Grameen Bank facts for kids
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Native name
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Grameen Bank
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| A Statutory Public Authority) | |
| Industry | Banking |
| Founded | October 1983 |
| Founder | Muhammad Yunus |
| Headquarters | Dhaka, Bangladesh |
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Number of locations
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2,568 branches (2022) |
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Area served
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Bangladesh |
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Key people
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AKM Saiful Majid (Chairman of the Board) Nur Mohammad (Managing Director) |
| Products | Microfinance Banking services Consumer Banking Investment Banking |
| ৳2360.49 million (2022) | |
| AUM | ৳169.251 billion (members), ৳74.94 billion (non-members) |
| Total assets | ৳301.05 billion (2022) |
| Total equity | ৳26.920 billion (2022) |
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Number of employees
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18,203 (2022) |
Grameen Bank (Bengali: গ্রামীণ ব্যাংক) is a special bank from Bangladesh. It helps people who are not rich by giving them small loans. These small loans are called microcredit or "grameencredit." The bank does not ask for valuable items as a guarantee for these loans.
Grameen Bank is run by its members who borrow money and by the government. Its story began in 1976 with Professor Muhammad Yunus at the University of Chittagong. He started a project to find out how to offer banking services to poor people in the countryside. In October 1983, a national law allowed Grameen Bank to become an independent bank.
The bank grew a lot between 2003 and 2007. By January 2022, almost 9.5 million people had borrowed from the bank. About 97% of these borrowers were women. In 1998, the bank's "Low-cost Housing Program" won a World Habitat Award. In 2006, the bank and its founder, Muhammad Yunus, won the Nobel Peace Prize together.
The success of Grameen Bank has inspired similar projects in over 64 countries. Even the World Bank has started projects like Grameen Bank.
Contents
How Grameen Bank Started
Muhammad Yunus was inspired during a difficult time in Bangladesh in 1974. He saw people struggling and decided to lend a small amount of money, about US$27, to 42 families. This money helped them start making things to sell without having to pay very high interest rates. Yunus believed that giving small loans to more people could help them start businesses and reduce poverty in rural areas.
Yunus developed the ideas for Grameen Bank from his research and experiences. The name Grameen Bank means "Rural" or "Village" Bank in the Bengali language. He started a research project with a national bank and the University of Chittagong. They tested his idea of giving microcredit and banking services to poor people in villages. In 1976, the village of Jobra was the first to get help from this project.
Over the next two years, the project grew to other villages. With support from the Bangladesh Bank, the project expanded in 1979 to the Tangail District. In the following years, its services reached more districts in Bangladesh.
On October 2, 1983, the government of Bangladesh officially turned the project into Grameen Bank. Bankers Ron Grzywinski and Mary Houghton from ShoreBank in Chicago helped Yunus set up the bank. They received a grant from the Ford Foundation. The bank faced challenges after a big flood in Bangladesh in 1998, but it recovered well. By early 2005, the bank had loaned over US$4.7 billion. By the end of 2008, this amount grew to US$7.6 billion.
In 2011, the Bangladesh government asked Yunus to step down from Grameen Bank. They said he was past the legal age limit for his position.
Grameen Bank also started expanding into wealthier countries. By 2017, Grameen America had 19 branches in eleven US cities. Nearly all of its 100,000 borrowers there were women.
How the Bank Gets Money
Grameen Bank gets its money from different places. In the beginning, most of its funds came from organizations that gave money at low interest rates. By the mid-1990s, the bank started getting most of its money from the central bank of Bangladesh. More recently, Grameen has started selling bonds to raise money. These bonds are guaranteed by the Government of Bangladesh.
In 2013, the Bangladesh parliament passed the 'Grameen Bank Act'. This law allows the government to make rules for how the bank operates.
How Microcredit Helps People
Grameen Bank believes that giving loans is better than just giving charity to stop poverty. Loans give people a chance to start businesses or farming projects. This helps them earn money and pay back their debt.
The bank believes that everyone has great potential. It thinks that helping people use their creativity and ideas can end poverty. Grameen has offered loans to people who usually don't get help from banks. These include poor people, women, and those who cannot read or write.
The loans have fair rules, like group lending and weekly payments. The loan periods are also long enough for people to use their skills to earn more money with each loan.
Grameen's main goal is to help poor people become financially independent. Yunus encourages all borrowers to save money. This way, their local savings can be used to give new loans to others. Since 1995, Grameen has funded 90% of its loans using money from interest and deposits. This means the bank uses money from its members to help other members.
The bank focuses on the poorest people, especially women. About 95% of its loans go to women. Women often have less access to money and power in their homes. Yunus and others found that lending to women helps them gain more control and improves life for their children. Yunus said in 2004 that women still had trouble getting loans from regular banks.
The interest rates at microfinance banks like Grameen Bank are higher than at traditional banks. Grameen's main loan product has an interest rate of about 20%.
Grameen has also started offering different types of loans. It supports loans for hand-powered wells and for businesses run by relatives of Grameen members. It has found that seasonal farming loans and rent-to-own plans for tools and animals help poor farmers. The bank has a new goal: to make each of its branch areas free of poverty. This means ensuring people have enough food, clean water, and good toilets.
| 18 Decisions |
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Grameen Bank is well-known for its system of solidarity lending. This means that borrowers form small groups. The bank also uses a set of values called the Sixteen Decisions in Bangladesh. At every Grameen Bank branch, borrowers say these Decisions and promise to follow them.
Because of the Sixteen Decisions, Grameen borrowers have been encouraged to adopt good social habits. One habit is sending children to school. Since the Grameen Bank started using the Sixteen Decisions, almost all school-aged children of Grameen borrowers go to regular classes. This helps bring about social change and educates the next generation.
Solidarity lending is a key part of microcredit. This system is now used in over 43 countries. Each borrower is responsible for paying back their own loan. Group members are not forced to pay if someone defaults. However, in practice, group members often help pay the missing amount. This is because Grameen will not give more loans to a group if one member doesn't pay.
There is no written contract between Grameen Bank and its borrowers. The system works based on trust. To help with lending, Grameen Bank asks borrowing members to save small amounts regularly. These savings go into different funds, like for emergencies or for the group. These savings act as a safety net.
Grameen Bank has focused on women borrowers. About 97% of its members are women. In Bangladesh, few women can get loans from large banks. A study by the World Bank found that microcredit helps women by giving them more access to money and control over decisions.
Grameen has a very high loan repayment rate, over 98%. Grameen says that more than half of its borrowers in Bangladesh have moved out of extreme poverty. This is measured by things like all children going to school, families eating three meals a day, having a clean toilet, a rainproof house, and clean drinking water.
The bank is also involved in social business and entrepreneurship. In 2009, the Grameen Creative Lab and the Yunus Centre started the Global Social Business Summit. This meeting is now a major event for social businesses worldwide. It helps them discuss, act, and work together to solve important global problems.
Village Phone Program
The bank has used microcredit in different ways. In the Village Phone program, women entrepreneurs can start businesses to offer wireless payphone service in rural areas. This program won the 2004 Petersburg Prize for using technology to help development. The prize announcement said that through this program:
"Grameen has created a new group of women entrepreneurs who have risen out of poverty. Also, it has improved the lives of farmers and others. They now have access to important market information and communication that was not available before in about 28,000 villages in Bangladesh. More than 55,000 phones are currently in use. Over 80 million people benefit from getting market news and messages from relatives."
Housing Loans
In 1984, Grameen asked the Central Bank for help starting a housing loan program. Their request was first rejected because the suggested US$125 loan seemed too small for a house. Grameen then suggested "shelter loans," but was rejected again. They tried a third time, calling them "factory loans," explaining that people worked from home, so the home was a "factory" for earning income. This was also rejected.
After these rejections, Yunus met with the Central Bank governor. When asked if borrowers would repay, he said, "Yes, they will. They do. Unlike the rich, the poor cannot risk not repaying. This is the only chance they have." Grameen was then allowed to offer housing loans.
By 1999, Grameen had given housing loans totaling $190 million to build over 560,000 homes. The repayment rate was almost perfect. By 1989, their average housing loan had grown to $300. That year, the Grameen housing program received the Aga Khan International Award for Architecture.
Grameen Bank's View on Helping People
When Muhammad Yunus started Grameen Bank, he wanted to help people living in deep poverty in rural Bangladesh.
In his book, Banker to the Poor, Muhammad Yunus explained his view. He said, "When you look at the world from far above, you become arrogant. You don't realize things get blurry from a distance. I chose to look from a 'worm's eye view.'" He learned about the problems poor people faced from their own perspective. This shows his desire to truly understand the people he wanted to help.
Yunus first saw this need when he met Sufiya Begum, who made bamboo stools. She was stuck in poverty because she lacked just 27 cents. This showed Yunus that Grameen Bank needed to be different. It had to be a bank that would lend to those who had nothing. As time went on, the bank also helped landless people and small farmers.
As Grameen Bank has grown, it still follows these ideas. Today, Grameen Bank believes that if people get loans, they can improve their lives by starting their own businesses. Grameen is different from many other social help efforts. It doesn't offer intense training programs. Instead, it gives borrowers the freedom to build a better future using the skills they already have. The only requirement is to join a five-person support group.
Grameen Bank encourages its members to get involved in their country's politics. Muhammad Yunus asked his bank staff to encourage Grameen borrowers to vote. However, they were not to tell people who to vote for. The Grameen staff were surprised to see how excited borrowers were to vote in the 1991 national election. This led to a big increase in political activity, which continued in later elections. Since Grameen Bank mainly helps women, the 1996 elections saw more women voting than men. This helped remove political parties that were against women's rights. Also, over 1,750 Grameen members were elected to local offices in 1997.
In a 2006 interview, Yunus said he was happy with Grameen Bank's microcredit system. He saw it as a way for poor people to improve their lives. He noticed that Grameen's borrowers gained confidence and self-reliance when they paid back their loans. He explained that while charity is good, receiving a gift doesn't give the same long-term emotional benefits as earning your own way.
Bank Facts and Figures
Grameen Bank is owned by its borrowers, most of whom are poor women. In 1983, the government owned 60% of the bank. This percentage dropped over time but increased again to 25% by the mid-2010s.
The bank grew a lot between 2003 and 2007. As of January 2022, nearly 9.5 million people have borrowed from the bank. About 97% of these borrowers are women. The number of borrowers has more than tripled since 2003, when there were 3.12 million members. The number of villages the bank serves has also grown.
By October 2007, the bank had over 24,703 employees. Its 2,468 branches served 80,257 villages. This was up from 43,681 villages in 2003. By the end of 2021, the bank reached 81,678 villages out of 87,223 in the country. This means it covered about 94% of Bangladesh.
By the end of 2021, the total amount of loans given out since the bank started was over 2.5 trillion taka (about US$33.767 billion). The bank says that about 95% of its loans are paid back.
Staff Training
The staff at Grameen Bank often work in challenging conditions. Employees get six months of training while working with experienced staff from different Grameen branches. The goal of this training is for new staff to understand the hidden potential of poor people. They also learn new ways to solve problems that come up at the bank. After six months, trainees go back to the main office in Dhaka for review before getting a job at a bank branch.
Awards and Recognition
- In 1994, Grameen Bank received the Independence Day Award. This is the highest government award in Bangladesh.
- On October 13, 2006, the Nobel Committee gave Grameen Bank and its founder, Muhammad Yunus, the 2006 Nobel Peace Prize. They received it "for their efforts to create economic and social development from below." The award announcement also said:
"From small beginnings three decades ago, Yunus, mainly through Grameen Bank, has made micro-credit an increasingly important tool in the fight against poverty. Grameen Bank has been a source of ideas and models for many micro-credit organizations around the world."
On December 10, 2006, Mosammat Taslima Begum accepted the Nobel Prize for Grameen Bank. She used her first loan of 16 euros (US$20) in 1992 to buy a goat. She later became a successful business owner and one of the bank's board members. She accepted the prize on behalf of Grameen Bank's investors and borrowers.
Grameen Bank is the only business company to have won a Nobel Prize. Professor Ole Danbolt Mjøs, Chairman of the Norwegian Nobel Committee, said that by giving the prize to Grameen Bank and Muhammad Yunus, they wanted to highlight achievements in the Muslim world, women's perspectives, and the fight against poverty.
People in Bangladesh celebrated the prize.
Other Projects by Grameen
Grameen Bank has grown into over two dozen related businesses. These are called the Grameen Family of Enterprises. Some of these organizations include Grameen Trust, Grameen Fund, Grameen Communications, Grameen Shakti (Grameen Energy), Grameen Telecom, Grameen Shikkha (Grameen Education), Grameen Motsho (Grameen Fisheries), Grameen Baybosa Bikash (Grameen Business Development), Grameen Phone, Grameen Software Limited, Grameen CyberNet Limited, Grameen Knitwear Limited, and Grameen Uddog (which owns the brand Grameen Check).
On July 11, 2005, the Grameen Mutual Fund One (GMFO) was approved and offered to the public. This was one of the first funds of its kind. It allows the more than four million Grameen bank members, and others, to invest in Bangladesh's stock market. The Bank and its related groups are together worth over US$7.4 billion.
The Grameen Foundation was created to share the Grameen ideas and help more of the world's poorest people benefit from microfinance. Grameen Foundation helps microfinance groups worldwide with loan guarantees, training, and sharing technology. As of 2008, Grameen Foundation supported microfinance groups in many regions:
- Asia-Pacific: Bangladesh, China, East Timor, Indonesia, India, Lebanon, Pakistan, Philippines, Saudi Arabia, Yemen
- Americas: Bolivia, Dominican Republic, El Salvador, Haiti, Honduras, Mexico, Peru, United States
- Africa: Cameroon, Egypt, Ethiopia, Ghana, Morocco, Nigeria, Rwanda, Tunisia, Uganda
From 2005, Grameen Bank worked on Mifos X, an open-source technology for banking solutions. Since 2011, Grameen Bank has shared this technology through the Mifos Initiative, a non-profit group in the US.
Grameen in Movies
- The film To Catch a Dollar (2010) shows how Grameen America programs were started in Queens, New York, in 2008.
- The documentary film Living on One Dollar (2010) features Grameen Bank. It shows how the bank provides microcredit to help people start small home businesses in a village in Guatemala.
See also
In Spanish: Banco Grameen para niños
- Accion International
- Acción Emprendedora
- Accion USA
- Cooperative banking
- Count Me In
- Flat rate (finance)
- Grama Vidiyal, Indian Microfinance Bank
- Islamic banking
- Kiva
- Micro credit for water supply and sanitation
- Microgrant
- Opportunity International
- Project Enterprise
