Friday, February 9, 2007

History of Micro Finance – Grameen Bank

Mohammed Yunis, the 2006 winner of the Nobel Peace Prize, as a young economics professor in the mid 70s was the Head of the Rural Economics Program at the University of Chittagong in Bangladesh. During that time the country was going through a famine. He found this quite frustrating as after all of his education he had no tools that enabled him to help solve the situation.

He went out and made a list of all the very poor people he knew. He had 42 people on his list and after talking to them he determined that for all of them put together they needed a total of $27 to improve their situation. So he loaned them each the money they needed out of his own pocket. They each paid the money back and improved their life.

One person was a lady who made bamboo chairs. She did not have the few cents needed to buy the materials to make her chairs each day. So she borrowed the money from a money lender who required that she sell her chairs to him at a drastic discount to the market. This kept her in a poverty trap of never being able earn enough money to buy her own materials and sell her chairs at market price and thus earn a much more livable wage. Dr. Yunis loaned her the money to buy the materials herself and from the profits she made by selling her chairs at the market price she was able to pay back her loan and break out of the poverty trap.

This was the beginning of GRAMEEN BANK which was founded by Dr. Yunis.

Based on the information I have the bank has had a total of 6.61 million borrowers 97 per cent of which are women. The bank has 2,226 branches. It works in 71,371 villages with a total staff of 18,795. The amount of loans disbursed by Grameen Bank, since inception, is US$ 5.72 billion. $ 5.07 billion has been repaid. Currently they have outstanding loans of $ 457.52 million

You can get more information about Grameen Bank at


Aaron said...

I was reading more on this. There is an article in Ode Magazine about a woman in India named Jaya Arunachalam. She is a women's right advocate and praises the microcredits but also says it's not enough so she started an organization that offers microinsurance to help deal with a lot of the 'personal shocks that can occur to drag those who use microcredits back in to poverty (i.e. sickness, accidents, epidemics, natural disasters)'

I guess one could say the microinsurance was born from microcredits. There was a need and the consumer is starting to get to the point where they can financially support there own needs (like insurance)

John said...

Hi Aaron. Micro Insurance. Cool. Sounds like a good idea. I think I've heard of some microcredit organizations building this type of thing into the loan payment.