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Main article: Grameen Bank

Grameen Model

Founder	Muhammad Yunus

Grameen Bank Mongla Bangladesh

Grameen Model

The Grameen model promotes community development banking provision which is based on the concept of microfinancing to provide loan to the poor in an attempt at improving their socio-economic conditions. It was introduced by Professor Mohammad Yunus in Bangladesh in the year 1997.

The idea emerged from the introduction of the Grameen Bank in Bangladesh, which is a microfinance organization providing loan to the poor without collateral. The Grameen model targets the poor people based on size of land holding, condition of the house and income of the households. Currently a total of more than 12 million people are making use of this provision and benefiting socially and financially from the scheme

The Grameen model is a banking service of sorts which is based on the concept that the bank goes to the consumers instead of the consumers going to the bank. The model emphasizes access to provision of better opportunities to the rural poor and is marked by characteristic features that target women empowerment and poverty and is recognized globally for its effects at providing support to the poor population.

History

Muhammad yunus

Grameen model was founded in the year 1997 by Nobel Laureate Professor Mohammad Yunus, who is a global leader in the fight against poverty. In the first decade, Grameen model worked with a network of micro finance institutions in Africa, Asia, United States and Middle East to extend the provision of micro finance to the poorest people of the world. All the financial and technical support was given by the Grameen foundation to its international and national partners. In the second decade, the Grameen model headed on its way to solve even more complex problems of the issues of poverty and empowering the marginalized sections of the society such as women. The solutions that could strengthen the poor were identified by the founders and partners of the Grameen model.

Technology was used by the Grameen model to ensure the security of food for poor people. Increment of income, building homes for the poor, enhancing healthcare facilities and ensuring financial security to the families are some of the main features and action plans of the Grameen model that ensure efficient penetration of the model into the lives of the local poor and aid them with financial support. In the Grameen model, a team of five members is put forth and trained for a period of five days to provide loan to the poor people. The model was appreciated internationally with Professor Yunus being rewarded with the Nobel Peace Prize in the year 2006 for his vision against poverty. The proliferation of the model from Bangladesh to a number of countries around the world, including the West has resulted in a rare case of technological transfer from the non-West to the West, marking a role-reversal in the functions of the first-world and the third-world countries, making the innovator the adopter. This also marks a significant shift in the social representation of the third-world countries.

Concept of the model

The Grameen model has been an attraction for the poor people all over the world as it provides them with loan facility without providing any collateral to the loan provider which takes away a significant amount of financial burden from the rural poor. The model focuses on the concept of micro finance which is an essential force and instrument to ensure fight against poverty. The main aim of micro finance is to ensure that by the help of the Grameen model, all the poor households can witness an elevation in their income and simultaneously look out for new self - employment opportunities.

The idea behind the concept of Grameen model was that by giving a very small amount of loan to someone living in a poor country, one could help him in expanding a small business, which can ultimately lift their family from the poverty. The concept functions in a pattern wherein "after the first two borrowers successfully repay their first five weekly installments, the next two group members become eligible to apply for their own loans. Once they make five repayments, the final member of the group may apply". The model promoted weekly meetings for efficient discussions and a list of Sixteen Decisions which constituted of the agreements that the borrowers had to follow to ensure the smooth running of the model.

The Grameen model proved to be a big success because of which a lot of business institutes imitated the concept of extending loan and financial services to the poor workers to ensure welfare of the workers and increase in goodwill through micro crediting services.. Most of the poor people suffer from the problem of unreliable and undependable income due to their involvement in the informal sector which is the main cause of their financial insecurity. The Grameen model caters to the needs of the poor in light of such issues. This is the reason why the existence of such a model is very helpful for the poor and has proved to be a real success, not only conceptually but also practically. The Grameen bank which was a result of the Grameen model is guided by a cause oriented mission that empowers the poor people to start with their own employment services and aim at eradicating poverty from the society.

Poverty

The Grameen model aims at targeting the poverty of the society by extending credit facilities as a basic right to the people who cannot afford to take loans in the traditional way by offering collateral to the banks. The model proposes providing aid to such people against the issue of poverty right from the grass-root level. The model is a collective of several micro enterprises for the people and by the people who provide loan to the poor people in order to encourage them in starting their own small businesses under self-employment schemes and repay the enterprises once they have a stable business.

The model suffered initially when it experienced a late to no return of loan from some borrowers. But Yunus adopted new policies such as organizing the borrowers into collectives so that they take responsibility for each other; making weekly micro savings compulsory so that people use the money strategically; and recruiting young graduates to look after the services. The model’s current success reflects in the figures that shows a steady loan repayment rate of 99% which is an impressive number and represents the successful involvement of the poor masses in the scheme and their readiness to engage in self-employment ventures, if provided with such opportunities.

The self-employment ventures range in small scale activities such as raising chickens to making earthen pots. It was estimated that "before joining the bank, 83 percent of the members were moderately poor and 33 percent were extremely poor. But a fifth of the members were able to lift themselves out of poverty after participating in the bank". Thus, the model promotes a practice that not only aids the poor but, in turn, depends on their entrepreneurial potential for its own success which emphasizes the significance of the poor people and gives them an agency for self-support.

Women empowerment

The Grameen model also focused on women empowerment. Women throughout the world suffer from the problem of gender inequality and dis-empowerment. Micro finance concept of the Grameen model is an efficient step to ensure economic empowerment of women. With the help of Grameen model, women can increase their income and savings and can also find access to social services and training.

The main purpose of Grameen model is to provide low interest loans to the women of rural areas to make them more self sufficient by providing them opportunities to be self-employed and, thus, empowered. Looking at older cases, it was observed that men in the family tend to spend the borrowed money in a careless manner which not only undermined the whole point of the scheme but also laid doubt on the repayment abilities of the borrowers. As a result, it was decided that women will be encouraged to make borrowings and start their own self-entrepreneurial ventures. The concept of the Grameen model says that once a woman applies for a loan at a Grameen bank and gets the money and starts her own business, she can pay the amount at a later stage when she has acquired the financial stability to repay the loan. The bank uses that amount to give it to other borrowers of rural areas and poor people to make them employed and empowered. Out of the 2.4 million borrowers in Bangladesh, 94% constitute of women.

The belief of the Grameen model is to empower the women so that they can raise their families, improve their income and lead the society towards a better future. For their exceptional micro finance ideas for women, the Grameen model is internationally recognized.

Criticisms of the Grameen model

Despite the tremendous success of the model and its proliferation around the globe, the Grameen model is also subjected to certain criticisms. The main criticism of the model is that it puts developing countries into inescapable debt. Moreover, because of the institutions like this, the borrowers are increasing in size and number and so are the lenders which posits a threat to the economy of a country by destabilizing it. During its inception, several challenges were raised towards the Grameen model as the local banks were not ready to give money to the poor because of the belief that they will never return their money. True to their estimate, over the years it is being observed that the repayment capability of Grameen bank has decreased. The borrowers are reported not to repay to the bank even after successfully initiating their business.

The rates of loan collection have also decreased over the years. There is no distinction between risky and safe borrowers. There is also less care taken by the Grameen model in the recruitment of its staff. Also, a lot of corruption began to come to the forefront as the scheme continued to grow, which eventually lead to a steady decline in its prospective growth. Several micro credit institutions, "in their drive to grow as big as possible as fast as possible, were found to have massively over-expanded and over-indebted the poor".

Scholars, journalists, and professors alike have shown some distrust in the exaggerated claims of the too good to be true model. "Recently, several economists from MIT's Poverty Action Lab have raised questions about the impact of microcredit in Bangladesh and elsewhere. Critics often suggest that despite the hype of the model and its immense theoretical success, the effect of the bank's attempt at seriously hitting poverty has been weak to non-existent. After the 2007 cyclone in Dhaka, which devastated a lot of households, one of the borrowers was reported saying, "How am I supposed to pay back my loan? The Grameen Bank has made profits from the interest we pay. We have also benefited, [but) I am telling the truth when I say I have nothing left". Such claims raise questions against the overall impact of the model and whether it actually has a long-term effect on the lives of the poor or is just a temporary aid to the poor for survival.