Grameen Bank was created over 30 years ago by Professor Muhammad Yunus. In 2006 Muhammad Yunus was awarded, along with Grameen Bank, with Nobel Peace Prize for the important economic and social development. Muhammad Yunus was the first Bangladeshi Nobel laureate.
Muhammad Yunus and some of Grameen Bank’s borrower-owners at a local Center meeting. Photo source: grameenfoundation
How it works
Grameen Bank first started in 1976 as a research project in Jobra, a village adjacent to Chittagong University, where Mr Yunus was the Head of the Economics department. In short time the new business model become very popular and in 1983 the project become an independent bank by government legislation.
Mr Yunus’ idea was to create a microfinance institution that offers small, non-collateral loans, for the poor people living in the rural areas of Bangladesh, especially for women. The main objective of Mr Yunus was to eliminate the exploitation of the poor people and to create entrepreneurial opportunities at the lowest socio-economic scale. Grameen Bank is founded on the principle that loans offer people the opportunity to take initiatives in business. The profit will enable them to pay off the debt. Loans are seen as more efficient than charity to combat poverty.
Today, Grameen Bank serves around 8.4 million families (more than 40 million people). 90% of the Bank is owned by the borrowers, while 10% is owned by the government. Most of the borrowers are women and over 97% of the loans are paid back. This is the best recovery rate than any other banking system.
Muhammad Yunus microcredit social business model gained worldwide recognition. Beside the great honor of a Nobel prize, Mr Yunus received many other awards for his social contributions. In March 2012, Dr. Yunus was named by Fortune Magazine as one of 12 greatest entrepreneurs of the current epoch.
Dr. Yunus received 113 international awards, from 26 different countries that include state honors from 10 countries. The most recently award is the Congressional Gold Medal. This is the highest civilian award in the United States and honors Mr Yunus pioneering microfinance work.
Muhammad Yunus has been also awarded with 50 honorary doctorate degrees. The awards were given by universities across 20 countries.
Besides the world wide admiration, Grameen Bank also received criticism. Some critics say that in many cases the borrowed money just cover the daily household expenses, driving poor women deeper into debts. Others believe that the bank takes advantage of women’s sense of shame and honor which guarantees the loans are paid back.
Besides this critics, in the last years the company faces great changes. In 2011, the government authority asked Muhammad Yunus for his resignation. The cited reason was that Yunus past his retirement age and was illegally holding on to the position of CEO. Muhammad Yunus removal caused criticism from many of Bangladesh’s foreign donors, including the USA.
Recently, the government revealed its intention to restructure Grameen Bank. This decision unleashed a strong wave of criticism. The plan includes splitting the bank into 19 institutions with independent management. All the institutions will be controlled by the general government who will achieve 51 percent of shares. At this moment, Grameen Bank has an uncertain future.
Women in Bangladesh returning loans to an officer. Photo source: nytimes
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