Neoclassical Economics and Grameen Bank

Topics: Poverty, Microfinance, Muhammad Yunus Pages: 9 (3120 words) Published: March 30, 2013
Neoclassical is the most widely taught form of economics in the present world, making it to be the primary take on modern day economics. In a nutshell, neoclassical economics makes an approach to economics that relates supply and demand to an individual’s rationality and his or her ability to maximize utility or profit. Neoclassical economic has also increased the use of mathematical equations in the study of various aspects of the economy. While Economic theory tries to explain how scarce resources are allocated to given and alternative ends with an approach that considers these elements as extra-economic ones. The more conceptual framework of the main schools of economic theory is the Neoclassical economics, Austrian economics, Evolutionary economics and others are based on an insufficient understanding of anthropology and this fact limits their explanatory capacity. In the understanding of neoclassical economic theory, the basic tools are elaborated under the following assumptions: (1) The neoclassical individual (consumer and producer) is defined as a given option structure. (2) All the "means and ends" considered have an equivalent monetary expression. (3) The only channel of communication between individuals is prices. 4) All the social relations and social ambits are considered as market exchange transaction.

Concept of Microcredit and Grameen Bank
Poverty is one of the vital problems of the third world countries, and to elevate poverty microcredit has become the most popular approach to address this undesirable phenomenon. According to Jonathan Murdoch, Chairman of UN Expert Group on Poverty Statistics, "Microcredit stands as one of the most promising and cost-effective tools in the fight against global poverty." Based on three C (character, capacity and capital ) this model, perceived more than a quarter century ago in Bangladesh, is now being pursued around the globe. In spite of this popularity, there is skepticism about the model’s ability to make “major dent in the two poverty situation”. These criticisms, however, seem just as weak as the arguments supporting the model. One apparent reason is that both the claims and criticism are founded on the same theoretical perspective of neoclassical economics. The word "microcredit" did not exist before the seventies. In today’s world microcredit refers to the agricultural credit, or rural credit, or cooperative credit, or consumer credit, credit from the savings and loan associations, or from credit unions, or from money lenders. Microcredit data are compiled and published by different organizations. They are the Number of poor borrowers, and their gender composition, loan disbursed, loan outstanding, balance of savings, etc. under each of these categories, country wise, region wise, and globally. These sets of information will tell us which category of microcredit is serving how many poor borrowers, their gender break-up, their growth during a year or a period, loans disbursed, loans outstanding, savings, etc. simultaneously, Grameen credit is based on the premise that the poor have skills which remain unutilized or under-utilized. It is definitely not the lack of skills which make poor people poor. Grameen believes that the poverty is not created by the poor; it is created by the institutions and policies which surround them. In order to eliminate poverty all we need to do is to make appropriate changes in the institutions and policies, and/or create new ones. Grameen believes that charity is not an answer to poverty. It only helps poverty to continue. It creates dependency and takes away individual's initiative to break through the wall of poverty. Unleashing of energy and creativity in each human being is the answer to poverty.

Grameen Bank brought credit to the poor, women, the illiterate, and the people who pleaded that they did not know how to invest money and earn an income. Grameen created a methodology and an...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Grameen Bank Essay
  • Essay on Grameen Bank
  • grameen bank Essay
  • Grameen Bank Essay
  • Essay on Grameen Bank
  • Grameen Bank Essay
  • Grameen Bank Essay
  • Business Model of Grameen Bank Essay

Become a StudyMode Member

Sign Up - It's Free