The Grameen Bank micro-credit programme for ‘struggling members’ in Bangladesh: Empowerment to tackle social exclusion

Change management

Grameen Bank is globally known for its innovative microcredit program and was awarded the Nobel Peace Prize in 2006. Its origin was in 1976, when its founder, Dr. Muhammad Yunus, started microcredit financing on a very small scale.

The original project started by providing small loans to poor women in Jobra, a village near Chittagong, the second largest city of Bangladesh. Credits were targeted in particular to women having property of less than an acre of land.

In conventional banking, the poor are excluded from getting a loan because they lack physical collateral, such as land or other immovable assets. Unlike ordinary banking, Grameen Bank has some special features, including (Khandker, 1996): 

• giving loans to a group instead of to an individual member;
• putting emphasis on savings and insurance; and especially,
• the reduction of the material risks of lending.

The original project became very popular among the rural poor. As a result, in October 1983, Grameen Bank was officially registered as an independent bank under government legislation.

In a highly ambitious move to reach out to the beggars, in July 2002 Grameen Bank developed a new micro-credit programme for so-called ‘struggling members’.The basic characteristics of this programme (Dowla and Barua, 2006) are: 

• The microcredit is based only on the borrower’s working potential. It is also free from mandatory peer monitoring and peer pressure, which applies to other programmes of Grameen Bank.
• All loans are interest-free and can be long-term to make repayment installments very small. For example, for a loan to buy a quilt or a mosquito-net, many borrowers are paying 2.00 taka (equal to US$ 0.034 – yes, that’s 3.4 cents!) per week.
• Beggar members are covered under life insurance and loan insurance programmes without incurring any cost.

A typical loan to a ‘struggling member’ amounts to 500 taka (US$9.00). The repayment schedule is flexible and decided by the member. Grameen Bank makes arrangements with local shops to give the members a credit line up to a given amount to pick-up whatever items from a list that includes bread, sweets, pickles and toys that they want to take out to sell in the village (door-to-door). The bank provides a guarantee to the shops that it will pay in case of default.

In addition, training programmes in family planning, sanitation, and tree plantation are designed and delivered, according to the interest of the members. Furthermore, the regular Grameen Bank group members (on ‘normal’ loans) act as mentors to the ‘struggling members’, providing guidance and support. As Muhammad Yunus (2005) points out, the bank treats its ‘struggling members’ with the same respect and attention as regular members and refrains from using the term ‘beggar’, which is socially demeaning.

In Bangladesh, many women are excluded from work. Many women therefore choose begging as a lifetime occupation, especially if getting divorced, or if they have a physical disability or lose their homes through flooding or river erosion (Dowla and Barua, 2006). In order to improve the situation, Grameen Bank has actively encouraged women to use their talents in productive employment. They can receive a housing loan that is explicitly designed to authorize women as decision-makers in the family.

Before the existence of the Struggling Members Programme, Grameen Bank employees were reluctant to have beggars joining the bank. They were doubtful whether beggars would be able to repay their loans. Now Grameen Bank has engaged its branch managers to identify beggars in their communities and convince them to join the Struggling Members Programme. Since employees typically commute through the village every day on their way to and from work, they know who these beggars are. Other members of Grameen Bank, e.g. those who already have loans, also help to identify beggars and encourage them to join the programme.

The concept of conventional banking practice is simply reversed by a system of mutual trust, accountability, participation and creativity. Therefore, the disabled, the blind, and people with learning disabilities, as well as older people in village society, become included in the banking orbit.