Grameen Bank a specialised bank established in October 1983 as a body corporate under the Grameen Bank Ordinance 1983 for extending credit exclusively to the landless men and women of rural areas of the country. The Bangla word grameen means rural and the bank emerged out of a rural banking project that began in 1976 at Jobra village of hathazari upazila of chittagong district. The project was an experiment initiated by Dr. Muhammad Yunus, a former professor of Economics at the university of chittagong. The principal objective of the Grameen Project (GP) was to develop an organisational structure, which can provide collateral-free credit to the landless people in a reasonably dependable form. The project also explored the potentiality of the poor to generate productive self-employment with marginal financial support at reasonable terms and conditions.
Encouraging results of the experiment inspired Prof. Younus to expand the project in more villages of tangail and Chittagong districts in November 1979 and he was extended funding support from the bangladesh bank for the purpose. In 1982, it was further expanded to dhaka, rangpur and patuakhali districts with the financial assistance from the International Fund for Agricultural Development (IFAD). By that time the project took the shape of a new type of banking for the poor and the banking units of the project were kept attached with the local branches of bangladesh krishi bank and of the nationalised commercial banks. In September 1983, the government decided to transform the project into a specialised credit institution under the name Grameen Bank, formally inaugurated in October 1983 with an authorised capital of Tk 100 million divided into ordinary shares of Tk 100 each. The paid up capital of the bank was Tk 30 million, of which 40% was subscribed by its borrowers themselves and the rest by the government and government-owned financial institutions. On 31 December 1999, the authorised and paid up capital of the bank stood at Tk 500 million and 264.57 million respectively. The shareholding position in the paid up capital of the Grameen Bank is: government of Bangladesh 4.54%, sonali bank 1.13%, Bangladesh Krishi Bank 1.13% and the members of Grameen Bank 93.20% (male 4.72% and female 88.48%).
The main functions of Grameen Bank are to provide collateral-free credit facilities in cash or in kind to landless persons for various types of income-generating and livelihood activities. The bank also accepts money on deposit, borrows money (against its assets as the security, or otherwise) for the purpose of its business excluding business in foreign exchange transactions. It invests in government securities, provides professional counsel to landless persons regarding investment in small business and cottage industries, and carries out survey and research.
The bank runs its credit programmes with the philosophy that credit for self-employment is a fundamental human right. It takes credit to the doorsteps of the poor instead of the conventional practice of clients coming to banks. The principle works as a powerful instrument in ensuring access of the poor to credit for providing them a chance to improve their economic condition. Through small loans amounting up to $300, Grameen Bank enables the landless, illiterate rural women to start their own businesses and thereby gain some independence, self-sufficiency, self-respect and self-empowerment. Credit delivery mechanism and the mode of repayment of the loans have become a model in poverty alleviation efforts in Bangladesh, other developing countries, and in some developed countries such as the USA, Canada, Germany and France.
Grameen Bank gives loans to individuals or group. The member-borrower alone is responsible for his/her loan although there exists informal inter-locking responsibility among the members of a group. The bank has a sixteen-point guideline for implementation of its credit delivery and the social development programmes. All members of the Grameen groups are to know and follow this guideline, which teaches them to follow and advance the principles of discipline, unity, courage and hard work. It instructs the Grameen beneficiaries to bring prosperity to their families, reconstruct and repair their own houses to avoid living in dilapidated houses, grow, eat and sell
vegetables all the year round, plant trees, keep the families small, minimise expenditure and save more, look after their own health, educate their children, keep children and the
environment pollution free, build and use pit-latrines, drink tubewell water or boiled water, give up the practice of child marriage, avoid taking and paying
dowry, refrain from doing any injustice on any one, undertake collective and bigger investments, follow the rule of mutual help, restore discipline in case of breach or violation by the fellow members, introduce physical exercise at all centres, and take part in all social activities collectively.
The broad activities for which Grameen Bank provides credit facilities from its own fund are processing and manufacturing, agriculture and forestry, service sector enterprises, trading, peddling (pulling
rickshaws and rickshaw vans), shop keeping, etc. There are innumerable types of different activities under each of these broad categories for which the bank extends credit financing. The bank accumulates savings of its members in the forms of direct deposits in savings accounts as well as through mandatory deductions from the loans sanctioned to create group funds. Members may be given loans from the group fund for their projects as well as for social and household expenditures, health and medical expenses, loan repayment, maintenance, repairing, and addition of capital.
On 31 December 1999, Grameen Bank had 1,149 branches in 122 areas and 15 zones covering almost all upazilas of the country. Up to the date, it extended credit facilities to a total of 2,357,083 members of 39,706 villages. The volume of its general loans disbursed since inception amounted to Tk 116.60 billion. Total cumulative savings of members of the bank rose to Tk 21.8 billion, of which current outstanding balance was Tk 5.4 billion excluding current savings deposits. Throughout the first twenty years of operation, it maintained a high loan recovery rate at around 98%.
Under the housing loan scheme of the bank introduced in 1984, a member can borrow up to Tk 25,000 ($500) at an interest rate of 8% for constructing a simple tin-roof house. Housing loans are to be paid back by the members in ten years in weekly instalments. Up to December 1999, more than 510,000 such houses had been constructed against a total amount of loans of Tk 7.44 billion.
Grameen Bank has a programme of leasing loan services, under which it introduced village phone to provide easy telecommunication services to the rural poor in Bangladesh. At the end of December 1999, the number of village phones distributed by 198 branches of 10 Grameen zones was 1,114. The bank started an Arsenic Mitigation Pilot Project with the assistance of UNICEF and the Department of Public Health and Engineering of the government of Bangladesh in chandpur district. The main focus of the project was to build capacity of the community and to undertake activities that will lead to comprehensive, sustainable and country-based solutions for arsenic contamination.
Sources of funds of the bank are share capital, general and other reserves, various special funds maintained and managed by the bank itself, deposits and balance of other funds, borrowing from banks and other foreign institutions etc. Up to December 1999, it borrowed Tk 11.64 billion and the list of funding institutions/ organisations includes Bangladesh Bank, IFAD, NORAD, SIDA, Ford Foundation, Dutch Grant Loan, Vic Spain and OECF. Grameen Bank also raises funds by issuing bonds and debentures under guarantee of the government of Bangladesh and the rate of interest for these varies between 4% and 10%.
In 1999, Grameen Bank had earned a net profit of Tk 76.93 million, which was entirely transferred to Rehabilitation Fund. The assets of the bank were valued at Tk 20.47 billion on 31 December 1999.
Grameen Bank is praised for success in its mission of alleviating poverty. Its success is attributed to employment creation and income generation through its extensive credit programmes for the landless rural poor of both genders. The special features of the institution are its high loan recovery rate, organisation of its members into groups exercising peer pressure in loan repayment and proper utilisation of the loans, close supervision by the bank's field staff, organised advisory services to the clients, and empowerment of the poor, especially the poor rural women by involving them in self-employment and income-generating activities.
The management of Grameen Bank is vested in a 13-member board of directors with its chairman appointed by the government. Nine of the 12 directors are nominated from amongst the female members of different
centres under its different branches. The head office of the bank located at Dhaka has 9 departments namely, accounts, administration, establishment, training, international programme, monitoring and evaluation, service, audit and the managing director's secretariat. There are also some sections like technology and development, construction, special programme and planning. [Abul Kalam Azad]