Creating economic and social development from below

When Professor Muhammad Yunus, Head of the Rural Economics Program at the University of Chittagong, launched an experiment in helping the poor by lending $27 to very poor women in a small village in Bangladesh, he had no idea that 30 years later, he and the bank he created would share the 2006 Nobel Peace Prize. That "small bubble of hope" eventually grew into $6 billion in very small loans to very poor women and inspired a global microcredit movement that now reaches more than 100 million, from rural South Africa to inner city Chicago.

The Grameen Bank Project (Grameen means "rural" or "village" in Bangla language) began in 1976 with the goals of:

  • extending banking to poor men and women,
  • ending moneylender exploitation of the poor,
  • creating self-employment opportunities for unemployed people in rural Bangladesh,
  • bringing the disadvantaged, mostly women from the poorest households, within an organizational format they can understand and manage themselves,
  • turning the vicious circle of "low income, low saving & low investment" into a virtuous circle of "low income, injection of credit, investment, more income, more savings, more investment, more income".

After three years of research in villages near the university, the project expanded into other districts. In 1983, government legislation made it an independent bank. Today, bank borrowers own 90% of its shares; the government holds the other 10%.

As of May, 2006, Grameen Bank has 6.67 million borrowers, 97% of them women. With 2247 branches, GB serves 72,096 villages - more than 86% of all Bangladesh villages. Bank members have a higher average household income than non-members, and only 20% live below the poverty level compared with 56% for comparable non-Grameen Bank members. The landless have benefited most, followed by marginal landowners, as many now are self-employed rather than agricultural labourers.

Grameen Bank is based on the voluntary formation of small groups of five people to provide mutual, morally binding group guarantees in lieu of collateral. At first only two group members can apply for a loan. If their repayment performance is good, the next two borrowers can apply and, finally, the fifth member as well. The assumption is that with credit, individual borrowers will be able to engage in income-earning activities such as paddy husking, lime-making, pottery making, weaving, sewing, storage, marketing and transport. From the beginning, women proved reliable borrowers and astute enterpreneurs who improved their lives and that of their children and whole household.

Bank operations are carried out by "Bicycle bankers" in branch units with delegated authority and features careful selection of borrowers, group peer pressure, and a repayment scheme based on 50 weekly installments. Saving is encouraged by providing that five per cent of loans is credited to a group fund, and women now hold most such savings. Borrowers are guided by the 16 Decisions that shape how they live their lives.

The Nobel Committee said Yunus has translated visions into practical action for the benefit of millions of people, not only in Bangladesh, but also in many other countries. Grameen Bank has been a source of ideas and models for micro-credit institutions that have sprung up around the world and has shown that "these millions of small people with their millions of small pursuits can add up to create the biggest development wonder."

Grameen Bank Bhavan

Mirpur-1, Dhaka-1216

Bangladesh.

The story above was adapted from materials on the Grameen Bank website. 

 

 

The International Herald Tribune reports that Muhammad Yunus is working with the Chinese government to bring the Grameen Bank lending system to rural China within a year. Yunus told a news conference in Hong Kong that China had invited him to begin a trial of the "microcredit" system in one of three remote locations that could lead to expansion of the program throughout China. China already has more than 100 separate microcredit programs, Yunus said, but they have attracted only about 100,000 customers over the past 12 years. Yunus said he had invited Chinese officials to select "a difficult spot" so that he could prove the value of the system and that he expected the Chinese trial to begin with fewer than 50,000 borrowers.

For the full story, see “Nobel laureate proposing loans to rural China” by Victoria Shannon, datelined Hong Kong December 3, 2006.

 


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