|Type||Body Corporate (Bank Ordinance)|
|Number of locations||2,565 (July 2010)|
|Key people||Mohammad Shahjahan, Acting Managing Director (CEO)|
|Revenue||12,435,830,045 Taka (176.67 million USD) (2010)|
|Operating income||8,513,832,110 Taka (120.95 million USD) (2010)|
|Net income||757,241,322 Taka (10.76 million USD) (2010)|
|Total assets||125,396,957,972 Taka (2010)|
|Employees||22,149 (July 2011)|
The Grameen Bank (Bengali: গ্রামীণ বাংক) is a Nobel Peace Prize-winning microfinance organization and community development bank founded in Bangladesh. It makes small loans (known as microcredit or "grameencredit") to the impoverished without requiring collateral. The name Grameen is derived from the word gram which means "rural" or "village" in the Bengali language.
Micro-credit loans are based on the concept that the poor have skills that are under-utilized, and with incentive, they can earn more money. A group-based credit approach is applied to use peer-pressure within a group to ensure the borrowers follow through and conduct their financial affairs with discipline, ensuring repayment and allowing the borrowers to develop good credit standing. The bank also accepts deposits, provides other services, and runs several development-oriented businesses including fabric, telephone and energy companies. The bank's credit policy to support under-served populations has led to the overwhelming majority (98%) of its borrowers being women.
Grameen Bank originated in 1976, in the work of Professor Muhammad Yunus, Professor at University of Chittagong, who launched a research project to study how to design a credit delivery system to provide banking services to the rural poor. Based on his positive results, in October 1983 the Grameen Bank was authorized by national legislation as an independent bank. In 2006, the bank and its founder, Muhammad Yunus, were jointly awarded the Nobel Peace Prize. In 1998 the Bank's "Low-cost Housing Program" won a World Habitat Award. In 2011, the Bangladesh Government forced Muhammad Yunus to resign from Grameen Bank, saying that at age 72, he was years beyond the legal limit for the position.
Muhammad Yunus earned a doctorate in economics from Vanderbilt University in the United States. He was inspired during the Bangladesh famine of 1974 to make a small loan of US$27 to a group of 42 families as start-up money so that they could make items for sale, without the burdens of high interest under predatory lending. Yunus believed that making such loans available to a larger population could stimulate businesses and reduce the widespread rural poverty in Bangladesh.
Yunus developed the principles of the Grameen Bank (literally, "Bank of the Villages" in Bengali) from his research and experience. He began to expand microcredit as a research project together with 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 near the University of Chittagong became the first areas eligible for service from Grameen Bank. Proving successful, the Bank project, with support from the central Bangladesh Bank, was extended in 1979 to the Tangail District (to the north of the capital, Dhaka). The bank's success continued and its services were extended to other districts of Bangladesh.
By a Bangladeshi government ordinance on October 2, 1983, the project was authorized and established as an independent bank. Bankers Ron Grzywinski and Mary Houghton of ShoreBank, a community development bank in Chicago, helped Yunus with the official incorporation of the bank under a grant from the Ford Foundation. The bank's repayment rate suffered from the economic disruption following the 1998 flood in Bangladesh, but it recovered in the subsequent years. By the beginning of 2005, the bank had loaned over USD 4.7 billion and by the end of 2008, USD 7.6 billion to the poor.
The Bank continues to expand across the nation and provide 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, including a World Bank initiative to finance Grameen-type schemes.
The bank has gained 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 low rates. By 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 are implicitly subsidised, as they are guaranteed by the Government of Bangladesh, and still they are sold above the bank rate.
Application of microcredit 
Grameen Bank is founded on the principle that loans are better than charity to interrupt poverty: they offer people the opportunity to take initiatives in business or agriculture, which provide earnings and enable them to pay off the debt.
The bank is founded on the belief that people have endless potential, and unleashing their creativity and initiative helps them end poverty. Grameen has offered credit to classes of people formerly underserved: the poor, women, illiterate, and unemployed people. Access to credit is based on reasonable terms, such as the group lending system and weekly-installment payments, with reasonably long terms of loans, enabling the poor to build on their existing skills to earn better income in each cycle of loans.
Grameen’s objective has been to promote financial independence among the poor. Yunus encourages all borrowers to become savers, so that their local capital can be converted into new loans to others. Since 1995, Grameen has funded 90 percent of its loans with interest income and deposits collected, aligning the interests of its new borrowers and depositor-shareholders. Grameen converts deposits made in villages into loans for the more needy in the villages (Yunus and Jolis 1998).
It targets the poorest of the poor, with a particular emphasis on women, who receive 95 percent of the bank’s loans. Women traditionally had less access to financial alternatives of ordinary credit lines and incomes. They were seen to have an inequitable share of power in household decision making. Yunus and others have found that lending to women generates considerable secondary effects, including empowerment of a marginalized segment of society (Yunus and Jolis 1998), who share betterment of income with their children, unlike many men. Yunus claims that in 2004, women still have difficulty getting loans; they comprise less than 1 percent of borrowers from commercial banks (Yunus 2004). The interest rates charged by microfinance institutes including Grameen Bank is high compared to that of traditional banks; Grameen's interest (reducing balance basis) on its main credit product is about 20%.
Grameen has diversified the types of loans it makes. It supports hand-powered wells and loans to support the enterprises of Grameen members' immediate relatives. It has found that seasonal agricultural loans and lease-to-own agreements for equipment and livestock help the poor establish better agriculture. The bank has set a new goal: to make each of its branch locations free of poverty, as defined by benchmarks such as having adequate food and access to clean water and latrines.
Grameen Bank is best known for its system of solidarity lending. The Bank also incorporates a set of values embodied in Bangladesh by the Sixteen Decisions. At every branch of Grameen Bank, the borrowers recite these 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. This in turn helps bring about social change, and educate the next generation.
Solidarity lending is a cornerstone of microcredit, and the system is now used in more than 43 countries. Although each borrower must belong to a five-member group, the group is not required to give any guarantee for a loan to its members. Repayment responsibility rests solely on the individual borrower. The group and the centre oversee that everyone behaves responsibly and none gets into a repayment problem. No formal joint liability exists, i.e. group members are not obliged to pay on behalf of a defaulting member. But, in practice the group members often contribute the defaulted amount with an intention to collect the money from the defaulted member at a later time. Such behavior is encouraged because Grameen does not extend further credit to a group in which a member defaults.
No legal instrument (no written contract) is made between Grameen Bank and its borrowers; the system works based on trust. To supplement the lending, Grameen Bank requires the borrowing members to save very small amounts regularly in a number of funds, designated for emergency, the group, etc. These savings help serve as an insurance against contingencies.
In a country in which few women may take out loans from large commercial banks, Grameen has focused on women borrowers; 97% of its members are women. While a World Bank study has concluded that women's access to microcredit empowers them through greater access to resources and control over decision making, some other economists argue that the relationship between microcredit and women-empowerment is less straightforward.
In other areas, Grameen has had very high payback rates—over 98 percent. However, according to the Wall Street Journal, in 2001 a fifth of the bank's loans were more than a year overdue. Grameen says that more than half of its borrowers in Bangladesh (close to 50 million) have risen out of acute poverty thanks to their loan, 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 4 USD) loan.
Village Phone program 
The bank has diversified among different applications of microcredit. In the Village Phone program, women entrepreneurs can start businesses to provide wireless payphone service in rural areas. This program earned the bank the 2004 Petersburg Prize worth EUR 100,000, for its contribution of Technology to Development. In the 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.
Struggling members program 
In 2003, Grameen Bank started a new program, different from its traditional group-based lending, exclusively targeted to the beggars in Bangladesh. This program is focused on distributing small loans to beggars. The loans are completely interest-free, the repayment period can be arbitrarily long, and the borrower is covered under life insurance free of cost. For example, a beggar taking a small loan of around 100 taka (about US $1.50) may pay back only 2.00 taka (about 3.4 US cents) per week.
Operational statistics 
Grameen Bank is owned by the borrowers of the bank, most of whom are poor women. Of the total equity of the bank, the borrowers own 94%, and the remaining 6% is owned by the Government of Bangladesh.
From 2003-2007, the bank grew significantly between 2003-2007. As of October 2007, the total borrowers of the bank number 7.34 million, and 97% of those are women. The number of borrowers has more than doubled since 2003, when the bank had 3.12 million members. Similar growth can be observed in the number of villages covered. As of October 2007, the Bank has a staff of more than 24,703 employees; its 2,468 branches provide services to 80,257 villages, up from the 43,681 villages covered in 2003.
The bank has distributed Tk 684.13 billion (USD 11.35 billion) in loans, out of which Tk 610.81 billion (USD 10.11 billion) has been repaid. The bank claims a loan recovery rate of 96.67%, up from the 95% recovery rate claimed in 1998. David Roodman has critiqued the accounting practices that Grameen used to determine this rate.
The global number of potential micro-borrowers is estimated to be 1 billion, with a total loan demand of $250 billion. The present microfinance model is serving 100 million people with $25 billion of loans. The Grameen Bank is 95% owned by the local poor and 5% by the government.
- 1994, Grameen Bank received the Independence Day Award in 1994, which is the highest government award.
- October 13, 2006, 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." 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.
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.
Grameen Bank is the only business corporation to have won a Nobel Prize. Professor Ole Danbolt Mjøs, Chairman of the Norwegian Nobel Committee, in his speech said that, by giving the prize to Grameen Bank and Muhammad Yunus, the Norwegian Nobel Committee wanted to encourage attention on achievements of the Muslim world, on the women's perspective, and on the fight against poverty.
Related ventures 
The Grameen Bank has grown into over two dozen enterprises of the Grameen Family of Enterprises. These 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, was listed as an Initial Public Offering. One of the first mutual funds of its kind, GMFO will allow the more than four million Grameen bank members, as well as non-members, to buy into Bangladesh's capital markets. The Bank and its constituents are together worth over USD 7.4 billion.
The Grameen Foundation was developed to share the Grameen philosophy and expand the benefits of microfinance for the world’s poorest people. Grameen Foundation, which has an A-rating from [Charity Watch], provides microloans in the USA (the only developed country where this is done), and supports microfinance institutions worldwide with loan guarantees, training, and technology transfer. As of 2008, Grameen Foundation supports microfinance institutions in the following regions:
- Asia-Pacific: Bangladesh, China, East Timor, Indonesia, India, Lebanon, Pakistan, Philippines, Saudi Arabia, Yemen
- Americas: Bolivia, Dominican Republic, El Salvador, Haiti, Honduras, Mexico, Peru, US
- Africa: Cameroon, Egypt, Ethiopia, Ghana, Morocco, Nigeria, Rwanda, Tunisia, Uganda
Some analysts have suggested that microcredit can bring communities into debt from which they cannot escape. Researchers have noted instances when microloans from the Grameen Bank were linked to exploitation and pressures on poor families to sell their belongings, leading in extreme cases to humiliation and ultimately suicides.
The Mises Institute's Jeffrey Tucker suggests that microcredit banks depend on subsidies in order to operate, thus acting as another example of welfare. Yunus believes that he is working against the subsidized economy, giving borrowers the opportunity to create businesses. Some of Tucker's criticism is based on his interpretation of Grameen's "16 decisions," seen as indoctrination, without considering what they mean in the context of poor, illiterate peasants.
Maulana Ibrahim, a reactionary imam in Bangladesh, spoke out against the Grameen Bank in 1993 for fostering "un-Islamic ways." He alleged that the lenders' pledge required women to say they would not obey their husbands and would not live in poverty anymore.
The Norwegian documentary, Caught in Micro debt, said that Grameen evaded taxes. The Spanish documentary, Microcredit, also suggested this. The accusation is based on the unauthorised transfer of approximately US$100 million, donated by The Norwegian Agency for Development Cooperation (NORAD), from one Grameen entity to another in 1996, before the expiry of the Grameen Bank's tax exemption.
Muhammad Yunus denies that this is tax evasion:
"There is no question of tax evasion here. The Government has provided organizations with opportunities; we have made use of these opportunities with aim of benefitting our shareholders who are the rural poor women of Bangladesh."
David Roodman and Jonathan Morduch question the statistical validity of studies of microcredit's effects on poverty, noting the complexity of the situations involved. Yoolim Lee and Ruth David discuss how microfinance and the Grameen model in South India have in recent years been distorted by venture capitalism and profit-makers. In sme cases, poor rural families have suffered debt spirals, harassment by microfinance debt collectors, and in some cases suicide.
Representation in other media 
- The film To Catch a Dollar (2010) documents the process of establishing Grameen America programs in Queens, New York in 2008. It premiered at the 2010 Sundance Film Festival.
See also 
- Accion International
- Acción Emprendedora
- Accion USA
- Cooperative banking
- Count Me In
- Flat rate (finance)
- Grama Vidiyal, Indian Microfinance Bank
- Grameen America, Grameen's microfinance project in the United States
- Islamic banking
- Micro credit for water supply and sanitation
- Opportunity International
- Project Enterprise
- Solidarity lending
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- "Profit and Loss Account". Grameen Bank Webpage. Grameen Bank. Retrieved 10 September 2011.
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- "The Nobel Prize for 2006". The Nobel Peace Prize for 2006. 2006-10-13. Retrieved 2006-10-13.
- Polgreen, Lydia; Bajaj, Vikas (2011-03-02). "Microcredit Pioneer Ousted, Head of Bangladeshi Bank Says". The New York Times. Retrieved 2012-10-09.
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- Brandon Glenn (2006-10-16). "ShoreBank leaders had hand in Nobel prize". Chicago Business News. Retrieved 2007-05-15.
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- "What is Microcredit ?". Grameen Bank. Retrieved 11 March 2011.
- Yunus, M. "Halving poverty by 2015—We can actually make it happen". London: Aurum Press.
- Fernando, Nimal A. (May 2006). Understanding and Dealing with High Interest Rates on Microcredit - A Note to Policy Makers in the Asia and Pacific Region (PDF). Manila, Philippines: ADB. p. 8.
- Sherraden, Margaret S. (1998). Community Economic Development and Social Work. Binghamton, New York: Haworth Press. pp. 113–114. ISBN 0-7890-0506-9.
- Siddiqui, Kamal, An Evaluation of the Grameen Bank Operation (Dhaka: National Institute of Local Government, 1984)
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- Sinclair, Paul (2007-12-22). "Grameen Micro-Credit & How to End Poverty from the Roots Up". One World One People. Retrieved 2008-02-04.
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- Feiner, Susan F.; Barker, Drucilla K. (Nov-Dec 2006). "Microcredit and Women's Poverty". Dollar & Sense, The magazine of Economic Justice. Boston, US: Economic Affairs Bureau, Inc.
- Daniel Perl, Michael M. Phillips (2001-11-27). "Grameen Bank, Which Pioneered Loans For the Poor, Has Hit a Repayment Snag". Wall Street Journal. Retrieved 2008-03-25.
- Fraser, Ian (2007-08-03). "Microfinance comes of age". Cover Story. Scottish Banker magazine. Archived from the original on October 7, 2007. Retrieved 2008-01-30.
- "Grameen Bank-Village Phone Wins Global Competition for Contribution of Technology to Development" (PDF). Development Gateway Foundation (Washington, DC). 2004-07-27. Archived from the original on February 26, 2008. Retrieved 2008-01-31.
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- "Nation parties on Nobel win". The Daily Star. 2006-10-15. Vol 5 Num 850. Retrieved 2008-02-04.
- "Grameen Family of Enterprises". Grameen Website. Grameen Communications. 2007-11-28. Archived from the original on August 22, 2008. Retrieved 2009-07-08.
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- "Grameen Foundation Annual Report 2006" (PDF). Grameen Foundation, Washington, DC, USA. 2007-08-01. Archived from the original on February 26, 2008. Retrieved 2008-01-31.
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- "Mikrolånen har blivit en skuldfälla för fattiga (Swedish)". SVT.se.
- Tucker, Jeffrey (November 1995). "The Micro-Credit Cult. The Free Market". Mises Institute.
- Hashmi, Taj ul-Islam (2000). Women and Islam in Bangladesh: Beyond subjection and tyranny. ISBN 978-0-312-22219-2.
- "David Roodman : Center for Global Development : CGD Experts". Cgdev.org. 2009-10-22. Retrieved 2009-12-20.
- "Jonathan Morduch's Home Page". Nyu.edu. Retrieved 2009-12-20.
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Further reading 
- Bornstein, David. The Price of a Dream: The Story of the Grameen Bank. Oxford University Press, NY: 2005, ISBN 0-19-518749-0
- Cockburn, Alexander, "A Nobel Peace Prize for Neoliberalism?"
- Counts, Alex, Give Us Credit, Crown, 1996, ISBN 0-8129-2464-9
- "Micro Loans for the Very Poor", New York Times, February 16, 1997
- Sachs, Jeffrey. "The End of Poverty". Penguin Books, NY: 2005, ISBN 0-14-303658-0
- Yunus, Muhammad (with Alan Jolis), Banker to the Poor: The Autobiography of Muhammad Yunus, Founder of Grameen Bank, Oxford University Press: USA, ISBN 0-19-579537-7
- Grameen Bank official site
- gramBangla, Australian Bangladeshi Community Grameen Support Group
- Grameen Bank: Taking Capitalism to the Poor, Mainsah, E. et al., Chazen Journal of International Business, Columbia Business School, 2004
- "Ending Global Poverty". MIT World. Video by Muhammad Yunus talking about Grameen Bank
- Grameen II: The First Five Years, 2001-2005; Stuart Rutherford et al. for MicroSave, February 2006.
- Grameen Bank History
- The crushing burden of microcredit F24 international report
- Grameen America - Grameen's microfinance operations in the US