Overcoming Poverty Through Credit: the Asian Experience in Replicating the Grameen Bank Approach - 2

The Grameen Bank in Bangladesh is identified as one of the world’s largest banking insitutions and has 950,000 borrowers, 11 zonal offices, 97 area offices and 886 branches (statistics of June 1991).

To establish a Grameen Bank Branch, the GB workers first carry out a familiarisation campaign among potential borrowers in the area, which include the poor communities. The communities are informed about the bank and its credit scheme. The people are then motivated to organise themselves into groups of five(5)like-minded members and a leader is chosen by the members of each group.

Every six such groups form a "centre". This becomes the operating unit of the GB. The Centre has weekly meetings at which loan applications and proposals are discussed, repayments of loans are accepted and compulsory savings deposits are collected.

The loans are disbursed to individuals within the groups of five but the group as a whole is responsible for the regular repayments of the loans. Several benefits show by this group formation system in that it promotes solidarity and participation among the members of the community and promotes mutual support and peer pressure to repay and use the loans properly and effectively.

The group system also makes the GBA more effective and viable as the group and the meetings facilitate loan processing which is especially helpful to the illiterate members who are unable to understand and fill loan papers and other documents. The grouping also cuts down transaction costs as group loans are processed as a whole.

The GB system is managed by a staff of 13,000 mostly young professionals trained in banking for the poor.All staff receive a basic field training for 6 months ad remain on probation for another 6 months. The 6 month field training is divided into 3 modules and during the last module the trainee is sent to a Bank which has some problem in order to learn how to handle particular problems.