The Grameen Bank approach
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CTA. 1995. The Grameen Bank approach. Spore 59. CTA, Wageningen, The Netherlands.
Permanent link to cite or share this item: http://hdl.handle.net/10568/47145
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In 1976, Dr Muhammed Yunus, Professor of Economics at Chittagong University, Bangladesh, began a programme to help bring the rural poor into a viable banking network. This was transformed in 1983 into the independent Grameen (village) Bank; a bank...
In 1976, Dr Muhammed Yunus, Professor of Economics at Chittagong University, Bangladesh, began a programme to help bring the rural poor into a viable banking network. This was transformed in 1983 into the independent Grameen (village) Bank; a bank for the poor, belonging to the poor, with only 25% of its shares being owned by the government. The Grameen Bank credit system is based on the group approach. Any individual applying for a loan must find four others, who are not relatives, to form a group. Such members must be like-minded and have similar economic and social backgrounds. The loan is not made to the group, however, but to each individual, who is personally responsible for repaying it. The function of the group is to exert peer pressure on potential loan defaulters. If one member of the group does not repay the loan, the group gets a bad reputation and will receive no further loans. But the group can also be supportive. A member unable to repay the loan may have very good reasons and thus may receive support from the other members, if only to protect the reputation of the group. A further advantage is that members can pool their resources to buy raw materials. This, for example, enables a group of weavers to buy their materials much more cheaply, directly from the mill. Before loans are granted borrowers undergo intensive training for one or two weeks on the philosophy and rules of the Grameen Bank. For their group to be recognized, they must satisfy the bank staff of their integrity and seriousness, of their understanding of the principles and procedures of the bank, and of their ability to write their names.
- CTA Spore (English)