Bangladesh Grameen Bank - Pioneers in Microfinance


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Case Details:

Case Code : FINC023
Case Length : 12 Pages
Period : 2003
Pub. Date : 2003
Teaching Note : Available
Organization : World Bank, Bangladesh Grameen Bank
Industry : Banking and Financial Services
Countries : Bangladesh

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Background Note

In the mid-1970s, Professor Muhammad Yunus (Yunus), then Head of the Rural Economics Program at the University of Chittagong, observed that banks did not extend their credit schemes to the rural poor as they were not considered creditworthy. In this situation, the rural poor were forced to approach moneylenders who charged exorbitant rates of interest.

In 1976, Yunus launched The Grameen Bank Project, on an experimental basis to study the framework of banking services for the rural poor.

The objectives of the Grameen Bank Project were:

Providing banking services to the rural poor

Eliminating exploitation of the rural poor by moneylenders

Facilitating self-employment projects for unemployed rural people

Making women self-reliant by providing them opportunities through Grameen Bank

To reverse the vicious cycle of - low income, low saving & low investment, into a new cycle of "low income, credit, investment, more income, more credit, more investment, more income."

To start with, Yunus took loans from commercial banks and extended the money to 42 needy women in Jobra village in Chittagong district (Refer Exhibit III). The project spread to surrounding villages between 1976 and 1979. However, bankers were skeptical about the project and argued that it was initially successful because Yunus implemented it around the university campus where he had a good reputation.

In order to convince bankers about the project's long-term viability, Yunus took two years leave from the university and started working in the Tangail district. The Bangladesh Central Bank provided financial support for the Tangail project and Yunus was appointed as the Project Director...

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