Overcoming Poverty through Credit

The Grameen Bank Approach(GBA)orginated in Bangladesh and has provided credit amounting to US$ 489 million in loans to one million borrowers. The GBA, replicated as a very effective credit scheme in various parts of the world, has a specific design and scheme of operation.

The GBA runs on support obtained by the government and a group of international and bilateral donors.The government contribution although appearing like a subsidy, is really not considered one. It is considered a payment for benefits to society created by the GB credit programme. The donors subsidize the cost of loanable funds to the GB.

Although largely funded by the government of Bangladesh and donor agencies, the GB operates autonomously without inteference from its sponsors. Its credit programme is run free of any outside influences. This autonomy helps to innovate a variety of ways to carry out its operations and to discard unworkable methods.

The ultimate strength of the GB lies in its own members. A compulsory savings scheme, especially styled to suit the poor clientele the bank attracts, ensures the growth and sustainability of the bank. This is an interesting feature in the GBA and is called the Group Fund. The Group Fund is fed by the loanees themselves. An automatic deduction of 5% is made at the outset on every loan made which is credited into the Group Fund which is also known as the group’s savings account. A further 1 Taka is collected from every member each week at meetings held regularly and added to the Fund.

Through this Fund members can purchase a share of the bank’s stock and the Fund also serves as a form of insurance for emergency cash needs. At present members have purchased shares worth Taka 85 million and the government, shares wortj taka 18 million.