Professional Documents
Culture Documents
Grameen Bank
Grameen Bank
Correspondence:
Dewan Mahboob Hossain
Department of Accounting & Information Systems,
University of Dhaka, Dhaka, Bangladesh.
Email: dewanmahboob@univdhaka.edu
1.0 Introduction
The term microfinance (or microcredit)
is not uncommon to the world anymore.
Over the last few decades this topic has
remained as one of the most popular
catchphrases for the people and the
institutions struggling against poverty.
Microfinance represents the
distribution of small-scale loans mainly
to the people who are living in extreme
poverty and who do not have much
access to the formal sources of finance.
This is usually a kind of collateral-free
loan. Shukran and Rahman (2011; 47)
defined microcredit as a small amount
of loan given to the poor to develop
their standard of living. It is expected
that by getting access to this loan, poor
people will gain economic sustenance
through using this money for selfemployment. Though there are huge
debates on the topic as to whether this
poverty alleviation strategy really works
effectively in all cases or not, there is no
doubt that there are a good number of
examples that can be shown as
evidence for the success of
microfinance as a tool for poverty
alleviation.
We can trace back the origin of
microfinance in a Third World country
named Bangladesh. It was introduced
in this country in the seventies by an
economist named Muhammad Yunus.
Getting inspired from the success of this
model, many underdeveloped as well as
developed countries in the world, at this
moment, are following this strategy to
fight against poverty. There is an
abundance of literature on the
microfinance program of Grameen
12
Abstract
The objective of this article is to
examine the role of microfinance/
microcredit in poverty alleviation
by applying social capital. In order
to fulfill this objective, the research
takes Grameen Bank, the most
renowned microfinance institution
in the world, as a case. Through
several items of published
literature on Grameen Bank, this
research concludes that Grameen
Bank follows a unique model of
operation by building and utilizing
social capital. This unique strategy,
in many ways, has helped in
improving the lives of the poor
people - the target group of
Grameen Bank loans. It also
ensured the sustainability of
Grameen Bank as an
organization. This paper, by
analyzing the mechanisms of
operation of this bank, identifies
how social capital is used in
different layers in order to ensure
the sustainability of this bank.
Key words: Microfinance, Social
Capital, Grameen Bank, Poverty.
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7.0. Conclusion
Over its lifetime, Grameen Bank has
faced both praise and criticisms. It was
admired because of its unique
functioning system that uses social
capital as the main tool for operation.
Though at the beginning the bank used
donor funds, from 1995, it stopped
taking any donation and any local or
external funds. The deposits and the
loan recovery rate were satisfactory and
thus the bank could ensure its sustainability. It is a profitable bank and other
than a very few years since its inception,
it could earn profit in every year.
Over the years the Grameen model
became very popular and was applied
in many countries in the world. The
greatest success of this bank came at
the end of the year 2006 when both
Grameen Bank and its founder Dr.
Muhammad Yunus won the Nobel
Peace Prize. It was the first Nobel Prize
for any Bangladeshi. The banks success
in womens empowerment got huge
attention from the international policy
makers.
But in its own country, Bangladesh, the
bank faced huge criticisms also. The
bank was blamed for providing loans
with interest to the extreme poor. The
banks policy was attacked by the
Marxist critics as well as the Islamic critics for this reason. The Marxists complained that giving a loan to the poor
and taking interest from them
ultimately follows the oppressing
model of capitalism. The poor people
are getting exploited when they are
made bound to repay the loan with
interest.
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