The Structure and Operations of the Grameen Bank

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The last belief of Yunus’ ideology is that the bank and the system must operate exclusively for the extremely poor people because if the poor are combined in the same program as the non-poor, then the non-poor will always “drive out” the poor.

2.2.2. The Structure and Operations of the Grameen Bank

The Grameen Bank is considered as a profit seeking institution, not a profit maximizing one.

This bank desires to be self-sustainable related only with social causes. For a better understanding of its functionality, this study categorizes the information related to the operation into different areas:

2.2.2.1 Infrastructure

Grameen Bank branches have a very small house, building, or room with personnel that are trained to go and look for Grameen clients.

2.2.2.2 Staff and Operations

The staff takes the credit to the borrower’s doorsteps. From the beginning the staff is trained to go out, recruit and guide borrowers.

2.2.2.3 Purpose of the Loans

The Grameen provides loans only to poor people for productive activities.

2.2.2.4 Non-traditional Collateral

The bank is based on social collateral. After the first contact between the staffs and the

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potential borrowers, they ask the borrower to find four more people in order to create a group of five co-borrowers. If one of them does not comply with the loan payments on time, then no other member could receive a loan until they have solved the problem. These small groups of five people belong to larger groups, known as centers. The center is formed by eight groups, and they meet once a week to follow and deal with all the affairs related to the Grameen Bank. During these meetings the staffs collect the dues from the borrowers and, if they need, help with any problems that they had during the week.

2.2.2.5 Loan Terms

Loans are given in one year period with weekly payments. According to Yunus, small loans in one year period provide a better source of capital for poor people because if they receive a large amount of money they will be more likely to default or even run away. This experience is new for borrowers; it is the first time in borrowers’ life that they are able to get a loan. The weekly payments are created because it is easier to the borrowers to handle and also to generate a disciplined routine in them. Although the regular payments are weekly, only the first payment is due two weeks after the borrowers have received their first loans for help them to adapt to the process. The staff has to make sure that each project could provide immediate profit (no more than one week), in that way the possibility for borrowers to meet the requirements are achievable.

2.2.2.6 Create the Culture of Saving

The bank asks their members to accept and generate a mandatory saving in one week. This is to encourage borrowers to build a savings culture so they could use it during hard times, and also that could be used to get an additional income. Moreover, each member has to provide

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25 per cent of their interest payment to create a fund which would help any emergency fund for the group. This fund also provides insurance to coverage cases of malnutrition; pay for medical treatments, or to help a business that has suffered from any natural disasters, and other cases.

2.2.2.7 Banks’ Ideology

The bank used to have annual workshops to review their problems and achievements, to identify any area of concern, and to look for solutions to social and economic challenges. At the end of one national workshop they make four decisions. Few years later after another national workshop they have ten decisions and are increased to sixteen. These decisions are for instance, discipline, unity, courage, hard-work, keep their families small, keep the children in a clean environment, not practice child marriage, not commit any injustice, or take part in social activities collectively. (See Table 2)

2.2.2.8 Performance and Sustainability

According to the Grameen Bank historical data, it is impressive how the bank has grown from 1976 to 2011. The information is available in RBT and USD; this study is going to use only USD for a better understanding. There are many indicators that show that, even it is not a simple model, it is sustainable and profitable. Among these indicators, some of the most important are the disbursement during the year which went from less than USD 1 million in 1976; USD 99 million in 1983; USD 320 million in 1999, and finally USD 1,382 million in 2010. It means that the borrowers increased as well, from 10 million in 1976; 58,320 million in 1983; more than 2 billion in 1999, and 8.3 billion in 2010. The profit/losses per year went to USD -5,900 in 1983 (when the bank got autonomy); USD 1.57 million in 1999; and USD

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10.76 millions in 2010. (See Table 1)

At the end of the first loan, borrowers are allowed to get a new loan meeting the same requirements but now with more experience. On the other hand, if borrowers want to leave the program, they could do it whenever they desire to, as long as they have paid the loan in full.

Table 2. Grameen Bank´s Sixteen Decisions