By Sakina Mohamed

This is the first of a two-part series on Grameen Bank, the first in the world that gives out loans to those who live below the poverty line and revolutionised banking worldwide. The first part explains a brief history of the bank as well as its latest updates and efforts, as revealed by its founder during his recent visit to Malaysia.

KUALA LUMPUR, Dec 29 (Bernama) -- Who has heard the story of a bank that has loaned over USD10 billion to the poor without collateral, yet has a repayment rate of over 98 percent? For those who have yet to hear the story of Grameen Bank, the world's first micro-credit organisation, is indeed an extraordinary one.

Despite defying all the rules of conventional banking, Grameen Bank has single-handedly lifted the Bangladesh poor from poverty. More amazingly, it has even reformed social development and economy not only in the country but across the world.

The man that came up with the idea is now befittingly a Nobel Laureate. Professor Dr Muhammad Yunus, founder and Managing Director of Grameen Bank, started the bank while his country was going through famine in the 1970s. And his inspiration came one morning in 1976, while he was walking past a village to the university in which he served as an economics professor.

"I encountered a poor woman who explained to me that she earned only two cents a day from making these beautiful bamboo chairs, all because she had to borrow from a loan shark. The loan shark had demanded that she sell her products to him at a price so low that she made a profit of only two cents a day".

Muhammad said at that moment, he needed to pay the loan shark only USD1 to set her free from debt and help her out from that cycle of poverty. And so he did.

The happiness and relief in the poor woman inspired him to look for other people in the village who owed the moneylender. He found 42 people who needed a total of only USD27 to pay off the loan shark, as well as to buy raw materials for their businesses. With that amount of money they managed to become debt free and at the same time sell their products to the highest bidder, thus improving their economic status.

In doing so, he found that he had helped the first woman make a profit of USD1.25 a day, instead of only two cents. Thus began a journey for Muhammad to set up Grameen Bank which breaks the cycle of "low income, low saving and low investment".

Muhammad shared the inspiringly famous history of the bank during a luncheon in Malaysia recently, while delivering a keynote address titled "Social Business and Poverty Reduction". The special luncheon was organised by Khazanah Malaysia and the Malaysian Directors Academy (Minda).


Grameen means "rural" or "village" in Bangla. Its tagline is "Bank for the Poor". It provides micro credit to the rural poor in Bangladesh, so that they may start or finance their business and keep their income growing.

Muhammad says the bank lends tiny loans of USD200 per month to about 8.3 million borrowers all over Bangladesh and are paid back in weekly instalments. Amazingly, although the bank lends out to those living below the poverty line, it manages to recoup nearly 98 percent of its loans.

The economics professor says one basic fundamental of the banks since inception is that banks should go to the people and not the other way.

"We meet all these 8.3 million borrowers at their doorsteps. They don't have to go anywhere. We meet them every week and do banking at their doorstep.

"It's a big task. But it's the only way we can get them to do banking with us, as over 97 per cent of our borrowers are women. If you ask them to come to our office, it won't happen. The men will take over, being the mobile ones. Women usually stay home trying to settle numerous tasks in care giving", he explained.

An inevitable question arises: why does Grameen Bank tend to give out loans to women? The bank's website addresses this frequently-asked-question with the following answer:

"Women in Bangladesh are neglected by society. Through the opportunity of self-employment and the access to money, Grameen Bank helps to empower women. In addition, studies have shown that the overall output of development is greater when loans are given to women instead of men, as women are more likely to use their earnings to improve their living situation and to educate their children".


Today Grameen Bank is owned by the rural poor whom it serves. Borrowers of the bank own 90 percent of its shares, while the remaining 10 percent is owned by the government.

While watching the success of Grameen Bank in elevating the living standards of its borrowers, another question came to Muhammad's mind: what will become of the future of their families?

It was a natural question to ask, considering that the parents are mostly illiterate. This almost guarantees the perpetuation of the traditional cycle of poverty, ill health and other social maladies that come with it.

"We decided that we must ensure the children of all these families go to school in order to break out of that cycle and move on to a different direction", he says. So that plan was then set into motion.

Then a wonderful and unexpected thing happened. The children not only went to school, but thrived and excelled in their studies. They soon found themselves going to high schools and subsequently, colleges.

"There were thousands of them, flourishing and excelling in school. We didn't at all expect this as we thought having them go to primary school was the best achievement we could hope for from these Grameen kids. But the reality turned out to be much better than we expected", he says.

But then another problem surfaced. While parents were happy that their children were progressing academically, they soon realised that the cost of tertiary education was beyond their means.

"So then we had scores of children who were academically excellent but couldn't further their education. We debated within Grameen bank on how best to ensure that they stay on, and we came up with this solution - to introduce the education loan. Now, nobody is left behind".

As a result, there are now more than 50,000 students with Grameen education loans in medical schools and engineering schools in universities across Bangladesh.

Muhammad believes that children from wealthy families are no different than the poor ones in terms of capabilities. However, opportunity-wise, there is a big difference.

"And that makes all the difference in their lives.

"If the poor children could go to the best schools in the world and compete with their best talents, they'll be as capable and as talented as everyone else."


Muhammad speaks fondly of Malaysia and his relationship with Khazanah Chief Executive Officer Tan Sri Azman Mokhtar. The former has visited Malaysia many times, even before the Grameen idea took off outside of Bangladesh.

"Malaysia is almost like my second home. In fact, the first time the Grameen idea was taken outside of Bangladesh was in Malaysia, with the first application in Penang", he revealed.

In 1994, Malaysia bestowed Muhammad the Tun Abdul Razak award in recognition of his remarkable contribution to the world. Since Grameen Bank's inception in 1976, he founded 25 companies, all of which aimed at improving the living situation of the poor.

He says on hearing his sentiments on education, Azman immediately come up with idea of providing scholarships to Grameen students to study in Malaysia.

Today, Yayasan Khazanah sponsors 10 students who are children of Grameen Bank employees in select universities in Malaysia via the Khazanah Asia Scholarship. The foundation also continues to annually select five students from families that are served by the Grameen Bank to be recipients of the scholarship.

"The students that get this fantastic opportunity are from families with very low income", explains Muhammad.

He describes the programme as one that binds both Grameen and Khazanah very closely and says he is happy with the partnership.

Today, the bank is the source of ideas and models for many institutions in the field of micro-credit. But in Bangladesh, it represents a whole lot more.

"It is the future of the second generation of borrowers", says Muhammad.

"Of where they can go, and what they can be. They no longer have to go back to age-old cycle of poverty. They can now take it forward".


Posted by Mr Thx Wednesday, December 29, 2010


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