Great work by Dr. Muhammad Yunus - Grameen Bank

In the class Prof. Dr. Mandi discusses about a great personality in the class. Person was Dr. Muhammad Yunus, the father of concept of Grameen Bank.

Here is the video for your reference - 

The video is of a speech delivered by him at the Emory university and it tells us how this concept originated, how it was implemented and how it has been transforming millions of lives worldwide. 

Before getting into details of work let’s have a brief introduction and know about background of Dr. Muhammad Yunus . He 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. And this is how the concept of Grameen Bank was conceived.

Grameen Bank’s goals were to fight poverty and increase the standard of living of the poorest people in Bangladesh.

Bank’s Model-

Acción International launched the first micro-credit organization in Recife, Brazil, although several others followed, such as Bank Rakyat in Indonesia and BancoSolin Bolivia. The Grameen Bank in Bangladesh is only one of these initiatives. Dr. Mohammed Yunus started lending money out of his own pocket to nearby villagers in order to support their crafts’ businesses. He later supported the craftsmen to get a traditional bank loan by acting as their guarantor. Yunus realized that his experiment resulted in substantially higher standards of living for borrowers, and that the majority of villagers repaid their loans. To expand his lending system, Yunus created the “Grameen Bank Project” in 1976 and turned it into a financial institution in 1983.

The Bank’s lending system, based on the functioning of market-based credit institutions, was adapted to break down barriers that had previously prevented access to credit by the poorest people. The Bank provided small amounts of credit at low interest rates without the need for paperwork or the provision of collateral. Instead, the Bank required group-lending with joint liability. Five people had to associate in order to receive a loan. Each person in the group would be responsible for the repayment of each others’ loans. If one person in the group did not pay, the other four would not be able to receive further loans. The delivery system for the loans and payments also differed from that of regular financial institutions. Instead of having to travel to a branch to do business, eight groups of five people met with a bank officer every week for a village “centre meeting,” where payments were processed and loans handed out.

These are some key contributions of the bank-

• The Bank addressed some structural determinants of poverty that were major impediments to rural economic development.
• The Bank also addressed the lack of investment by financial institutions in rural areas as well as the restricted access to financial services by poor people which hampered development in these areas. 
• Women also benefited from the establishment of microfinance in Bangladesh. The Bank targeted female lenders, and therefore improved their economic and social status. More than 96% of Yunus’ borrowers are women.

The key learnings from this class were how a person motivated to bring about change in the society can work in a field he/she is completely unknown with. It is an inspirational example indeed. 

Another takeaway is the clarity of objective. Since the Grameen Bank had clear objectives of bringing people out of abject poverty, it chose an altogether different path than the conventional banks. And the success behind this great initiative can be attributed to the vision that Prof. Muhammad Yunus had and the efforts that were in line with his vision.