''The Daily Star (Bangladesh)'' Vol 5 Num 903, (in English) 2006-12-11, accessdate 2008-09-02</ref>
+
On December 10, 2006, Mosammat Taslima Begum, who used her first 16-euro (20-dollar) loan from the bank in 1992 to buy a [[goat]] and subsequently became a successful entrepreneur and one of the elected board members of the bank, accepted the Nobel Prize on behalf of Grameen Bank's investors and borrowers at the prize awarding ceremony held at [[Oslo]] City Hall.<ref>AFP, [http://www.thedailystar.net/2006/12/11/d6121101011.htm Yunus unveils vision to end global poverty,] ''The Daily Star (Bangladesh)''. Retrieved September 2, 2008.</ref>
 +
{{readout||left|250px|Grameen Bank and [[Muhammad Yunus]] were awarded the [[Nobel Peace Prize]] for the initiation of [[microcredit]]}}
 +
Grameen Bank stands as the only business corporation to have won a [[Nobel Prize]]. In a speech given at the presentation ceremony, Professor Ole Danbolt Mjøs, Chairman of the Norwegian Nobel Committee, mentioned that, by giving the prize to Grameen Bank and Muhammad Yunus, the Norwegian Nobel Committee wished to focus attention on dialog with the Muslim world, on the women's perspective, and on the fight against poverty.<ref>Ole Danbolt Mjøs, [http://nobelprize.org/nobel_prizes/peace/laureates/2006/presentation-speech.html The Nobel Peace Prize for 2006: Presentation Speech,] ''The Nobel Peace Prize for 2006.'' Retrieved September 2, 2008.</ref>
  
Grameen Bank stands as the only business corporation to have won a [[Nobel Prize]]. In a speech given at the presentation ceremony, Professor Ole Danbolt Mjøs, Chairman of the Norwegian Nobel Committee, mentioned that, by giving the prize to Grameen Bank and Muhammad Yunus, the Norwegian Nobel Committee wished to focus attention on dialog with the Muslim world, on the women's perspective, and on the fight against poverty.<ref>Ole Danbolt Mjøs, [http://nobelprize.org/nobel_prizes/peace/laureates/2006/presentation-speech.html The Nobel Peace Prize for 2006: Presentation Speech]. ''The Nobel Peace Prize for 2006'', 2006-10-13. accessdate 2008-09-02</ref>
+
Celebration welcomed the Nobel prize announcement in Bangladesh.<ref>''The Daily Star,'' [http://www.thedailystar.net/2006/10/15/d6101501011.htm Nation parties on Nobel win.] Retrieved September 2, 2008.</ref> Some critics asserted that the award affirms [[neoliberalism]].
 
 
Celebration welcomed the Nobel prize announcement in Bangladesh.<ref> [http://www.thedailystar.net/2006/10/15/d6101501011.htm Nation parties on Nobel win]. ''The Daily Star (Bangladesh)'' Vol 5 Num 850 (in English) 2006-10-15, accessdate 2008-09-02</ref> Some critics asserted that the award affirms [[neoliberalism]].
 
  
 
==Related ventures==
 
==Related ventures==
Line 99: Line 99:
 
The Grameen Bank has spawn over two dozen enterprises represented by the Grameen Family of Enterprises. Those 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]]).
 
The Grameen Bank has spawn over two dozen enterprises represented by the Grameen Family of Enterprises. Those 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]]).
  
On July 11, 2005 the Grameen Mutual Fund One (GMFO), approved by the Securities and Exchange Commission of Bangladesh, made an [[IPO|Initial Public Offering]]. One of the first mutual funds of its kind, GMFO will allow the over four million Grameen Bank members, as well as non-members, to buy into Bangladesh's capital markets. The Bank and its constituents combine for a worth of over USD&nbsp;7.4 billion.<ref> [http://news.independent.co.uk/world/asia/article1870835.ece Credit where credit is due: The banker who changed the world] ''The Independent'' 2006-10-14 accessdate 2008-09-02 </ref>  
+
On July 11, 2005, the Grameen Mutual Fund One (GMFO), approved by the Securities and Exchange Commission of Bangladesh, made an [[IPO|Initial Public Offering]]. One of the first mutual funds of its kind, GMFO will allow the over four million Grameen Bank members, as well as non-members, to buy into Bangladesh's capital markets. The Bank and its constituents combine for a worth of over US$7.4 billion.<ref>''The Independent,'' [http://news.independent.co.uk/world/asia/article1870835.ece Credit where credit is due: The banker who changed the world.] Retrieved September 2, 2008.</ref>  
  
The work of Grameen Bank in Bangladesh inspired the creation of the Grameen Foundation, which aims to share the Grameen philosophy and accelerate the impact of microfinance on the world’s poorest people.<ref name="GF2006">[http://www.grameenfoundation.org/docs/resource_center/GrameenFoundation-AnnualReport2006.pdf Grameen Foundation Annual Report 2006]. ''Grameen Foundation, Washington, DC, USA'' accessdate 2008-09-02 (in English)</ref> Grameen Foundation USA, which has an A-rating from Charity Watch,<ref>[http://www.charitywatch.org/toprated.html Top Rated Charities]. ''American Institute of Philanthropy''. accessdate 2008-09-02 </ref> not only provides microloans in the USA itself (the only rich country in the program), but also supports microfinance institutions worldwide with loan guarantees, training, and technology transfer.<ref> "25 entrepreneurs who are changing the world" [http://www.fastcompany.com/social/2006/statements/grameen.html Grameen Foundation USA]. accessdate 2008-09-02 ''Fast Company Monitor Group''. </ref> As of 2008, Grameen Foundation supports [[microcredit|microfinance]] institutions in the following regions:
+
The work of Grameen Bank in Bangladesh inspired the creation of the Grameen Foundation, which aims to share the Grameen philosophy and accelerate the impact of microfinance on the world’s poorest people.<ref name="GF2006">Grameen Foundation, [http://www.grameenfoundation.org/docs/resource_center/GrameenFoundation-AnnualReport2006.pdf Grameen Foundation Annual Report 2006.] Retrieved September 2, 2008.</ref> Grameen Foundation USA, which has an A-rating from Charity Watch,<ref>Charity Watch, [http://www.charitywatch.org/toprated.html Top Rated Charities,] ''American Institute of Philanthropy''. Retrieved September 2, 2008.</ref> not only provides microloans in the USA itself (the only rich country in the program), but also supports microfinance institutions worldwide with loan guarantees, training, and technology transfer.<ref>Fast Company Monitor Group, [http://www.fastcompany.com/social/2006/statements/grameen.html Grameen Foundation USA.] Retrieved September 2, 2008.</ref> As of 2008, Grameen Foundation supports [[microcredit|microfinance]] institutions in the following regions:
*'''[[Asia-Pacific]]''': [[Bangladesh]], [[China]], [[East Timor]], [[Indonesia]], [[India]], [[Pakistan]], [[Philippines]], [[Saudi Arabia]]
+
*'''[[Asia-Pacific]]:''' [[Bangladesh]], [[China]], [[East Timor]], [[Indonesia]], [[India]], [[Pakistan]], [[Philippines]], [[Saudi Arabia]]
*'''[[Americas]]''': [[Bolivia]], [[Dominican Republic]], [[El Salvador]], [[Haiti]], [[Honduras]], [[Mexico]], [[Peru]], [[USA]]
+
*'''[[Americas]]:''' [[Bolivia]], [[Dominican Republic]], [[El Salvador]], [[Haiti]], [[Honduras]], [[Mexico]], [[Peru]], [[U.S.]]
*'''[[Africa]]''': [[Cameroon]], [[Egypt]], [[Ethiopia]], [[Ghana]], [[Lebanon]], [[Morocco]], [[Nigeria]], [[Rwanda]], [[Tunisia]], [[Uganda]], [[Yemen]]
+
*'''[[Africa]]:''' [[Cameroon]], [[Egypt]], [[Ethiopia]], [[Ghana]], [[Lebanon]], [[Morocco]], [[Nigeria]], [[Rwanda]], [[Tunisia]], [[Uganda]], [[Yemen]]
  
 
==Criticism==
 
==Criticism==
Sudhirendar Sharma, a development analyst, claims that the Grameen Bank has "landed poor communities in a perpetual debt-trap",<ref>Sudhirendar Sharma, Is micro-credit a macro trap? ''The Hindu'', 2002-09-25, [http://www.hinduonnet.com/businessline/2002/09/25/stories/2002092500810900.htm] accessdate 2008-09-02</ref> and that its ultimate benefit goes to the corporations that sell capital goods and infrastructure to the borrowers.<ref>Sudhirendar Sharma, ''The Hindu'', 2002-01-05 [http://www.thehindubusinessline.com/2002/01/05/stories/2002010500111200.htm Microcredit: Globalisation unlimited.]. accessdate 2008-09-05</ref> It has also attracted criticism from the former [[Prime Minister]] of [[Bangladesh]], [[Sheikh Hasina]], who commented, "There is no difference between usurers [Yunus] and corrupt people."<ref>[http://www.economist.com/world/asia/displaystory.cfm?story_id=E1_RSQNJQJ A new party for Bangladesh's fray]. ''Economist'', 2007-02-22  accessdate 2008-09-02 English</ref> Hasina touches upon one criticism of Grameen Bank: the high rate of interest that the bank demands from those seeking credit.<ref name="WebIndia">Sheikh Hasina sneers at Nobel winner Yunus's bid to enter politics ''Webindia123.com'' 2007-02-18. accessdate 2008-09-02 (English) [http://news.webindia123.com/news/ar_showdetails.asp?id=702180187&cat=&n_date=20070218] ''Indo-Asian News Service IANS''</ref> Similar to all microfinance institutes, the Grameen Bank charges higher interest compared to that of traditional banks, as Grameen's interest (reducing balance basis) on its main credit product stands about 20 percent.<ref name="NF">Nimal A. Fernando. ''Understanding and Dealing with High Interest Rates on Microcredit - A Note to Policy Makers in the Asia and Pacific Region'' [http://www.adb.org/Documents/Books/interest-rates-microcredit/Microcredit-Understanding-Dealing.pdf] [[Manila]], 2006. [[Asian Development Bank|ADB]]  8. Retrieved September 2, 2008.</ref> The [[Mises Institute]]'s [[Jeffrey Tucker]] has criticized the Grameen Bank,<ref>Jeffrey Tucker, The Micro-Credit Cult. ''The Free Market''  [[Mises Institute]] November 1995 [http://www.mises.org/freemarket_detail.asp?control=215]. Retrieved September 2, 2008.</ref> asserting that the Grameen Bank and others based on the Grameen model lack economically viability and depend on subsidies to operate, thus essentially becoming another example of welfare.<ref>Jeffrey Tucker, 2006-11-08 [http://www.mises.org/story/2375 Microcredit or Macrowelfare: The Myth of Grameen]. ''Mises Institute'' Retrieved September 2, 2008.</ref> Grameen's Sixteen Decisions has been another target of criticism. Critics say that the bank's Sixteen Decisions force families and borrowers to abide by the rules and regulations set forth by the bank. In response to that, the Grameen bank neither forces or instills its morals into those who decide against becoming a part of the Grameen Bank. Seeing the Grameen Bank as a vehicle out of poverty and abysmal conditions, the Sixteen Decisions represent a means for which to bring about positive social changes, and to better the lives of those who live in poverty.
+
Sudhirendar Sharma, a development analyst, claims that the Grameen Bank has "landed poor communities in a perpetual debt-trap,"<ref>Sudhirendar Sharma, Is micro-credit a macro trap? ''The Hindu.'' </ref> and that its ultimate benefit goes to the corporations that sell capital goods and infrastructure to the borrowers.<ref>Sudhirendar Sharma, [http://www.thehindubusinessline.com/2002/01/05/stories/2002010500111200.htm Microcredit: Globalisation unlimited,] ''The Hindu.'' Retrieved September 2, 2008.</ref> It has also attracted criticism from the former [[Prime Minister]] of [[Bangladesh]], [[Sheikh Hasina]], who commented, "There is no difference between usurers [Yunus] and corrupt people."<ref>''The Economist,'' [http://www.economist.com/world/asia/displaystory.cfm?story_id=E1_RSQNJQJ A new party for Bangladesh's fray.] Retrieved September 2, 2008.</ref> Hasina touches upon one criticism of Grameen Bank: the high rate of interest that the bank demands from those seeking credit.<ref name="WebIndia">WebIndia, [http://news.webindia123.com/news/ar_showdetails.asp?id=702180187&cat=&n_date=20070218Sheikh Hasina sneers at Nobel winner Yunus's bid to enter politics,] ''Indo-Asian News Service IANS.'' Retrieved September 2, 2008.</ref> Similar to all microfinance institutes, the Grameen Bank charges higher interest compared to that of traditional banks, as Grameen's interest (reducing balance basis) on its main credit product stands about 20 percent.<ref name="NF">Nimal A. Fernando, [http://www.adb.org/Documents/Books/interest-rates-microcredit/Microcredit-Understanding-Dealing.pdf Understanding and Dealing with High Interest Rates on Microcredit—A Note to Policy Makers in the Asia and Pacific Region.] Retrieved September 2, 2008.</ref> The [[Mises Institute]]'s [[Jeffrey Tucker]] has criticized the Grameen Bank,<ref>Jeffrey Tucker, [http://www.mises.org/freemarket_detail.asp?control=215 The Micro-Credit Cult,] ''The Free Market.'' Retrieved September 2, 2008.</ref> asserting that the Grameen Bank and others based on the Grameen model lack economically viability and depend on subsidies to operate, thus essentially becoming another example of welfare.<ref>Jeffrey Tucker, [http://www.mises.org/story/2375 Microcredit or Macrowelfare: The Myth of Grameen,] ''Mises Institute'' Retrieved September 2, 2008.</ref> Grameen's Sixteen Decisions has been another target of criticism. Critics say that the bank's Sixteen Decisions force families and borrowers to abide by the rules and regulations set forth by the bank. In response to that, the Grameen bank neither forces or instills its morals into those who decide against becoming a part of the Grameen Bank. Seeing the Grameen Bank as a vehicle out of poverty and abysmal conditions, the Sixteen Decisions represent a means for which to bring about positive social changes, and to better the lives of those who live in poverty.
  
 
==See also==
 
==See also==
Line 117: Line 117:
  
 
==Notes==
 
==Notes==
{{reflist|2}}
+
<references/>
  
 
==References==
 
==References==
 +
*Bornstein, David. ''The Price of a Dream: The Story of the Grameen Bank.'' New York: Oxford University Press, 2005. ISBN 0195187490.
 +
*Cockburn, Alexander. ''Counterpunch.'' 2006.
 +
*Counts, Alex. ''Give Us Credit.'' New York: Crown, 1996. ISBN 0812924649.
 +
*"Micro Loans for the Very Poor." ''New York Times.'' February 16, 1997.
 +
*Sachs, Jeffrey. ''The End of Poverty: Economic Possibilities for Our Time.'' New York: Penguin Press, 2005. ISBN 0143036580.
 +
*Siddiqui, Kamal. ''An Evaluation of the Grameen Bank Operation.'' Dhaka: Grameen Bank, 1984. {{OCLC|27300544}}
 +
*Yunus, Muhammad, and Alan Jolis. ''Banker to the Poor: The Autobiography of Muhammad Yunus, Founder of Grameen Bank.'' Karachi: Oxford University Press, 2001. ISBN 0195795377.
  
*Bornstein, ''David. The Price of a Dream: The Story of the Grameen Bank.'' New York: Oxford University Press, 2005. ISBN 0195187490
 
* Cockburn, Alexander, "[[A Nobel Peace Prize for Neoliberalism?]]" ''Counterpunch'', 2006. [http://www.counterpunch.org/cockburn10202006.html]
 
*Counts, Alex. ''Give Us Credit.'' New York: Crown, 1996. ISBN 0812924649
 
*"Micro Loans for the Very Poor," ''[[New York Times]]'', February 16, 1997.
 
*Sachs, Jeffrey. ''The End of Poverty: Economic Possibilities for Our Time.'' New York: Penguin Press, 2005. ISBN 0143036580
 
*Siddiqui, Kamal. ''An Evaluation of the Grameen Bank Operation.'' Dhaka: Grameen Bank, 1984. OCLC 27300544
 
*Yunus, Muhammad, and Alan Jolis. ''Banker to the Poor: The Autobiography of Muhammad Yunus, Founder of Grameen Bank.'' Karachi: Oxford University Press, 2001. ISBN 0195795377
 
 
==External links==
 
  
<div class="references-small">
 
* [http://www.grameen-info.org/ Grameen Bank Official Site]. Retrieved September 2, 2008.
 
* [http://www.grambangla.com/ gramBangla], Australian Bangladeshi Community Grameen Support Group. Retrieved September 2, 2008.
 
* A video by Muhammad Yunus talking about Grameen Bank [http://mitworld.mit.edu/video/289/]. Retrieved September 2, 2008.
 
* [http://www.microsave.org/SearchResults.asp?cboKeyword=72&ID=20&cmdSubmit=Submit&NumPerPage=10 Grameen II: The First Five Years, 2001-2006]; Stuart Rutherford et al for MicroSave, February 2006. Retrieved September 2, 2008.
 
* [http://www.fundinguniverse.com/company-histories/Grameen-Bank-Company-History.html Grameen Bank History]. Retrieved September 2, 2008.
 
* [http://yunusphere.net YuNuSphere - Expanding Dr. Yunus' Sphere of Influence] by promoting [[Social business]] and the Grameen principle of "Credit without Collateral." Retrieved September 2, 2008.
 
*[http://www.france24.com/en/20080404-bangladesh-burden-microcredit-caring-grameen-bank-mohammed-yunnus The crushing burden of microcredit] F24 international report. Retrieved September 2, 2008.
 
*[http://www.grameen-info.org/bank/WhatisMicrocredit.htm What is Microcredit?]. Retrieved September 2, 2008.
 
  
 
{{Nobel Peace Prize Laureates 2001-2025}}
 
{{Nobel Peace Prize Laureates 2001-2025}}

Latest revision as of 12:15, 24 January 2023


Grameen Bank (GB)
Nobel prize medal.svg
Type Body Corporate (Bank Ordinance)
Founded 1983
Headquarters Dhaka, Bangladesh
Key people Muhammad Yunus, founder
Area served Bangladesh
Industry Finance
Products Financial Services
Microfinance
Revenue Green Arrow Up Darker.svg 6,335,566,324 Taka (92.3 million USD) (2006)
Operating income Green Arrow Up Darker.svg 5,959,675,013 Taka (86.9 million USD) (2006)
Employees 24,703 (Oct 2007)


Website http://www.grameen-info.org/


The Grameen Bank (Bengali: গ্রামীণ ব্যাংক) is a microfinance organization and community development bank started in Bangladesh that makes small loans (known as microcredit or "grameencredit") to the impoverished without requiring collateral. The word "Grameen," derived from the word "gram," means "of the village." The bank's system is based on the idea that the poor have skills that have been under-utilized. A group-based credit approach utilizes the peer-pressure within the group to ensure the borrowers follow credit discipline. The bank also accepts deposits, provides services, and operates several development-oriented businesses including fabric, telephone, and energy companies. Remarkably, women are a significant majority of borrowers the bank's credit program.

The origin of Grameen Bank traces back to 1976. Muhammad Yunus, a professor at the University of Chittagong, launched a research project to examine the possibility of designing a credit delivery system to provide banking services targeted to the rural poor. In October 1983, government legislation transformed the Grameen Bank Project into an independent bank. The organization and its founder, Yunus, were jointly awarded the Nobel Peace Prize in 2006. In 2011, the Bangladesh Government forced Yunus to resign from Grameen Bank, saying that at age 72, he was years beyond the legal limit for the position.

The bank has earned well-deserved attention for introducing a novel concept in the area of finance. Prior to the inauguration of Grameen Bank, financial institutions showed great reluctance in providing loans to the poor. They have little or no collateral to guard against loan default. Compounded, they have little or no training or education in schools to make them reasonable investment risks. Probably most damaging, a popular stereotype casting them as lazy, unreliable, and ignorant has prevailed. The Grameen Bank has broken those stereotypes by extending micro-loans that the poor have consistently repaid. The success of Grameen Bank has provided an alternative to governments merely awarding welfare money to the poor by giving the poor incentive to make a profit from their labor and innovation.

History

Muhammad Yunus speaking in Houston

Muhammad Yunus, the bank's founder, earned a doctorate in economics from Vanderbilt University in the United States. The terrible Bangladesh famine of 1974 prompted him to make a small loan of USD 27 to a group of 42 families so that they could create small items for sale without the burdens of predatory lending.[1] 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) grew out of 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 became immensely successful and the project, with support from the central Bangladesh Bank, extended in 1979 to the Tangail District (to the north of the capital, Dhaka).

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.[2] The bank's repayment rate suffered following the 1998 flood of Bangladesh before recovering again in subsequent years. By the beginning of 2005, the bank had loaned over US$4.7 billion to the poor.

The Bank today continues to expand across the nation and still provides small loans to the rural poor. By 2006, Grameen Bank branches numbered over 2,100. Its success has inspired similar projects in more than 40 countries around the world and became a model for World Bank initiatives to finance Grameen-type schemes.[3]

The bank gets its funding from different sources, and the main contributors have shifted over time. In the initial years, donor agencies used to provide the bulk of capital at extremely low rates. In the mid-1990s, the bank started to get most of its funding from the central bank of Bangladesh. More recently, Grameen has started bond sales as a source of finance. The bonds implicitly receive subsides as the government of Bangladesh guarantees the loans.[4]

Application of microcredit

16 Decisions
  1. We shall follow and advance the four principles of Grameen Bank: Discipline, Unity, Courage and Hard work—in all walks of our lives.
  2. Prosperity we shall bring to our families.
  3. We shall not live in dilapidated houses. We shall repair our houses and work towards constructing new houses at the earliest time.
  4. We shall grow vegetables all the year round. We shall eat plenty of them and sell the surplus.
  5. During the plantation seasons, we shall plant as many seedlings as possible.
  6. We shall plan to keep our families small. We shall minimize our expenditures. We shall look after our health.
  7. We shall educate our children and ensure that they can earn enough to pay for their education.
  8. We shall always keep our children and the environment clean.
  9. We shall build and use pit-latrines.
  10. We shall drink water from tubewells. If it is not available, we shall boil water for use.
  11. We shall not take any dowry at our sons' weddings, neither shall we give any dowry at our daughter's wedding. We shall keep our center free from the curse of dowry. We shall not practice child marriage.
  12. We shall not inflict any injustice on anyone, neither shall we allow anyone to do so.
  13. We shall collectively undertake bigger investments for higher incomes.
  14. We shall always be ready to help each other. If anyone is in difficulty, we shall all help him or her.
  15. If we come to know of any breach of discipline in any center, we shall all go there and help restore discipline.
  16. We shall take part in all social activities collectively.

Grameen Bank has become best known for its system of solidarity lending.[5] The Bank also incorporates a set of values embodied in Bangladesh by the "Sixteen Decisions." At every branch of Grameen Bank the borrowers recite those Decisions 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. Since the Grameen Bank embraced the Sixteen Decisions, almost all Grameen borrowers have their school-age children enrolled in regular classes. That, in turn, helps foster social change, and educate the next generation.[6]

Solidarity lending constitutes a cornerstone of microcredit and the system works in over 43 countries. Although each borrower must belong to a five-member group, the group has discretion on approving loans to its members. Repayment responsibility rests solely with the individual borrower, while the group and the center oversees everyone's responsible behavior, ensuring that none gets into a repayment problem. Although technically the group enjoys freedom from enforced joint liability (that is, group members obligation to pay on behalf of a defaulting member), in practice the group members often contribute the defaulted amount with an intention of collecting the money from the defaulted member at a later time. Grameen's policy of refusing any further credit to a group in which a member defaults encourages such behavior.[7]

Without a legal instrument between Grameen Bank and its borrowers, the system works based entirely on trust.[8] To supplement the lending, Grameen Bank also requires the borrowing members to save small amounts regularly in a number of funds like an emergency fund and a group fund. Those savings help serve as insurance against unexpected contingencies.[9]

In a country in which few women may take out loans from large commercial banks, Grameen has focused on women borrowers, as 97 percent of its members are women.[10] In other areas, Grameen's track record has also been notable, with an extremely high payback rate—over 98 percent. According to the Wall Street Journal, a fifth of the bank's loans had been more than a year overdue in 2001.[11] Grameen claims that more than half of its borrowers in Bangladesh (close to 50 million) have risen out of acute poverty thanks to their loans, 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 four USD) loan.[12]

Village Phone Program

The Village Phone program, through which women entrepreneurs can start a business providing wireless payphone service in rural areas of Bangladesh, stands out among many different applications of microcredit. That program earned the bank the 2004 Petersberg Prize worth EUR 100,000/-, for its contribution of Technology to Development.[13] In a press release announcing the prize, the Development Gateway Foundation noted that through this program:

Grameen has created a new class of women entrepreneurs who have raised themselves from poverty. Moreover, it has improved the livelihoods of farmers and others who are provided access to critical market information and lifeline communications previously unattainable in some 28,000 villages of Bangladesh. More than 55,000 phones are currently in operation, with more than 80 million people benefiting from access to market information, news from relatives, and more.[13]

Struggling members program

Grameen Bank Building in Dhaka

In 2003, Grameen Bank started a new program, different from its traditional group-based lending, exclusively targeted to the beggars in Bangladesh. That program focuses on distributing small loans to beggars. With the existing rules of banking suspended, the completely interest-free loans can have arbitrarily long repayment periods. 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 U.S. cents) per week and furthermore the borrower receives free life insurance coverage.

The bank allows borrowers to continue begging, encouraging them to use the loans for generating income by selling low-priced items. Based on a paper presented in the Global Microcredit Summit in 2006 by one of the bank's managers, as of May 2006, around 73,000 beggars have taken loans of about Tk 58.32 million (approx. US$833,150) and repaid Tk. 34.78 million (about US$496,900).[14]

Operational statistics

Strikingly, the poor borrowers of the bank, most of whom are women, own the Grameen Bank. Of the total equity of the bank, the borrowers own 94 percent, and the Government of Bangladesh owns the remaining 6 percent. The bank has grown significantly between 2003 and 2007. As of October 2007, the total borrowers of the bank number 7.34 million, and 97 percent of those are women.[15] Similar growth occurs in all the villages covered. As of October 2007, the Bank has a staff of over 24,703 employees and 2,468 branches covering 80,257 villages,

Since its inception, the bank has distributed Tk 347.75 billion (USD 6.55 billion) in loans. Out of that, Tk 313.11 billion (USD 5.87 billion) has been repaid.[16] Many critics doubt that recovery rate and the definition that Grameen uses to come up with that rate.

Nobel Peace Prize

Nobel Laureate, Muhammad Yunus, the bank's founder

Grameen Bank received several prestigious awards including the highest civilian award in Bangladesh, the Independence Day Award, in 1994. The greatest recognition of the bank's achievements came on October 13, 2006, when the Nobel Committee awarded Grameen Bank and its founder, Muhammad Yunus, the 2006 Nobel Peace Prize "for their efforts to create economic and social development from below."[17] The award announcement also mentions that:

From modest beginnings three decades ago, Yunus has, first and foremost through Grameen Bank, developed micro-credit into an ever more important instrument in the struggle against poverty. Grameen Bank has been a source of ideas and models for the many institutions in the field of micro-credit that have sprung up around the world.[17]

On December 10, 2006, Mosammat Taslima Begum, who used her first 16-euro (20-dollar) loan from the bank in 1992 to buy a goat and subsequently became a successful entrepreneur and one of the elected board members of the bank, accepted the Nobel Prize on behalf of Grameen Bank's investors and borrowers at the prize awarding ceremony held at Oslo City Hall.[18]

Did you know?
Grameen Bank and Muhammad Yunus were awarded the Nobel Peace Prize for the initiation of microcredit

Grameen Bank stands as the only business corporation to have won a Nobel Prize. In a speech given at the presentation ceremony, Professor Ole Danbolt Mjøs, Chairman of the Norwegian Nobel Committee, mentioned that, by giving the prize to Grameen Bank and Muhammad Yunus, the Norwegian Nobel Committee wished to focus attention on dialog with the Muslim world, on the women's perspective, and on the fight against poverty.[19]

Celebration welcomed the Nobel prize announcement in Bangladesh.[20] Some critics asserted that the award affirms neoliberalism.

Related ventures

The Grameen Bank has spawn over two dozen enterprises represented by the Grameen Family of Enterprises. Those 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).

On July 11, 2005, the Grameen Mutual Fund One (GMFO), approved by the Securities and Exchange Commission of Bangladesh, made an Initial Public Offering. One of the first mutual funds of its kind, GMFO will allow the over four million Grameen Bank members, as well as non-members, to buy into Bangladesh's capital markets. The Bank and its constituents combine for a worth of over US$7.4 billion.[21]

The work of Grameen Bank in Bangladesh inspired the creation of the Grameen Foundation, which aims to share the Grameen philosophy and accelerate the impact of microfinance on the world’s poorest people.[22] Grameen Foundation USA, which has an A-rating from Charity Watch,[23] not only provides microloans in the USA itself (the only rich country in the program), but also supports microfinance institutions worldwide with loan guarantees, training, and technology transfer.[24] As of 2008, Grameen Foundation supports microfinance institutions in the following regions:

Criticism

Sudhirendar Sharma, a development analyst, claims that the Grameen Bank has "landed poor communities in a perpetual debt-trap,"[25] and that its ultimate benefit goes to the corporations that sell capital goods and infrastructure to the borrowers.[26] It has also attracted criticism from the former Prime Minister of Bangladesh, Sheikh Hasina, who commented, "There is no difference between usurers [Yunus] and corrupt people."[27] Hasina touches upon one criticism of Grameen Bank: the high rate of interest that the bank demands from those seeking credit.[28] Similar to all microfinance institutes, the Grameen Bank charges higher interest compared to that of traditional banks, as Grameen's interest (reducing balance basis) on its main credit product stands about 20 percent.[29] The Mises Institute's Jeffrey Tucker has criticized the Grameen Bank,[30] asserting that the Grameen Bank and others based on the Grameen model lack economically viability and depend on subsidies to operate, thus essentially becoming another example of welfare.[31] Grameen's Sixteen Decisions has been another target of criticism. Critics say that the bank's Sixteen Decisions force families and borrowers to abide by the rules and regulations set forth by the bank. In response to that, the Grameen bank neither forces or instills its morals into those who decide against becoming a part of the Grameen Bank. Seeing the Grameen Bank as a vehicle out of poverty and abysmal conditions, the Sixteen Decisions represent a means for which to bring about positive social changes, and to better the lives of those who live in poverty.

See also

Notes

  1. Anand Giridharas and Keith Bradsher, Microloan Pioneer and His Bank Win Nobel Peace Prize, New York Times. Retrieved September 2, 2008.
  2. Brandon Glenn, ShoreBank leaders had hand in Nobel prize, Chicago Business News. Retrieved September 2, 2008.
  3. Shahidur R. Khandker, M. A. Baqui & Z. H. Khan, Grameen Bank: Performance and Sustainability (World Bank Publications, 1995, ISBN 0821334638).
  4. Jonathan Morduch, The role of subsidies in microfinance: Evidence from the Grameen Bank, Journal of Development Economics 60 (1) (October 1999): 240.
  5. Khandker, Baqui, & Khan (1995), xi
  6. Garda Ghista, 2004, Bangladesh: Towards Economic and Women’s Liberation Via Grameen Bank, ProutWorld. Retrieved September 2, 2008.
  7. Mahabub Hossain, Credit for Alleviation of Rural Poverty: The Grameen Bank in Bangladesh (Int Food Policy Res Inst IFPRI, 1988, ISBN 0896290670), 7.
  8. Paul Sinclair, Grameen Micro-Credit & How to End Poverty from the Roots Up, One World One People. Retrieved September 2, 2008.
  9. Shahidur R. Khandker, M. A. Baqui, & Khan Z. H. Grameen Bank: Performance and Sustainability (World Bank Publications, 1995, ISBN 0821334638), x.
  10. Susan F. Feiner and Drucilla K. Barker, Microcredit and Women's Poverty, Economic Affairs Bureau, Inc. Retrieved September 2, 2008.
  11. Daniel Perl, Michael M. Phillips, Grameen Bank, Which Pioneered Loans For the Poor, Has Hit a Repayment Snag, Wall Street Journal. Retrieved September 2, 2008.
  12. Ian Fraser, Cover Story, Microfinance comes of age, Scottish Banker Magazine.
  13. 13.0 13.1 Development Gateway Foundation, Grameen Bank-Village Phone Wins Global Competition for Contribution of Technology to Development. Retrieved September 2, 2008.
  14. D. C. Barua, Five Cents a Day: Innovative Programs for Reaching the Destitute with Microcredit, No-interest Loans, and other Instruments: The Experience of Grameen Bank (Nova Scotia, Canada: Global Microcredit Summit, 2006).
  15. Grameen Bank, Historical Data Series 2003. Retrieved September 2, 2008.
  16. Grameen Communications, Credit delivery system. Retrieved September 2, 2008.
  17. 17.0 17.1 Nobel Prize, The Nobel Peace Prize for 2006. Retrieved September 2, 2008.
  18. AFP, Yunus unveils vision to end global poverty, The Daily Star (Bangladesh). Retrieved September 2, 2008.
  19. Ole Danbolt Mjøs, The Nobel Peace Prize for 2006: Presentation Speech, The Nobel Peace Prize for 2006. Retrieved September 2, 2008.
  20. The Daily Star, Nation parties on Nobel win. Retrieved September 2, 2008.
  21. The Independent, Credit where credit is due: The banker who changed the world. Retrieved September 2, 2008.
  22. Grameen Foundation, Grameen Foundation Annual Report 2006. Retrieved September 2, 2008.
  23. Charity Watch, Top Rated Charities, American Institute of Philanthropy. Retrieved September 2, 2008.
  24. Fast Company Monitor Group, Grameen Foundation USA. Retrieved September 2, 2008.
  25. Sudhirendar Sharma, Is micro-credit a macro trap? The Hindu.
  26. Sudhirendar Sharma, Microcredit: Globalisation unlimited, The Hindu. Retrieved September 2, 2008.
  27. The Economist, A new party for Bangladesh's fray. Retrieved September 2, 2008.
  28. WebIndia, Hasina sneers at Nobel winner Yunus's bid to enter politics, Indo-Asian News Service IANS. Retrieved September 2, 2008.
  29. Nimal A. Fernando, Understanding and Dealing with High Interest Rates on Microcredit—A Note to Policy Makers in the Asia and Pacific Region. Retrieved September 2, 2008.
  30. Jeffrey Tucker, The Micro-Credit Cult, The Free Market. Retrieved September 2, 2008.
  31. Jeffrey Tucker, Microcredit or Macrowelfare: The Myth of Grameen, Mises Institute Retrieved September 2, 2008.

References
ISBN links support NWE through referral fees

  • Bornstein, David. The Price of a Dream: The Story of the Grameen Bank. New York: Oxford University Press, 2005. ISBN 0195187490.
  • Cockburn, Alexander. Counterpunch. 2006.
  • Counts, Alex. Give Us Credit. New York: Crown, 1996. ISBN 0812924649.
  • "Micro Loans for the Very Poor." New York Times. February 16, 1997.
  • Sachs, Jeffrey. The End of Poverty: Economic Possibilities for Our Time. New York: Penguin Press, 2005. ISBN 0143036580.
  • Siddiqui, Kamal. An Evaluation of the Grameen Bank Operation. Dhaka: Grameen Bank, 1984. OCLC 27300544
  • Yunus, Muhammad, and Alan Jolis. Banker to the Poor: The Autobiography of Muhammad Yunus, Founder of Grameen Bank. Karachi: Oxford University Press, 2001. ISBN 0195795377.



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