Grameen Bank and Microfinance
The Grameen Bank was started in the early 1970’s by a man by the name of Muhammad Yunus who wanted to do something to help the people from his native Bangladesh. Basically Grameen Bank provides unsecured loans to the poorest of individuals, teaches them the principles of hard work, self-reliance, and community involvement, and helps them to achieve relative economic success. Professor Yunus is credited with starting the Microfinance movement.
Microfinance is a term used to refer to the activity of provision of financial services to clients who are excluded from the traditional financial system on account of their lower economic status. These financial services will most commonly take the form of loans (see microcredit) and savings, though some microfinance institutions will offer other services such as insurance and payment services.
(For an overview of FAQ’s relating to Microfinance, see this article)
So how do you offer small loans to some of the poorest individuals, and still boast a 99% payback ratio? Well, Grameen Bank, and the many other banks that are following its lead, do more than just offer loans; they help develop a culture of healthy economic activity, starting with the individual, and moving toward the community. This has not only turned out to be a successful business model but has served as an enviable community development model as well.
Specifically, the principles of self reliance the Grameen Bank teaches are as follows (What they call the 16 decisions of Grameen Bank):
- We shall follow and advance the four principles of Grameen Bank — Discipline, Unity, Courage and Hard work – in all walks of our lives.
- Prosperity we shall bring to our families.
- We shall not live in dilapidated houses. We shall repair our houses and work towards constructing new houses at the earliest.
- We shall grow vegetables all the year round. We shall eat plenty of them and sell the surplus.
- During the plantation seasons, we shall plant as many seedlings as possible.
- We shall plan to keep our families small. We shall minimize our expenditures. We shall look after our health.