1. Abstract
Bangladesh is a South Asian nation with low economic growth and poor
institutional capacity to meet the growing needs of the people. Most of the
people of this country live in rural areas inflicted with poverty. Almost half of
the population is women and a large portion of them are the poorest of the poor,
and they are the most disadvantaged section of the society. Grameen Bank is
one of the largest NGOs in Bangladesh working with the socio-economic
development of the poor women through operating microcredit programs.
Microcredit programs do nothing to change the structural conditions that create
poverty. But this program is a solution to poverty, because poor women can
generate income by using the borrowed funds to start small -scale enterprises,
often home based handicraft production. These enterprises are almost in
informal sector outside the range of any law that protects women to ensure their
rights. The main objective of this study is to investigate the changes in
livelihood status of women beneficiaries of Grameen Bank in Bangladesh.
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2. Acknowledgement
At first, we are grateful to Almighty Allah for creating us in such a beautiful
country like Bangladesh and also for controlling our life. For the mercy of him,
we got such courage to start this assignment on “Role of Grameen Bank in the
Socioeconomic Development of the Country”
.
Our respected parents who gave us mental support and inspiration for our
assignment, there is a special thanks for them.
We also want to give a lot of thanks to our honorable course teacher, Md.
Jainul Abedin for giving us mental support and a clear concept about this
assignment.
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3. Without the help of our friends and classmates it was quite impossible to
prepare a such kind of assignment. They give us some necessary information
about this topic which is unknown to us. So, we would like to give thanks to all
of them.Introduction
4. Grameen Bank (GB) has reversed conventional banking practice by removing
the need for collateral and created a banking system based on mutual trust,
accountability, participation and creativity. GB provides credit to the poorest of
the poor in rural Bangladesh, without any collateral. At GB, credit is a cost
effective weapon to fight poverty and it serves as a catalyst in the over all
development of socio-economic conditions of the poor who have been kept
outside the banking orbit on the ground that they are poor and hence not
bankable. Professor Muhammad Yunus, the founder of "Grameen Bank" and its
Managing Director, reasoned that if financial resources can be made available to
the poor people on terms and conditions that are appropriate and reasonable,
"these millions of small people with their millions of small pursuits can add up
to create the biggest development wonder."Objective of Term Paper
The primary purpose of the term paper is to partially fulfill the requirements for
Industrial psychology course and develop the knowledge and learn the formal
procedures of successful term paper. However, in preparing our term paper, we
have looked for the following objectives:
(a) Conducted a comprehensive literature search relating to the area of
investigation.
(b) Synthesized and analyzed the evidence from the literature search and
identified an appropriate approach to the problem specified.
(C) Demonstrated practical and professional skills in the development of
business solution.
(d) Documented the system to professional standards.
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5. (e) Perform an in-depth critical review of the work undertaken.
(f) Made an effective contribution within the Industrial environment.
(g) Communicated effectively with colleagues.
CONTENT
Subject Page no.
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6. 1. Background of the studyThe origin of Grameen Bank can be
traced back to 1976 when Professor Muhammad Yunus, Head of
the Rural Economics Program at the University of Chittagong,
launched an action research project to examine the possibility of
designing a credit delivery system to provide banking services
targeted at the rural poor. The Grameen Bank Project (Grameen
means "rural" or "village" in Bangla language) came into operation
with the following objectives:
5. Extend banking facilities to poor men and women;
6. Eliminate the exploitation of the poor by money lenders;
7. Create opportunities for self-employment for the vast multitude of
unemployed people in rural Bangladesh;
8. Bring the disadvantaged, mostly the women from the poorest households,
within the fold of an organizational format which they can understand and
manage by themselves; and
9. Reverse the age-old vicious circle of "low income, low saving & low
investment", into virtuous circle of "low income, injection of credit, investment,
more income, more savings, more investment, more income".
2. The action research demonstrated its strength in Jobra (a village adjacent
to Chittagong University) and some of the neighbouring villages during 1976-
1979. With the sponsorship of the central bank of the country and support of the
nationalized commercial banks, the project was extended to Tangail district (a
district north of Dhaka, the capital city of Bangladesh) in 1979. With the
success in Tangail, the project was extended to several other districts in the
country. In October 1983, the Grameen Bank Project was transformed into an
independent bank by government legislation. Today Grameen Bank is owned by
the rural poor whom it serves. Borrowers of the Bank own 90% of its shares,
while the remaining 10% is owned by the government.
7. 3. Significance of the study
4. Grameen Bank is a well established organization of Bangladesh. It is
playing a vital role in the eradication of poverty from our country. Through
preparing this assignment we can gather huge knowledge about it, its function,
its organization, management, policy .future plan etc. Moreover this will
enhance our thinking capacity; we can be familiar with the banking sector of
our country
5. Objective of the study
6. Primary objective:
7. The first and most important objective of the assignment is to gather
knowledge about Grameen Bank, its function, management, Accounting policy,
marketing strategy and its future plan.
8. Secondary objective:
1. Helps to acquire knowledge and skills needed to carry out rights and
responsibilities.
2. Increasing thinking skills and decision making process.
3. Information and ideas.
4. Increasing our vocabulary.
5. Completion of the assignment given by our course teacher.
6. Use our skills in finding, comprehending, organizing and
communicating with others.
8. 9. Methodology
10. We collected our necessary information for preparing this assignment
from secondary sources like books, journal, newspaper & magazine. We also
visited different sites of internet including the official website of Grameen Bank
for data collection.
11. Literature review
12. Micro Credit
13. Micro credit is the most talked about topic in the whole world at the
moment. Micro credit emerged as a revolutionary tool to fight poverty in the
different parts of the world. Micro credit, in the recent years, proved that it
become a effective tool to help the poor population of a country who get neither
the World Bank/IMF aid which is given for them nor the governmental help. In
the question of poverty alleviation micro credit become the rival of WB/IMF
prescription. In this paper the effort would be to define and describe micro
credit the whole new world-shattering idea that is fighting against the vicious
circle of poverty. To achieve that, Grameen Bank (GB) the pioneer of the micro
credit movement, would be taken as a model to define the micro credit and its
operating systems. At the same time, success stories from different parts of the
world would be described as the tangible evidence.
14. Micro credit is the practice of extending small loans to people in poverty
so that they can start small businesses and develop savings. It is the extension of
small loans to entrepreneurs too poor to qualify for traditional bank loans
(Micro credit Summit, 1997). Definitions defer, of course, from country to
country. Some of the defining criteria used include- size - loans are micro, or
9. very small in size target users - micro entrepreneurs and low-income households
utilization - the use of funds - for income generation, and enterprise
development, but also for community use (health/education) etc. terms and
conditions - most terms and conditions for micro credit loans are flexible and
easy to understand, and suited to the local conditions of the community. Vision
15. The most important aspect of Grameen intervention is that the vision of a
poverty free society expounded by the Grameen leadership has been fostered
among the important stakeholders management, operating staff and bank
members. They all share the same vision and values. This vision has enormous
impact upon the organisational functioning of the system. All the stakeholders
are convinced that poverty is a man-made phenomenon exacerbated by the
prevailing institutional forces. Poverty could be eradicated if concerted efforts
were taken. This particular vision is really the driving force for the whole
Grameen family to work with dedication, mutual trust, a sense of accountability
and creativity.
16. Grameen Bank's Ownership
17. From the beginning, the poor women have bought shares of Grameen
Bank with their tiny savings. They have been working tirelessly to keep the
bank strong, because they know that this is their bank. But now they are very
upset that their bank's ownership is questioned by the government. A shocking
question has been placed in front of the Inquiry Commission. The 8.4 million
poor women, the people of the country, will anxiously wait for the answers
given by the Commission. All those interested in women's empowerment all
over the world will also be waiting them.
18. Grameen Trust
19. To spread the concept of Grameen Bank all over the world for alleviating
poverty, Grameen Trust was formed in 1989. It is a company limited by
10. guarantee. Initially, this institution started its activities by taking loan amounting
to taka 26 thousand. At present this institution has been run by grant and loan.
Among the 5 members of the Board of Directors of this institution, 4 members
arc the employees of Grameen Bank. Dr. Muhammad Yunus is the chairman of
Grameen Trust. Four employees of Grameen Bank have given guarantee in
forming this institution.
20. Micro Credit & United Natioas
21. The objective of the First United Nations Decade for the Eradication of
Poverty (1997-2006), proclaimed by the General Assembly in its resolution
50/107 or 20 December 1995, is to achieve the goal of eradicating absolute
poverty through national action and international cooperation. Progress on the
anti-poverty front was last reported to the General Assembly in the report to the
Secretary-General entitled "Observance of the International Year for the
Eradication of Poverty (1996) and recommendations for the rest of the Decade"
(A/52/ 573)(UNPAN, 1996). The General Assembly, in its resolution 52/194
o f l 8 December 1997, noted that, in many countries micro credit programs
have proved to be an effective tool in freeing people from poverty and have
helped to increase their participation in the economic and political processes of
society. Among other provisions, the Assembly called upon the relevant organs,
organizations and bodies of the United Nations system, in particular its funds
and programs and the regional commissions, as well as relevant international
and regional financial institutions and donor agencies involved in the
eradication of poverty, to explore including the micro credit approach in their
programs as a tool for the eradication of poverty. The assembly requested the
Secretary-General, in collaboration with relevant organizations of the United
Nations system, including funds and programs and the World Bank, to submit to
it at its fifty-third session a report on the role of micro credit in the eradication
of poverty.
11. 22. Micro Credit & World Bank/IMF
23. Though it is not admitted officially, the third world countries of the world
are ruled mostly, not by the government but by the prescription of the World
Bank and IMF. World Bank and IMF give loan for the poorest people of the
poorest countries of the world and at the same time give some kinds of pre-
requisites to get that loan. These pre-requisites are called the prescriptions.
From the general trend, it is seen that the 90% of the available loan arc used up
to get the loan, paying the WB/IMF consultants and the bureaucrats of the
government. Remaining 10% managed to get the mid level but never reached
the grass-root level.
24. Primary health eare and basic education are two critical tools for ending
poverty. The World Bank distributes more than $20 billion in loans to
developing countries every year, and can have an immense impact on the extent
to which these services arc available to the poorest of the world's citizens. In
1996 and 1997, World Bank President Jim Wolfensohn promised members of
Congress that he would increase Bank lending for health and education to $15
billion over three years, with an increased share focused on primary services for
the poorest. Despite his promises, lending for health and education dropped
from roughly $4 billion in 1996 to just about $2.25 billion in 1997 (World Bank,
1998).
25. Awards Received by Grameen Bank
2. SWITZERLAND : Aga Khan Award For Architecture : 1989
3. BELGIUM : King Baudouin International Development Prize : 1993
4. BANGLADESH : Independence Day Award : 1994
5. MALAYSIA : Tun Abdul Razak Award : 1994
6. UNITED KINGDOM : World Habitat Award : 1997
12. 7. INDIA : Gandhi Peace Prize : 2000
8. U.S.A.: Petersberg Prize : 2004
9. Norway : Nobel Peace Prize : 2006
26. Coping with Crises
27. 1995 Boycott Movement
28. In 1995, Grameen Bank experienced its first major operational crisis.
Men in the communities joined local politicians who disapproved of the bank's
mission of turning women into entrepreneurs and pressured borrowers to stop
repaying loans. This boycott movement explicitly challenged Grameen Bank to
eliminate a charge imposed on borrowers who chose to leave a borrowing
group.
29. At the time of this movement, Grameen Bank had already become a
politically charged and financially powerful institution. While Grameen had
avoided many of the political and relationship pitfalls that other emerging-
market banks encounter, its success had attracted the unwelcome attention of
male chauvinists and religious fundamentalists who were unhappy with the
power that was being put into the hands of women. Some women were targeted,
and other nongovernmental organizations providing health and educational
services became the targets of sustained attacks from these fundamentalists
(Lucas and Kapoor 1996). The boycott proved quite successful at dropping
repayment rates and punctured the aura surrounding the near-100 percent
repayment record that had distinguished Grameen from other charitable and
government programs. Even after Grameen agreed to remove the charge in
13. order to settle the boycott, repayment rates were slow to recover, as many
borrowers believed there were no significant consequences to defaulting.
30. 1998 Floods
31. The bank was still emerging from the challenge of the boycott movement
when in 1998 floods ravaged the country, leaving much of the population
without homes and businesses. The bank went into the bond markets and
received a Tk 1 billion loan from the Central Bank of Bangladesh and a Tk 2
billion loan from commercial banks in Bangladesh to cover massive defaults
and to disburse new loans to borrowers who had been made destitute. Old loans
were not forgiven, however, and the increasing burden of debt overwhelmed
many borrowers, resulting in lower repayment rates and some dropouts from the
Grameen system
32. Issues of Transparency and Credibility
33. These incidents provided Grameen's management with important
information about weaknesses due to rigidity in the loan process. Under the
classic Grameen Bank model, borrowers who were late in their loan payments
were banned from the loan process until they had repaid in full. This approach
left individuals with loans in arrears with few options, as they lacked access to
credit and savings to meet fixed interest and principal payments and renter the
loan process. Instead of acting as a deterrent against default, the process posed a
moral hazard; women in danger of defaulting took unnecessary risks to remain
in the Grameen system lest they lose all access to credit, as well as any chance
of escaping abject poverty. Since the Grameen Bank's clients are predominantly
the very poor, these individuals had very little to lose and everything to gain by
remaining in the Grameen system. Critics accused Grameen Bank of
unwillingness to fully disclose the impact of these crises on its financial
position. These critics argued that reluctance to disclose losses was
characteristic of other microfinance institutions eager to see microfinance
14. survive and thrive and did not systematically evaluate the industry's strengths
and weaknesses. Poor management of these disclosures compounded the
damage the problems did to Grameen Bank's image, and the media, which had
uniformly lauded the global development movement for several years, now
widely criticized Grameen and the microfinance industry for their lack of
transparency and questionable results.
34. Findings
35. Before preparing this assignment we were totally in dark about this
organization and its function. But when we started dealing with this topic we
came to know details about this organization. What we have found from this
assignment arc given below:
1. Large number of branches whole through the country even its function is
spread out in some countries of the world.
2. Its huge amount of call up and paid up capital which was beyond our
imagination.
3. It's working in a different way than the normal banking sector of our
country.
4. It's playing a vital role in reducing the poverty from our country.
15. 36. Limitation of the data collection
ii. Time Limitation: as our submission date of assignment is 12lh April
we can't get enough time to collect necessary data for enriching the assignment.
iii. Budgetary Limitation: we are living in developing country & we are
also student that's why we don't have sufficient money to spend for betterment
of the assignment.
iv. Internet Limitation: In our country the internet service is too slow
that's why we can't access to internet so easily and find the data.
v. Shortage of necessary books: There are lackage of sufficient books in
our campus library about this topic.
vi. Political crises: The present political condition of our country isn't so
good which creates hindrance on the way of preparing the assignment.
37. Conclusions and Recommendations
1.According to the article 152 of the Constitution of the People's Republic of
Bangladesh, Grameen Bank is a Statutory Public Authority, since it was
established in 1983 under an Ordinance. It is neither a NGO nor a bank /a bank
company / a scheduled bank in traditional term. Although its micro credit
activities are similar to that of an NGO, government possesses 25% ownership
of that institution by law. But government didn't take that opportunity and it
owns only 3.29% of the ownership. Thus, government must have to set it right
in terms of ownership.
2. Government didn't take any effective initiative over a period of twelve years
to rectify irregularities such as- the continuation as Managing Director by Dr.
16. Mohammed Yunus after end of his tenure mentioned in the inspection report on
GB by Bangladesh Bank submitted in 1999. It is needless to mention that
present situation would not arise if timely initiatives were taken. It is a matter of
investigation to identify the social, economic or political reasons behind
inaction of the government.
3. Due to the expansion of micro credit program and other activities, Grameen
Bank has become a large institution. But the tendency of violation of rules and
regulations has been observed in almost all operations such as administrative
decision, purchasing activities, the role of directors in the Board of Directors,
establishment of company/institutions outside of Grameen Bank, use of fund,
intercompany fund transfer etc. In fact, it has grown up as a person oriented 43
institution instead of a system oriented one. In these circumstances, at first a
national policy has to be formulated to make the activities and poverty
eradicating efforts of Grameen Bank effective where ensuring recovery of the
collateral free loan disbursed to the landless poor in rural areas. The governance
of micro credit, Grameen Bank and its associate institutions should be
emphasized in formulating such policy. These policies have to be compiled in
order to amend the necessary regulatory structure.
4. At the next stage, 'Grameen Bank Reformation Commission' has to be formed
and a new act has to be drafted by the experts. According to the decision of the
committee, following steps should be considered:
5. A regulatory authority is a must for any credit providing organization. It will
ensure the proper use of assets and good governance. Even though Grameen
Bank is a microcredit institution, according to Microcredit Regulatory Authority
Act 2006, it is not a micro credit institution. As a result, Grameen Bank doesn't
come under the control of Microcredit Regulatory Authority (MRA).
Microcredit Regulatory Authority (MRA) was established according to the
Microcredit Regulatory Authority Act 2006 to supervise and control the
17. activities of the microcredit institutions in the country. Since the main objective
of establishing GB according to the Grameen Bank Ordinance 1983, is to
extend credit to the rural landless people, it should be placed under the control
of Microcredit Regulatory Authority. Necessary amendment of Grameen Bank
Ordinance 1983 and MRAAct
38. Bibliography
1. Ahmed, M., 1985. Status, Perception, Awareness and Marital Adjustment
of Rural Women: the role of Grameen Bank, Grameen Bank, Dhaka.
2. Alam, M., 1988. 'Special employment programs in Bangladesh: an
evaluation of major schemes' in M. Muqtada (ed.). The Elusive Target: an
evaluation of target group approach to employment generation in rural Asia,
International Labour Organisation, Rome:37-78.
3. Asian Development Bank (ADB), 1993. An Assessment of the Role and
Impact of NGOs in Bangladesh, Asian Development Bank, Dhaka.
4. Auwal, M.A., 1996. 'Promoting micro capitalism in the service of the poor:
the Grameen model and its cross-cultural adaptation', The Journal of Business
Communication, 33( 1):27—42.
5. Bangladesh Institute of Development Studies (BIDS), 1985. Rural
Development Study 1985, Bangladesh Institute of Development Studies, Dhaka.
6. Barua, D.C., 2000. 'The creation of enabling conditions for the poor: the
experience of Grameen Bank', Paper presented at the Melton Foundation
Alumni's International Conference organised by Melton Foundation, Berlin,
March 7-13.
7. Barzelay, M„ 1992. Breaking Through Bureaucracy, University of
California Press, Berkeley.
18. 39. Bornstein, D., 1996. The Price of a Dream, Simon & Schuster,
New York.
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