Financial Instruments and Markets

Amna Qayyum
Hamza Khaver
Shaharyaar Asif
Umaira Fazal
 1. Compare the Grameen Bank Model with the Yunan Model. Why is Yunan model right for
China’s improvised areas?
Grameen Bank Model:
 This model took place in Bangladesh by Muhammad Yunus.
 Inspired by Bangladesh Famine of 1974
 Government was not in support of this model.
 This model was adopted by more than 100 countries.
Yunan Model:
 This model incorporated in 2008, in rural China.
 Inspired by the Grameen Model of Microfinance.
 Unlike Grameen Model, the Chinese government showed their affection towards this model.
 Yunan Model only had its roots in Yunan country.
Both of these models serve the same purpose helping the needy, both these models were not self-
driven they were directed to others. Both provided social and economic welfare to the society
collecting no collaterals or mortgages.

2. How does Capital Theory relate to the Yunan Model?

The principle challenge looked by the legislature in the implementation of this model was the
failure of the borrowers who obtained microloans to make repayments. Due to the absence of
mortgages/insurances/collaterals the locals were forced to live in poverty as financial
institutions refused to fund to the unknowns, due to which Proper information centers were
established which undergone the following steps for informed credit evaluations:
 Individually
 Collectively
 Building an Incentive
This whole process attracted benefits and more borrowers, and spread in the near vicinities due to
which the health of funds also enhanced which is how through word of mouth and beneficiary
participation it gained a value.

3. How does mechanism design theory relate to the Yunan Model?

The Yunan model was a huge success because it was innovative it brought something different
and new to the table, it carried a whole process, a map from the collection of the data to the
lending’s of the funds. Mechanism design theory is the mechanism used to reach a desired
outcome, which is started through identification and then work in reverse to figure out the
results. Yunan Model wanted to eradicate poverty for which they implemented the plan of
1) Establishing Credit Information Centers
2) Credit Villages
3) Lending of Funds.
The information gathered was structured and evaluated using technological tools and
techniques, Credit information Centers gathered the scattered Information, Information Center
collected data of tax, business, and other economic factors of more than 100,000 households in
order to eradicate poverty. Due to this model people received high credit ratings.

4. Are the Yunus model and the Yunan model the only formulas for economic development?
 There are numerous examples in the real world that discusses the microfinances model for
economic growth. and development. They are still in existence today used mostly by low-income
households who don’t not have access to formal banks.
 ROSCA Model: Rotating savings and credit associations which is also known as ROSCA
where members pool their money into a common fund, which is structured around monthly
contributions, and one member withdraws the money from it as a lump sum at the start of
each period or cycle.
 Bank Guarantees Model: This model explains when an institution who lends funds promises
to cover a loss if a borrower is unable to payback This guarantee helps the business in
growth and promoting entrepreneurial activity.
 Community Banking Model
 Cooperative Model
 Group Model
 Individual Model
 NGO Model
5. How does the introduction of modern credit informaztion systems impact certain social
values surrounding personal privacy in rural communities?
Credit Ratings are posted on the boards so everyone can view it, it is open to the public. Their
might be scenarios where someone might receive a lower rating and due to which he would
create a negative impact about himself around the locals, if a person has received low credit
rating there is a possibilty that we base it on the persons political activities and most
importantly his social activity and he is consieded socially irresponsible which will effect the
health of his funds. A person with a better rating is considered socially responsible, which
automatically means higher loans and funds. Regardless, the Credit Information Sytems has
encouraged people to become more responsible regarding their actions which later determined
their credit score.
6. Will the Yunan model evolve into another form in China? If so, what form?
Although China has one of the fastest growing urban economy in the world, more than 85% of the
population remains in rural areas. The yunan Model regardless being successful had some restrictions
that were a hurdle in the further implications. The whole process of individual data gathering,
evaluating, funding is very lengthy and time consuming, and demands a lot of effort, China as a
developed country can us the innovative tools to reduce this time gap that arises though digital
payments like bank or mobile payments. If it includes non-financial services it will attract a much
bigger audience, other than that saving accounts are very effective people won’t need to borrow money
during a personal crisis if they have their own savings.
7. To what degree local government involve itself in economic development at the risk of
over control that would defeat individual initiative?
Government should act as a watch-dog, they should implement rules, policies, and regulations that
encourage their investors and enterprises to meet for new ventures which in town would be beneficial
for the country’s economy as a whole. As what happened in the case of Grameen Bank the government
intervention became less and less with every passing day and now the bank itself hold 96.5% of the
share which at the time was mostly held by the government of Bangladesh.