Grameen Bank

Bank for the poor

Sunday 5 June 2011, by Ares Quere, Carmen Miranda, Clare Rodriguez, Maria Parras

5 inspired

a) The main facts about the activities of the company.

The principal role of the Grameen Bank is to provide microcredits. It is done by giving to a group of five people money on loan (with very few requirements), but if someone of the members is not capable to return the loan, the entire group loses the possibility of further credit. This creates an economical incentive for the group to act responsibly, making the bank economically viable.

The vast majority of customers (96%) are women, an opposite situation to that of large banks in the country. The bank?s payment record is amazing as well, the 98?85% of loans are returned.

The total average money distributed in loans is about 4.560 Euros.

Another peculiar feature of the bank is that it is owned by the people that receive the loans; they have the 94% of the company (the remaining 6% is owned by the government of Bangladesh).

b) The ethical challenges this company is addressing.

Currently, the main objectives of Grameen Bank are two:

? Poverty reduction

Through microcredits, they want to give to the most disadvantaged in society opportunities so that they can start a small business and generate a regular source of income, and so improve their standards of living and those of their families too.

This is the main objective of GB.

? The pursuit of economic and financial benefit of the institution

That is, that the bank?s income (mainly those from the interest charged to customers) are sufficient to meet all costs of the organization: operating costs and management, salaries and wages, cost of inflation and opportunity cost of capital.

For GB, this should never be the main objective (for any type of institution). They think that the pursuit of economic and financial benefit should be understood as a tool to achieve the main objective: poverty reduction, which will be more easily achievable with solvent institutions that are sustainable over the long term.

For GB reaching sustainability is a strategic objective.

The Grameen Bank believes that credit is an effective method in the fight against poverty, as well as a driver of socioeconomic development status. According to the founder (Muhammad Yunus), all these millions of small groups people with their millions of small projects can lead to the miracle of development.

That is, if the individuals can get access to credit, almost impossible for poor people through the traditional banks, they will be able to detect and implement viable economical activities and also to generate income that would allow them to quit the extreme poverty in which many of them are.

The GB sees credit as a human right. They think that the financial systems should be built in a way that those that have nothing, could have the major priority to access to credit.

The main distinction of the GB with the other traditional banking is that they provide credit based on people?s potential, without requiring physical guarantees.

And microfinance is not the only way the GB is trying to modify the social development; they are associated with many local organizations to carry out activities to train and aware women. All this news had powered the birth control, education of children, to phase out the dowry as well as the caste system, and to promote solidarity and humanitarian values.

c) What makes you believe this company is really ethical and why you trust it.

Because it has been a project that has gone countercurrent since 1976, that few people and maybe just Muhammad believed in it, because he follow his objective and he got it.

Because he didn?t care about the income that he would get, he thought first in the poor people in a way to give them opportunities, the ones that any government have ever thought and tried to do. It is important to say that at the beginning of this project, Muhammad gave the loans from its own money.

He has given also an important role to women who in the majority of those countries didn?t have a voice and were just housewives. He has been a godsend for those people, he cared and tried its best to achieve a new era, a new world for poor entrepreneurs that are in the right to move forward and to expect a better life.

He made his customers part of the project, which shows that with effort and good ideas poverty can be a thing of the past for lots of people. The fact that you are born in a developing country does not mean you don?t have a right to get on in life and have a decent future full of opportunities.

Because of all these things Muhammad Yunus has been recognized with the Prince of Asturias Award of Concord in 1998, the Simon Bol?var International Prize in 1996, and what is more, the Nobel Peace Prize in 2006 for its efforts to encourage economic and social development.

d) The possible challenges facing the company in the future and how you think this company may improve.

The world is changing as we speak and will continue to so at an incredible speed. GB?s main concern is to manage to eradicate poverty in the new future. They will continue with this task and will try to improve the situation in order to allow new opportunities to those who were brought up to think that they would always remain in poverty.

GB wants to expand its financial system to the entire world; they don?t want to eliminate the traditional system, but maintain both and lead to a better all round better economic climate.

It?s a long process from hard work to welfare; It should not be based on charity, ?don?t give them fish, teach them to fish?, you need to develop people?s skills to become self-sufficient and earn a decent living for themselves. Poverty should become a thing of the past and only glimpsed at in museums.

A social bank is not one that doesn?t care about profitability, but one that puts it in second place, second to helping local populations. A change is needed in economics, we all think that the only reason to invest is to make more income, and that is because no one has shown us an alternative way forward.

If GB achieves its objectives there will be investors interested in helping towards this social impact, it could probably start as a small project and develop gradually. News entrepreneurs would emerge, and with them, new activities, and more capital flow.

Communication and technology are powerful tools to achieve a world of free agents, especially for those disadvantaged groups, deprived of a voice. We can say that Internet will help to make the difference.

Some new projects had been carried out in Bangladesh those last years. An agreement with Danone (Grameen Danone Foods) to produce food for babies at a very low price (is already underway).

Another project is the creation of eye clinics for cataract operations. This illness is very common due to malnutrition (this cause has nothing in common with the one of the developed country for the seam illness).

As Yumus said, in the Microcredit System we are trying spread our wings as the Wright?s brothers did years ago. We are starting new projects here and there. Some people think that our method is not safe; others think that is rough and others that it is not appropriate for the object in mind. But GB can guarantee the day will come when we will be ready to take off.

We have achieved a world free of slavery, smallpox or apartheid, creating a world without poverty therefore seems plausible.


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1 Discussion / 1 Message

  • Grameen Bank 19 June 2012 at 15:57 , by Sara Pardo

    I would like to add that microfinance business model can be more effective than aid or NGO’s programs to boost development, since it creates opportunity and also incentives to locals. Aid has fail to boost growth: :sometimes because projects did not match local needs, others because they were not sustainable since they were dependent on foreigners’ skills or flows were fluctuant, in other locals did not implicate themselves since they saw aid as something normal and given–why they should make an effort if westerners keep bringing aid?
    I believe microfinance, in a certain way, allows and “transfers” the responsibility of development to the locals.In bangladesh a microfinance had a direct impact of 1% on GDP. However, it is important to say that due to spillovers and o-ring effects the impact on economic growth might be even greater.
    However,things are not as nice as they appear to be. The Grameen Bank and microfinance has been recently criticized for still high interest rates and its apparently positively correlated to an increase on the suicide rate and stress within the community. Moreover, tensions between theory and practice have appeared, since assertive matching is not verified in practice. So this tool, might not be a revolution in the end.Notwithstanding, we can say that microfinance positive impact is greater than its costs and that although it is not a panacea, it works. An eye should be kept to the social effects of the practise into society through Randomized Control Experiments.

Location: Jobra (India, Bangladesh)

Sector: microfinance, social bank

Official website:

Key figures:

Cumulative Amount Disbursed Since Inception: 10.631’17 (million US$)

Cumulative Amount Repaid Since Inception: 9.424’35 (")

Number of employees: 23283 (in 2009)

Numbers of Members: 8.358 (8.045 women, 313 men)

Grameen worlwide: America (Bolivia, costa Rica, Ecuador, El Salvador, Guatemala, Mexico, USA), Africa (C. African Republic, Cameroon, Egypt, Ethiopia, Kenya, Lesotho, Mauritania, Nigeria, Senegal, Tanzania, Togo, Uganda, Zambia, Zimbabwe), Europ (Bosnia, Kosovo), Asia and Pacific (Afghanistan, Bangladesh, China, India, Indonesia, Kyrghyzstan, Malaysia, Myanman, Nepal, Pakistan, Philippines, Samoa, South Korea, Turkey, Vietnam).

Other families organizations: Grameen Communications, Grameen Trust, Grameen Fund, Grameen Telecom, Grameen Cybernet, Grameen Shakti(energy), Grameen Phone, Grameen Shikkha(education), Grameen Solutions, Grameen Knitwear Limited, Grameen Byabosa Bikash,

Nbr. visits: 797

Nbr. inspires: 5