On
Research Methods for Strategic Managers
Level-7
Submitted to:
Muhammad Sameer
Submitted by
Ashraful Gani
ID:LCC20102653
PGD
Assignment Title: The Role of Microfinance Banking for the Rural Economic
Development.
Abstract
The Grameen Bank is a microfinance organization and community development bank that offers
small loans to impoverished people without demanding any collateral. Prof. Muhammad Yunus
who wanted to design a credit delivery system providing banking services targeted to the rural
poor, the bank started 1976 in Bangladesh. In 1983, the project was transformed into an
independent bank by government legislation. In 2006 the organization and its founder, Prof.
Yunus, were finally awarded the Nobel Peace Prize. In my proposed research The strategic
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management of small business in developing countries has various types of sector among
them .I have choose the Grameen bank in Bangladesh. In my research I have found how
Grameen bank is successful all over the developing countries and what type of strategies they
took for their success. Also what have found the previous researchers about Grameen bank as a
small business.
Contents
page
Introduction .......05
Literature Review.......06
Methodology ...18
Results and Discussion(Findings).20-21
Conclusion and Recommendations...22
Reference ..23-25
Appendix....26-30
page
Chapter 1: Introduction05
Chapter: 2. Literature Review.06
2.1. Background
06
07
08-09
10
2.5. Special loan condition for particularly for the poor peoples
11
11
12-17
Chapter: 3 Methodology.18
3.1. Introduction
18
18
19
19
4
19
..22
Reference.23-25
Appendix.26-30
Chapter 1: Introduction
Microfinance is the provision of a broad range of financial services to low-income households
and microenterprises. The range of financial services usually includes voluntary savings and
loans. Other products might also include insurance, leasing, and money transfers. The term
microfinance encourages exploration of the entire range of financial needs and requirements of
poor people. It is important to distinguish this term from the term microcredit. Microcredit refers
to the provision of credit services to low-income clients, usually in the form of small loans for
the purpose of microenterprise and income-generating activities. A focus on credit only in
financial development interventions ignores the reality that creating access to credit will not
necessarily meet the financial needs of the poorest or alleviate poverty. This strategy may further
marginalize those poor people who are unable or unwilling to take up loans and risk increased
debt (name of author, year).
The Grameen Bank is a microfinance organization and community development bank started in
Bangladesh that makes small loans (known as microcredit or "grameen credit" to the
impoverished without requiring collateral. The word "Grameen", derived from the word "gram"
or "village", means "of the village".
The system of this bank is based on the idea that the poor have skills that are under-utilized. A
group-based credit approach is applied which utilizes the peer-pressure within the group to
ensure the borrowers follow through and use caution in conducting their financial affairs with
strict discipline, ensuring repayment eventually and allowing the borrowers to develop good
credit standing. The bank also accepts deposits, provides other services, and runs several
development-oriented businesses including fabric, telephone and energy companies. Another
distinctive feature of the bank's credit program is that a significant majority of its borrowers are
women.
The origin of Grameen Bank can be traced back to 1976 when Professor Muhammad Yunus, a
Fulbright scholar at Vanderbilt University and Professor at University of Chittagong, launched a
research project to examine the possibility of designing a credit delivery system to provide
banking services targeted to the rural poor. In October 1983, the Grameen Bank Project was
transformed into an independent bank by government legislation. The organization and its
founder, Muhammad Yunus, were jointly awarded the Nobel Peace Prize in 2006.
that making such loans available to a wide population would have a positive impact on the
rampant rural poverty in Bangladesh.
Philips(2001) defines, Nobel Laureate Muhammad Yunus, the bank's founder. The Grameen
Bank (literally, "Bank of the Villages", in Bangla) is the outgrowth of Yunus' ideas. The bank
began as a research project by Yunus and the Rural Economics Project at Bangladesh's
University of Chittagong to test his method for providing credit and banking services to the rural
poor. In 1976, the village of Jobra and other villages surrounding the University of Chittagong
became the first areas eligible for service from Grameen Bank. The Bank was immensely
successful and the project, with support from the central Bangladesh Bank, was introduced in
1979 to the Tangail District (to the north of the capital, Dhaka). The bank's success continued
and it soon spread to various other districts of Bangladesh.
Keith Bradshar (2006),The Bank today continues to expand across the nation and still provides
small loans to the rural poor. By 2006, Grameen Bank branches numbered over 2,100. Its success
has inspired similar projects in more than 40 countries around the world and has made World
Bank to take an initiative to finance Grameen-type schemes.
Targeting
Gender
and Empowerment
and Rules
can provide access to larger amounts of money more quickly, but are costly and can require
institutional forms which restrict local control, decision-making and ownership. It is crucial
that the design features are examined at a number of levels. Why are they the best features
for this situation? Whose interests do they serve? What are the implications for empowerment
of the target group/ what implications do they have for non-target groups? What are the
disadvantages? Do they fit within the organisations objectives? Who was involved in their
development?
Some principles, identified by Johnson & Rogaly, which underlie key design features in
Microfinance are:
Poverty Targeting: many schemes now practice self-selection through keeping loan
sizes small, and demanding regular attendance at meetings which better-off people
would find time-consuming or socially difficult to attend. Some schemes use measures
to directly target poor people, such as wealth ranking. Self-selection lowers the costs
but cannot be assumed to exclude the better-off entirely, especially if loan sizes start to
rise as the scheme progresses.
Women as scheme users: Many schemes are designed to provide women with credit.
However, as previously stated, it cannot be assumed that disbursing loans to women
means either that they use them or that they are empowered.
Lending through groups: groups have been a common component of methodologies
forlending to the poor and are a unique and key feature of the majority of
Microfinance schemes. They are seen as an economical way to deliver Microfinance
by reducing screening costs and financial risk, because of group pressure to internally
moderate compliance. However building, developing and maintaining effective group
dynamics is an art in itself. Yunus, the founder of the group concept within
Microfinance schemes, provides a rationale and some guidelines: Savings plus credit
can be a good starting point for group formation. There is a great incentive to form a
group if people see that it is the only way one can get access to credit.
The second regional workshop on Banking with the Poor identified 16 principles for
bestpractice in self-help groups, many of which reinforce those highlighted by Yunus.
(see Appendix 2.)
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Savings: Voluntary and flexible savings facilities have so far been a largely unmet
need of poor people. Consideration should be given to developing flexible savings
mechanisms, including group common fund savings. The existence of a common fund
gives the group experience in money management which is important for any joint
experience. However, to operate a savings facility is to take responsibility for other
peoples money, and should not be undertaken lightly.
Interest Rates: there is now widespread acceptance of the need to charge interest rates
which cover inflation and make a contribution to the costs of providing the service.
This reassessment has recognised that is often the availability rather than the cost of
credit to poor people which is the constraining factor. Long-term availability requires
that the loan fund does not become eroded through inflation, and that a degree of cost
recovery ensures sustainability.
households in several countries. Some of the social changes in Grameen Bank villages impact
positively on the community as a whole for example the increased visibility and mobility of
women. One study found that a significant change in household and community status could be
derived by women who maintained control of their loans. Women reported a direct correlation
between having money and increased status and recognition - resourceful women using the loans
to empower themselves.
2.5 Special loan condition for particularly for the poor peoples:
Brandon Glen(2006) defines, The Grameen Bank provide poorest people with loans without any
collateral. Loans are repayable weekly. The small credits worthy groups identified by the Field
manager are closely supervised by the bank staff. For collective or group borrowings all
members are responsible for loan repayment. The Company ensures special safeguards to
minimize the risk of lending to the poor.
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1983
1984
1985
1986
50,194
15,459
1,178
11,443
12,682,213
19,950,903
19,135,063
19,382,718
Investment
26,500,000
146,500,000
218,500,000
435,500,000
74,272,387
177,478,313
246,056,571
330,970,341
1,393,074
4,822,645
9,684,851
32,072,870
3,928,881
27,874,022
52,638,792
82,018,126
118,826,749
376,641,342
546,016,455
899,955,498
100,000,000
100,000,000
100,000,000
100,000,000
Paid Up
18,000,000
25,175,000
30,000,000
35,466,500
(3,064,274)
1,500,000
2,000,000
2,300,000
18,509,569
38,332,671
79,824,804
144,990,972
85,374,425
311,302,328
433,897,283
716,845,158
7,029
200,000
294,368
352,868
118,826,749
376,509,999
546,016,455
899,955,498
Contigent Liabilities
1987
1988
1989
1990
252,982
330,189
495,101
31,817
22,307,953
34,563,657
49,116,078
60,089,017
Investment
408,250,000
399,250,000
Cash in hand
Revolving Funds
Deposits and Other Funds
Borrowings from banks and
foreign
institutions
Other Liabilities
Profit and loss account
Total:
Cash in hand
Balance with other Banks
641,971,000 1,077,721,000
2,117,370,482
63,836,093
115,307,544
161,751,287
264,244,810
123,896,725
192,495,162
329,473,144
444,077,355
Sources: http://www.grameen-info.org/
Chapter: 3 Methodology
3.1 Introduction:
The nature of this research topic is mostly qualitative research. Qualitative research mainly
focuses on understanding, behavior patterns. Also there is a high degree of flexibility and it is
possibly to rely on secondary data or present view points or small surveys.
In my literature review, I mainly try to focus on operation of and drawbacks of Microfinance
institutions. At the same time I attempt to explain how these operation systems could be
improved. I explain the operation Bangladesh economy between in and the Grameen banking
system.
In my research I set out current theories, review, analyze and evaluate the circumstances facing
the Grameen banking sector in Bangladesh. I try to find out actual Grameen banking
performance which play a vital role in Bangladesh rural economy. So its can be classified as a
deductive research model, because of, a deductive research model starts from general ideas and
progress to specific situations.
impoverished without requiring collateral. The word "Grameen", derived from the word "gram"
or "village", means "of the village".
Data analysis methods: For this reasearch we have to analysis the data for get the
correct information of the case study.
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According to Ghista Garda(2004),The Norwegian Nobel Committee has decided to award the
Nobel Peace Prize for 2006, divided into two equal parts, to Muhammad Yunus and Grameen
Bank for their efforts to create economic and social development from below. Lasting peace can
not be achieved unless large population groups find ways in which to break out of poverty.
Micro-credit is one such means. Development from below also serves to advance democracy and
human rights
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Muhammad Yunus has shown himself to be a leader who has managed to translate visions into
practical action for the benefit of millions of people, not only in Bangladesh, but also in many
other countries. Loans to poor people without any financial security had appeared to be an
impossible idea. From modest beginnings three decades ago, Yunus has, first and foremost
through Grameen Bank, developed micro-credit into an ever more important instrument in the
struggle against poverty. Grameen Bank has been a source of ideas and models for the many
institutions in the field of micro-credit that have sprung up around the world.
Sudhirenda Sharma(2002) defines, Every single individual on earth has both the potential and
the right to live a decent life. Across cultures and civilizations, Yunus and Grameen Bank have
shown that even the poorest of the poor can work to bring about their own development.
17
Paul Sinclair(2007) defines, On July 11, 2005 the Grameen Mutual Fund One (GMFO),
approved by the Securities and Exchange Commission of Bangladesh, was listed as an. One of
the first mutual funds of its kind, GMFO will allow the over four million Grameen bank
members, as well as non-members, to buy into Bangladesh's capital markets. The Bank and its
constituents are together worth over USD 7.4 billion.
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References
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Loss Account, for the year ended 31 December 2006.
2. Ahmed & Ahmed (Chartered Accountants) (2007-08-01). "GRAMEEN BANK Balance
Sheet, As at 31 December 2006".
3. "The Nobel Prize for 2006". The Nobel Peace Prize for 2006. 2006-10-13.
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