Introducing Social Business - Grameen Bank

Topics: Money, Credit card, Loan Pages: 3 (644 words) Published: June 17, 2013
The Grameen Bank Methodology – Social Business

1.IntroductionThe Grameen model emerged from the poor-focussed grassroots institution. Grameen Bank was started by Prof. Mohammed Yunus in Bangladesh.

2.What makes Grameen Bank Methodology so different ?The following shall define this difference:-

The conventional banking system is based on the principle that the more you have, the more you can borrow. Grameen gives priority to those who have nothing, particularly the poorest women. The loans are small and repayments are made in small amounts spread over a year, with a built-in insurance scheme so that the family doesn’t become responsible for the loan if something happens to the borrower. There is no legal contract between the bank and the borrower, and no danger of legal action if the repayments are not made – the relationship is based on trust and good faith.

Repayment rates are very high for two main reasons. Firstly, borrowers know that they cannot borrow again if they don’t repay the first loan. And secondly, they must join a group of other borrowers who all share some responsibility for other members’ loans and are encouraged to make group decisions. So there is considerable peer pressure and support from the group to encourage them to pay it all back. Another important difference from conventional banks is that Grameen has a social program.

The system also encourages the borrowers to do practical things to improve their living conditions, health and level of education.

3.Lessons Learnt

a.Small Loans: Successful programs offer small loans (usually less than $100) in the beginning. Larger loans are given later after the women have developed the skills, discipline and commitment needed for success

b.Primarily Women: Successful programs make loans mostly to women, who are much more committed to using their loans for the benefit of their families, and generally have a stronger commitment to repay their loans in order to...
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