Grameen Bank: Revolutionizing Credit

Written by on March 13, 2009 in Africa, Asia, Entrepreneurship, Microfinance, Videos, World - 1 Comment

grameen_bank

When Dr. Muhammad Yunus founded Grameen Bank in 1983, he certainly did not expect to initiate the revolution we now know as micro-credit. Instead, he founded Grameen Bank because of the staggering poverty which surrounded him in his native country of Bangladesh. Dr. Yunus sincerely believed that the poor (almost half the world’s population by western standards) deserved basic human rights to lift themselves out of poverty, earn a minimum wage living and perhaps even send their children to college.

But in his country of Bangladesh (as is the case in most countries), the poor were left behind. The poorest of the poor were understandably illiterate, with no collateral, often times begging. For those that could read and write, they were not ‘credit worthy’ and since poverty tends to be generational, they had no one to turn to.

Dr. Yunus, in his experiences working with poor in various agricultural projects obtained a key piece of information most of us have neglected to understand: most of the poor in our world are entrepreneurs at heart and the perpetual poverty in which they reside is through no fault of their own, but rather a societal bias.

Here is Dr. Yunus explaining Grameen Bank’s vision at MIT.

The poorest of the poor he noticed were constantly seeking means of lifting themselves and families out of poverty. Whether by farming, crafting, or fishing, they were diligently seeking a higher standard of living. However, without institutional help, without capital, their tireless efforts are often times in vain.

Banks would not lend to them citing lack of a credit history, lack of collateral, illiteracy or high risks of default. Interestingly, banks only lent money to individuals who already had money, creating a vicious cycle and leaving billions behind.

Dr. Yunus decided to take matters into his own hand. He worked tirelessly, fighting conventional wisdom, institutional bureaucracy and cynics everywhere to found Grameen Bank. Grameen offers micro loans (think $25) to poor families, requiring no collateral. Instead, borrowers (94% women) form support groups to encourage and hold each other accountable. The bank has made over $5 billion in collateral free loans, and the repayment rate is a staggering 98%. Take that conventional wisdom.

grameen headquarters

Besides, an extraordinarily high repayment rate on tiny loans, Grameen Bank loans have helped over 7 million poor families in Bangladesh and is projected to reach 100% of the poor within that country by 2012. During the previous 30 years, Grameen has expanded significantly launching various enterprises to assist the poor including: Grameen Krishi (agriculture training), Grameen Fund (venture funding), Grameen Telecom (telephones), Grameen Health and many others. And did we mention Grameen and Dr. Yunus won the Nobel Peace Prize in 2006?

yunus_nobel_prize

Now, the fun stuff. We can all agree that Grameen Bank has pioneered a powerfully new method of thinking about poverty alleviation and one that is, thus far, remarkably successful. However, there are many questions still unanswered and we would like to invite some discussion of a few of these. Do you think micro credit is sustainable? Can we successfully replicate the Grameen ‘model’ in other developing countries? What will it take to once and for all alleviate poverty on a global scale?

Tell us what you think!

Grameen Bank

grameen_logo

  • Grameen Bank is a microfinance organization and community bank lending to the poor via micro-credit
  • Organization Type: For-Profit
  • Website: www.grameenfoundation.org
  • Founder(s):Muhammad Yunus
  • Founded: 1983
  • Location:New York, New York, United States of America
  • See complete company list here

(Photo credit FARJANA K. GODHULY/AFP/Getty Images)

Naiomi

Naiomi is passionate about business for good and social entrepreneurship. As co-founder of SocialEarth, she hopes to help create an information platform enabling those doing good to share their stories with those those seeking to help and are interested in moving our world forward.

More Posts - Website