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Chapter: 1Introduction1.1Origin of the Report:The report entitled Grameen Bank-A Bank for Landless People is prepared which is mandatory

requirement MBA Program under East West University, which aims to reflect the professional view

of the real world.

1.2Objective of the Report:The objective of this report is to know about the various activities and services provided by the

Grameen Bank to landless people to fight against the poverty and development of socio economic

condition of the poor, who have been keeping outside the banking sector. To know about the

Grameen Banks mission, vision and their contribution in national economy.

1.3Scope of the Report:This report is mainly focuses on the Grameen Bank -A Bank of Landless People in the context of

Bangladesh. The propose study covers different aspect of the Grameen Bank activities and social

responsibilities. As Bangladesh is a least developing country the role of Grameen Bank is most

essential for developing the landless people.

1.4Historical Background: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 project to

examine the possibility of designing a credit delivery system to provide banking services targeted at

the rural poor. The Grameen Bank Project (Grameen means "rural" or "village" in Bangla language)

came into operation with the following objectives:

1. Extend banking facilities to poor men and women;

2. Eliminate the exploitation of the poor by money lenders;

3. Create opportunities for self-employment for the vast multitude of unemployed people in rural

Bangladesh;


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4. Bring the disadvantaged, mostly the women from the poorest households, within the fold of an

organizational format which they can understand and manage by themselves; and

5. 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, moreinvestment, more income".

1.5Grameen Bank's MissionGrameen Bank claims to be different from conventional banks in that it provides loans to the poor,

who are otherwise seen as not credit-worthy. It is believed that those who are poverty stricken

around the world have vast untapped potent ional for innovation and productivity if only given the

resources to work. And this entrepreneurship can lift a person, family and society up from poverty

and into a self-sufficient, productive work-force. Additionally, Grameen promotes establishing

women as the financial hub of society. According to Grameen, women have been proven to be the

more responsible members of society and, therefore, a greater tool for development.

1.6Decision of Grameen Bank:1. We shall follow and advance the four principles of Grameen Bank --- Discipline, Unity, Courage

and Hard work in all walks of out lives

2. Prosperity we shall bring to our families3. 3.0 We shall not live in dilapidated houses. We shall repair our houses and work towards

constructing new houses at the earliest

4. We shall grow vegetables all the year round. We shall eat plenty of them and sell the surplus5. During the plantation seasons, we shall plant as many seedlings as possible6. We shall plan to keep our families small. We shall minimize our expenditures. We shall look after

our health

7. We shall educate our children and ensure that they can earn to pay for their education8. We shall always keep our children and the environment clean9. We shall build and use pit-latrines


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10.We shall drink water from tubewells. If it is not available, we shall boil water or use alum11.We shall not take any dowry at our sons' weddings, neither shall we give any dowry at our

daughters wedding. We shall keep our centre free from the curse of dowry. We shall not

practice child marriage

12.We shall not inflict any injustice on anyone, neither shall we allow anyone to do so13.We shall collectively undertake bigger investments for higher incomes14.We shall always be ready to help each other. If anyone is in difficulty, we shall all help him or her15. If we come to know of any breach of discipline in any centre, we shall all go there and help

restore discipline

16.We shall take part in all social activities collectively

1.7Indicators of Grameen BankEvery year GB staffs evaluate their work 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 moved out of poverty if her family fulfills the following criteria:

1. The family lives in a house worth at least Tk. 25,000 (twenty five thousand) or a house with a

tin roof, and each member of the family is able to sleep on bed instead of on the floor.

2. Family members drink pure water of tube-wells, boiled water or water purified by using alum,

arsenic-free, purifying tablets or pitcher filters.

3. All children in the family over six years of age are all going to school or finished primary school.

4. Minimum weekly loan installment of the borrower is Tk. 200 or more.

5. Family uses sanitary latrine.

6. 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.

7. 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.

8. The borrower maintains an average annual balance of Tk. 5,000 in her savings accounts.

9. Family experiences no difficulty in having three square meals a day throughout the year, i. e.


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no member of the family goes hungry any time of the year.

10. 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.

1.8 Essential Features of the Savings and Loan Delivery System

1 Exclusive Focus on the Poorest of the Poor

2 Borrowers Organized into Small Homogenous Groups

3 Loan Conditions Specially Tailored for the Poor

4 Undertaking Social Development Programs to Address Basic Needs of the Poor

5 Designs and Development of a Credit Conducive Organization and Management System Capable of

Servicing the Poor

6 Expansion of the Loan Portfolio to Meet Diverse Development Needs of the Poor

7 Strategic Market Orientated Credit Policies

8 The Organizational Structures and Functions

1.9 Methodology:

This report was created by accumulating data from various sources. Namely, books, websites and

annual reports. The books and websites were used for the presentation of financial instruments

related information. Annual reports were used for institute profiles and content analysis.


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Chapter 2:

An overview of Grameen Bank

2.1 Introduction

Grameen Bank (GB) has reversed conventional banking practice by removing the need for collateral

and created a banking system based on mutual trust, accountability, participation and creativity. GB

provides credit to the poorest of the poor in rural Bangladesh, without any collateral. At GB, credit is

a cost effective weapon to fight poverty and it serves as a catalyst in the over all development of

socio-economic conditions of the poor who have been kept outside the banking orbit on the ground

that they are poor and hence not bankable. Professor Muhammad Yunus, the founder of "Grameen

Bank" and its Managing Director, reasoned that if financial resources can be made available to the

poor people on terms and conditions that are appropriate and reasonable, "these millions of small

people with their millions of small pursuits can add up to create the biggest development wonder."

As of October, 2011, it has 8.349 million borrowers, 97 percent of whom are women. With 2,565

branches, GB provides services in 81,379 villages, covering more than 97 percent of the total villages

in Bangladesh.

Grameen Bank's positive impact on its poor and formerly poor borrowers has been documented in

many independent studies carried out by external agencies including the World Bank, the

International Food Research Policy Institute (IFPRI) and the Bangladesh Institute of Development

Studies (BIDS).

2.2 Brief History of Grameen Bank:

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 country and support of the nationalized commercial 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. Today 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.


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2.3 Founder of the Grameen Bank:

Professor Muhammad Yunus is the founder and Managing Director of Grameen Bank which

currently operates 2,564 branches providing credit to 8.29 million poor people residing in 81,367

villages in Bangladesh. He originated the concept of Grameen Bank, i.e. banking without collateralfor the poorest of the poor.

Professor Yunus studied economics in the Vanderbilt University, USA and received his Ph.D. in

Economics in 1970. He taught economics in the Middle Tennessee University from 1969 to 1972.

Returning to Bangladesh in 1972, he joined the University of Chittagong as Head of the Economics

Department. He started the Grameen Bank Project in 1976. It was transformed into a formal bank in

1983. The Grameen Bank offers small loans for self employment for the rural poor, especially poor

women.

2.4 Biography of Dr. Muhammad Yunus

Muhammad Yunus was born in 28th June, 1940 in the village of Bathua, in Hathazari, Chittagong, the

business centre of what was then Eastern Bengal. He was the third of 14 children of whom five died

in infancy. His father was a successful goldsmith who always encouraged his sons to seek higher

education. But his biggest influence was his mother, Sufia Khatun, who always helped any poor that

knocked on their door. This inspired him to commit himself to eradication of poverty. His earlychildhood years were spent in the village. In 1947, his family moved to the city of Chittagong, where

his father had the jewelery business.

In 1974, Professor Muhammad Yunus, a Bangladeshi economist from Chittagong University, led his

students on a field trip to a poor village. They interviewed a woman who made bamboo stools, and

learnt that she had to borrow the equivalent of 15p to buy raw bamboo for each stool made. After

repaying the middleman, sometimes at rates as high as 10% a week, she was left with a penny profit

margin. Had she been able to borrow at more advantageous rates, she would have been able to

amass an economic cushion and raise herself above subsistence level.

Realizing that there must be something terribly wrong with the economics he was teaching, Yunus

took matters into his own hands, and from his own pocket lent the equivalent of ? 17 to 42 basket-

weavers. He found that it was possible with this tiny amount not only to help them survive, but also

to create the spark of personal initiative and enterprise necessary to pull themselves out of poverty.


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Against the advice of banks and government, Yunus carried on giving out 'micro-loans', and in 1983

formed the Grameen Bank, meaning 'village bank' founded on principles of trust and solidarity. In

Bangladesh today, Grameen has 2,564 branches, with 19,800 staff serving 8.29 million borrowers in

81,367 villages. On any working day Grameen collects an average of $1.5 million in weekly

installments. Of the borrowers, 97% are women and over 97% of the loans are paid back, a recovery

rate higher than any other banking system. Grameen methods are applied in projects in 58

countries, including the US, Canada, France, The Netherlands and Norway.

2.5 What is Microcredit ?

The word "micro credit" did not exist before the seventies. Now it has become a buzz-word among

the development practitioners. In the process, the word has been imputed to mean everything to

everybody. No one now gets shocked if somebody uses the term "micro credit" to mean agricultural

credit, or rural credit, or cooperative credit, or consumer credit, credit from the savings and loan

associations, or from credit unions, or from money lenders. When someone claims micro credit has a

thousand year history, or a hundred year history, nobody finds it as an exciting piece of historical

information.

I think this is creating a lot of misunderstanding and confusion in the discussion about micro credit.

We really don't know who is talking about what. I am proposing that we put labels to various types

of micro credit so that we can clarify at the beginning of our discussion which micro credit we are

talking about. This is very important for arriving at clear conclusions, formulating right policies,

designing appropriate institutions and methodologies. Instead of just saying "micro credit" we

should specify which category of micro credit.

A broad classification of micro credit :

A) Traditional informal micro credit (such as, moneylender's credit, pawn shops, loans from friends

and relatives, consumer credit in informal market, etc.)

B) Micro credit based on traditional informal groups (such as, tontin, su su, ROSCA, etc.)

C) Activity-based micro credit through conventional or specialized banks (such as, agricultural credit,

livestock credit, fisheries credit, handloom credit, etc.)

D) Rural credit through specialized banks.

E) Cooperative micro credit (cooperative credit, credit union, savings and loan associations, savings


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banks, etc.)

F) Consumer micro credit.

G) Bank-NGO partnership based micro credit.

H) Grameen type micro credit or Grameen credit.

I) Other types of NGO micro credit.

J) Other types of non-NGO non-collateralized micro credit.

This is a very quick attempt at classification of micro credit just to make a point. The point is? Every

time we use the word "micro credit" we should make it clear which type (or cluster of types) of

micro credit we are talking about. Otherwise we'll continue to create endless confusion in our

discussion. Needless to say that the classification I have suggested is only tentative. We can refine

this to allow better understanding and better policy decisions.

Classification can also be made in the context of the issue under discussion. I am arguing that we

must discontinue using the term "micro credit" or "microfinance" without identifying its category.

Micro credit data are compiled and published by different organizations. We find them useful. I

propose that while publishing these data we identify the category or categories of micro credit each

organization provides. Then we can prepare another set of important information? Number of poor

borrowers, and their gender composition, loan disbursed, loan outstanding, balance of savings, etc.

under each of these categories, countrywide, regionwise, and globally.

These sets of information will tell us which category of micro credit is serving how many poor

borrowers, their gender break-up, their growth during a year or a period, loans disbursed, loans

outstanding, savings, etc. The categories which are doing better, more support can go in their

direction. The categories which are doing poorly may be helped to improve their performance. For

policy-maters this will be enormously helpful.

I urge Microcredit Summit Campaign secretariat to present the information that they already collect

on number of clients, number of the poorest among them, number of poorest clients that are

women, number of clients that have crossed the poverty line? broken down for each of the

categories of micro credit. This will help donors to select the categories they would like to support.

This sorting out is very important for the donors, as well as the policymakers.


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2.6 Grameen credit

Whenever I use the word "micro credit" I actually have in mind Grameen type microcredit or

Grameen credit. But if the person I am talking to understands it as some other category of micro

credit my arguments will not make any sense to him. Let me list below the distinguishing features of

Grameen credit. This is an exhaustive list of such features. Not every Grameen type programme has

all these features present in the programme. Some programmes are strong in some of the features,

while others are strong in some other features. But on the whole they display a general convergence

to some basic features on the basis of which they introduce themselves as Grameen replication

programmes or Grameen type programmes.

General features of Grameencredit are :

a) It promotes credit as a human right.

b) Its mission is to help the poor families to help themselves to overcome poverty. It is targeted to

the poor, particularly poor women.

c) Most distinctive feature of Grameencredit is that it is not based on any collateral, or legally

enforceable contracts. It is based on "trust", not on legal procedures and system.

d) It is offered for creating self-employment for income-generating activities and housing for the

poor, as opposed to consumption.

e) It was initiated as a challenge to the conventional banking which rejected the poor by classifying

them to be "not creditworthy". As a result it rejected the basic methodology of the conventional

banking and created its own methodology.

f) It provides service at the door-step of the poor based on the principle that the people should not

go to the bank, bank should go to the people.

g) In order to obtain loans a borrower must join a group of borrowers.

h) Loans can be received in a continuous sequence. New loan becomes available to a borrower if her

previous loan is repaid.


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i) All loans are to be paid back in installments (weekly, or bi-weekly).

j) Simultaneously more than one loan can be received by a borrower.

k) It comes with both obligatory and voluntary savings programmes for the borrowers.

l) Generally these loans are given through non-profit organizations or through institutions owned

primarily by the borrowers. If it is done through for-profit institutions not owned by the borrowers,

efforts are made to keep the interest rate at a level which is close to a level commensurate with

sustainability of the programme rather than bringing attractive return for the investors.

Grameencredit's thumb-rule is to keep the interest rate as close to the market rate, prevailing in the

commercial banking sector, as possible, without sacrificing sustain-ability. In fixing the interest rate

market interest rate is taken as the reference rate, rather than the moneylenders' rate. Reaching the

poor is its non-negotiable mission. Reaching sustainability is a directional goal. It must reach

sustainability as soon as possible, so that it can expand its outreach without fund constraints.

Grameen credit is based on the premise that the poor have skills which remain unutilized or under-

utilized. It is definitely not the lack of skills which make poor people poor. Grameen believes that the

poverty is not created by the poor, it is created by the institutions and policies which surround them.

In order to eliminate poverty all we need to do is to make appropriate changes in the institutions

and policies, and/or create new ones. Grameen believes that charity is not an answer to poverty. It

only helps poverty to continue. It creates dependency and takes away individual's initiative to break

through the wall of poverty. Unleashing of energy and creativity in each human being is the answer

to poverty.

Grameen brought credit to the poor, women, the illiterate, the people who pleaded that they did

not know how to invest money and earn an income. Grameen created a methodology and an

institution around the financial needs of the poor, and created access to credit on reasonable term

enabling the poor to build on their existing skill to earn a better income in each cycle of loans.

If donors can frame category wise micro credit policies they may overcome some of their

discomforts. General policy for micro credit in its wider sense is bound to be devoid of focus and

sharpness.


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2.7 Owner of the Bank:

2.7.1 Owned by the Poor

Grameen Bank Project was born in the village of Jobra, Bangladesh, in 1976. In 1983 it was

transformed into a formal bank under a special law passed for its creation. It is owned by the poor

borrowers of the bank who are mostly women. It works exclusively for them. Borrowers of Grameen

Bank at present own 95 percent of the total equity of the bank. Remaining 5 per cent is owned by

the government.

Beggars as Members

i. Existing rules of Grameen Bank do not apply to beggar members; they make up their own rules.ii. All loans are interest-free. Loans can be for very long term, to make repayment installments very

small. For example, for a loan to buy a quilt or a mosquito-net, or an umbrella, many borrowers

are paying Tk 2.00 (3.4 cents US) per week.

iii. Beggar members are covered under life insurance and loan insurance programmes withoutpaying any cost.

iv. Groups and centers are encouraged to become patrons of the beggar members.v. Each member receives an identity badge with Grameen Bank logo. She can display this as she

goes about her daily life, to let everybody know that she is a Grameen Bank member and this

national institution stands behind her.

vi. Members are not required to give up begging, but are encouraged to take up an additionalincome-generating activity like selling popular consumer items door to door, or at the place of

begging.

vii. Objective of the programme is to provide financial services to the beggars to help them find adignified livelihood send their children to school and graduate into becoming regular Grameen

Bank members. We wish to make sure that no one in the Grameen Bank villages has to beg for

survival.


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Chapter ThreeGrameen Bank at a Glance3.1.0 Nobel Peace Prize, 2006

October 13, 2006 was the happiest day for Bangladesh. It was a great moment for the whole

nation. Announcement came on that day that Grameen Bank and I received the Nobel Peace

Prize, 2006. It was a sudden explosion of pride and joy for every Bangladeshi. All

Bangladeshi's felt as if each of them received the Nobel Peace Prize. We were happy that

the world has given recognition through this prize, that poverty is a threat to peace.

Grameen Bank, and the concept and methodology of micro-credit that it has elaborated

through its 30 years of work, have contributed to enhancing the chances of peace by

reducing poverty. Bangladesh is happy that it could contribute to the world a concept and

an institution which can help bring peace to the world.

Following is a brief introduction to Grameen Bank.

3.2.0 Owned by the Poor

Grameen Bank Project was born in the village of Jobra, Bangladesh, in 1976. In 1983 it was

transformed into a formal bank under a special law passed for its creation. It is owned by

the poor borrowers of the bank who are mostly women. It works exclusively for them.

Borrowers of Grameen Bank at present own 95 percent of the total equity of the bank.

Remaining 5 per cent is owned by the government.

3.3.0 No Collateral, No Legal Instrument, No Group-Guarantee or Joint Liability

Grameen Bank does not require any collateral against its micro-loans. Since the bank does

not wish to take any borrower to the court of law in case of non-repayment, it does not

require the borrowers to sign any legal instrument.

Although each borrower must belong to a five-member group, the group is not required to

give any guarantee for a loan to its member. Repayment responsibility solely rests on the

individual borrower, while the group and the centre oversee that everyone behaves in a

responsible way and none gets into repayment problem. There is no form of joint liability,

i.e. group members are not responsible to pay on behalf of a defaulting member.


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3.4.0 97 per cent Women

Total number of borrowers is 8.35 million, 96 per cent of them are women.

3.5.0 Branches

Grameen Bank has 2,565 branches. It works in 81,379 villages. Total staff is 22,124

3.6.0 Over Tk 684 billion Disbursed

Total amount of loan disbursed by Grameen Bank, since inception, is Tk 684.13 billion (US $

11.35 billion). Out of this, Tk 610.81 billion (US $ 10.11 billion) has been repaid. Current

amount of outstanding loans stands at TK 73.32 billion ( US $ 968.31 million). During the

past 12 months ( from November10 to October'11) Grameen Bank disbursed Tk. 107.30

billion (US $ 1480.53 million). Monthly average loan disbursement over the past 12 month

was Tk 8.94 billion (US $ 123.38 million).

Projected disbursement for year 2011 is Tk 110.00 billion (US$ 1557.63 million), i.e. monthly

disbursement of Tk 9.17 billion (US $ 129.80 million). End of the year outstanding loan is

projected to be at Tk. 78.00 billion (US $ 1105 million).

3.7.0 Recovery Rate Over 97 per cent

Loan recovery rate is 96.67 per cent.

3.8.0 100 per cent Loans Financed From Banks Deposits

Grameen Bank finances 100 per cent of its outstanding loan from its deposits. Over 56 per

cent of its deposits come from banks own borrowers. Deposits amount to 145 per cent of

the outstanding loans. If we combine both deposits and own resources it becomes 160 per

cent of loans outstanding.

3.9.0 Borrower-Deposits Keep Growing

Besides building financial strength of the poor women by encouraging them to build up

significant amount of personal savings, borrower deposit is also a very important element in

Grameen Bank. Forty-two per cent of the branches have borrower deposits equal to 75 per

cent or more of outstanding loans of the branches.

One-fifth of the branches have more borrower-deposits than the amount of loans

outstanding. In some branches borrower-deposits are as high as 50 per cent above the


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outstanding loans.

In eight zones, out of forty, borrower deposits are equal or more than the outstanding loans

in zones.

3.10.0 No Donor Money, No Loans

In 1995, GB decided not to receive any more donor funds. Since then, it has not requested

any fresh funds from donors. Last installment of donor fund, which was in the pipeline, was

received in 1998. GB does not see any need to take any donor money or even take loans

from local or external sources in future. GB's growing amount of deposits will be more than

enough to run and expand its credit programme and repay its existing loans.

3.11.0 Earns Profit

Ever since Grameen Bank came into being, it has made profit every year except in 1983,

1991, and 1992. It has published its audited balance-sheet every year, audited by two

internationally reputed audit firms of the country. All these reports are available on CD, and

some on our web-site : www.grameen.com.

3.12.0 Revenue and Expenditure

Total revenue generated by Grameen Bank in 2010 was Tk 17.74 billion (US $ 252.05million). Total expenditure was Tk 16.98 billion (US $ 241.29 million). Interest payment on

deposits of Tk 9.23 billion (US $ 131.09 million) was the largest component of expenditure

(54 per cent). Expenditure on salary, allowances, pension benefits amounted to TK. 4.64

billion (US $ 65.92 million), which was the second largest component of the total

expenditure (27 per cent). Grameen Bank made a profit of Tk 757.24 million (US $ 10.76

million) in 2010.

3.13.0 30% Dividend for 2010

Grameen Bank has declared 30% cash dividend for the year 2010. This is the highest cash

dividend declared by any bank in Bangladesh in 2010.Highest record of dividend declared by

Grameen Bank was in 2006.It was 100%.The bank has also created a Dividend Equalization

Fund to ensure distribution of dividends without much fluctuation in successive years

.Receiving of dividends each year greatly inspires our shareholders, 97% of whom are our

borrowers.


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3.14.0 Low Interest Rates

Government of Bangladesh has fixed interest rate for government-run microcredit

programmes at 11 per cent at flat rate. It amounts to about 22 per cent at declining basis.

Grameen Bank's interest rate is lower than governmentrate.

Recently MRA has fixed the maximum interest rate for microcredit at 27% on declining

balance method and instructed the NGO-MFIs to implement this capped interest rate within

June 2011.MRA found in a recent survey the effective interest rate of NGO-MFIs on General

Loan ranges from 25% to 33% and the modal value is 29%.On the contrary Grameen Bank's

highest interest rate is 20%.

Microfinance Transparency an internationally reputed pricing certification agency also

verified the pricing of Grameen Bank loan products and found that GB actually charges the

same interest as it publicly claims.

There are four interest rates for loans from Grameen Bank : 20% for income generating

loans, 8% for housingloans, 5% for student loans, and 0% (interest-free) loans for Struggling

Members (beggars). All interests are simple interest, calculated on declining balance

method. This means, if a borrower takes an income-generating loan of say, Tk 1,000, and

pays back the entire amount within a year in weekly instalments, she'll pay a total amount

of Tk 1,100, i.e. Tk 1,000 as principal, plus Tk 100 as interest for the year, equivalent to 10%

flat rate.

3.15.0 Deposit Rates

Grameen Bank offers very attractive rates for deposits. Minimum interest offered is 8.5 per

cent. Maximum rate is 12 per cent.

3.16.0 Beggars As Members

Begging is the last resort for survival for a poor person, unless he/she turns into crime or

other forms of illegal activities. Among the beggars there are disabled, blind, and retarded

people, as well as old people with ill health. Grameen Bank has taken up a special

programme in 2002, called Struggling Members Programme exclusively for the beggars.

Over 111,296 beggars have joined the programme. Total amount disbursed stands today at

Tk. 162.60 million. Of this amount of Tk. 130.89 million (80% of the amount disbursed) has


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already been paid off.

19,678 beggars have left begging and are making a living as door-to-door sales persons.

Among them 10,185 beggars have joined Grameen Bank groups as main-stream borrowers.

Beggers members have voluntarily opened their personal savings accounts. Cumulative

deposit in these savings accounts amounts to BDT 22.41 million; present balance stands at

BDT 8.08 million.

Basic features of the programme are :

1) Existing rules of Grameen Bank do not apply to beggar members; they make up their

own rules.

2) All loans are interest-free. Loans can be for very long term, to make repayment

instalments very small. For example, for a loan to buy a quilt or a mosquito-net, or an

umbrella, many borrowers are paying Tk 2.00 (3.4 cents US) per week.

3) Beggar members are covered under life insurance and loan insurance programmes

without paying any cost.

4) Groups and centres are encouraged to become patrons of the beggar members.

5) Each member receives an identity badge with Grameen Bank logo. She can display this

as she goes about her daily life, to let everybody know that she is a Grameen Bank

member and this national institution stands behind her.

6) Members are not required to give up begging, but are encouraged to take up an

additional income-generating activity like selling popular consumer items door to door,

or at the place of begging.

Objective of the programme is to provide financial services to the beggars to help them find

a dignified livelihood, send their children to school and graduate into becoming regular

Grameen Bank members. We wish to make sure that no one in the Grameen Bank villages

has to beg for survival.


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3.17.0 Housing For the Poor

Grameen Bank introduced housing loan in 1984. It became a very attractive programme for

the borrowers. This programme was awarded Aga Khan International Award for

Architecture in 1989. Maximum amount given for housing loan is Tk 25,000 (US $ 354) to berepaid over a period of 5 years in weekly instalments. Interest rate is 8 per cent. 690,737

houses have been constructed with the housing loans averaging Tk 13,059 (US $ 181.50). A

total amount of Tk 9.02 billion (US $ 211.21 million) has been disbursed for housing loans.

During the past 12 months (from Nov.'10 to October11) 4,482 houses have been built with

housing loans amounting to Tk 52.43 million (US $ 0.69 million).

3.18.0 Micro-enterprise Loans

Many borrowers are moving ahead in businesses faster than others for many favourable

reasons,such as, proximity to the market, presence of experienced male members in the

family, etc. Grameen Bank provides larger loans, called micro-enterprise loans, for these fast

moving members. There is no restriction on the loan size. So far 3,590923 members took

micro-enterprise loans. A total of Tk 105.96 billion(US$ 1540.58 million) has been disbursed

under this category of loans. Average loan size is Tk 29,507 (US $ 389.69), maximum loan

taken so far is Tk 1.6 million (US $ 23,209). This was used in purchasing a truck which is

operated by the husband of the borrower. Power-tiller, irrigation pump, transport vehicle,and river-craft for transportation and fishing are popular items for micro-enterprise loans.

3.19.0 Scholarships

Scholarships are given, every year, to the high performing children of Grameen borrowers,

with priority on girl children, to encourage them to stay ahead to their classes. Upto

October'11, scholarships amounting to Tk 205.03 million (US$ 3.00 million) have been

awarded to 1,33031 children. During 2011, US$ 592,849 will be awarded to about 24,611

children, at various levels of school and college education.

3.20.0 Education Loans

Students who succeed in reaching the tertiary level of education are given higher education

loans, covering tuition, maintenance, and other school expenses. By October11, 49,588

students received higher education loans, of them 46,885 students are studying at various

universities; 577 are studying in medical schools, 894 are studying to become engineers,

1232 are studying in other professional institutions.


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3.21.0 Grameen Network

Grameen Bank does not own any share of the following companies in the Grameen network.

Nor has it given any loan or received any loan from any of these companies. They are all

independent companies, registered under Companies Act of Bangladesh, with obligation topay all taxes and duties, just like any other company in the country.

1) Grameen Phone Ltd.

2) Grameen Telecom

3) Grameen Communications

4) Grameen Cybernet Ltd.

5) Grameen Solutions Ltd.

6) Grameen Information Highways Ltd.

7) Grameen Bitek Ltd.

8) Grameen Krishi Foundation

9) Grameen Motsho (Fisheries) Foundation

10) Grameen Uddog (Enterprise)

11) Grameen Shamogree (Products)

12) Grameen Knitwear Ltd.

13) Grameen Shikkha (Education)

14) Grameen Capital Management Ltd.

15) Grameen Byabosa Bikash (Business Promotion )

16) Grameen Trust

17) Grameen Health Care Trust

18) Grameen Health Care Service Ltd.

19) Grameen Danone Food Ltd.

20) Grameen Veolia Water Ltd.

21) Grameen Shakti.

22) Grameen IT Park Ltd.

23) Grameen Star Education Ltd.

24) Grameen Employment Services Ltd.

25) Grameen Fabrics and Fashion Ltd.

26) Grameen Distribution Ltd.

27) Grameen Shamogree Purbanchal Ltd.

28) Grameen Shamogree Uttaranchal Ltd.


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29) BASF Grameen Ltd.

30) Grameen Fund: Inherited Social Venture Capital Fund (SVCF) that was created in

Grameen Bank as a donor funded project. Subsequently money in the fund was given as

loan to Grameen Fund, an independently created not-for-profit company,with the consent

of the donors. Grameen Fund continues to function as a social venture fund.

31) Grameen Kalyan: Grameen Kalyan (Well-being) is a not for profit company registered

under the Companies Act 1994. Grameen Bank created an internal fund called Social

Advancement Fund (SAF) by imputing interest on all the grant money it received from

various donors. Money accumulated in SAF was given to Grameen Kalyan to manage a

project of undertaking social advancement activities among the Grameen borrowers, such

as, education, health, technology, etc. Not only Grameen Kalyan is implementing the

project, it has also ensured growth of the initial fund by several times, and expanding the

coverage of the social advancement activities for Grameen borrowers.

3.22.0 Loans Paid Off At Death

Grameen offers an optional insurance programme called Loan Insurance Programme. Those

who sign up for this programme in case of their death , all outstanding loans are paid off.

Under this programme, an insurance fund is created by the interest generated in a savingsaccount created by deposits of the borrowers made for loan insurance purpose, at the time

of receiving loans. Each time an amount equal to 3 per cent of the loan amount is deposited

in this account. This amount is transferred from the Special Savings account. If the current

balance in the insurance savings account is equal or more than the 3 per cent of the loan

amount, the borrower does not need to add any more money in this account. If it is less

than 3 per cent of the loan amount, she has to deposit enough money to make it equal.

Total deposits in the loan insurance savings account stood at Tk 7,000.17 million (US$ 93.77

million) as on October 31, 2011. Up to that date 217,907 insured borrowers and insured

husbands died and a total outstanding loans and interest of Tk 2022.00 million (US $ 29.53

million) left behind was paid off by the bank under the programme. The families of the

deceased borrowers are not be required to pay off their debt burden any more, because the

insured borrowers or their insured husbands do not leave behind any debt burden to take

care of.


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3.23.0 Life Insurance

Each year families of deceased borrowers of Grameen Bank receive a total of Tk 17 to 20

million (US $ 0.25 million to 0.29 million) in life insurance benefits. Each family receives Tk

1,500. A total of 137,976 borrowers died so far in Grameen Bank. Their families collectively

received a total amount of Tk 241.34 million (US$ 4.74 million). Borrowers are not required

to pay any premium for this life insurance. Borrowers come under this insurance coverage

by being a shareholder of the bank.

3.24.0 Deposits

By the end of October, 2011 total deposit in Grameen Bank stood at Tk. 105.95 billion (US$

1399.30 million). Member deposit constituted 56 per cent of the total deposits. Balance of

member deposits has increased at a monthly average rate of 1.42 percent during the last 12

months.

3.25.0 Pension Fund for Borrowers

Another optional, but enormously popular programme in Pension Fund Programme.As

borrowers grow older they worry about what will happen to them when they cannot work

and earn any more. Grameen Bank addressed that issue by introducing a programme of

creating a Pension Fund for old age. It immediately became a very popular programme.

Under this programme a borrower is required to save a small amount, such as Tk 50 (US $

0.66), each month over a period of 10 years. The depositor gets almost twice the amount of

money she saved, at the end of the period. The borrowers find it very attractive. By the end

of October 2011 the balance under this account comes to a total of Tk 38.87 billion (US $

513.28 million). Tk 6.28 billion (US $ 86.61 million) was added during the past 12 months

(November10-October, 2011). We expect the balance in this account to grow by Tk 6.65

billion (US $ 94.17 million) in 2011 making the balance to reach Tk 44.56 billion (US $ 631.04

million).


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3.26.0 Loan Loss Reserve

Grameen Bank has a very rigourous policy on bad debt provisioning. If a loan does not get

paid back on time it is converted into a special type of loan called "Flexible Loan", and 50 per

cent provisioning is done on the last day of each month. Hundred per cent provisioning isdone when flexible loan completes the second year. At its third year, the outstanding

amount is completely written off even if the loan repayment still continues.

Balance in the loan loss reserve stood at Tk 5.40 billion (US $ 76.70 million) at the end of

2010 after writing off an amount of Tk 1.22 billion (US $ 17.37 million) during 2010. Out of

the total amount written off in the past an amount of Tk 0.58 billion (US $ 8.24 million) has

been recovered during 2010.

3.27.0 Retirement Benefits Paid Out

Grameen Bank has an attractive retirement policy. Any staff can retire after completing ten

years or more of service. At the time of retirement he receives a retirement benefit in cash.

It is usually paid out within a month after retirement. Since this benefit was introduced

8,857 staff members retired and received a total amount of Tk 7.09 billion (US $ 113.94

million) in cash. This amounts to Tk 0.80 million (US $ 12864) per retiring staff. During the

past 12 months 689 staffs went on retirement collecting a retirement benefit of Tk 1287.16

million (US $ 17.75 million). Average retirement benefit per staff was Tk 1.87 million (US $

25,752 ).

3.28.0 Telephone-Ladies

To-date Grameen Bank has provided loans to 457953 borrowers to buy mobile phones and

offer telecommunication services in nearly half of the villages of Bangladesh where this

service never existed before. Telephone-ladies run a very profitable business with these

phones.

Telephone-ladies play an important role in the telecommunication sector of the country,

and also in generating revenue for Grameen Phone, the largest telephone company in the

country. Telephone ladies use 2.22 percent of the total air-time of the company, while their

number is only 1.89 per cent of the total number of telephone subscribers of the company.


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3.29.0 Getting Elected in Local Bodies

Grameen system makes the borrowers familiar with election process. They routinely go

through electing group chairmen and secretaries, centre-chiefs and deputy centre-chiefs

every year. They elect board members for running Grameen Bank every three years. Thisexperience has prepared them to run for public offices. They are contesting and getting

elected in the local governments. In 2011 local government (Union Porishad) election got

elected 13 Chairman out of 4,498 candidates. In the reserved seats for women 3,473

members got elected out of 13,494 candidates. They constitute 26 per cent of the total

members elected in the seats reserved for women members in the Union Porishad local

government.During 2003 and 1997 local government election 3,059 and 1,753 members

respectively got elected to these reserved seats.

3.30.0 Computerised MIS and Accounting System

Accounting and information management of nearly all the branches (2,565 out of 2,565) has

computerised. This has freed the branch staff to devote more time to the borrowers rather

than spend it in paper-work. Branch staffs are provided with pre-printed repayment figures

for each weekly meeting. If every borrower pays according to the repayment schedule, the

staff has nothing to write on the document except for putting the signature. Only the

deviations are recorded. Paper work that remains to be done at the village level is to enterfigures in the borrowers' passbooks.

All zones (40) are connected with the head office, and with each other, through intra-net.

This has made data transfer and communications very easy.

3.31.0 Policy For Opening New Branches

New branches are required to fund themselves entirely with the deposits they moblise. No

fund from head office or any other office is lent to them. A new branch is expected to break-

even within the first year of its operation.

3.32.0 Crossing the Poverty-Line

According to a recent internal survey, 68 per cent of Grameen borrowers' families of

Grameen borrowers have crossed the poverty line. The remaining families are moving

steadily towards the poverty line from below.


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3.33.0 'Stars' for Achievements

Grameen Bank provides colour-coded stars to branches and staff for 100 percent

achievement of a specific task. A branch (or a staff) having five-stars indicate the highest

level of performance. At the end of June'2011, branches showed the following result.

929 branches, out of total 2,565 branches, received stars (green) for maintaining 100 per

cent repayment record.

19,93 branches received stars (blue) for earning profit. (Grameen Bank as a whole earns

profit because the total profit of the profit-earning branches exceeds the total loss of the

loss-incurring branches.)

1,869 branches earned stars (violet) by meeting all their financing out of their earnedincome and deposits. These branches not only carry out their business with their own funds,

but also contribute their surpluses to meet the fund requirement of deficit branches.

324 branches have applied for stars (brown) for ensuring education for 100% of the children

of Grameen families. After the completion of the verification processes their stars will be

confirmed. 65 branches have applied for stars (red) indicating branches those have

succeeded in taking all its borrowers' families (usually 3,000 families per branch) over the

poverty line.

The star will be confirmed only after the verification procedure is completed. Each month

branches are coming closer to achieving new stars. Grameen staff look forward to

transforming all the branches of Grameen Bank into five star branches.


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Chapter FourAllied Concern of Grameen Bank

4.1 Allied Concern of Grameen Bank:

Inspired by the work of Grameen Bank in Bangladesh, Grameen Foundation was created to

accelerate the impact of microfinance on the worlds poorest people, especially women.

Started in 1976 by Professor Muhammad Yunus with a mere $27, Grameen Bank now serves more

than 7 million poor families with loans, savings, insurance and other services. The bank is fully

owned by its clients and has been a model for microfinance institutions around the world. In 2006,

Professor Yunus and Grameen Bank jointly received the Nobel Peace Prize. President Barack Obama

awarded Professor Yunus the 2009 Presidential Medal of Freedom.

Although we are independent organizations, Grameen Foundation and Grameen Bank maintain an

enduring relationship. Grameen Foundation President Alex Counts trained under and worked closely

with Professor Yunus during his six-year tenure in Bangladesh. Professor Yunus was a founding

member of Grameen Foundations board of directors and currently serves as director emeritus.

Grameen Foundation seeks to further the Grameen Bank legacy and objectives by supporting

microfinance institutions and poverty-fighting organizations that embody its vision and values on a

global scale.

The allied concerns of Grameen Banks are as follows:

4.1.1 Grameen Trust

As a result of the success of Grameen Bank in reaching and serving the poor with credit, many

people and organizations began to think in Grameen's way, and wanted to learn more about

Grameen and follow Grameen's principles in their own sphere of work. It is primarily to meet this

demand that the Grameen Trust (GT) came into being in 1989.
http://www.grameen-info.org/grameen/gtrust/index.html


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The program goals are:

1. Create an option for a begging-free honorable life for a beggar through interest andcollateral free flexible term microcredit.

2. Provide basic literacy and mentoring to the struggling members.3. Provide peer support to the struggling members.4. Through Innovation Dialogue programs harness information about the field level challenges

and innovative solutions for creating opportunities for the beggars.

5. Compile the collective wisdom of the Innovations Dialogue to disseminate within the partnernetwork for adaptation and replication.

4.1.2 Grameen Communications:

Grameen Communications, a member of Grameen family of enterprises, is a not for profit

Information Technology company. It has been providing complete systems solution through

developing software products and services, internet services, hardware & networking services and IT

education services since its inception in 1997 under the Companies Act, 1994.

4.1.3 Grameen America

Grameen America is a microfinance company whose mission is to help alleviate poverty through

entrepreneurship. It provides financial services, such as loans, savings programs and a pathway to

establish credit to the working poor, especially women, in the United States.

4.1.4 Grameen Crdit Agricole Foundation
http://www.grameen-credit-agricole.org/en/index.htmlhttp://www.grameenamerica.com/http://www.grameen-credit-agricole.org/en/index.htmlhttp://www.grameenamerica.com/


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The Grameen Crdit Agricole Foundation offers a combination of financial support and technical

assistance to microfinance institutions and "social business" enterprises and projects. It mobilizes

human and financial resources to poorest.

4.1.5 Grameen Kalyan

Grameen Kalyan provides affordable health care services to the rural poor in Bangladesh. They

currently operate 30 health clinics in different parts of rural Bangladesh.

4.1.6 Grameen Shakti

Grameen Shakti promotes, develops and popularizes renewable energy technologies in rural areas of

Bangladesh. Having served more than 2 million people since inception, Grameen Shakti is one of the

largest and fastest growing renewable energy technology programs in the world.

4.1.7 Grameen Shikkha

Grameen Shikkha is a company in the family of Grameen companies. Established in 1997 its main

objectives are to promote mass education in rural areas, provide financial support in the form of

loans and grants for the purpose of education, use IT for alleviation of illiteracy and evelopment of

education, promote new technologies and innovate ideas and methods for development of

education etc. Grameen Shikkha has been conducting Life Oriented Education Program, Pre-

school/Child Development Program, Early Childhood Development Program and Arsenic Mitigation

Program in various districts of Bangladesh.
http://www.grameen-info.org/grameen/gshikkha/index.php?option=com_frontpage&Itemid=1http://www.gshakti.org/http://grameenkalyan.org/http://www.grameen-info.org/grameen/gshikkha/index.php?option=com_frontpage&Itemid=1http://www.gshakti.org/http://grameenkalyan.org/http://www.grameen-info.org/grameen/gshikkha/index.php?option=com_frontpage&Itemid=1http://www.gshakti.org/http://grameenkalyan.org/


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4.1.8 Grameen Fund

Grameen Fund was incorporated on January 17, 1994 as a "not-for-profit" company and started

operations on February 1, 1994. Its emphasis is on providing finance to ventures that are risky,

technology - oriented and otherwise deprived of financing from existing formal lending institutions.

4.1.9 Grameen Telecom

Grameen Telecom is a company dedicated to bringing the information revolution to the rural people

of Bangladesh. Grameen Telecom is planning, over the next 4 years, to provide GSM 900/1100

cellular mobile phone service to 100 million rural inhabitants in 68,000 villages of Bangladesh by (1)

financing 60,000 members of Grameen Bank to provide village pay phone service and (2) providing

direct phones to potential subscribers.

4.1.10Grameen Cyber Net

Grameen Cybernet Ltd. has been Bangladesh's leader in Internet service provision since it

commenced operation in July 1996. Its Chief Executive has had an extensive career in education and

information technology in the US and is assisted by a team of bright, young executives

4.1.11 Grameen Phone

In the fast-paced world of telecommunications, vibrant and dynamic Corporate Governance

practices are an essential ingredient to success. Grameenphone believes in the continued

improvement of corporate governance. This in turn has led the Company to commit considerable

resources and implement internationally accepted Corporate Standards in its day-to-day operations

4.1.12 Grameen Knitwear Limited

Grameen Knitwear Limited: The company is a 100% export oriented composite knitwear factory,

located in the Export Processing Zone in Savar in the vicinity of Dhaka, the capital of Bangladesh. It

has knitting, dyeing, finishing and garments production facilities. Most of the machinery and

equipment have been sourced from Europe. The factory is capable to produce very high quality of

different knit fabrics and garments of children, men and women. The fabrics and garments are fabric

and yarn dyed 100% cotton, TC, CVC, Polyester with lycra attachement etc of various counts. The

countries where the goods are currently exported are mostly Europe. The goods are exported

against confirmed irrevocable letter of credit.


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4.1.13 Grameen Solutions

Grameen Solutions, a flagship technology company within Grameen family of organizations.

Founded by Dr. Muhammad Yunus, recipient of 2006 Nobel Peace Prize, Grameen Solutions offers

business services, management consulting, software development, business process and service

outsourcing. Grameen Solutions offers unparallel total value through creative solutions that meet

the diverse and dynamic needs of our global and local client base

4.1.14 Grameen Byabosa Bikash

Grameen Byabosa Bikash (GBB) is one of the sister organizations in the Grameen family of

enterprises. The English meaning of this name is Grameen Business Promotion and Services. GBB is

a social business and not-for-profit organization registered under the Companies Act 1994 of

Peoples Republic of Bangladesh Government. It started operation in 2001 with its registered office

located at the Grameen Bank Complex at Mirpur area of Dhaka city.

GBB has a board consisting of 8 members. The Board is headed by nobel laureate Professor

Muhammad Yunus. The other Board members are also renowned in their respective field. The Board

sits at least every four months to assess the progress of the organization.


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Chapter FiveSummary of Grameen Bank

Balance Sheet 2003-2010 (As on December 31), Amount in Million Taka

Property and Assets 2007 2008 2009 2010

Cash in hand 6,799,759 3,798,731 1,119,488 895,544

Balance with other Banks 929,598,021 1,324,659,716 1,295,311,555 1,310,692,097

Investment 24,465,809,686 28,730,304,221 37,750,731,641 47,757,186,897

Loans and Advances 37,546,479,706 45,786,957,884 56,359,028,995 68,417,977,923

Fixed assets-(at cost less

accumulated depreciation) 1,114,517,485 1,163,268,845 1,222,283,438 1,379,656,418Investment property (at cost less

accumulated depreciation)- - 111,558,215 108,540,014

Other assets 4,890,494,100 5,791,712,934 6,265,224,923 6,422,009,079

Total: 68,953,698,757 82,800,702,331103,005,258,255125,396,957,972

Capital and Liabilities

Share Capital:

Authorized 500,000,000 3,500,000,000 3,500,000,000 3,500,000,000

Paid Up 318,000,000 358,000,000 523,949,300 547,689,200

General and Other reserves 5,547,882,878 6,078,437,278 6,219,533,668 6,815,290,863Revolving Funds - - - -

Deposits and Other Funds 55,640,755,203 68,314,322,203 87,286,490,709 109,206,727,710

Borrowings from banks and foreign

institutions1,793,276,465 1,731,218,532 1,669,160,600 1,589,027,602

Other Liabilities 5,653,784,211 6,318,724,318 7,306,123,978 7,238,222,597

Profit and loss account - - - -

Total: 68,953,698,757 82,800,702,331103,005,258,255125,396,957,972

Contigent Liabilities 5,719,054 - - -


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Chapter SixStrength & weakness

Recommendation & Conclusion

6.1 Weakness

Theres not much research done on the actual effectiveness of microfinance as a tool for economic

growth. Some argue that theres to much focus on microfinance which will motivating less spending

in other helping assistances as public health, welfare, and education.

Some are doubting microfinance really have those impacts on poverty as the practioners would

submit. Other describes microcrediting as a privatization of public safety net programs. There are

also some microfinance institutions charging excessive interest rates.

Questions against the Grameen Bank were raised in a Wall Street Journal article. It was regarding the

repayment rate, collection methods and questionable accounting practices.

Studies of microcredit programs have found that women often act as collection agents for their

husbands and sons, such that the men spend the money themselves while women are saddled with

the credit risk. Some borrowers have become dependent on loans for household expenditures

rather than capital investments.

The key debate about microfinance is weather it should focus on improved welfare or financial

sustainability. The two different approaches are usually named as poverty lending or the welfares

approach and the institutions approach or financial system approach. The welfares approach

could be for example supplying the customer with education and health wilts the institutions focus

only on the financial service. The reason for that is only with total focus on financial sustainability

the huge demand can be met. MFIs with the welfares approach are for example the Grameen Bank

and Womens World Banking. Examples of institutions are ACCION International and BRI Unit Desa.


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6.2 Main Strengths

1. Banking for the Poor

2. Empowerment

3. Easy replication

4. Going beyond Donor Assistance

5. A Common Praxis

6.3 General Recommendations & conclusion

The policy recommendations that follow draw on the innovative institutional arrangements,

practices and policies designed within the Co-operative Banking Model and the Grameen Bank

Model.

There are five main recommendations:

(1) Specific Institutional Recommendations

1.1 The Midrand Council consider establishing a Savings and Credit Co-operative (SACCO) in the

Greater Midrand area with the following objectives and institutional tiers :

Objectives

Harness local community savings in order to provide the poor with access to credit; Establish a financial backbone to sustain and develop the local co-operative movement; Ensure local economic development is financed to meet the needs of the poor in an

ecologically sustainable manner.

The Board of Directors

Sets overall policy for the co-operative; employs managerial staff; Establishes an Education Committee and a Credit Committee; has formalized representation from the Council and at least two co-operatives operating in

the community;

Ensures regular auditing.


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Supervisory Committee

Monitors the operation of the Board; Ensures regular audits are carried out.

Management Centre

Provides technical back-up and training to branches; Has regular meetings with branches to receive reports on operations; Provides business planning facilities to co-operatives and other clients of the SACCO; Plans and develops projections for the expansion of the SACCO; Makes policy recommendations and provides reports to the Board of Directors; Sits on the SACCO Credit Committee; Sources outside expertise when necessary; Employs staff for the branches; Manages the IT of the SACCO and ensures proper linkages with even commercial banks to

acquire benefits of ATM technology of possible.

Produces publication; Liases with SACCOL.

(2)The Savings and Loan Delivery System

The savings and loan delivery system envisaged should be member driven and based on the twin

objective of building up a stable savings portfolio that contributes to self sufficiency and a loan

system that balances meeting the needs of members and ensuring the financial self sufficiency of

the co-operative, as well. It is proposed that the following conceptual framework be considered for

the design of a savings and loan delivery system :

2.1 Membership

The common bond for membership is the fact of living in the common area of the GreaterMidrand;

Every member pays a once of joining fee (that is not refundable) and buys a share for acertain sum of money. A member should be able to buy more than one share but not more

than ten, for which they would receive a dividend once the co-operative begins to produce a

surplus. All members, irrespective of the number of shares they own would be entitled to

only one vote;


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Membership shall be opened to co-operatives, community organisations and even localgovernment itself;

Members will be entitled to vote for the Board of Directors and can have a say on policymatters;

Every member is entitled to a monthly financial statement Members can only utilise the services of the co-operative once they are organised into a

Savings and Credit Team of 7 people, living in their immediate area. The Savings and Credit

team would monitor compulsory savings by meeting twice a month and would also monitor

loan repayment;

Every member should receive a smart card that would enable withdrawals and balancestatements to be obtained at any ATM, as well as branches of the SACCO.

2.2 Savings and Investment Policy

Savings can happen through payroll deductions, stop order and direct cash deposits; Savings must be compulsory for all members and monthly minima must be agreed to for

employed and unemployed members. The Savings and Credit Teams must monitor

compulsory savings of members, using the monthly financial statements they would receive;

At least 80% of savings received, equity finance and other reserves of the SACCO must beinvested;

10% must be saved with the CFC of SACCOL; Savings products both fixed, annual like X-mas savings and open account must receive

commercial rates of return that are not below inflation;

The savings and depositor base of the SACCO must be constantly expanded to even include ahost of organizations including the local council, other co operatives, trade unions and

community organizations.

2.3 Loans Policy

Loans must only happen through Savings and Credit Teams and only three out of the sevenmembers in the team will get loans first. Based on successful repayment, loans will be

extended to other members and even obtained for other purposes;

Loan products have to be decided and should initially have a mix of productive, consumptionand development products. A special loan product for co-operatives must be developed,

either for start-up or expansion, and this has to be linked to proper business planning;


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Loans should only be given out once the SACCO has achieved financial self sufficiencythrough its savings policy. The percentage of assets given out as loans initially has to be

prudent and well managed;

(3)Technology The Smart Card

The feasibility of providing members with a plastic smart card must be explored with SACCOL. The

extent to which it can be harmonised with the current ATM banking infrastructure has to also be

explored. If the CUBIS system, used by SACCOL, allows for this then this technology can be used for

the following purposes :

Easy withdrawals, even through the ATM system, in Midrand and any other place;

Controlling of withdrawals by placing a withdrawal limit if there is a loan taken out by theparticular member.

This technology also opens up the prospect of experimenting with a complimentarycurrency.

(4) The Public - Community Partnership

The idea of Savings and Credit Co-operative for Midrand can only work if there is

Widespread support. To achieve this the Council must secure a public and community partnershipfor the Midrand SACCO. The main focus of the partnership is to bring the poor and women into this

initiative that are unemployed or are poor working class and self employed. The public and

community partnership should be launched at a workshop which achieves the following:

A declaration that clearly defines the objectives of the SACCO, the benefits to members andresponsibilities of the parties associated with this initiative;

constitutes a community liason task group that would participate in the capacitatingprocess;

Launches a recruitment program for members; and Clarifies and kicks of the capacitating process.


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(5) The Capacitating Agents and the Capacitating Process

Consideration must be given to establishing a capacitating team that includes COPAC, SACCOL and

FSA. The capacitating process that this team will manage will include the following:

Finalizing and clarifying the Concept envisaged for the SACCO; Work shopping the liaison team to secure statutes, bye laws, business plan and policies; Training of prospective staff; Forming and registering the co-operative once recruitment is at a critical level; Setting up a pilot branch of the SACCO.


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Appendix

1. http://www.microfinanceinfo.com/category/microcredit/2. http://dspace.nitle.org/handle/10090/117223. http://copac.org.za/publications/comparative-study-cooperative-banks-and-grameen-bank-

model

4. http://www.grameenfoundation.org/5. Grameen Bank | Bank for the poor - GB At a Glance6. Grameen Trust7. Grameen Families Organizations8. Our Impact of Grameen Foundation9. What We Do about Grameen Foundation
http://www.microfinanceinfo.com/category/microcredit/http://dspace.nitle.org/handle/10090/11722http://copac.org.za/publications/comparative-study-cooperative-banks-and-grameen-bank-modelhttp://copac.org.za/publications/comparative-study-cooperative-banks-and-grameen-bank-modelhttp://copac.org.za/publications/comparative-study-cooperative-banks-and-grameen-bank-modelhttp://copac.org.za/publications/comparative-study-cooperative-banks-and-grameen-bank-modelhttp://www.grameenfoundation.org/http://www.grameen-info.org/index.php?option=com_content&task=view&id=26&Itemid=175http://www.grameentrust.org/http://www.grameen-info.org/index.php?option=com_content&task=view&id=465&Itemid=547%5dhttp://www.grameenfoundation.org/our-impacthttp://www.grameenfoundation.org/what-we-dohttp://www.grameenfoundation.org/what-we-dohttp://www.grameenfoundation.org/our-impacthttp://www.grameen-info.org/index.php?option=com_content&task=view&id=465&Itemid=547%5dhttp://www.grameentrust.org/http://www.grameen-info.org/index.php?option=com_content&task=view&id=26&Itemid=175http://www.grameenfoundation.org/http://copac.org.za/publications/comparative-study-cooperative-banks-and-grameen-bank-modelhttp://copac.org.za/publications/comparative-study-cooperative-banks-and-grameen-bank-modelhttp://dspace.nitle.org/handle/10090/11722http://www.microfinanceinfo.com/category/microcredit/

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