The Asian University for Women Writing Team, Dhaka Community Managers
Grameen Bank is one of the most successful experiments in extending credit to Bangladesh’s poor. Many have used microfinance to pull themselves out of poverty. The beginnings of Grameen Bank can be traced back to 1976, when Professor Muhammad Yunus, the head of the Rural Economics Program at the University of Chittagong, launched a research project to examine the possibility of designing a credit delivery system to provide banking services for the rural poor. This research project grew, and as of 2011, Grameen Bank’s 23,144 employees serve 8.349 million borrowers (97 percent of which are women) in 81,379 villages, covering more than 97 percent of the total villages in Bangladesh. Borrowers own 90 percent of the bank’s shares, while the remaining 10 percent is owned by the government.
The Grameen Bank’s loan system is divided into several steps. The first step is to encourage the poor to believe that they can succeed as an entrepreneur. The poor attend a training program, and then draft a credit proposal. Only then do the beneficiaries receive the funds for investment. The rest of the process includes fund collection, returns, operations, and credit cost.
Grameen’s methodology encourages borrowers to strive for specific goals in social, educational, and health sectors, known as the “sixteen decisions”. These include helping others in need, drinking clean water, and educating children. Grameen therefore does not limit itself to providing credit, but also works on other development goals.
Grameen Bank’s work shows how transformative a small amount of money can be in breaking the cycle of poverty. Microfinance has shown to be one of the most effective means of “developing from below,” leading not only to increased income but also to empowerment.
Photo credit: Schipul