NAME: Chezka C.

Quinte Grameen Bank Assignment

SOEN 1 Group 2 TTH 9:00 – 10:30 AM

The objectives of Yunus are the following:

1. To stimulate interest in microfinancing that could consequently alleviate the issue

of poverty in Bangladesh.

Due to the unusual political situation and unprecedented monsoonal flooding, it

had caused a noticeable drop in borrowers’ repayment rates, and it was unknown if the
situation was a temporary disruption or an emerging epidemic. Since the Grameen Bank
was historically healthy and even considered the pride of the country of Bangladesh, the
situation in September 1998 had backfired and the bank was in distress. However, these
circumstances left Professor Muhammad Yunus to think about how to address the
problem since the issue was under the scrutiny of international public opinion.

2. To eliminate the exploitation of the poor by money lenders

Yunus asked local banks to start offering similar loans, but they turned him down.
When he questioned them about their reasons, they stated that the poor do not deserve
credit. However, Yunus was not convinced since when he gave them money, they paid
him back. Finally, Yunus was given permission by the local bank to borrow money in his
own name and make loans in Jobra and this program grew in popularity, with each cycle
resulting in complete repayment. With these means, he returned to the banks and
convinced them once again that the poor are indeed creditworthy.

3. To widen the network of individuals and organizations

Yunus’ lending model enables a widening of the network even at an individual

level. A typical Grameen Bank branch was composed of members, groups, and centers.
Five members comprised a group, and four to eight groups comprised a center. This
network that integrates different levels (branch, area, zone, and head office) will enable
Grameen employees to easily understand the philosophy of the people and also examine
in an in-depth observation if the lending model is serving the poor in different localities.

4. To employ collateral-free microcredit

Yunus employed collateral-free microcredit to extend small loans, savings, and

other basic financial services to people that don’t currently have access to capital. It’s a
key strategy in helping people living in poverty to become financially independent, which
helps them become more resilient and better able to provide for their families in times of
economic difficulty.
5. To develop systems for training and overseeing workers and borrowers
 Growing up till the late 1980s necessitated the creation of systems for training and
monitoring personnel and borrowers. This system needs to be efficient and effective in
training and educating employees in order to properly conduct the activities of the
organization. Later on, Grameen Bank established a training facility, with each employee
receiving six months of apprenticeship and classroom instruction.

6. To raise money

The only thing standing in the way of faster expansion was a lack of finance. The
organization could only grow at its present rate due to loan reserve requirements and a
restricted number of grants and help from international agencies. This is where the
organization realized that it needed to raise some funds.

7. To have new branches financially self-sustainable

Grameen’s systems for cost-saving and supervision were already in place. But the
capacity to make these additional branches financially self-sustaining as soon as possible
was a worry for both Yunus and the donor group. That is why the most important measure
to achieve was for each branch to be at capacity with the number of loans it handled.

8. To cope with the problems of imperfect information that is germane in any credit
transaction

Grameen bank pioneered the group credit model due to its sustained high
repayment performance, Yunus and his group have found innovative ways in coping with
the problems of imperfect information that is germane in any credit transaction. Since
Grameen bank serves the poor, they cannot be offered tangible, marketable collateral,
informal credit history, and do not have access to formal insurance arrangements.

9. To begin a reeducation program, convincing Grameen bank’s borrowers to make

better financial decisions.

The 1991 election in Bangladesh threatened the existence of Grameen Bank as

the two major political parties at the time swore to forgive all agriculture loans under
$1,000. As a result, repayment stopped in other parts of the country affecting various
branches of Grameen. Hence, Yunus opted to begin a reeducation program to convince
their borrowers that 1) the government doesn’t have the right to forgive these loans, and
2) they are better off if they remain with Grameen Bank. While repayment had recovered
significantly within a few years, there was still an increased percentage of borrowers that
were late in their payments.

10. To implement the Grameen Disaster Relief Program.

 Upon seeing the massive destruction of the floods during the rain of 1998 and how
it severely affected the social community of Bangladesh, Yunus then started to draft the
implementation of the Grameen Disaster Relief Program, which aids the distress and
struggles of the borrowers affected by natural calamities, especially the poor, mitigating
the risk of hunger, disease, by providing them with financial assistance and services.

11. To build connections with the international poverty reduction and financial
assistance network.

Yunus had noticed that they lack financial funds to aid the victims of the disaster
and seeking international donor funds would be challenging and would most likely not be
able to suffice the financial need of the social community. Since there is insufficient funds,
he then recognized the need to structure a network of connections who are interested in
helping the survivors of the natural calamity and provide financial assistance and services.

12. To establish the Grameen Bank, not for profit but the catharsis of the poor

As a compassionate and selfless person, Yunus aimed to establish the Grameen

Bank, not for profit but the catharsis of the poor. It offers financial services to the poor who
do not have many opportunities. To illustrate, commercial banks and lending institutions
typically require collateral to secure the borrowers' payment; thus, they primarily lend
money to people who could surely repay them. On the contrary, Grameen Bank lends to
people who are in dire need of financial help; basically, they lend to the entrepreneurial
potential of the poor to support them with more money to get them out of the liquidity trap.
In sum, the Grameen Bank aims at providing more opportunities to the poor to better
themselves and consequently help others in the process.