Born in Chittagong, Yunus studied in Chittagong Collegiate School and Chittagong College. He got his PhD in economics from Vanderbilt University in 1969. Later, he joined Chittagong University as a professor of economics. Yunus first got into the business of fighting poverty during a 1974 famine in his Bangladesh, one of the poorest countries in the world. Yunus discovered that very small loans could make a significant difference in a poor person's ability to survive.
His first loan consisted of $27 from his own pocket which he lent to women in the village of Jobra-near Chittagong University who made bamboo furniture. They sold these items back to moneylenders to repay usurious loans that they had take out to buy the bamboo. With a net profit of 5 Bangladeshi taka (.02 USD), the women were unable to support themselves or their families. However, traditional banks were not interested in making tiny loans to poor people, who were considered poor repayment risks.
Founding the Grameen Bank
In 1976, Yunus founded the Grameen Bank to make loans to poor Bangladeshis. Since then the Grameen Bank has issued more than $3 billion in loans to approximately 2.4 million borrowers. To ensure repayment, the bank uses a system of "solidarity groups". These small informal groups apply together for loans and its members act as co-guarantors of repayment and support one another's efforts at economic self-advancement.
As it has grown, the Grameen Bank has also developed other systems of alternate credit that serve the poor. In addition to microcredit, it offers housing loans as well as financing for fisheries and irrigation projects, venture capital, textiles, and other activities, along with other banking services such as savings.
The success of the Grameen model has inspired similar efforts throughout the developing world and even in industrialized nations including the United States. Many, but not all, microcredit projects also emulate its emphasis on lending specifically to women. More than 94 percent of Grameen loans have gone to women, who suffer disproportionately from poverty and who are more likely than men to devote their earnings to serving the needs of the entire family.
Quotes
One day our grandchildren will go to museums to see what poverty was like.” - quoted in "The Independent", 5 May 1996
The Grameen Bank is a microcredit organization started in Bangladesh that makes small loans to the impoverished without requiring collateral. The system is based on the idea that the poor have skills that are underutilized.
History
Muhammad Yunus, the bank's founder, earned a doctorate in economics from Vanderbilt University. He was inspired during the terrible Bangladesh famine of 1974 to make a small loan to a group of families so that they could create small items for sale. Yunus believed that making such loans available to a wide population could ameliorate the rampant rural poverty in Bangladesh.
The Grameen Bank (literally, Bank of the villages, in Bangla) is the outgrowth of Muhammad Yunus' ideas. The bank began as a research project by Yunus and the Rural Economics Project at the University of Chittagong, Bangladesh 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 government support, 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 and in 1983, it was transformed into an independent bank by the legislature of Bangladesh. The bank's stellar repayment rate was broken in 1995 by a religious fundamentalist boycott by certain sections of society who objected to the bank's focus on improving the status of women. The boycott soon folded, but the bank's repayment rate was again hit following the 1998 flood of Bangladesh before recovering again in recent years.
The Bank today continues to expand across the nation and still provides small loans to the rural poor. As of mid-2005, Grameen Bank branches number over 1,500. Its success has inspired similar projects around the world.
Ownership and other facts
One unusual feature of the Grameen Bank is that it is owned by the poor borrowers of the bank, most of whom are women. Of the total equity of the bank, the borrowers own 94%, and the remaining 6% is owned by the Government of Bangladesh.
Some other facts about the bank, as of July, 2005 are:[1]
Total number of borrowers is 4.76 million, and 96% of those are women
The Bank has 1,537 branches, covering 54,022 villages, with a total staff of 13,947
Loan recovery rate is 98.95%
Since inception, total loans distributed amounts to 235.05 billion (US$ 4.90 billion). Out of this, Tk 211.57 billion (US$ 4.38 billion) has been repaid.
Application of microcredit
The system incorporates a set of values into the banking system, embodied in Bangladesh by the Sixteen Decisions.
The system is the basis for the microcredit and the Self Help Group system now at work in over 43 countries. Each group of five individuals are loaned money, but the whole group is denied further credit if one person defaults. This creates economic incentives for the group to act responsibly, increasing Grameen's economic viability.
In a country in which few women may take out loans from large commercial banks, the fact that most (96%) loan recipients are women is an amazing accomplishment. In other areas, Grameen's track record has been equally astonishing, with very high payback rates—over 98 percent. More than half of Grameen borrowers in Bangladesh (close to 50 million) have risen out of acute poverty thanks to their loan, as measured by such standards as having all children of school age in school, all household members eating three meals a day, a sanitary toilet, a rainproof house, clean drinking water and the ability to repay a 300 taka-a-week (US$8) loan.
