Grameen Bank: Impact, Costs, and Program Sustainability

Abstract

Grameen Bank of Bangladesh is known worldwide for its innovative credit delivery to the rural poor. By incorporating group-based lending, mandatory savings and insurance, repayment rescheduling in case of disasters, and similar other schemes, it has been able to minimize both behavioral and material risks of lending. By 1994, Grameen’s coverage had increased to include 50 percent of villages of Bangladesh with more than 2 million members (94 percent of whom are women), with a loan recovery rate steadily above 90 percent. It also has noticeable positive impacts on participants’ economic and social well-being, and on the overall income growth and poverty reduction in the village level. To become cost-effective, Grameen Bank should not only expand its outreach, but also diversify its loan portfolio with more growth-oriented activities. This also requires sound macroeconomic policies from the government. Replication of Grameen’s financial model is possible with necessary modifications as long as it is social-conscience-driven and its operations are transparent.