Credit for alleviation of rural poverty: the Grameen Bank in Bangladesh
1993
Hossain, M.
The Grameen Bank is a specialized financial institution in Bangladesh that was established to provide credit to the rural poor for the purpose of improving their economic conditions with the hypothesis that if the poor are supplied with working capital they can generate productive self employment without external assistance. Loans from the Grameen Bank are used primarily for undertaking noncrop activities. The loan repayment performance is excellent. Only 0.5 percent of loans to 975 borrowers surveyed were overdue beyond one year, and overdue weekly installments (before the expiration of the one-year repayment period) were only 3.3 percent of the total amount borrowed. The Grameen Bank concept of credit without collateral should work in other countries with widespread poverty and underemployment. But elements like taking the bank to the people and intensive interaction of bank staff with borrowers may be inappropriate and highly expensive for sparsely settled areas with underdeveloped transport systems. For such environments, an appropriate delivery mechanism has to be worked out.
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