Grameen Bank

Grameen Bank

Founded	1983
Founder	Muhammad Yunus
Type	Microfinance organization
Headquarters	Dhaka, Bangladesh
Area served	Bangladesh
Products	Microcredit, Microfinance
Key people	Muhammad Yunus
Website	Grameen Bank

Grameen Bank is a pioneering microfinance organization and community development bank founded in Bangladesh. It was established in 1983 by Muhammad Yunus, a Bangladeshi social entrepreneur, banker, economist, and civil society leader. The bank is renowned for its innovative approach to providing financial services to the rural poor, particularly women, who are traditionally excluded from the formal banking sector.

History

The concept of Grameen Bank originated in 1976 when Muhammad Yunus, then a professor of economics at University of Chittagong, initiated a research project to design a credit delivery system to provide banking services targeted at the rural poor. The project began in the village of Jobra, near Chittagong, and was later expanded to other villages.

In 1983, the project was transformed into an independent bank by the government of Bangladesh. Grameen Bank was established as a specialized financial institution with the mandate to provide microcredit to the impoverished without requiring collateral.

Objectives

Grameen Bank aims to:

• Provide credit to the poorest of the poor in rural Bangladesh without any collateral.
• Eliminate the exploitation of the poor by money lenders.
• Create opportunities for self-employment for the vast multitude of unemployed people in rural Bangladesh.
• Bring the disadvantaged, mostly the women from the poorest households, within the fold of an organizational format which they can understand and manage by themselves.

Methodology

Grameen Bank's methodology is based on the principle of group lending. Borrowers are organized into small groups, typically consisting of five members. These groups are part of larger centers, which meet weekly to discuss financial matters and repay loans. The group lending model ensures peer support and accountability, reducing the risk of default.

The bank provides small loans, known as microcredit, to individuals who do not have access to traditional banking services. These loans are used for a variety of purposes, including starting small businesses, agriculture, and housing.

Impact

Grameen Bank has had a significant impact on poverty alleviation and women's empowerment in Bangladesh. By providing access to credit, the bank has enabled millions of people to improve their living standards, increase their income, and gain financial independence.

The success of Grameen Bank has inspired the global microfinance movement, leading to the establishment of similar institutions worldwide. In 2006, Muhammad Yunus and Grameen Bank were jointly awarded the Nobel Peace Prize for their efforts to create economic and social development from below.

Criticisms

Despite its successes, Grameen Bank has faced criticisms. Some critics argue that microcredit can lead to over-indebtedness among borrowers. Others have raised concerns about the high interest rates charged by some microfinance institutions. However, Grameen Bank maintains that its interest rates are fair and that its lending practices are designed to prevent over-indebtedness.

Also see

• Microfinance
• Muhammad Yunus
• Nobel Peace Prize
• Poverty alleviation
• Women's empowerment