Overcoming Poverty Through Credit: the Asian Experience in Replicating the Grameen Bank Approach - 1

The Grameen Bank Approach (GBA)of credit delivery for the poor began as a small pilot project in 1976 in the village of Chittagong in Bangladesh. It has evolved into one of the world’s largest banking institutions for the poor, having disbursed a total of US$ 489 million in loans to one million borrowers of whom 98% are women in the space of 16 years.(October 1992 statistics)

It was seen at the inception of the pilot project that many credit programmes and poverty alleviation programmes failed because their targeting was too broadly based and open to abuse by the local elite of the programme area who fell within the same target group as the poorest of the poor.

The GBA clearly defines who its prospective loanees are. This is in order to avoid providing loans for the more affluent, thereby ensuring that credit facilities are provided to the poor who do not have access to the formal forms of credit available through banks and formal institutions.

To be eligible to borrow from a Grameen Bank(GB), a prospective borrower’s land asset must not exceed 0.5 of an acre and the annual income of the borrower must be less than the market value of one acre of arable land, in the area of his residence.

The loanees are selected by officials known as ’Agents’ of the GB. At the initiation of a GB Branch, a team of bank workers trained by the GB visits the target area and briefs prospective borrowers about the GB and its credit scheme.

The bank officials then mobilise the target group to form units of six people, who meet regularly to discuss the credit scheme offered. Proposals for loans are submitted to these bank officials who manage the branch of the newly established GB and decisions on disbursing loans are made by the officials.

The loans are administered and managed by bank staff.The group of loanees as a whole is responsible for each individual loan as subsequent loans to any member depend on the repayment of all previous loans. All loans and their repayment are monitored by bank officials.