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Grameen Bank (GB)


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 October, 2011, it has 8.349 million borrowers, 97 percent of whom are women. With 2,565 branches, GB provides services in 81,379 villages, covering more than 97 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).

History of Grameen Bank
Muhammad Yunus earned a doctorate in economics from Vanderbilt University in the United States. He was inspired during the Bangladesh famine of 1974 to make a small loan of US$27 to a group of 42 families as start-up money so that they could make items for sale, without the burdens of high interest under predatory lending. Yunus believed that making such loans available to a larger population could stimulate businesses and reduce the widespread rural poverty in Bangladesh.

rally, “Bank of the Villages” in Bengali) from his research and experience. He began to expand microcredit as a research project together with the Rural Economics Project at Bangladesh’s University of Chittagong to test his method for providing credit and banking services to the rural poor. In 1976, the village of Jobra and other villages near the University of Chittagong became the first areas eligible for service from Grameen Bank. Proving successful, the Bank project, with support from Bangladesh Bank, was extended in 1979 to the Tangail District (to the north of the capital, Dhaka). The bank’s success continued and its services were extended to other districts of Bangladesh.

By a Bangladeshi government ordinance on October 2, 1983, the project was authorized and established as an independent bank. Bankers Ron Grzywinski and Mary Houghton of ShoreBank, a community development bank in Chicago, helped Yunus with the official incorporation of the bank under a grant from the Ford Foundation. The bank’s repayment rate suffered from the economic disruption following the 1998 flood in Bangladesh, but it recovered in the subsequent years. By the beginning of 2005, the bank had loaned over USD 4.7 billion and by the end of 2008, USD 7.6 billion to the poor.

The Bank continues to expand across the nation. By 2006, Grameen Bank branches numbered over 2,100. Its success has inspired similar projects in more than 40 countries around the world, including a World Bank initiative to finance Grameen-type schemes.

The bank has gained its funding from different sources, and the main contributors have shifted over time. In the initial years, donor agencies used to provide the bulk of capital at low rates. By the mid-1990s, the bank started to get most of its funding from the central bank of Bangladesh. More recently, Grameen has started bond sales as a source of finance. The bonds are implicitly subsidised, as they are guaranteed by the Government of Bangladesh, and still they are sold above the bank rate. In 2013, Bangladesh parliament passed ‘Grameen Bank Act’ which replaces the Grameen Bank Ordinance, 1983, authorizing the government to make rules for any aspect of the running of the bank.

The bank is also engaged in social business and entrepreunership fields. In 2009, the Grameen Creative Lab collaborated with the Yunus Centre to created the Global Social Business Summit. The meeting has become the main platform for social businesses worldwide to foster discussions, actions and collaborations to develop effective solutions to the most pressing problems plaguing the world.

Awards Received by Grameen Bank
1 SWITZERLAND : Aga Khan Award For Architecture : 1989
Awarded Aga Khan Award For Architecture, 1989 by Geneva based Aga Khan Foundation for designing and operating Grameen Bank Housing Programme for the poor, which helped poor members of Grameen Bank to construct 60,000 housing units by 1989, each costing on an average $ 300.
2 BELGIUM : King Baudouin International Development Prize : 1993
Awarded “The King Baudouin International Development Prize 1992” for its recognition of the role of women in the process of development and the novelty of a financial credit system contributing to the improvement of the social and material condition of women and their families in rural areas.
3 BANGLADESH : Independence Day Award : 1994
Awarded Independence Day Award for outstanding contribution to Rural Development.
4 MALAYSIA : Tun Abdul Razak Award : 1994
Awarded 1994 Tun Abdul Razak Award for the Bank’s unique programme to lend money to the poorest of the poor and thus transform the lives of thousands of impoverished people.
5 UNITED KINGDOM : World Habitat Award : 1997
Awarded “World Habitat Award : 1997” by Building and Social Housing Foundation.
6 INDIA : Gandhi Peace Prize : 2000
Awarded “Gandhi Peace Prize :2000” by Government of India.
7 U.S.A. : Petersberg Prize : 2004
Awarded “Petersberg Prize 2004” by the Development Gateway Foundation, U.S.A. in 2004.
8 Norway : Nobel Peace Prize : 2006
Awarded “Nobel Peace Prize 2006” in October, 2006.

The Nobel Peace Prize 2006
The Norwegian Nobel Committee has decided to award the Nobel Peace Prize for 2006, divided into two equal parts, to Muhammad Yunus and Grameen Bank for their efforts to create economic and social development from below. Lasting peace can not be achieved unless large population groups find ways in which to break out of poverty. Micro-credit is one such means. Development from below also serves to advance democracy and human rights.

Muhammad Yunus has shown himself to be a leader who has managed to translate visions into practical action for the benefit of millions of people, not only in Bangladesh, but also in many other countries. Loans to poor people without any financial security had appeared to be an impossible idea. From modest beginnings three decades ago, Yunus has, first and foremost through Grameen Bank, developed micro-credit into an ever more important instrument in the struggle against poverty. Grameen Bank has been a source of ideas and models for the many institutions in the field of micro-credit that have sprung up around the world.

Every single individual on earth has both the potential and the right to live a decent life. Across cultures and civilizations, Yunus and Grameen Bank have shown that even the poorest of the poor can work to bring about their own development.

Micro-credit has proved to be an important liberating force in societies where women in particular have to struggle against repressive social and economic conditions. Economic growth and political democracy can not achieve their full potential unless the female half of humanity participates on an equal footing with the male.

Yunus’s long-term vision is to eliminate poverty in the world. That vision can not be realised by means of micro-credit alone. But Muhammad Yunus and Grameen Bank have shown that, in the continuing efforts to achieve it, micro-credit must play a major part.

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