Grameen Bank: A Success Story Part 2

Continuing with the previous post lets look in the detailed working and business model of Grameen bank

Concept of Micro Credit:

Micro-credit: programs that extend small loans or wider range of financial services to poor people to foster self-employment and income generations and improve their living standards.

Micro-finance: programs that provide credit for self-employment and other business and financial services, includes both credit and savings aspects of the program.

                                                                

Features of Micro-credit:
Micro-credit generally involves :

• Small loans, for both working capital and assets
• Collateral free, substituted by group guarantee or compensatory savings
• Access to repeat and larger loans
• Intensive supervision and close monitoring
• Loan period generally for one year, may go up to 3 years
• Options available for weekly/monthly installment payment
• Can combine social development with financial inter-mediation 

Architect of Grameen Bank:
Professor Muhammad Yunus, founder of the globally renowned Grameen Bank  and architect of Grameen Model.  Joint winner of 2006 Nobel Prize Winner for Peace

Project Overview:

• extend banking facilities to poor 
• eliminate the exploitation of the poor by money lenders 
• create opportunities for self-employment 
• bring the disadvantaged, mostly the women from the poorest households, within the fold of an organizational format 
• reverse the age-old vicious circle of "low income, low saving & low investment“ into virtuous circle of "low income,injection of credit, investment, more income, more savings, more investment, more income 

Opportunity Identified:

• Designing credit delivery system to provide Banking Services targeted at the rural poor who were capable of self sustenance (initially started with funding women initiatives)‏
• Organizing the un-organized sector largely dominated by the corrupt money lenders
• Bring the disadvantaged, mostly the women from the poorest into the financial umbrella
• Year 1976-79: Started with a pilot project in District Jobara, Bangladesh 
• He made his first loan of $27 to 42 women so that they could expand their bamboo business
• Year 1980-83: Spread across the country with the help of Central Bank and the Nationalized Banks
•  Year 1983: Transformed into an Independent Bank by the Government Legislation