Analysing The Grameen Bank Of Bangladesh Economics Essay

Analysing The Grameen deposit Of Bangladesh Economics EssayGrameen Bank (GB) is c eached the bank of ugly mountain in Bangladesh. It has been established for the welf atomic number 18 of the poor closure race of Bangladesh, which becomes a role model of the world of micro reference banking system. At the beginnings of Microcredit, Dr. Muhammed Yunus who is an economist educated in the United States of America, although originally from Bangladesh, introduced the world to the nonion of micro-credit in the 1970s.Counts (1996) said that Muhammed Yunus talked with the poor village people and discover that general local bank never shows interest to provide add to poor people and does non lend them and they had to borrow money from extortionate moneylenders with high interest rates. As a result, they ended up more(prenominal)-or-less permanently in debt and any money they make went to pay the interest on these high-interest loans. Yunus became conscious at that moment that the po or problems were in some ways no different from anyone else low interest credit was a necessity of life.Definition of Micro Credit Auwal (1996)An extremely small loan openn to impoverished people to help them become self employed. in like manner known as micro lending. This small loans extension (microloans) to those in poverty designed to spur entrepreneurship. These loans especially given to a poor person to alter him or herself to become self employed. Financial services loaned a small amounts of money usually around $50-$150 to poor people as a capital of a small business to start or extend it. The Grameen Bank in Bangladesh has become a model of successful micro loan provider.Principles of MicrocreditGeneral financing or credit.It emphasizes building capacity of a micro-entrepreneur.Employment generation.Trust building.Socioeconomic development.Help the micro entrepreneur on during difficult.Advantage of Microcredit Soeama (2004) computer address and cost of funding In order for the Microfinance institutions to loan they need funding too and a stable microfinance institution might have a competitory advantage of low cost of funds which enables it to provide finance at low cost.Infrastructure set upMicrofinance companies must have a infallible net run for and infrastructure to deliver these services. The Grameen Bank of Bangladesh creates and implements this structure in arcadian village area.ImageMFIs are many times criticized as money squeeze play machines which charge very high cost. Which is not necessarily true considering their cost of funds and risks moreover they have to be sustainable. So here I forecast having a good name, image and Top management team helps a lot.Disadvantages of Micro CreditAlthough microcredits are the keystone in terms of development in poor countries, it can also have its difficult. Indeed, the disadvantages of microcredits areSome microcredit institutions are often unpredictable.Refunding problems.Budget depends on subsidises from the government or NGOs.Fig 1 authoritative Microcredit Network of Grameen BankHistory of Grameen BankThe founder of Grameen Bank Muhammad Yunus open up the idea of micro-creditminuscule loans to the very poor. The bank currently lends more than $500 jillion a year with a repayment rate of better than 97 percent. Its Group Savings Funds have assets of $186 million. Grameen Bank operates 1,100 branches in half of Bangladeshs well 80,000 villages. The program has been successfully replicated in dozens of countries, including the Philippines, Malaysia, Vietnam, South Africa, and Bolivia. It has also been applied to inner city and rural poverty in rich nations in northwestern America and Europe.The origin of Grameen Bank can be traced back to 1976 when Professor Muhammad Yunus, Head of the Rural Economics Program at the University of Chittagong, launched an action research intent to examine the possibility of designing a credit delivery system to provide banking serv ices targeted at the rural poor. The Grameen Bank Project (Grameen means rural or village in Bangla language) came into operation with the following objectivesExtend banking facilities to poor men and women.Eliminate the exploitation of the poor by money lenders.Create opportunities for self-employment for the wide multitude of unemployed people in rural Bangladesh.Bring the disadvantaged, mostly the women from the poorest households, within the fold of an presidencyal format which they can understand and manage by themselves.Reverse the age-old vicious circle of low income, low saving low investment, into virtuous circle of low income, injection of credit, investment, more income, more savings, more investment, more income.The action research demonstrated its strength in Jobra (a village adjacent to Chittagong University) and some of the neighboring villages during 1976-1979. With the sponsorship of the central bank of the rustic and support of the nationalized mercenary banks , the project was extended to Tangail district (a district north of Dhaka, the capital city of Bangladesh) in 1979. With the success in Tangail, the project was extended to several other districts in the country. In October 1983, the Grameen Bank Project was transformed into an independent bank by government legislation. To twenty-four hour period Grameen Bank is owned by the rural poor whom it serves. Borrowers of the Bank own 90% of its shares, while the remaining 10% is owned by the government.Current structure of Grameen BankGrameen Bank allowed to operate branches in urban areas. precedent they could open branches only in the rural areas. government postal service cut down from 25% to 15%. Note that when the Bank started, Government had a stake of 60%.Number of Government nominated directors brought down to 2 from 3.Chairman of the bank will be appointed by the board instead of Government nomination which existed until now.Fig 2 Current structure of Grameen Bank.Aims and Obje ctives of Grameen bankThe Grameen Bank believes that the best way for participants to learn about how the bank works, is through first script exposure and observations at the field level. Through these experiences, participants are encouraged to draw their own conclusions about the effectiveness of Grameen Banks work and the impact it has on the poorest of the poor. The objectives of GBs training programs are toArouse curiosity.Stimulate interest on the subject of Micro financing.Encourage responsibility of self-motivated learning.Learn and share with others.Discover individual role in the organization and the global community.Methods of GrowthThe Grameen Banks Method of action can be illustrated by the following principlesStart with the problem rather than the solution.Adopt a progressive attitude. founder sure that the credit system serves the poor, and not vice-versa.Establish priorities for action vis-a-vis to the the target population.Lean on solidarity groups.Establish priori ties for action vis-a-vis to the target population. link savings with credit without it being necessarily a prerequisite.Do everything possible to ensure the systems financial balance.Invest in human resources.There are 16 decisions and 10 indicators in Grameen Bank policy to grow it up. These areDecisions Follow the four principles of Grameen Bank- Discipline, Unity, Courage and Hard work.Bring prosperity to the families.Work towards to construct new-sprung(prenominal) houses.Grow vegetables all the year round.During the plantation seasons plant as many seedlings as possible.Plan to keep families small which will help to minimize expenditures sluttish to look after every bodys health.Provide education to the children and ensure that they can earn to pay for their education.Keep the environment clean.Build and use pit-latrines.Arrange proficient drinking pee from tubewells and boil water or use alum when needed.Do not take any dowry at our sons weddings, neither shall give any d owry at any ones daughters wedding.No body inflict any injustice on anyone.Will do more collectively abridge bigger investments for higher incomes.Always be ready to help each other. If anyone is in difficulty, all help him or her.Come to know of any interruption of discipline in any centre, go there and help restore discipline.Take part in all social activities collectively.IndicatorsGrameen Bank does staff military rank of their work every year and check whether the socio-economic situation of GB members is improving. GB evaluates poverty level of the borrowers using ten indicators.A member is considered to have locomote out of poverty if her family fulfils the following criteriaThe family lives in a house worth at least Tk. 25,000 (twenty five thousand) or a house with a john roof, and each member of the family is able to sleep on bed instead of on the floor.Family members drink pure water of tube-wells, boiled water or water purified by using alum, arsenic-free, purifying t ablets or pitcher filters.All children in the family over six years of age are all going to groom or finished primary school.Minimum weekly loan instalment of the borrower is Tk. 200 or more.Family uses sanitary latrine.Family members have adequate clothing for every day use, warm clothing for winter, such as shawls, sweaters, blankets, etc, and mosquito-nets to protect themselves from mosquitoes.Family has sources of additional income, such as vegetable garden, fruit-bearing trees, etc, so that they are able to fall back on these sources of income when they need additional money.The borrower maintains an average annual balance of Tk. 5,000 in her savings accounts.Family experiences no difficulty in having three square meals a day passim the year, i.e. no member of the family goes hungry any time of the year.Family can take care of the health. If any member of the family falls ill, family can afford to take all necessary steps to seek adequate healthcare.PESTEL AnalysisThere Wahid (1999) are many factors which are affecting the work process and decision making of GB. measure changes, new laws, trade barriers, demographic change and government policy changes are all examples. To analyse these factors we can categorise them by using the PESTEL analysis. This classification distinguishes betweenPoliticalThe political condition of Bangladesh is not stable. The opposite part of government never helps their government properly to the welfare of the country. As a result work strike is happening, which affect the working progress of GB.EconomicalBangladesh is a developing country. Most of the villagers are considering as poor. Lone interest rate, tax, unemployment, inflation has effect to any business. Basically unemployment and low national income are the main problem, that why GB trying to motivate people to become self employed. Though Bangladesh is a poor economic country grameen bank faced this crisis to move forward their journey.SocialIn Bangladesh peoples a verage age is 60 years. A large number of populations of the country are aged and have no activity in the economy. Grameen Bank also working with the working attitude to change it that people can get wind interest in different job activities.TechnologicalGrameen Phone is another sister organisation of Grameen bank in Bangladesh. Muhammed Yunus bring the technology to the poor village people and give them an opportunity of phone business by doing cheap rate mobile phone call all over the world.Environmental diametric environmental issues like global worming have concern in Bangladesh. Grameen bank motivate people to concern about it and also the human health by providing the easy way to make sanitary latrines, pure drinking water which is arsenic free.LegalIn their different development program Grameen Bank see people about their legal rights and law, that people can get more knowledge about their and others rights.SWOT Analysis of Grameen BankStrengthVillage people are the main re source.Trust between bank and customer.Loan with low interest for poor people.Modern technology.WeaknessLoan return is difficult sometime. deliver give big amount of loan to the poor people.Sometime face the staff unhappiness.OpportunitiesGrameen bank a role model for the world. So this bank could spread all over the world.More job field can be created inside and outside of the country.ThreatsPolitical instability.Economic inflation.Environmental threats. e.g. cyclone.ConclusionGrameen Bank is not only for Bangladesh but also a role model for other organisations all over the world. The village poor life style already has been changed by the different activities of this bank. In Bangladesh it has been success in finance and human health sectors. Australia, USA and some African country are trying to follow the Grameen bank.