Grameen Bank

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Surma Tower, Sylhet
An Assignment on
“Grameen Bank”
Course title: Industrial Psychology
Course code: GED-215
Submitted to:
Md. Thanvir Ahmed Chowdhury
Senior Lecturer
Department of Business Administration
Leading University, Sylhet
Prepared by:
Torch Bearer’s
IDIDIDID NameNameNameName
1201010242 Shahidul Islam
1201010248 Syed Ali Hasan
1201010226 Jaber Ahmed Chowdhury
1201010231 Tanin Miah
1201010249 Md. Alimuzzaman
1201010202 Masum Hussain
Section: E
Semester: 4th
Batch: 30th
Department of Business Administration
Leading University, Sylhet
Date of Submission:Date of Submission:Date of Submission:Date of Submission: 10 April, 201310 April, 201310 April, 201310 April, 2013

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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 “Grameen Bank”
After that we want to give thanks to our honourable Head
of the Department Dr. Bashir Ahmed Bhuyian for giving us
the opportunity to study in this subject. We would like to
express our thanks to the Librarian of Leading University for
all his help that we have received.
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. Thanvir Ahmed Chowdhury for giving
us mental support and a clear concept about this assignment.
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.

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CONTENT
Subject Page no.
1. Introduction 4
2. Background of the study 5
3. Significance of the study 5
4. Objective of the study 6
• Primary Objective 6
• Specific Objective 6
5. Methodology 6
6. Literature Review 7
• Micro Credit 7
• Vision 7
• Grameen Bank’s Ownership 7
• Grameen Trust 7
• Micro Credit & United Nations 8
• Micro Credit & World Bank/IMF 8
• Awards Received by Grameen Bank 8
• Coping with Crises 9
1995 Boycott Movement 9
1998 Floods 9
7. Findings 10
8. Limitation of the Study 10
9. Conclusions and Recommendations 11
10. Bibliography 12

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Introduction
The story behind the first concerted effort to make financing accessible to the world’s poorest
is the stuff of folklore. Befitting the goal of poverty alleviation, the setting for this early
experiment was a time of great tragedy in Bangladesh, one of the poorest countries in the
world. A small country in the Indian subcontinent with a population of 130 million, a gross
national product (GNP) per capita of about $300 and a literacy rate of only 38 percent for
those over 15 years of age, 1 Bangladesh experienced drought and famine in 1974 that killed
1.5 million people (Macfarlane 2002). Having recently completed studies as a Fulbright
scholar in the United States, Professor Mohammad Yunus was lecturing on economic theory
at Chittagong University and growing increasingly frustrated at his inability to ease his
neighbors’ suffering.
Yunus attributes the origin of his vision to a chance encounter in Jobra with Sufia Begum, a
21-year-old woman who, desperate to support herself, had borrowed about 25 cents from
moneylenders charging exorbitant interest rates approaching 10 percent per day. Ms. Begum
used the money to make bamboo stools that, as a condition of the loan, she sold back to the
moneylenders at a price well below market value for a profit of about of 2 cents (Yunus
2003). Ms. Begum’s desperate position could best be described as bonded labor.
In 1976 Professor Muhammad Yunus and his Colleagues of the Chittagong University started
giving out tiny loans under a system, which later become known as the Grameen Bank (GB).
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 overall 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 (Grameen Info, 1998). The
action research demonstrated its strength in Jobra (a village adjacent to Chittagong
University, Bangladesh) 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. The rural poor whom it serves own
today Grameen Bank. Borrowers of the Bank own 90% of the shares of the bank, while the
government owns the remaining 10%. Over the time, that tiny effort became a leading
economic theory of the present world. Now it has more than 2.3 million borrowers, 94
percent of whom are women. With 1,128 branches, GB provides services in 38,951 villages,
covering more than half of the total villages in Bangladesh. The repayment of its loan, which
average US $ 160, is over 95% (Grameen Info, 2002a).
A Short History of Grameen Bank

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The 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:
• Extend banking facilities to poor men and women;
• Eliminate the exploitation of the poor by money lenders;
• Create opportunities for self-employment for the vast multitude of unemployed people
in rural Bangladesh;
• 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
• 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".
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.
Significance of the study
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

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Objective of the study
Primary objective:
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.
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.
Methodology
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.
Literature review
Micro Credit
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.
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 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
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

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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.
Grameen Bank’s Ownership
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.
Grameen Trust
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 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 are 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.
Micro Credit & United Nations
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 of 18 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.
Micro Credit & World Bank/IMF
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 are 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.

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Primary health care 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 are 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).
Awards Received by Grameen Bank
1. SWITZERLAND : Aga Khan Award For Architecture : 1989
2. BELGIUM : King Baudouin International Development Prize : 1993
3. BANGLADESH : Independence Day Award : 1994
4. MALAYSIA : Tun Abdul Razak Award : 1994
5. UNITED KINGDOM : World Habitat Award : 1997
6. INDIA : Gandhi Peace Prize : 2000
7. U.S.A. : Petersberg Prize : 2004
8. Norway : Nobel Peace Prize : 2006
Coping with Crises
1995 Boycott Movement
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.
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 order to settle the boycott, repayment rates were slow to recover, as many borrowers
believed there were no significant consequences to defaulting.
1998 Floods
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

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Issues of Transparency and Credibility
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 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.

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Findings
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 are given below:
Large number of branches whole through the country even its function is spread out in
some countries of the world.
Its huge amount of call up and paid up capital which was beyond our imagination.
It’s working in a different way than the normal banking sector of our country.
It’s playing a vital role in reducing the poverty from our country.
Limitation of the data collection
i. Time Limitation: as our submission date of assignment is 12th
April we can’t
get enough time to collect necessary data for enriching the assignment.
ii. 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.
iii. 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.
iv. Shortage of necessary books: There are lackage of sufficient books in our
campus library about this topic.
v. Political crises: The present political condition of our country isn’t so good
which creates hindrance on the way of preparing the assignment.

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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. 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 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 MRA Act

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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.
8. Bornstein, D., 1996. The Price of a Dream, Simon & Schuster, New York.

Grameen Bank

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