Grameen Bank : A success story Part 1

Today I will be sharing about a revolution which took Capitalism to Poor.I am sharing the Story of Grameen Bank. 

Befitting the goal of poverty alleviation, the setting for this early experiment was a time of great tragedy in Bangladesh, one of the poorest countries in the world.A small country in the Indian subcontinent with a population of 130 million, a gross national product per capita of about $300 and a literacy rate of only 38 percent for those over 15 years of age, 1 Bangladesh experienced drought and famine in 1974 that killed 1.5 million people.

Having recently completed studies as a Fulbright scholar in the United States,Professor Mohammad Yunus was lecturing on economic theory at Chittagong University and growing increasingly frustrated at his inability to ease his neighbors'suffering.

Yunus attributes the origin of his vision to a chance encounter in Jobra with Sufia Begum, a 21-year-old woman who, desperate to support herself, had borrowed about 25 cents from moneylenders charging exorbitant interest rates approaching 10 percent per day. Ms. Begum used the money to make bamboo stools that, as a condition of the loan,she sold back to the moneylenders at a price well below market value for a profit of about of 2 cents.Ms Begum’s desperate position could best be described as bonded labor.

Yunus found 42 people in Jobra in the same poverty trap, and in 1976 he experimented by lending them small amounts of money at reasonable rates. Yunus lent a total of $27-about 62 cents per borrower.To his pleasant surprise, all the borrowers repaid the loans, in the process convincing him that this success could be replicated across Bangladesh.

From these humble efforts emerged a new industry: micro credit-the extension of small loans and other financial and business services to entrepreneurs too poor to qualify for traditional bank loans. Yunus carried his success story to traditional banks and proposed that they could also make uncollateralize loans to society's poorest.In response, the banks asserted that borrowers would never sufficiently organize themselves to repay, that proceeds from such loans were too small to cover administrative costs and that female borrowers would simply hand over the funds to their husbands.

Yunus answered these challenges by founding an institution of his own, Grameen Bank, the name of which derives from gram, the Bengali word for "Village." He did so in the belief that capital is a friend of the poor and that its accumulation by the poor represents their best means of escaping the abject poverty that the welfare state and wasteful, corrupt and incompetent international aid organizations have failed to combat.

Yunus 's vision was of a bank that would address all aspects of rural life and support commercial activities ranging from manufacturing to retail, including even door-to-door sales.The bank would require no collateral and would prove once and for all what Righter later referred to as "The bank ability of the unbankable."