Example Initiative - The Grameen Bank

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The Bangladeshi-based Grameen Bank (www.grameen.com) is a microfinance and community development organisation (formally established as a bank in 1983) set up to target the rural poor – it was founded with the primary goal of poverty alleviation through socio-economic improvements deriving from provision of small loans to individuals excluded from using traditional banking services.

Muhammed Yunus

Context: The Perceived Problem

The initiative was originally started by Muhammad Yunus who lent his own personal money to poor householders in the rural Bangladeshi village of Jobra in 1976 in order to support their businesses. Muhammad Yunus, from personal experience and using his own personal academic and research background as a professor of Economics at Chittagong College realised that many rural dwellers were only able to gain access to loans to

support their micro businesses at very high interest rates. He realised that this lack of capital was a major reason why entire families remained in poverty and was also an impediment to regional economic development. In order to circumvent this problem, over a period of decades Muhammad Yunus formalised the microcredit model and gained significant institutional support for it.

Initiative Solution and Process

Grameen bank has a focus on socio-economic empowerment through providing trust-based (i.e. zero collateral) micro-loans to the low-income demographic, primarily rural Bangladeshi people (primarily to women – who make up 97% of the current loan portfolio). Loans are typically in the order of 100-1000 Taki (a few dollars to tens of dollars) and lenders are supported through peer pressure to abide by the principles of solidarity lending and a set of values known as the Sixteen Decisions (which include prescriptions about supporting environmental protection and promoting social justice). The model is hi

ghly successful and recovery rate of loans is high – over 97% (as of 2010).

Contraction and Convergence Elements


The primary aim of the initiative is socio-economic empowerment. Escaping from poverty may mean that the ecological footprints of the affected individuals increase rather than decrease. The CONVERGE project understands that ‘equity within planetary limits’ requires a decrease in the environmental footprints of some citizens and corresponding growth of others. Nonetheless the 16 Decisions which each borrower pledges to abide by do cover environmental scarcity issues – there are statements on limiting family size, keeping the environment clean and the use of disease-limiting sanitation facilities.


The initiative has Convergence as its heart, seeing credit “as a human right”. The initiative explicitly seeks to empower the low income fraction of the population according to the principles and practice of social justice. This principle is also embedded ‘vertically’ in the initiative through the 16 Decisions where borrowers pledge to work with each other in a democratic and ethical manner towards common goals.

Current Status

The Grameen Bank has been extremely successful and has grown considerably over the last 3 decades. Loans have been made to 8.04 million individuals (Feb 2010) and in 2007 the bank had a staff of over 24,000 employees. Grameen Bank is now a major, incorporated, profit-making financial institution with support from central bank of Bangladesh and other private investors. Numerous profit-making and non-profit spinoff businesses have been created (Grameen family of Organisations) and Grameen Bank has become large enough to have come to the attention of national policymakers in Bangladesh. Many microcredit organisations have been founded internationally (e.g. Bank for the Poor in Hungary) on similar lines, although Grameen Bank remains the largest and best known.

Click here to watch a video in which Muhammad Yunus describes the theory and practice of micro-finance

Further reading about The Grameen Bank and Microfinance

Brau, J. (2004). Microfinance: A Comprehensive Review of the Existing Literature. Journal of Entrepreneurial Finance and Business Ventures, Vol. 9, Issue 1, 2004, pp. 1-26

Holcombe, S. H. (1995).Managing to empower: the Grameen Bank's experience of poverty alleviation. Zed Books, ISBN 1-85649-316-4.