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Credit delivery system
Grameen Bank credit
delivery system has the following features:
- There is an
exclusive focus on the poorest of the poor.
Exclusivity is ensured by:
- establishing
clearly the eligibility criteria for selection of targeted
clientele and adopting practical measures to screen out
those who do not meet them
- in delivering
credit, priority has been increasingly assigned to women
- the delivery
system is geared to meet the diverse socio-economic development
needs of the po
- or.
-
Borrowers
are organized into small homogeneous groups.
Such characteristics facilitate group solidarity as well as
participatory interaction. Organizing the primary groups of
five members and federating them into centres has been the
foundation of Grameen Bank's system. The emphasis from the
very outset is to organisationally strengthen the Grameen
clientele, so that they can acquire the capacity for planning
and implementing micro level development decisions. The Centres
are functionally linked to the Grameen Bank, whose field workers
have to attend Centre meetings every week.
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Special
loan conditionalities which are particularly suitable for
the poor.
These include:
- very small
loans given without any collateral
- loans repayable
in weekly instalments spread over a year
- eligibility
for a subsequent loan depends upon repayment of first
loan
- individual,
self chosen, quick income generating activities which
employ the skills that borrowers already posses
- close supervision
of credit by the group as well as the bank staff
- stress
on credit discipline and collective borrower responsibility
or peer pressure
- special
safegaurds through compulsory and voluntary savings to
minimise the risks that the poor confront
- transparency
in all bank transactions most of which take place at centre
meetings.
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Simultaneous
undertaking of a social development agenda addressing basic
needs of the clientele.
This is reflected in the "sixteen decisions" adopted by Grameen
borrowers. This helps to:
- raise the
social and political consciousness of the newly organized
groups
- focus increasingly
on women from the poorest households, whose urge for survival
has a far greater bearing on the development of the family
- encourage
their monitoring of social and physical infrastructure
projects - housing, sanitation, drinking water, education,
family planning, etc.
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Design
and development of organization and management systems capable
of delivering programme resources to targeted clientele.
The system has evolved gradually through a structured learning
process, that involves trials, errors and continuous adjustments.
A major requirement to operationalize the system is the special
training needed for development of a highly motivated staff,
so that the decision making and operational authority is gradually
decentralized and administrative functions are delegated at
the zonal levels downwards.
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Expansion
of loan portfolio to meet diverse development needs of the
poor.
As the general credit programme gathers momentum and the borrowers
become familiar with credit discipline, other loan programmes
are introduced to meet growing social and economic development
needs of the clientele. Besides housing, such programmes include:
- credit
for building sanitary laterines
- credit
for installation of tubewells that supply drinking water
and irrigation for kitchen gardens
- credit
for seasonal cultivation to buy agricultural inputs
- loan for
leasing equipment / machinery, ie., cell phones purchased
by Grameen Bank members
- finance
projects undertaken by the entire family of a seasoned
borrower.
T
he underlying premise of Grameen is that, in
order to emerge from poverty and remove themselves from the clutches
of usurers and middlemen, landless peasants need access to credit,
without which they cannot be expected to launch their own enterprises,
however small these may be. In defiance of the traditional rural
banking postulate whereby "no collateral (in this case, land)
means no credit", the Grameen Bank experiment set out to prove
- successfully - that lending to the poor is not an impossible
proposition; on the contrary, it gives landless peasants the opportunity
to purchase their own tools, equipment, or other necessary means
of production and embark on income-generating ventures which will
allow them escape from the vicious cycle of "low income, low savings,
low investment, low income". In other words, the banker's confidence
rests upon the will and capacity of the borrowers to succeed in
their undertakings.
The mode
of operation of Grameen Bank is as follows. A bank branch is set
up with a branch manager and a number of center managers and covers
an area of about 15 to 22 villages. The manager and the workers
start by visiting villages to familiarise themeselves with the
local milieu in which they will be operating and identify the
prospective clientele, as well as explain the purpose, the functions,
and the mode of operation of the bank to the local population.
Groups of five prospective borrowers are formed; in the first
stage, only two 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 two borrowers begin
to repay the principal plus interest over a period of six weeks,
do the other members of the group become eligible themselves for
a loan. Because of these restrictions, there is substantial group
pressure to keep individual records clear. In this sense, the
collective responsibility of the group serves as the collateral
on the loan.
Loans are
small, but sufficient to finance the micro-enterprises undertaken
by borrowers: rice-husking, machine repairing, purchase of rickshaws,
buying of milk cows, goats, cloth, pottery etc. The interest rate
on all loans is 16 percent. The repayment rate on loans is currently
- 95 per cent - due to group pressure and self-interest, as well
as the motivation of borrowers.
Although
mobilization of savings is also being pursued alongside the lending
activities of the Grameen Bank, most of the latter's loanable
funds are increasingly obtained on commercial terms from the central
bank, other financial institutions, the money market, and from
bilateral and multilateral aid organizations.
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