Grameen Bank is not like most other banks in the world. Indeed, it is a location that has been fighting the good fight against global poverty since its construction. Grameen Bank is located in Bangladesh, and has primarily focused on helping women leave poverty through micro-loans.
The bank originated in 1976 when Professor Muhammad Yunus began to research the idea of having a “credit delivery system” in order to allow the rural poor to have banking services. Indeed, the word Grameen itself translates to “rural” or village” in Bangla, the official language of Bangladesh.
The objectives of this Grameen Bank Project included allowing the poor to have banking facilities, putting a halt to the exploitation of the rural poor, and creating self-employment opportunities. The Bank also reduces the number of disadvantaged women and to aims to destroy the “cycle of poverty” (which basically states that a poor child will grow up to be poor and continue to have poor children, without having a chance to rise out of that poverty).
After the success of the Grameen Bank Project, the Grameen Bank was extended to more districts in Bangladesh, and eventually, in 1983, it became an independent bank that is now owned by the rural poor it serves. Indeed, the poor that borrow from the bank own 90% of it, while the other 10% is in the hands of the Bangladeshi government.
The focus of the credit delivery system is on the poorest of the poor, including women. In fact, today, the bank prioritizes helping women due to their unequal standing in society. There are several unique features to Grameen Bank’s credit delivery system, such as organizing borrowers into small groups with similar goals. This is done so that the clientele of Grameen Bank can learn to plan and implement development decisions through sending the group to centres linked to the bank.
The borrowers have a meeting at the centers each week. There are also special loan conditions aimed to help the poor; they can repay them weekly, there is no collateral, they can have more loans, transparency in interactions, and more. Each of these factors is helpful to the poor, because they are not faced with incredible interest, or having to pay back large sums at once. To learn more about the methodology of the bank, check out Grameen Bank.
The Grameen Bank currently has 8 million borrowers, an incredible amount. Over $8 billion has been lent to borrowers to have a chance to start businesses without the worry of being financially abused. No credit history is required for the bank, and those who give the loans back late are not sent to court, and do not have their property seized. Still, 97% of the money it has given out has been returned. The main reason Grameen Bank is so successful lies in its principles.
It focuses on creating empowerment within women and other borrowers, as well as independence. The bank has successful created sustainable change in Bangladesh through its microlending, and many have been working their way out of poverty with the help of the bank. Women, who use Grameen Bank, in the past, have been refused loans from other banks because they were poor, or because the bank wanted to lend to their husbands – yet Grameen Bank has a 97% success rate.
Unfortunately, Grameen Bank is at risk of being changed and reformatted by the government, by kicking out its all-female board of directors, and depriving most of the current borrowers from future loans. Nonetheless, even if Grameen Bank is changed, it will not be the end. Indeed, Grameen Bank should serve as an inspiration to other countries as a potential way to reduce poverty.
Micro-loans have already shown to be wildly successful in developing countries, but creating a government-supported bank that focus on helping the poor through loans could really make a difference in multiple countries. Overall, this may be the end of Grameen Bank, but it certainly is far from the end of the fight against poverty, and the ingenious use of microloans.
– Corina Balsamo
Sources: The Daily Beast, Grameen Bank, UNESCO