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Research Methods for Strategic Managers

Submitted to:
Muhammad Sameer

Submitted by
Ashraful Gani

Date of Submission: 14th June, 2012.

Assignment Title: The Role of Microfinance Banking for the Rural Economic

The Grameen Bank is a microfinance organization and community development bank that offers
small loans to impoverished people without demanding any collateral. Prof. Muhammad Yunus
who wanted to design a credit delivery system providing banking services targeted to the rural
poor, the bank started 1976 in Bangladesh. In 1983, the project was transformed into an
independent bank by government legislation. In 2006 the organization and its founder, Prof.
Yunus, were finally awarded the Nobel Peace Prize. In my proposed research The strategic

management of small business in developing countries has various types of sector among
them .I have choose the Grameen bank in Bangladesh. In my research I have found how
Grameen bank is successful all over the developing countries and what type of strategies they
took for their success. Also what have found the previous researchers about Grameen bank as a
small business.



Introduction .......05
Literature Review.......06
Methodology ...18
Results and Discussion(Findings).20-21
Conclusion and Recommendations...22
Reference ..23-25

List of Figures &Table


Chapter 1: Introduction05
Chapter: 2. Literature Review.06
2.1. Background


2.2. Microfinance and best practice


2.3. Design features in microfinance


2.4. Positive impacts of microfinance on scheme Participants


2.5. Special loan condition for particularly for the poor peoples


2.6. Expansion of Loans to meet the development needs of the poor


2.7. Table no-2 Grameen bank balance sheet statement


Chapter: 3 Methodology.18
3.1. Introduction


3.2. Data collection Method


3.3. Qualitative data collection method


3.4. Qualitative data collection method


3.5. Sampling Method


Chapter. 4: Results and Discussion(Findings)....20-21

Chapter 5. Conclusion and Recommendations



Chapter 1: Introduction
Microfinance is the provision of a broad range of financial services to low-income households
and microenterprises. The range of financial services usually includes voluntary savings and
loans. Other products might also include insurance, leasing, and money transfers. The term
microfinance encourages exploration of the entire range of financial needs and requirements of
poor people. It is important to distinguish this term from the term microcredit. Microcredit refers
to the provision of credit services to low-income clients, usually in the form of small loans for
the purpose of microenterprise and income-generating activities. A focus on credit only in
financial development interventions ignores the reality that creating access to credit will not
necessarily meet the financial needs of the poorest or alleviate poverty. This strategy may further
marginalize those poor people who are unable or unwilling to take up loans and risk increased
debt (name of author, year).
The Grameen Bank is a microfinance organization and community development bank started in
Bangladesh that makes small loans (known as microcredit or "grameen credit" to the
impoverished without requiring collateral. The word "Grameen", derived from the word "gram"
or "village", means "of the village".

The system of this bank is based on the idea that the poor have skills that are under-utilized. A
group-based credit approach is applied which utilizes the peer-pressure within the group to
ensure the borrowers follow through and use caution in conducting their financial affairs with
strict discipline, ensuring repayment eventually and allowing the borrowers to develop good
credit standing. The bank also accepts deposits, provides other services, and runs several
development-oriented businesses including fabric, telephone and energy companies. Another
distinctive feature of the bank's credit program is that a significant majority of its borrowers are
The origin of Grameen Bank can be traced back to 1976 when Professor Muhammad Yunus, a
Fulbright scholar at Vanderbilt University and Professor at University of Chittagong, launched a
research project to examine the possibility of designing a credit delivery system to provide
banking services targeted to the rural poor. In October 1983, the Grameen Bank Project was
transformed into an independent bank by government legislation. The organization and its
founder, Muhammad Yunus, were jointly awarded the Nobel Peace Prize in 2006.

Aim and objectives:

The study undertaken with the following objectives:
a. To know about the customer satisfaction and dissatisfaction of microfinance.
b. To know which type of people like which type of people like microfinance.

what are the main reason to take mircofinance loan.

Chapter: 2. Literature Review

2.1 Background:
According to Ahmed& Ahmed (2007),Muhammad Yunus, the bank's founder, earned a doctorate
in economics from Vanderbilt University in the United States. He was inspired during the terrible
Bangladesh famine of 1974 to make a small loan of US$27.00 to a group of 42 families so that
they could create small items for sale without the burdens of predatory lending. Yunus believed

that making such loans available to a wide population would have a positive impact on the
rampant rural poverty in Bangladesh.
Philips(2001) defines, Nobel Laureate Muhammad Yunus, the bank's founder. The Grameen
Bank (literally, "Bank of the Villages", in Bangla) is the outgrowth of Yunus' ideas. The bank
began as a research project by Yunus and the Rural Economics Project at Bangladesh's
University of Chittagong to test his method for providing credit and banking services to the rural
poor. In 1976, the village of Jobra and other villages surrounding the University of Chittagong
became the first areas eligible for service from Grameen Bank. The Bank was immensely
successful and the project, with support from the central Bangladesh Bank, was introduced in
1979 to the Tangail District (to the north of the capital, Dhaka). The bank's success continued
and it soon spread to various other districts of Bangladesh.
Keith Bradshar (2006),The Bank today continues to expand across the nation and still provides
small loans to the rural poor. By 2006, Grameen Bank branches numbered over 2,100. Its success
has inspired similar projects in more than 40 countries around the world and has made World
Bank to take an initiative to finance Grameen-type schemes.

2.2 Microfinance and best practice

The picture emerging of Microfinance in the late 1990s is mixed, and suggests the need for a
closer look at the complex interrelationship between the financial needs of the poor and the
impact of financial interventions designed to enhance their economic well-being. In establishing
the place of Microfinance as a successful development intervention alleviating poverty among
the poorest households, the issues mentioned in the previous section need to be addressed.
Critical questions need to be asked in the areas of targeting, gender and design to allow best
practice principles to be established, while acknowledging and considering issues highlighted in
the ideological and political debate.


What are the financial needs of the poor?

How can they best be met?
How can Microfinance schemes ensure they are enhancing the
conditions of poor people, not exacerbating them?


Are women exploited or empowered by Microfinance?

and Empowerment

Who maintains control of the loans?

How can gender awareness and transformation be promoted
through Microfinance schemes?

In whose interests is the Microfinance institution primarily operating?

Policy Regulations

Who sets the policies?

and Rules

What is the impact of policy and regulations on borrowers economically

and socially?
What are effective models of Microfinance service delivery? How
can policies ensure gender issues are addressed?
What principles emerge in scheme design?
Can Microfinance schemes be developmental? How?
Are they able to develop a social agenda beyond finance such as
empowerment, social justice, social transformation?
How can NGOs capitalise on the positive aspects of group lending
and saving?

2.3 Design features in microfinance

Poor peoples needs and context are critical determinants in the design of microfinance
schemes. While there are a number of design features that have evolved, the application of
any set of features must be carefully considered in light of the overall objectives and local
social and economic circumstances. Initial assessment should include questions such as
What already exists? Where are the gaps? What are the needs?
Low level, self-managed and owned schemes cost much less to run. Large scale institutions

can provide access to larger amounts of money more quickly, but are costly and can require
institutional forms which restrict local control, decision-making and ownership. It is crucial
that the design features are examined at a number of levels. Why are they the best features
for this situation? Whose interests do they serve? What are the implications for empowerment
of the target group/ what implications do they have for non-target groups? What are the
disadvantages? Do they fit within the organisations objectives? Who was involved in their
Some principles, identified by Johnson & Rogaly, which underlie key design features in
Microfinance are:
Poverty Targeting: many schemes now practice self-selection through keeping loan
sizes small, and demanding regular attendance at meetings which better-off people
would find time-consuming or socially difficult to attend. Some schemes use measures
to directly target poor people, such as wealth ranking. Self-selection lowers the costs
but cannot be assumed to exclude the better-off entirely, especially if loan sizes start to
rise as the scheme progresses.
Women as scheme users: Many schemes are designed to provide women with credit.
However, as previously stated, it cannot be assumed that disbursing loans to women
means either that they use them or that they are empowered.
Lending through groups: groups have been a common component of methodologies
forlending to the poor and are a unique and key feature of the majority of
Microfinance schemes. They are seen as an economical way to deliver Microfinance
by reducing screening costs and financial risk, because of group pressure to internally
moderate compliance. However building, developing and maintaining effective group
dynamics is an art in itself. Yunus, the founder of the group concept within
Microfinance schemes, provides a rationale and some guidelines: Savings plus credit
can be a good starting point for group formation. There is a great incentive to form a
group if people see that it is the only way one can get access to credit.
The second regional workshop on Banking with the Poor identified 16 principles for
bestpractice in self-help groups, many of which reinforce those highlighted by Yunus.
(see Appendix 2.)

Savings: Voluntary and flexible savings facilities have so far been a largely unmet
need of poor people. Consideration should be given to developing flexible savings
mechanisms, including group common fund savings. The existence of a common fund
gives the group experience in money management which is important for any joint
experience. However, to operate a savings facility is to take responsibility for other
peoples money, and should not be undertaken lightly.
Interest Rates: there is now widespread acceptance of the need to charge interest rates
which cover inflation and make a contribution to the costs of providing the service.
This reassessment has recognised that is often the availability rather than the cost of
credit to poor people which is the constraining factor. Long-term availability requires
that the loan fund does not become eroded through inflation, and that a degree of cost
recovery ensures sustainability.

2.4 Positive impacts of microfinance on scheme Participants

Reviewing thirty independent studies of Microfinance institutions across the globe, Remenyi
concludes that borrowers experienced an average of 20% increase in income. While it is a
acknowledged that within most loan schemes borrowers do experience improved incomes, there
are many variables which influence the extent of success at an individual ,organisational and
environmental level for example who is initially targeted, their skill level ,gender, marital
status, and what external support is available. Ongoing access to loans has had a positive impact
on borrowers household security. For example, successful Grameen Bank borrowers have
achieved food security and accumulation of assets such as goats, ducks, poultry, cows and
rickshaws. Successful borrowers have also improved their living conditions and, in some cases,
gained access to land. This has helped move households from hand-to-mouth survival to a more
secure position. Access to loans for successful borrowers has also meant that they are less likely
to liquidate their assets when disaster strikes. Expanding employment opportunities and
increasing hours of employment per week have also been noted amongst successful borrower

households in several countries. Some of the social changes in Grameen Bank villages impact
positively on the community as a whole for example the increased visibility and mobility of
women. One study found that a significant change in household and community status could be
derived by women who maintained control of their loans. Women reported a direct correlation
between having money and increased status and recognition - resourceful women using the loans
to empower themselves.

2.5 Special loan condition for particularly for the poor peoples:
Brandon Glen(2006) defines, The Grameen Bank provide poorest people with loans without any
collateral. Loans are repayable weekly. The small credits worthy groups identified by the Field
manager are closely supervised by the bank staff. For collective or group borrowings all
members are responsible for loan repayment. The Company ensures special safeguards to
minimize the risk of lending to the poor.

2.6 Expansion of Loans to meet the development needs of the poor:

Muhammad Younus (2005) defines, Under this system the Grameen Bank members of staffs
usually try to become familiar with borrowers with credit discipline, loan programs and
encourage borrowers to take credit for socio economic development. Mainly these loans are
provided under this followings.
-Credit for building sanitary latrines.
-Credit for installation of tube wells for pure drinking water
-Credit for seasonal cultivation to buy agriculture inputs.

-Credit for joint enterprise undertake by the group.

2.7 Table No-1

Balance Sheet (1983-2009) in BDT


Balance Sheet 1983-2009 (As on December 31), Amount in Million Taka

Property and Assets









Balance with other Banks










Loans and Advances





















Paid Up





General and Other reserves





















Contigent Liabilities

Property and Assets
















Loans and Advances

644,066,762 1,094,895,804 1,593,232,844

Cash in hand

Fixed assets-at cost less

accumulated depreciation
Other assets
Capital and Liabilities

Revolving Funds
Deposits and Other Funds
Borrowings from banks and
Other Liabilities
Profit and loss account

Cash in hand
Balance with other Banks

Fixed assets-at cost less

accumulated depreciation
Other assets

641,971,000 1,077,721,000









1,262,610,515 1,836,842,356 2,776,039,454 3,963,534,481

Capital and Liabilities



Chapter: 3 Methodology
3.1 Introduction:
The nature of this research topic is mostly qualitative research. Qualitative research mainly
focuses on understanding, behavior patterns. Also there is a high degree of flexibility and it is
possibly to rely on secondary data or present view points or small surveys.
In my literature review, I mainly try to focus on operation of and drawbacks of Microfinance
institutions. At the same time I attempt to explain how these operation systems could be
improved. I explain the operation Bangladesh economy between in and the Grameen banking

In my research I set out current theories, review, analyze and evaluate the circumstances facing
the Grameen banking sector in Bangladesh. I try to find out actual Grameen banking
performance which play a vital role in Bangladesh rural economy. So its can be classified as a
deductive research model, because of, a deductive research model starts from general ideas and
progress to specific situations.

Research strategy: talk about case study:

Microfinance is the provision of a broad range of financial services to low-income households
and microenterprises. The range of financial services usually includes voluntary savings and
loans. Other products might also include insurance, leasing, and money transfers.
The Grameen Bank is a microfinance organization and community development bank started in
Bangladesh that makes small loans (known as microcredit or "grameen credit" to the

impoverished without requiring collateral. The word "Grameen", derived from the word "gram"
or "village", means "of the village".

Data analysis methods: For this reasearch we have to analysis the data for get the
correct information of the case study.

3.2 Data collection Method:

The data collection method for this research is very specific. This research is mainly based on
secondary data. And two kinds of data collection methods qualitative data and quantitative data
collection methods have been used.

3.3 Qualitative data collection method:

The qualitative data collection method is based on random sampling and structured secondary
data. On the basis of this data its become very much easier to compare evaluate and to make
Telephone, email and online are the basics of my data collection method. Most of the data is
collected either online or by telephone.
Telephone survey or data collection is the most commonly used for any research program.
Because it ensures a relatively strong response rate, relatively low cost and wide distribution.
Online data collection makes it faster and a little bit easier to do my research. This method is less
expensive and its most effective to reach certain target respondents to through email. It also
ensures that the most current data.
The source of qualitative data is the Grameen Bank in Bangladesh. Most of the journals or
articles have been taken from their websites. Annual reports or financial performance of
Grameen Bank has been collected through email and by telephone questionnaires.


3.5 Sampling Method

Basically the main sampling method of my research is used random sampling. Firstly, I choose
Grameen bank and try to collect data (primary and secondary). After that I try to evaluate these
data. And last through comparative analysis I try to focus on the drawbacks of the Grameen
banking system and provide solution how Grameen bank is successful as a microfinance bank all
over the developing countries.

Chapter 4: Results and Discussion(Findings)

This section consists of an extensive literature review of archive of British library and various
other published that are highly recognized as a contribution to the existing studies. Objectives is
one of the most necessary part of my research. objective of my proposed study are
o Is Grameen Bank different from conventional Bank ?
o What is microcredit and what the impact of microcredit over developing
o What previous researchers have found about Grameen Bank success?
o How Grameen bank will be success in developing countries?
o How microfinance bank are developed rural economy in developing countries?

According to Ghista Garda(2004),The Norwegian Nobel Committee has decided to award the
Nobel Peace Prize for 2006, divided into two equal parts, to Muhammad Yunus and Grameen
Bank for their efforts to create economic and social development from below. Lasting peace can
not be achieved unless large population groups find ways in which to break out of poverty.
Micro-credit is one such means. Development from below also serves to advance democracy and
human rights

Muhammad Yunus has shown himself to be a leader who has managed to translate visions into
practical action for the benefit of millions of people, not only in Bangladesh, but also in many
other countries. Loans to poor people without any financial security had appeared to be an
impossible idea. From modest beginnings three decades ago, Yunus has, first and foremost
through Grameen Bank, developed micro-credit into an ever more important instrument in the
struggle against poverty. Grameen Bank has been a source of ideas and models for the many
institutions in the field of micro-credit that have sprung up around the world.
Sudhirenda Sharma(2002) defines, Every single individual on earth has both the potential and
the right to live a decent life. Across cultures and civilizations, Yunus and Grameen Bank have
shown that even the poorest of the poor can work to bring about their own development.

Micro-credit has proved to be an important liberating force in societies where women in

particular have to struggle against repressive social and economic conditions. Economic growth
and political democracy can not achieve their full potential unless the female half of humanity
participates on an equal footing with the male.
Yunus's long-term vision is to eliminate poverty in the world. That vision can not be realised by
means of micro-credit alone. But Muhammad Yunus and Grameen Bank have shown that, in the
continuing efforts to achieve it, micro-credit must play a major part.


Chapter-5: Conclusion & Recommendation

There is no doubt that the contribution of microfinance banking are worth maintaining for rural
economic development. In my proposed research I have shown how Grameen bank develop in
the poorer nations & developing countries. Also I have shown what type of Strategic
Management took Grameen bank.
According to D.C Barua(2006) ,Grameen Bank is the only business corporation to have won a
Nobel Prize. In a speech given at the presentation ceremony, Professor Ole Danbolt Mjs,
Chairman of the Norwegian Nobel Committee, mentioned that, by giving the prize to Grameen
Bank and Muhammad Yunus, the Norwegian Nobel Committee wished to focus attention on
dialogue with the Muslim world, on the women's perspective, and on the fight against poverty.

Paul Sinclair(2007) defines, On July 11, 2005 the Grameen Mutual Fund One (GMFO),
approved by the Securities and Exchange Commission of Bangladesh, was listed as an. One of
the first mutual funds of its kind, GMFO will allow the over four million Grameen bank
members, as well as non-members, to buy into Bangladesh's capital markets. The Bank and its
constituents are together worth over USD 7.4 billion.


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