Report on Grameen Bank Project
Chapter one: Introduction 1.1 Introduction: Grameen Bank Project was born in the village of Jobra, Bangladesh, in 1976. In 1983 it was transformed into a formal bank under a special law passed for its creation Grameen Bank (GB) has reversed conventional banking practice by removing the need for collateral and created a banking system based on mutual trust, accountability, participation and creativity. GB provides credit to the poorest of the poor in rural Bangladesh, without any collateral. At GB, credit is a cost effective weapon to fight poverty and it serves as a catalyst in the over all development of socio-economic conditions of the poor who have been kept outside the banking orbit on the ground that they are poor and hence not bankable. Professor Muhammad Yunus, the founder of "Grameen Bank" and its Managing Director, reasoned that if financial resources can be made available to the poor people on terms and conditions that are appropriate and reasonable, "these millions of small people with their millions of small pursuits can add up to create the biggest development wonder." As of December, 2008, it has 7.67 million borrowers, 97 percent of whom are women. With 2,539 branches, GB provides services in 83,566 villages, covering more than 99 percent of the total villages in Bangladesh. Grameen Bank's positive impact on its poor and formerly poor borrowers has been documented in many independent studies carried out by external agencies including the World Bank, the International Food Research Policy Institute (IFPRI) and the Bangladesh Institute of Development Studies (BIDS). 1.2 A Short History of Grameen Bank: If we are looking for one single action which will enable the poor to overcome their poverty, I would go for credit. Money is power. (Yunus, 1994a, p. 9) In 1974 when thousands of Bangladeshi died of hunger, Dr. Yunus, Chairman of the Economics Department at Chittagong University, found little use for the economic theories he had studied at Vanderbilt University in Tennessee. He decided to learn about the lives of poor people in the countryside surrounding the University: I met a woman, Sophia, who made bamboo stools. She was extremely poor. No wonder she was poor. She made only two pennies US$ a day by making bamboo stools. Why so little? Because she did not have the working capital to buy bamboo from the market for 20 pennies US$. A trader lent her the money with the condition that she would sell her product to him at the price he decides. Now you can guess why she was extremely poor. (Yunus, 1994a, pp. 3-4) He observed blatant exploitation of poor women by money-lenders. Women were paying up to 10% a day on their loans, keeping them from making reasonable gains from their work. Yunus concluded that cheap and accessible credit was key to combating poverty for Sophia and others like Golie G. Jansen and James L. Pippard 109 her. He found 42 other people who, if they were to cut out the lender, collectively only needed 30 dollars. When Yunus approached a traditional bank, he was informed that poor people had no right to credit. The bank explained that: Banks need collateral. The