Grameen Bank

Microfinance bank in Bangladesh

Bangladesh is widely known for its microfinance success with Muhammad Yunus and Grameen bank at the forefront. With a motto of “Banking for the poor”, Grameen bank is currently providing micro credit to 7.31 million borrowers (cite Grameen website). Its network covers 95 percent of total villages in Bangladesh.

Today Grameen bank provides financial services to the poor, as well as runs development-oriented business including telephone and energy companies. In terms of financial services, according to Grameen website, it provides micro credit, saving with interest, housing loans, micro enterprise loans, education loans and insurance. The bank prides itself on a low interest rate of 20% for income generating loan, 8% for housing loan, 5% for education and 0% for struggling members. Grameen differentiate itself from other banks by eliminating the joint liability system, in which the whole group is responsible if one member defaults on her loan. At the same time, Grameen still require its borrower to be in a group of five to be eligible for taking out loan. The group functions as an informational network through which the bank learns earlier of repayment problems.

Although Grameen bank business seems risky and not profitable, the bank is achieving continuous financial success. Its repayment rate is 98 percent. According to the bank’s annual report, in 2005, its return on equity was 21.22%, which is significantly higher than its 2002 ratio of 2.93%. In 2006 Grameen’s net profit was 20 million US dollars. The bank is not only lifting a large portion of Bangladesh population form poverty and helping to change lives, it is also making substantial growth as a business institution.

Microfinance in Asia and Africa