Grameen Bank Bangladesh Case Study

2638 Words11 Pages
A growing body of research asserts that the provision of capital through small-scale loans facilitated via rural banking reforms and microfinance initiatives is an effective policy intervention to promote self-employment. Such microfinance initiatives target individuals who face difficulty obtaining conventional loans through commercial banks, with women being a special target group. Without access to formal loans, these individuals have often had to rely on informal-sector money lenders and other expensive sources of credit. Not only does microfinance, thus, allow the opportunity for entrepreneurship to flourish, but removing borrowing constraints also enables liquidity-constrained individuals to access more productive technology, increasing…show more content…
They include formal commercial banks, rural banks, cooperative institutions, credit unions and non-governmental organizations. One of the most well-known international examples is that of Grameen Bank, Bangladesh. The Grameen Bank came into existence in the 70s with its microcredit programme aimed at reducing the credit constraints faced by the poor. Grameen Bank’s methods of doing business range from working through individual clients and self-managed self-help groups. Both the Grameen Bank and the Bangladesh Rural Advancement Committee (BRAC) have gone beyond credit to offer non-financial services, such as retail outlet facilities for products of their clients. In Bangladesh, formal sector financial institutions are gender biased. Women constitute only less than one percent of total number of borrowers. In the microfinance sector, the scenario reverses in favour of women. In the Grameen Bank, ninety seven percent borrowers are women. It is assumed that the access to microcredit helps women members of the Grameen Bank to start micro-enterprises that are owned and managed by them. Previous research suggests that the targeted use of small loans can support and incentivise women’s labour market activities and promote economic welfare. Grameen Bank has been the subject of numerous studies that have generally found positive results. For example, Pitt and Khandker found that credit given to women participants through the Grameen Bank had a strong positive effect on women’s labour supply, while income effects associated with the increased supply of credit reduced men’s labour supply. Millions of poor women have received loans from the Grameen Bank and the BRAC, and many have proven to be effective entrepreneurs. Through training, credit, and other extension services, BRAC in particular has stimulated women’s productivity in and out of the home. Other research shows that a vast
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