WHEN SIMPLICITY CAN DO WONDERS:

GRAMEEN BANK

“Money, says the proverb, makes money. When you have got a little, it
is often easy to get more. The great difficulty is to get that little.”
Adam Smith
INTRODUCTION

• Grameen bank, means the rural or The village bank

• A microfinance organization
• Began as a research project by Muhammad Yunus and the
Rural Economics Project at Bangladesh in 1974.
• It provides credit and financial services :
1. Exclusively to the rural poor in Bangladesh
2. without any collateral for creating self employment
opportunities to quickly increase their income and
empower the poor.
• As of August, 2009, it has 7.94 million borrowers, 97 percent of whom are
women. With 2,559 branches, GB provides services in 84,652 villages,
covering more than 100 percent of the total villages in Bangladesh.
• www.grameen-info.org/
Process of giving loans
Interest Rates of Grameen Bank
Loan
 Income Generating Loans :
Flat rate -10%.
 Housing Loans : 8%
 Higher Education Loan :
On study - 0%
After study - 5%
 For Struggling Members
(Beggars) : 0%
 Center House Construction :
0%
Savings
 Savings : 8.5%
 Fixed Deposit : 8.75 - 9.50%
 Double in Seven Years : 10.40%
 Fixed Deposit (5 years) with
monthly income : 10.04%
 Fixed Deposit (10 years) with
monthly income : 10.67%
 Grameen Pension Savings (Five
Years) : 10%
 Grameen Pension Savings (Ten
Years) : 12%
Essentials Features of Grameen Credit
Delivery System
1 Exclusive focus on bottom poor
2 Borrowers organized into small homogeneous groups
3 Loan conditional ties specially suitable for the poor
4 Capable organization and management system
5 Loan Portfolio to meet diverse development needs
6 Social development program
• Sixteen Decisions
-Condt..
Reasons behind the success of
gramEEn bank
• Banking as a new approach" class to mass” and thus
reaching the poor
• Programmed participation to enable members to enhance
their net worth and enhance their assets
• Customers as an internal stake holders via equity
ownership thus provide protection against loan default
• Credit directly reaches to most poor segment by high
woman involvement
• Credits based on self-employment in familiar rural non-farm
activities and individuals access to credit via group
repayment activities
• Thus has lead to increase in rural wages
• Creative and effective leadership
The concept of “low margins-high
consumer base”
Advantages
• Relationship based banking
• Association of savings with credit not perquisite
• Group based credit approach decreases default rate

Disadvantages
• Huge investment in human resource
• Relaying heavily on systems financial balance
• Development based on the aspirations and commitment of
the economic operators
• Must be able to expand lending in more growth-oriented
activities for its survival in long run
Above strategy as applied to other
sectors
• Rural insurance can be based on the above strategy of high
volume and low margins
• Pooling the two end customer base (low and high) to create a
synergy of risk as applied to insurance sector
• Conversion of Customers to internal stake holders via equity
ownership thus provide a new domain to define relationship
based marketing as relates to services sector and increase
profitability
• Emerging sectors such as insurance can break the traditional
approaches of customer identification and conversion and thus
can break the jinx of pre-established techniques
• As we see in case of grameen bank Great human resource team
can open new sectors for a company's growth via creativity,
rigors, understanding and respect for the environment specially in
rural markets.
Solutions on the negative aspects of
gramin bank
• Moving up the ladder i.e. from rural banking to generalized
banking to pool in sub prime lenders and prime lenders
and thus reduce risk of loan defaults.
• As the bank expands focus from traditional non-farm
activities may need to be changed to other domains too.
• Increase or decrease in interest rate via credit rating can
also lead to less default in loans and will have to be applied
in long run.
• To break the vicious cycle of debt a continued check on
the borrowers must be done.
• Technology must be relied upon to identify any such
situations if they come up.
• Thus, relaying heavily on systems financial balance
Prepared by:

Ravi Singh (XI09035)

Priyanka Kumari (XI09030)

XLRI JAMSHEDPUR
PGPMI 2009-10
DATE 12-11-2009
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