BANKERS TO THE POOR

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Road map of presentation

Conclusion

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Introduction
Muhammad Yunus was born in 1940 in Chittagong, Bangladesh. He was the 3rd of 14 children 5 of who died in their infancy. He was educated at Dhaka University and was awarded a Fulbright scholarship to study economics at Vanderbilt University. In 1972 he became the head of the economics department at Chittagong University.

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Introduction
In 1983, Muhammad Yunus established Grameen, a bank devoted to providing the poorest of Bangladesh with minuscule loans. The Grameen Bank Project was an idea that was born in a village called Jobra (near Chittagong) in Bangladesh in 1976 when he loaned $27 from his own pocket to fortytwo people living in a tiny village. With the sponsorship of the central bank of the country and support of the nationalized commercial

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Introduction
Twenty-three years later in 2006 Grameen Bank and Mohammed Yunus both won the Nobel Prize for Peace for their work in eradicating poverty. 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. Today, more than 250 institutions in nearly 100 countries operate micro-

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Grameen Bank-Brief Snapshot In Bangladesh, Grameen Bank today has

a. b.

c.

d.

e.

143,000 branches with 22,124 staff. Serves 8.3 million borrowers in more than 81,000 villages. On any working day Grameen collects an average of $3.5 million in weekly installments. Of the borrowers, 96% 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.

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Grameen Bank-Brief Snapshot 100% of loans financed from banks deposits. Grameen Bank has been earning profits in every year other than in 3 years 83, 91 and 92. Profits in 2010 was $ 10.76 Million. From 1995 onwards the Grameen Bank has stopped accepting donor funds and is completely self reliant now. Paid out a dividend of 30% in 2010. Relatively low interest rates 16% p.a. Offers attractive deposit rates ranging between 8.5 to 12%.

f.

g.

h.

i. j. k.

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Grameen Bank-Brief Snapshot : Feb, 2012 Particulars Amount in Million (USD) 11,853.22 10,558.27 116.11 102.86 930.96 96.54 1,385.76 8,383,849

Cumulative Amount Disbursed Since Inception Cumulative Amount Repaid Since Inception Amount Disbursed in Feb-12 Amount Repaid this Month Outstanding Loan Rate of Recovery Balance of Deposits Number of Members [8,063,945 Females, 319,904 Males

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Grameen Group Organizations The Grameen Group has 25 Organizations some of which are as follows:
a. b. c. d. e. f. g. h. i. j.

Grameen Grameen Grameen Grameen Grameen Grameen Grameen Grameen Grameen Grameen

Communications. Trust. Fund. Telecom. Cybernet Ltd. Shakti/ Energy. Shiksha/ Education. Knitwear Ltd. Solutions. Byabosa Bikash
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Microcredit & Microfinance

Microcredit is the extension of very small loans (microloans) to poor borrowers who typically lack collateral, steady employment and a verifiable credit history.

It is designed to spur entrepreneurship, increase incomes, alleviate poverty and often also to empower women.

Microcredit is a part of microfinance, which is the provision of a wider range of financial services, in particular savings, to the poor.

As of 2009 it was estimated that there were 74 million recipients of microcredits with a total of $38 billion in outstanding loans.

Modern microcredit is generally considered to have10 10 originated with the Grameen Bank founded in

Need for Micro Finance Mrs. X, 48 years old

Case study

Unemployed husband 4 children No savings Good cook Mrs. X decides to start a small catering service at home Mrs. X goes to the bank and makes a demand for a loan at her bank MRS. XS DEMAND IS REJECTED
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Justification and definition of Need for Micro Finance- Why are people excluded from microfinance
certain financial services?

Lack collateral or guarantors A bad credit history Gap in the communication / lack of confidence in the Banks Doubt of the bank of the repayment capacity Lack of access to financial infrastructure and services in remote areas
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WHAT IS THE ALTERNATIVE? MICROFINANCE

Need for Micro Finance

Microfinance is the offer of financial & non-financial services to people excluded from the traditional banking system. The services are adapted to the needs of the target populations Microfinance is a tool against poverty by enabling the beneficiaries to :

Definition

Create sustainable activities to increase their incomes

Reduce external shocks

Improve the living conditions of entrepreneurs and of their families

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Microcredit Best Practice (2/4 ) Need for Micro Finance Repayment

Microfinance is not philanthropy!

Clients need to pay for the services Microcredit clients need to repay the loans Interest rate to cover the costs

Why is repayment important?

Offer new loans and extend the client base

Ensure correct functioning and growth of the institution Cover office & operational costs Cover for non-payments when they occur
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Avoid financial loss and loss of credibility for the institution

Micro Enterprises

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Objectives of Grameen Bank 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
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Mission Statement-Grameen Bank

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Grameen Bank

Its not people who arent credit-worthy. Its banks that arent people worthy.
Muhammad Yunus
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Grameen Bank

Conventional banks ask their clients to come

to their office. Its a terrifying place for the poor and illiterate. The entire Grameen Bank system runs on the principle that people should not come to the bank, the bank should go to the people. If any staff member is seen in the office, it should be taken as a violation of the rules of the Grameen Bank. It is essential that [those setting up a new village Branch] have no office and no place to stay. The reason is to make us as different as possible from government officials. . 19
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Features of Grameen Credit

General features of Grameen credit are :
a)

It promotes human right.

credit

as

a)

Its mission is to help poor families to help themselves to overcome poverty. It is targeted to the poor, particularly poor women. It is offered for creating self-employment for income-generating activities and housing for the poor, as opposed to consumption. It was initiated as a

a)

a)

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Features of Grameen Credit e) 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. f) No CollateralGrameen Bank does not require any collateral against its micro-loans. g) No Legal InstrumentSince the bank does not wish to take any
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Group Responsibility for Grameen Credit Groups of 5 prospective borrowers are formed. In the first stage, only 2 of them are eligible for, and receive, a loan. The group is observed for a month to see if the members are conforming to the rules of the bank. Only if the first 2 borrowers begin to repay the principal plus
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Group Responsibility for Grameen Credit

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Grameen Bank vs Conventional Banks To bring economic and social change to the poor. Based on Trust. Looks at what the borrower can have. Located areas. in Rural To make Profit. Based on collateral. Looks at what the borrower already has. Located areas. in Urban

The bank goes to the customer. Flexible payment

Customers have to go to the bank. Strict schedule.

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Micro Enterprises-Womens Entrepreneurial Group-Uganda

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Micro Enterprises-Womens Business-Uganda

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Micro Enterprises-Village Bank in Uganda

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Micro Finance organizations across the Globe

28 The three large dots represent India, Philippines and 28 Russia with 178,113 and 101 micro finance institutions.

The Asia MF landscape is large and growing Micro Finance organizations in Asia
Population, developing world, 2010
12 10 8 6 4 2 0

Borrowers by Region 2010

12 10 8 6 4 2 0 12 10 8 6 4 2 0
*Figure downloaded from http://databank.worldbank.org/data/home.aspx Data represent totals. **Figure downloaded from MIX Market Cross Market Analysis, 11/11/11. Depositors does not include ASA

Asia has: 62% of the population of the developing world, or 3.5 billion people* 75% of the worlds microfinance borrowers, or 74 million borrowers**

Deposit Accounts 2010

47% of the worlds microfinance deposit accounts, or 37 million deposit accounts**

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Worlds largest sector, dominated by Micro Finance organizations across the Globe India and Bangladesh
In Asia:
74 million borrowers have a total 34 billion USD in loans outstanding*

91 % of loans are used to fund microenterprises**

croenterprise loans vs. other loans in Asia

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

32 million depositors have mobilized 15 billion USD in deposits*

7 out of 10 borrowers in Asia live in Bangladesh or India* 12

10 8 6 4 2 0

Borrowers in Asia 2010

*Figure downloaded from MIX Market Cross Market Analysis, http://mixmarket.org/profiles-reports/crossmarket-analysis-report?rid=YDZeX2AG 11/11/11 **MIX Product Data Extract. 3/2/2012

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Fast growth, especially in South Asia Micro Finance organizations across the Globe
The number of borrowers in Asia doubled in 5 years

EAP and SA show vastly different market sizes and growth trajectories

South Asia is growing faster than any other region in the world, while;

Growth in EAP remains similar pace to the rest of the world

Figure downloaded from MIX Market Cross Market Analysis, http://mixmarket.org/profiles-reports/crossmarket-analysis-report?rid=ghj5yHDZ 11/18/11 Data represent totals.

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Impact/ Advantages of Micro Finance

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Impact/ Advantages of Micro Finance

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