Review on Grameen Bank

It seems to me that there is something spiritual about microfinance.
Microfinance is giving the poor access to credit.
What a simple and logical idea, is it not?

A “micro” loan helps poor people, who wish to become self sufficient, to undertake income generating activities. These actions will give the opportunity to borrowers to cross the poverty line and will ultimately contribute to the gross domestic product. The basic loan is the most popular product offered by Grameen Bank in Bangladesh. Borrowers are charged with an interest rate of 10% (flat rate) or 20% (declining rate) over a period of 1 year.

Dr. Mohummad Yunus officially started the Grameen Bank in 1983. Since then, the Grameen Bank’s pioneering use of micro-credit has been duplicated across the globe.

To remain sustainable Grameen Bank foresees the behavior of its people, encouraging them to repay their loans. Indeed Grameen pioneered the group lending model. Moreover each group member benefits from the support of fellow members and stay accountable to the others, creating a powerful form of social collateral. Nowadays Grameen Bank records a repayment rate of 97.31% for 7,904,797 borrowers.

Grameen Bank assists the people of Bangladesh by giving access to credit and savings.
Dr. Mohummad Yunus philosophy assumes that the poor already have their own skills since they can survive on a day to day basis.

”Grameen helps the people to discover and diversify themselves” a village counselor told me in the district of Khulna. From weaving factories, grocery stores, fruit fields, rice fields, fisheries to milk cows the poor of Bangladesh abound with ideas and entrepreneurial skills to create income-generating activities.

The ultimate goal of Grameen Bank is not to make a substantial profit; rather a means of providing all the financial products to poor. That is why Grameen introduced a special type of loan for those subject to extreme poverty. A typical loan to a beggar is Tk. 500 (US$ 9.00). It is collateral-free and there is no interest charged on it. The repayment schedule is flexible, decided by the struggling member herself. The installments are to be paid according to their convenience and earning capability, and must not be paid from money earned from begging.

Furthermore to remain viable, Grameen has to take care of its borrowers. Bangladesh is a country prone to natural disasters and each year is hit by cyclones, floods or even typhoons. On May 25th 2009, the cyclone Aila hit Bangladesh and put the coastal population in severe danger. It swept away many areas and took the lives of more than 3,500 people, who were still recovering from the cyclone Sidr.

I went to the Kulhna district last July and witnessed the affected area with my own eyes. I interviewed villagers, teachers and local representatives to learn about national emergency procedure. Grameen came the following day to bring pure water, health-care, 10kgs of rice for all villagers and Tk. 500 grant for its borrowers. Moreover local branches have stopped to collect the money until borrowers are back on their feet.