Bangladesh Grameen Bank – Pioneer in Microfinance

BACKGROUND NOTE Contd...

TABLE I
GRAMEEN FAMILY

FOUNDATION	DESCRIPTION
Grameen Trust	Grameen Trust was formed in 1989. It provided training to organizations for replicating Grameen Bank model in other countries.
Grameen Fund	Grameen Fund was formed in 1994 to provide capital for the new ventures.
Grameen Communications	Grameen Bank's IT department was hived off into Grameen Communications in 1994. In 1997, it entered the ISP market.
Grameen Shakti/Energy	This was formed in 1996 to provide renewable energy in the rural areas.
Grameen Shiksha/Education	This was established in 1997 to provide education to bank's members and their children. It also extended scholarships to the children for pursuing higher education.
Grameen Telecom	Grameen Telecom was formed to provide telephone services to the rural areas. It provided GSM cellular mobile phone services to 100 million rural people in and around 68,000 villages.
Grameen Knitwear Limited	A 100% export-oriented composite knitwear factory with knitting, dyeing, finishing and garments production facilities and majority of its finished products were being exported to Europe.
Grameen Cybernet Ltd.	This became operational in 1996 and it provided Internet service. It also offered customer service, technical support and web page consulting.

By 2002, Grameen Bank had 2.4 million borrowers (95% of them were women) and its activities were spread across 41,000 villages with over 1,100 branches. By August 2002, it had disbursed cumulative loans of $3708.22 millions and the loan repayment rate was reported to be around 95%.

THE GRAMEEN BANK MODEL

The Grameen Bank model was one of the most widely researched microfinance models all over world. The Bank had four tiers, the lowest level being branch office and the highest level being the head office (Refer Figure I). The branch office supervised all the ground activities of the bank such as organizing target groups, supervising the credit process and sanctioning loans to members. For every 15-22 villages, a branch was set up with a manager and staff. An area office supervised around 10-15 branch offices. Program officers assisted the area office to supervise the utilization of loans and their recovery. All area offices were under the purview of a Zonal Office. Each zonal office supervised around 10-13 area offices and all zonal offices reported to the head office situated in Dhaka.

Grameen Bank operated on the principles of mutual trust, supervision, accountability and member participation. Unlike commercial banks, which granted credit on the basis of collateral security, Grameen Bank did not demand any security for extending credit. The interest charged by Grameen Bank was higher than that charged by commercial banks, but lower than the interest charged by moneylenders. The difference between the interest earned by the Grameen Bank and interests paid by it on the loans taken from commercial banks was used to cover the operational costs of the Bank.