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In Bangladesh, Grameen banks have side-stepped the local power structure and provided a mechanism for the poor to take responsibility for their own socio-economic development.

These village banks have been so successful that the idea has been taken up in other parts of Asia, in Africa and the developed world of North America. Loans to the poor, even to the illiterate and those without collateral, have proved to be good banking practice. Contrary to traditional banking wisdom, the poor and especially women, are an eminently bankable group. A repayment rate of 98% ensures that the bank can be self sustaining at any level.

The Grameen Bank was started in 1976 by Muhammad Yunus, a 37-year-old economics professor at Chittagong University, who had in mind certain clearly defined objectives. He wanted to extend banking facilities to the poor; to eliminate exploitation by money lenders; and create opportunities for self employment amongst landless people who had scant resources for earning a decent living. He wanted to bring the poor into a process they could understand. He wanted them to learn how to run it themselves in an atmosphere of mutual support. As an economist, he knew that credit was basic to economic improvement. He recognised too that, in the group process, social and political awareness would strengthen.

By 1980, seven nationalised banks were involved in running 25 branches of the Grameen Bank Project with groups in 300 villages. Three years latter the GBP was formally inaugurated as the Grameen Bank. Funds for its subsequent rapid expansion were provided by the Bangladesh Bank (in association with the government) and other institutions including the Ford Foundation.

To become a member (not a customer) of the Grameen Bank, people form groups of five. It is this group organisation and group responsibility for the loans that is the strength of the Grameen Bank. Interaction within the group provides both discipline and support. Most groups are entirely of women and their shares may not be sold to men. About 90% of borrowers are women. There are sound reasons for this. Women are a good credit risk. They repay the loan in reliable weekly instalments. The income they earn goes immediately into the household economy and benefits the local community.

Where a Grameen Bank is part of a village life in Bangladesh, the villagers and their children do not starve anymore: their houses keep out of the monsoon: the women have more than one sari and some undergarments: some have opened schools with their savings. The Bank offers more than credit - such goods as seeds, saplings, and oral rehydration kits (for infant diarrhoea) are sold to members at cost.

Yunus has now set up the Grameen Trust with the idea of expanding into business management utilising the "corpses" of old development projects that litter Bangladesh. Offshore he has acted as consultant for various adaptations of his group lending program, which is a form of 'development bank" working as it does for the economic betterment of poor people and communities. Similar initiatives are being tried out in Malaysia, Burkina Faso, Guinea, Mali and the USA. The South Shore Bank of Chicago is a neighbourhood development corporation. "The availability of credit", says Yunus," combined with restored self confidence, can precipitate the release of local energies, inducing citizens to risk their own savings and become personal stakeholders in the future of the community".

Source: Pacific World, No. 28, Aug. 1993.


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