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Grameen Bank

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Grameen Bank in Bangladesh  started as a small village credit society in
1976 in Jobra in the backdrop of mass mobilization that took place for
Independence of the country, where large number of poor people
participated. The basis was small groups of five members who were
landless women and men, who had similar social and economic background.
Loans were given  predominantly from out of the amounts mobilized by the
groups themselves, without any collateral security and the community was
totally involved in lending decisions as well as helping recovery of the
loan.( These are three broad features which distinguish this approach
from the traditional rural banking approach in India. In traditional
banking, a)  the money belonged to Bank and b) it needed collateral or
other securities. In programmes like IRDP, collateral was by and large
not required, but the sponsoring was influenced by great deal of local
politics, rather than viability of the scheme. c)Recovery is considered
the look-out of the Bank, with no involvement or responsibility of the
village community) In 1979 the credit programme was extended to district
Tangail as a pilot project. In 1983 the Grameen Bank became a
full-fledged private bank, with 88 % of total paid-up share capital
owned by the landless rural poor, while government owned the remaining
12 %. The Bangladesh Grameen Bank experiment was a very positive one in
the sense that it demonstrated that the poor are bankable. This
experiment started attracting world-wide attention and many donor
organizations came forward to put in their own fund as 'matching
contribution' or 'revolving fund' in proportion to amounts mobilized by
the local people. The rural bank approach also addressed a number of
health, nutrition and environment-related issues without compromising on
recovery of bank loans. It covered activities like sale of vegetable
seeds, distribution of millions of  saplings to borrowers at cost price,
setting up of pre-school feeding centres for children etc.
One of the criticisms against the Bangladesh approach is that the
poorest of the poor are not touched by this intervention and that
sufficient funds are not getting channelized into infrastructure or
other capital-oriented, medium-gestation-period projects, with primary
emphasis on immediate recovery.
In India also efforts are being made  mainly in the government sector to
form self-help-groups, to harness the combined strength of savings by
the poor. The government scheme of Swarna Jayanthi Swarozgari Yojana or
SGSY is one such important intervention. Andhra Pradesh is one
pioneering State which has taken maximum advantage of this appraoach of
self-help-groups. People took inspiration from different cooperative
endeavours including Total Literacy Campaign to help channelize their
own savings and use them in a disciplined manner. Out of  all the
self-help-groups in the country, over half are in this single state of
Andhra Pradesh. It is estimated that there are about 10 million poor
women in the world who are channelizing their savings through 'thrift',
out of whom over 2 million are in Andhra Pradesh. They have formed
about 80,000 groups and a combined savings of about Rs 120 crores. State
Government has given a matching contribution as revolving fund. This
approach is arguably superior to that of Bangladesh Grameen Bank, as it
is not 'top-down' but is rooted firmly in the grassroots mobilization of
thrift amount at the rate of, for example, Re 1 a day by each member of
the group. By avoiding 'federation-type' tendencies, this approach
strengthens  micro-level initiatives. The individual member is free to
borrow money for any purpose whatsoever, including sheer consumption
need. The recovery period and interest rate are all decided by each
group in an open and participatory process..
What has happened in Bangladesh and Andhra Pradesh is something which
other States in the country must attempt to follow. At the basic level,
NGOs and government agencies/activists/banks should help poor women to
form groups of their own. The group should decide one among them as a
President and another as Treasurer. The members should agree to
contribute some fixed amount everyday or for example, seven rupees every
saturday and depost with the treasurer. The thrift amount will be
deposited in a bank in the name of the group. The group meetings are to
be properly minuted and registers maintained. Whenever any member of the
group approaches the group for a loan, it will be debated and the group
is to take clear decision on a) the amount to be given as loan b) the
repayment schedule and c) the interest rate. If all group members are
involved in decision-making in a participatory manner and if the group
develops good cohesiveness over a period of time, Banks will very easily
extend their support to the group in proportion to amount mobilized by
the group's own savings. NABARD extends refinancing support to Banks who
do this 'linking' with self-help-groups.
But the important questions to be addressed in future are to what extent
market interventions are made by the investments, what kind of trades,
kind of technology upgradations and skill-upgradations are needed, how
exactly they are achieved etc. Of course  all this is placed in the
overall context of globalization and one has to really see to what
extent small operators can play in the the

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