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Themes: EVA Financial concepts
Period : 2003
Organization : World Bank, Bangladesh Grameen Bank
Pub Date : 2003
Countries : Bangladesh
Industry : Banking and Financial Services

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Case Code : FINC023
Case Length : 12 Pages
Price: Rs. 300;

"Micro-credit is something which is not going to disappear... because this is a need of the people, whatever name you give it, you have to have those financial facilities coming to them because it is totally unfair... to deny half the population of the world financial services."

- Dr. Muhammad Yunus, Founder - Bangladesh Grameen Bank, in March 2002.1

"Grameen's repayment rates have never been as good as they've claimed, because Grameen has been so well-known, nobody has wanted to risk undermining the reputation of the idea."

- Jonathan J. Morduch, Associate Professor of Economics, New York University in 2001.2

"Micro finance has tremendous potential as an instrument for poverty reduction."

-Shahid Khandker, Senior Economist, World Bank, in 1999.3

Grameen Bank- A Role Model in Microfinance

Yet another monsoon season was approaching; but Joshuna Begum (Begum) unlike her neighbours was not worried about her house getting damaged during the monsoon. Her house now had a tin roof, mud walls and wooden windows, a luxury in rural Bangladesh. Earlier, Begum’s house had a straw roof and bamboo walls, which used to get damaged in the monsoon season, forcing the whole family to live in the kitchen. She got her hut repaired with a loan from the Bangladesh Grameen4 Bank (Grameen Bank).

Begum wasn’t the only one; there were thousands of people in rural Bangladesh who had improved their living conditions with the help of the microfinance programs of Grameen Bank, a pioneer in microfinance (Refer Exhibit I for more about microfinance). Grameen Bank helped thousands of poor Bangladeshi women to improve their lives by extending loans to them to start. their own enterprises. By 2003, it was reported that between 33-48% of Grameen Bank borrowers had moved above the poverty line5. By 2003, with 1,170 branches across Bangladesh, Grameen Bank was seen as a role model for microfinance all over the world.

The Grameen Bank model was replicated across the world -- not only in developing countries like India, Pakistan, and Vietnam, but even in developed countries such as Australia and the USA, where similar schemes were set up to improve the lives of the urban poor (Refer Exhibit II).

However, the Grameen Bank also attracted criticism from the media and economists all over world. Analysts pointed out that there was no proper monitoring of how the loans were utilized; it was reported that the loans availed of by women were used largely for consumption rather than for investment purposes. Analysts also pointed out that the accounting methods used by Grameen Bank were not in accordance with industry standards, and that the bank did not provide full details about its financial position and loan repayments position.

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1] Grameen Bank in 'strongest position ever',, March 12, 2002.
2] Grameen Bank, Which Pioneered Loans For the Poor, Has Hit a Repayment Snag, Wall Street Journal, November 27, 2001.
3] New Study Confirms Benefits of Bangladesh's Microcredit Programs,, January 14, 1999.
4] Grameen in Bengali language means - Village.
5] Defined as a per capita income of $1 a day in terms of purchasing power parity.