Grameen Bank Bangladesh

1. Grameen Bank
Presented by
Name: Muhammad Ali
Roll No: MBKM-13-40
Presented to :
Sir Khalid rafique
IBF, BZU, Multan

2. Historical Background
•Bangladesh is a predominantly rural economy whose
labor force grows by 2.4 percent annually but whose
agriculture, industry and service sectors can
accommodate an annual growth rate of only 1.7
percent.
• Since the agricultural sector supplies 78 percent of
rural employment started the Grameen Bank in 1976
as a research project.
•The Grameen Bank believes that with the appropriate
support, the poor can be productively employed in
income generating activities, including processing and
manufacturing, transportation, storing and marketing
agricultural produce and raising livestock.

3. What is 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.

4. What is the Grameen Bank?
The Grameen Bank is a rural bank in Bangladesh
that provides micro credit to the rural poor,
particularly women, who own less than half an acre
of land or whose assets do not exceed the value of
one acre of land. Unlike traditional commercial bank
loans, Grameen Bank loans need not be secured by
collateral.

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

6. “It’s not people who aren’t credit-worthy. It’s
banks that aren’t people worthy.”

7. GRAMEEN
BANK
Covers almost the
Whole Country

8. Grameen Bank vs. Conventional Banks
๏ To bring economic and social change
to the poor.
๏ Based on trust
๏ Looks at what the borrower can have
๏ Located in rural areas
๏ The bank goes to the customer
๏ Flexible payment scheme
๏ Most owners and borrowers are poor
women
๏ Loans are for productive activity, not
consumption
๏ To make profit
๏ Based on collateral
๏ Looks at what the borrower already
has
๏ Located in urban areas
๏ Customers have to go to the bank
๏ Strict payment scheme
๏ Most owners and borrowers are
wealthy men
๏ Loans could be used for
consumption or other activities.

9. Member I
Member 2
Member 3
Member 4
Member 5
Secretary
and
Chairperson
Weekly
Meeting
Weekly
Savings
Training
Extension of
Loan
First Two
Members
Next two
Members
Chairperson
Credit Delivery Model

10. Social Collateral Approach vs. Traditional
Collateral Approach
• Small borrowers self-
select into group
• Information
• Diversification
• Peer pressure ensures
repayment
• Individual finds others to
co-sign or guarantee
• Banker must screen
• Diversification is banker’s
responsibility
• Banker monitors borrower
for repayment

11. Peer Pressure
Joint liability: every member of the peer group is in
default if any member is.
If peers can/will impose social penalties on each
other, this adds an additional incentive not to
default on one’s portion.
=> reduces moral hazard
 reduces the riskiness of the loans
 increases likelihood of obtaining the loan

12. Information Transfer
Borrowers self-select into groups with people they
know and trust.
 reduces incidence of adverse selection
 new or low income entrepreneurs more welcome
 increased value of the group loan as an asset (to
the lender)

13. Mutual Insurance
The group is a safety net against default and its
consequences for each borrower
and the lender.
Members effectively insure each other across
project-specific downside risks.
=> Less credit risk.
=>Applications rates rise.
=> Loan approval rates can rise.

14. For what purposes loans are granted
๏ Average loan size is $120 and must be used for
business venture
๏ Self Employment- Income generating activities.
๏ Credit for installation of tube wells that supply drinking
water and irrigation for kitchen gardens
๏ Credit for seasonal cultivation to buy agricultural
inputs
๏ Loan for leasing equipment / machinery,
๏ Finance projects undertaken by the entire family of a
seasoned borrower.

15. Micro Credit Programs
Village Phone program
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... 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.
Housing Loans
Grameen has made housing loans totaling $190 million to build over 560,000
homes with near-perfect repayment. By 1989, their average housing loan had
grown to $300. That year, the Grameen housing program received the Aga
Khan International Award for Architecture

16. Structure of Grameen Bank
Head Office
Zonal Offices
Area Offices
Branches
Centres
Groups
In Villages
1 ZO for 8 Area Offices
1 AO for 8 10-12 Branches
1 Branch for 50-60 Centers
1 Center for 6-8 Groups
Each Group will have 5 members

17. Governance of Grameen Bank
Governance: Managed by 13 Member Board
comprising 9 Members from borrower shareholders,
3 nominees of Gove of Government, and 0ne
Managing Director rnment, and 0ne Managing
Director

18. Funding Sources
Foreign Loan
Sources
Commercial
Lending
Foreign Donation
Central Bank
Lending

19. Indicators of Poverty Line
Grameen Bank borrower is said to have
moved out from poverty if it meets the following
criteria
– The family lives in a house worth at least Tk. 25,000
or a house with a tin roof, and each member of the
family is able to sleep on a bed instead of on the floor.
– Family members drink pure water of tube-wells,
boiled water or water purified by using alum, arsenic-
free, purifying tablets or pitcher filters.
– All children in the family over six years of age are all
going to school or finished primary school. Family
experiences no difficulty in having three square meals
a day throughout the year, i. e. no member of the
family goes hungry any time of the year.
–

20. Indicators of Poverty Line
• Minimum weekly loan installment of the borrower is Tk.
200 or more.
• Family uses sanitary latrine.
• Family members have adequate clothing for every day
use, warm clothing for winter, such as shawls,
sweaters, blankets, etc, and mosquito-nets to protect
themselves from mosquitoes.
• Family has sources of additional income, such as
vegetable garden, fruit-bearing trees, etc, so that they
are able to fall back on these sources of income when
they need additional money.
• The borrower maintains an average annual balance of
Tk. 5,000 in her savings accounts.
• Family can take care of the health. If any member of
the family falls ill, family can afford to take all necessary
steps to seek adequate healthcare.

21. Vital Statistics
•Members : 6.83 million – 96 % are women,
1,086,744 groups
•Area Coverage : 73,609 villages through 121,755
centres, 2283 branches and 20,233 staff
•Deposits: Tk 41.22 b – 62 % from members , rates
8.5 to 12.0%
•Loans: Cumulative disbursement - Tk 301.72 b
Loan Outstanding – Tk 32.66 b , Annual
disbursement – Tk – 49.46 b
•Interest rate : 20% (declining basis) for income
generating loans, 8% for housing loans, 5% for
student loans, and 0% (interest-free) loans for
Struggling Members (beggars)

22. Sustainability
•Loan Recovery Rate : 98.91 per cent
•ROI on loans – Income generating activities – 20 %, Housing
Purposes – 8 %, Student loan – 5 %
•All interest rate are simple interest & applied on declining
basis. Interest collected not to exceed Principal
•After 1995 the Bank had decided not to receive anymore donor
funds. It has become self reliant.

23. Grameen Family of Enterprises
Grameen started to diversify in 1980 and these interests
grown into separate organizations-:
•Grameen Communications- not for profit IT company.
•Grameen Shakti- promote and develop renewable
energy technology.
•Grameen Telecom
•Grameen phone- GSM based cellular operator
•Grameen Fund- to provide capital to SMEs
•Grameen Trust- Aid in replication of the model
internationally
•Grameen Fisheries
•Grameen Danone Foods -joint venture between
Grameen Bank and French food company

24. Some Grameen Replicators in India
1. Share Micro Fin Ltd, Hyderabad
2. Spandana, Guntur
3. Swyam Krishi Sangam, Hyderabad
4. Cashpor Micro Credit, Varanasi
5. Grameen Koota, Bangalore

25. Nobel Peace Prize
 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.
“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.”
 Only business corporation to have won a Nobel Prize

26. Conclusion
From its inception as an experimental project in 1976, the
Grameen Bank has been led by Dr. Yunus, whose dynamic
leadership has positively influenced its performance and
expansion. However, since it began operating as a bank in
1983, its growth as a well-structured and decentralized
organization has been instrumental in its phenomenal
expansion and replication. Unlike other development financial
institutions and even government infrastructural investments,
the expansion and location of Grameen Bank branches does
not depend on favorable agro climate and area factors
considered important for financial institutions' viability. The
Grameen Bank has thus proven that financial intermediation
can alleviate poverty.