Although Muhammad Yunus had come up with the idea of micro lending in 1976 when he was a professor of economics at Chittagong University in southern Bangladesh, it was not until 1983 that the Grameen Bank was born. He founded the bank especially for the poorest members of the rural communities of Bangladesh.
It was during the famine facing Bangladesh in 1974 that Mr Yunus saw the plight of a woman trying to borrow money from a corrupt money lender. He tried to get local banks to give access to credit facilities to the poor but the lack of collateral proved to be a major stumbling block. He stepped in by taking over a small loan from a group of borrowers to stop them paying the exorbitant interest rates. Since then Grameen bank has made funds available especially to women and the poorest members of the community to set up self employment projects to improve their financial well being.
Since the beginning of the idea in Jobra, a small village in Bangladesh, microcredit programs have spread in many parts of the world. The 2006 Nobel Peace Prize was awarded jointly to Muhammad Yunus and Grameen Bank “for their efforts to create economic and social development from below.” In a speech made by Muhammad Yunus at the ceremony he mentioned that out of the US$ 6.0 billion loans given out, 97 percent were given to women. He said that, “we focused on women because we found giving loans to women always brought more benefits to the family.”
Muhammad Yunus lives up to his reputation as the ‘world’s banker for the poor’ by setting up branches which are in rural rather than urban areas. Bank staff members travel to meet the borrowers in their homes to make it convenient for them and repayment of loans is made in small instalments on a weekly basis. Another unconventional rule is that defaulted loans are renegotiated without borrowers being pressured to repay them if they do not have the facilities. After the interest amount equals the principal, there is no additional interest charges added and the bank takes on the loan in case the borrower dies without the loan liability being transferred to the family of the deceased.
The Grameen Bank also partakes in the education of the children through scholarships and student loans and in improving community life through environmental projects, provision of clean water and better sanitation facilities. According to Mr Yunus, “we are creating a completely new generation that will be well equipped to take their families out of the reach of poverty. We want to make a break in the historical continuation of poverty.” There is a spread of community projects that the Grameen Bank has initiated including a mobile phone company called the Grameen Phone which has over 10 million subscribers.
This “tiny home grown project” with visionary goals has come under recent criticism regarding unpaid loans and using aid for other purposes than intended. The criticism that many microcredit programs around the world face might be justified but the concept on which Muhammad Yunus started the Grameen Bank is definitely unprecedented. Over the years, the Grameen Bank has given many poorer members an opportunity to become self sufficient and participate as active members of their communities.