Grameen Bank At a Glance
this summary draws on history by Muhammad Yunus presented
|1.0||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 94 per cent of the total equity of the bank. Remaining 6 percent is owned by the government.
|2.0||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.
|3.0||97 per cent Women|
Total number of borrowers is 7.06 million, 97 per cent of them are women.
|Grameen Bank has 2,422 branches. It works in 78,101 villages. Total staff is 22,924.|
|5.0||Over Tk 318 billion Disbursed|
Total amount of loan disbursed by Grameen Bank, since inception, is Tk 326.96 billion (US$ 6.25 billion). Out of this, Tk 293.26 billion (US$ 5.58 billion) has been repaid. Current amount of outstanding loans stands at TK 33.70 billion (US$ 488.90 million). During the past 12 months (from June’06 to May’07) Grameen Bank disbursed Tk. 50.42 billion (US $ 729.44 million). Monthly average loan disbursement over the past 12 month was Tk 4.20 billion (US $ 60.79 million).
Projected disbursement for 2007 is Tk 65.00 billion (US $ 930 million), i.e. monthly disbursement of Tk 5.42 billion (US $ 77.50 million). End of the year outstanding loan is projected to be at Tk. 40.00 billion (US $ 572 million).
|6.0||Recovery Rate 98 per cent|
Loan recovery rate is 98.28 per cent.
|7.0||100 per cent Loans Financed From Bank’s Deposits|
Grameen Bank finances 100 per cent of its outstanding loan from its deposits. Over 59 per cent of its deposits come from bank’s own borrowers. Deposits amount to 137 per cent of the outstanding loans. If we combine both deposits and own resources it becomes 155 per cent of loans outstanding.
|8.0||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.
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.
|10.0||Revenue and Expenditure|
Total revenue generated by Grameen Bank in 2006 was Tk 9.43 billion (US $ 134.90 million). Total expenditure was Tk 8.03 billion (US $ 114.90 million). Interest payment on deposits of Tk 3.47 billion (US $ 35.35 million) was the largest component of expenditure (43 per cent). Expenditure on salary, allowances, pension benefits amounted to Tk 2.03 billion (US $ 28.97 million), which was the second largest component of the total expenditure (25 per cent). Grameen Bank made a profit of Tk 1398 million (US $ 20.00 million) in 2006. Entire profit is transferred to a Rehabilitation Fund created to cope with disaster situations. This is done in fulfillment of a condition imposed by the government for exempting Grameen Bank from paying corporate income tax.
|11.0||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 government rate.
There are four interest rates for loans from Grameen Bank : 20% (declining basis) for income generating loans, 8% for housing loans, 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.
|Grameen Bank offers very attractive rates for deposits. Minimum interest offered is 8.5 per cent. Maximum rate is 12 per cent.|
|13.0||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, called Struggling Members Programme, to reach out to the beggars. About 94,000 beggars have already joined the programme. Total amount disbursed stands at Tk. 92.62 million. Of that amount of Tk. 60.21 million has already been paid off.
Basic features of the programme are :
|14.0||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 15,000 (US $ 218) to be repaid over a period of 5 years in weekly instalments. Interest rate is 8 per cent. 6,47,130 houses have been constructed with the housing loans averaging Tk 13,182 (US $ 191). A total amount of Tk 8.53 billion (US $ 204.27 million) has been disbursed for housing loans. During the past 12 months (from June’06 to May’07) 12,545 houses have been built with housing loans amounting to Tk 133.47 million (US $ 2.21 million).
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 1,085,959 members took micro-enterprise loans. A total of Tk 23.42 billion (US $ 364.91 million) has been disbursed under this category of loans. Average loan size is Tk 21,566 (US $ 313), maximum loan taken so far is Tk 1.2 million (US $ 19,897). 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.
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 to May 2007, scholarships amounting to US$ 560,000 have been awarded to 49,208 children. During 2007, US$ 775,000 will be awarded to about 30,000 children, at various levels of school and college education.
Students who succeed in reaching the tertiary level of education are given higher education loans, covering tuition, maintenance, and other school expenses. By May’07, 16,608 students received higher education loans, of them 15,531 students are studying at various universities; 191 are studying in medical schools, 347 are studying to become engineers, 539 are studying in other professional institutions.
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 to pay 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 Software Ltd.
6) Grameen IT Park
7) Grameen Information Highways Ltd.
8) Grameen Star Education Ltd.
9) Grameen Bitek Ltd.
10) Grameen Uddog (Enterprise)
11) Grameen Shamogree (Products)
12) Grameen Knitwear Ltd.
13) Gonoshasthaya Grameen Textile Mills Ltd.
14) Grameen Shikkha (Education)
15) Grameen Capital Management Ltd.
16) Grameen Byabosa Bikash (Business Promotion )
17) Grameen Trust
|19.0||Grameen Bank-Created Companies|
The following companies in the Grameen network were created by Grameen Bank, as separate legal entities, to spin off some projects within Grameen Bank funded by donors. Donor funds transferred to Grameen Fund were given as a loan from Grameen Bank. These companies have the following loan liability to Grameen Bank :Grameen Fund : Tk 373.2 million (US $ 6.38 million)
Grameen Krishi Foundation : Tk 19 million (US $ .33 million)
Grameen Motsho (Fisheries) Foundation : Tk 15 million (US $ .26 million)Grameen Bank provided guarantees in favour of the following organizations while they were receiving loans from the government and the financial organizations. These guarantees are still in effect.Grameen Shakti : Tk 9 million (US $ 0.12 million)
Grameen Motsho (Fisheries) Foundation : Tk 8 million (US $ 0.11 million)Grameen Kalyan
Grameen Kalyan (well-being) is a spin off company created by Grameen Bank. Grameen Bank created an internal fund called Social Advancement Fund (SAF) by imputing interest on all the grant money it received from various donors. SAF has been converted into a separate company to carry out its mandate to undertake social advance activities among the Grameen borrowers, such as, education, health, technology, etc.
|20.0||Loans Paid Off At Death|
In case of death of a borrower, all outstanding loans are paid off under Loan Insurance Programme. Under this programme, an insurance fund is created by the interest generated in a savings account 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.
Coverage of the loan insurance programme has also been extended to the husbands with additional deposits in the loan insurance deposit account. A borrower can get the outstanding amount of loan paid off by insurance if her husband dies. She can continue to borrow as if she has paid off the loan.
Total deposits in the loan insurance savings account stood at Tk 3,840.96 million (US$ 55.71 million) as on May 31, 2007. Up to that date 62,714 insured borrowers and insured husbands died and a total outstanding loans and interest of Tk 414.70 million (US $ 6.57 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.
Each year families of deceased borrowers of Grameen Bank receive a total of Tk 8 to 10 million (US $ 0.12 million to 0.15 million) in life insurance benefits. Each family receives Tk 1,500. A total of 93,444 borrowers died so far in Grameen Bank. Their families collectively received a total amount of Tk 174.05 million (US$ 3.77 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.
By the end of May, 2007 total deposit in Grameen Bank stood at Tk. 46.21 billion (US$ 670.27 million). Member deposit constituted 59 per cent of the total deposits. Balance of member deposits has increased at a monthly average rate of 1.84 per cent during the last 12 months.
|23.0||Pension Fund for Borrowers|
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 the 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 $ 0.72), 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 May, 2007 the balance under this account comes to a total of Tk 13.36 billion (US $ 193.82 million). Tk 3.88 billion (US $ 56.13 million) was added during the past 12 months (June ’06 – May, 2007). We expect the balance in this account to grow by Tk 6.26 billion (US $ 89.54 million) in 2007 making the balance to reach Tk 19.60 billion (US $ 280.36 million).
|24.0||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 at the first annual closing. Hundred per cent provisioning is done 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 2.83 billion (US $ 40.49 million) at the end of 2006 after writing off an amount of Tk 1.72 billion (US $ 24.60 million) during 2006. Out of the total amount written off in the past an amount of Tk 0.64 billion (US $ 9.17 million) has been recovered during 2006.
|25.0||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 6,390 staff members retired and received a total amount of Tk 3.59 billion (US $ 64.03 million) in cash. This amounts to Tk 0.56 million (US $ 10,020) per retiring staff. During the past 12 months 507 staff went on retirement collecting a retirement benefit of Tk 491.20 million (US $ 7.11 million). Average retirement benefit per staff was Tk 0.97 million (US $ 14,024).
To-date Grameen Bank has provided loans to 294,235 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 16.5 percent of the total air-time of the company, while their number is only 4 per cent of the total number of telephone subscribers of the company.
|27.0||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. This experience has prepared them to run for public offices. They are contesting and getting elected in the local governments. In 2003 local government (Union Porishad) election 7,442 Grameen members contested in the reserved seats for women, 3,059 members got elected. They constitute 24 per cent of the total members elected in the seats reserved for women members in the Union Porishad local government. During 1997 local government election 1,753 members got elected to these reserved seats.
|28.0||Computerised MIS and Accounting System|
Accounting and information management of nearly all the branches (2,287, out of 2,422) has been computerised. This has freed the branch staff to devote more time to the borrowers rather than spend it in paper-work. Branch staff 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 enter figures in the borrowers’ passbooks.
Thirty six zones, out of 39, are connected with the head office, and with each other, through intra-net. This has made data transfer and communications very easy.
|29.0||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.
|30.0||Crossing the Poverty-Line|
According to a recent internal survey, 64 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.
|31.0||‘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 December 2006 branches showed the following result.
1553 branches, out of the total of 2,319 branches, received stars (green) for maintaining 100 per cent repayment record.
1627 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.)
1375 branches earned stars (violet) by meeting all their financing out of their earned income 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.
337 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. 54 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.