GRAMEEN BANK

- Banker For The Poor

Target Customer The target customer for the Grameen Bank is one who satisfies the following characteristics : ‡ They have no asset ‡ They have nothing to offer as collateral . accountability. low investment. y Grameen Bank is just one of the SBU under the Grameen Trust umbrella which also includes many other SBUs like Grameen Phone. credit. more income. Grameen Bank is also a very sustainable solution and at the same time scalable because during its inception. low savings. It is the best example of an effective Marketing strategy wherein the focus is not on the solution but rather on the problem. Grameen Textile. etc. The objectives as identified by Grameen Bank are as below: Objectives: y y y y to extend banking facilities to the poor. Grameen Bank has changed the conventional way of credit lending practice( normally called the 3C¶s of credit) as it lends without the borrower submitting a collateral. Buddhists and the Christians and this has helped him replicate the Grameen Banks model in the southern regions of Africa and America very successfully.Grameen Bank is the outcome of an Idea from Muhammad Yunus translated into action. more income´. Muslims. low income´into an expanding system of ³low income. to reverse the age old [poverty] cycle of ³low income. participation and creativity. to create small enterprise opportunities for the unemployed and underemployed to bring disadvantaged people within the fold of some organizational format which they can understand and operate and can find some socio-political and economic strength through mutual support.A. more credit. B. more investment. Executive Summary ³Banking for the poor´ . The whole model of Grameen bank is all about mutual trust. It doesn¶t just believe in empowering the destitute financially but rather believes in bringing about a complete all round development in their life by empowering them so that they can move up the economic ladder together with gaining the knowhow of a better living. to eliminate exploitation by money lenders. Muhammad Yunus implemented it in the Jobra village which comprises of 3 different groups of people.

There has been many cases wherein violence has crept amongst many families for the reason of one family not being able to repay the loan. SWOT Analysis Strengths: 1. Weakness: Grameen Bank suffers from various weaknesses. Also because of the peer-pressure many families try to repay the loan by borrowing the money from the ³paikars´ the local . has created a lot of domestic pressure amongst the destitute families. Muhammad Yunus himself being a resident of the Jobra village knew exactly the problem that the community was facing and hence he could very well cater to the needs of the destitute by providing them tailor-made lending services which can maintain a balance between their earnings and repayment rates. The biggest strength of Grameen Bank lies in bringing financial services to poor people and making it financial sustainable by the economies of scale effect. 2. Moreover. Some of the other advantages are that the bank offers tailor-made services to the poor people. Grameen banks not only provides credit to its borrowers but also helps them grow their small business and helps them learn the basic principles of healthy living and grows alongwith the customers. Grameen Bank focuses on area which is largely untapped and has huge potential. Also. Creator of service himself has a personal experience and feel of being with the customers. This helps in the creation of loyal customers to the bank. 1.‡ They have no business experiences ‡ They have no training ‡ They have no credit history ‡ They have no education C. 3. the costumers are called members so they have the feelings of ³belongingness´. Peer-Pressure : Because of the group-lending strategy which demands that all the members of the group should repay the loan or else none of them will be given the loan the next time.

health and insurance. 2. Hence if Grameen Bank comes out with a consultancy service for their customers then this on one hand help their customers grow financially as well as this will help the bank increase the repayment rates because the customer is financially well enough then to pay back the loans Threats: 1. Other service sectors like health. 2. Rise in Violence against Women : Grameen bank has the policy of lending it only to the female members of the family. Till now the commercial banks have never focused on tapping the rural customers but with the mandate from the Govt. This at times defeats the complete purpose of Grameen Bank of getting the destitute out of the vicious cycle of the credit from local money-lenders. as many borrowers try to pretend to be destitute and borrow money and then lend it themselves to the actual destitute charging them higher rates. Actual Users of the loan : Many a times the loans didn¶t use to reach to the actual users of the loan. an increase in violence against the women borrowers is seen because of the in-laws and the husband not ready to accept the empowerment of women. The target customers of Grameen Bank are destitute who even if given money in hand would not be able to use it in a well planned way so as to help them eventually grow. Consultancy services for helping the customers to be more profitable : This can be a potential area of penetration for Grameen Bank keeping in mind the literacy level of their target customers. in many of the borrower families. This has aimed at motivating the females so that they get a social status as deserved by them and can drive the family. This is both aligned with their purpose of bringing about an all-round socio-economic change aswell as sustaining the operations by going for economies of scope. commercial banks pose a big threat to Grameen bank. .money-lenders who would charge them double the rates (10% a week). Opportunities: 1. 3. But as per the recent statistics this has been the other way. Government policies making Financial inclusion a mandate for banks : This will make the commercial banks come into compete with the Grameen Bank. education and insurance can be explored for their customers : Grameen Bank can focus on getting into other sectors so that the loans provided by them goes in for spending for the services like education.

Interest rates of competitors : Earlier the interest rates that the banks used to charge to rural customers were considerably high but now with the BPLR to BASE RATE transition banks wont be able to charge higher rates to its customers. Borrowers Organised into Small Homogenous Groups 1. 3. economic development etc. Since mixing of different income groups tend to result in the higher income groups ousting the low ones. family planning. Women are given priority. Establishing clearly the eligibility criteria for selection of target group and adopting practical screening techniques to exclude those who do not qualify. like SKS microfinance : There is a potential threat from MFI¶s like SKS Microfinance which have a great deal of penetration in the rural market in India already. Centres are functionally linked to the GB via the field workers. nutrition. Marketing Strategies and Implementation: Exclusive Focus on the Poorest of the Poor Exclusivity is ensured by: 1. 2. since their empowerment has a greater positive impact on the family and they have proven to be disciplined and astute entrepreneurs. D. Hence this can pose a threat to Grameen bank. 2. On the outset the emphasis is on building strong grassroots borrower organizational structures. who have to officiate at compulsory centre meetings on a weekly basis and present weekly reports to their superiors. education. Organising the primary groups of 5 members and federating them into centres has been the basic building blocks of the GB¶s credit delivery system. and this is one of the reasons why Grameen Bank has not entered the Indian market.2.The delivery system is geared to meet the diverse socio-economic development needs of the poor housing. 3. MFI¶s . . 3. this is the means of empowering and enabling borrowers to develop the capacity for planning and implementing micro level development decisions.

9. 2. Textiles. Transparency in all bank transactions most of which occurs at centre meetings. 7. 4. A policy of replacing traditional collateral with social collateral. drinking water. Loan Conditions Specially Tailored for the Poor The key to the Banks success was the achievement of a simple to operate loan mechanism that all borrowers understand almost immediately: 1. rapid income generating activities. 6. Group pressure forces members to conform to the payment agreements. Stress on credit discipline and collective borrower responsibility (peer pressure). 5. employing skills that the borrower is already equipped with. . the development of a broader social upliftment programmes. Undertaking Social Development Programs to Address Basic Needs of the Poor This is reflected in the ³sixteen decisions´ adopted by the GB borrowers. Access to larger subsequent loans dependent on repayment history Individual. by making a group of five borrowers responsible for each others loans. focus increasingly on women from poorest households. The adaptation of financial services to suit local demand through ³regular door-to. 8. This helps to: 1. Close supervision of credit utilization by the group as well as the bank staff. self chosen . Compulsory (borrowers are compelled to save a minimum of 67cents22 in SA currency per week) and voluntary savings schemes to minimize income fluctuation risks that usually confront the poor. which includes the building of houses and schools. whose survival urges has a far greater bearing on the development of the family. family planning etc.door banking´. raise the social and political consciousness of the newly organised groups 2. sanitation.housing. Very small amounts of loans given without any collateral. 3.4. Loans payable in small 50 weekly installments spread over a year. 3. Savings implies that borrowers are paying a higher effective interest rate thus allowing the GB to charge only 20% on micro enterprise loans . empower the poor to take care of their own basic needs . undertaking of large economic projects eg. education. fisheries and telecommunications. 4.

Some researchers have posited the notion that the Grameen Bank¶s success lies in its organizational policies. Expansion of the Loan Portfolio to Meet Diverse Development Needs of the Poor As the general credit programme gathers momentum and the borrowers become familiar with credit discipline. train and develop highly motivated and progressive staff members. GB charges 20% interest pa. At the branch level workers enjoy considerable delegated authority. The organizational structures may be split into three hierarchical levels . finance projects undertaken by the entire family of a seasoned borrower. The system has evolved gradually through a structured learning process that involves trails and errors and continuous adjustments. Special training programme has evolved.Design and Development of a Credit Conducive Organisation and Management System Capable of Servicing the Poor 1. so that decision making and operational authority is gradually decentralized and administrative functions delegated at the zonal level downwards. The management style of top and middle management not only supports but also empowers field workers and branch managers. credit for installation of tubewells that supply drinking water and irrigate kitchen gardens 3. Protection of loan funds from inflation by depositing dormant funds in commercial banks that earn competitive interest rates and by engaging in bond trading. 3. 3. such programs include: 1. other loan programmes are introduced to meet the growing social and economic development needs of borrowers. credit to buy agricultural inputs for seasonal cultivation 4. 5. to screen. 2. Market related interest rates that cover costs.. Loans for the purchase of equipment and machinery Strategic Market Orientated Credit Policies Apart from the above policies. A moderate subsidy dependent index (the amount by which interest rates need to be raised in order to remove subsidies). the following also contribute significantly towards GB¶s success 1. credit for building sanitary latrines 2. 2. Apart from housing projects which are well established. A dedicated and committed workforce achieved both through rigorous practical management training programmes and market related remuneration packages. of which 5% is contributed toward a group fund to cover risks.

Branches supervised and supported by the area offices .. if any member fails then the group¶s acceptance into the bank is stalled until exams are retaken.the local people¶s organization ie. the group leader receives her/his loan last. E. He/she then visits the same centres in the afternoon to check on the utilization of loan monies and the performance of all ongoing loan activities Each case of nonpayment of savings/loan is followed up.viz. Before gaining acceptance into the Bank each member has to separately undergo an oral exam (85% of rural women are illiterate). Moreover this approach commits them to the GB before they could borrow. Evaluation and Control Performance Standards and Financial Controls A set of standards was followed for processing/deciding loans. then loans are granted to a further two members. Loans are first extended to only two group members . zonal offices and the headquarters y y Branch Supervision . This process not only ensures that the most desperate qualify for loans. if they pay regularly for the next six weeks . centres. some of which are as follows: y y y y Five member group Weekly meeting Each branch managed by a team of 6 workers A branch worker served 10 centres 5 days a week. the field organization comprising branches and area offices and support organizations comprising of zonal offices and headquarters The Organisational Structures and Functions New recruits are required to form into a group of at least 5 members then each prospective member has to undergo training in order to understand what the Bank is all about. since the moderately well off will avoid such difficulties. supervising branches. setting new branches. During mornings the branch worker attends two centre meetings and collected savings/loan installments. but also encourages group participation and empowerment of women.

At the time of a loan disbursal. Worker and centre performance were also reviewed so that it became the common knowledge of all staff members.The Branch Manager makes supervisory visits to different centres and checks the physical utilization of loan monies for at least 20% of all loans. Each branch prepares detailed weekly reports on branch performance. . Furthermore he/she makes on the spot checks on the performance of Branch Assistants and also ensured that Bank Assistants and Group Leaders did not discriminate against any member. he/she personally enquired about the loan activity and ensured that the borrower understood all the conditions of the contract. Every month he/she also checks and countersigns each members account book to ensure that amounts of cash collected were correctly entered.

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