Grameen Bank

The Grameen Approach and Methodology

The overarching goal of the Grameen methodology is to provide financing options to the poor, who are otherwise considered ‘not credit worthy’. To assist poor women and men in their fight against poverty, Grameen introduced [Page 386]an innovative approach to banking based on the local realities in rural Bangladesh and in close consultation with the people it serves. Building savings; offering collateral-free loans, primarily to women, and delivering financial services at clients' doorsteps are some of the key ingredients of the Grameen methodology. A fundamental principle of Grameen is that the bank goes to the clients instead of the clients going to the bank.

Grameen challenged the dominant notion of ‘credit worthiness', bringing a massive change in the approach to banking with the poor. From its engagement with the poor people in Jobra, and eventually across the country, Grameen strengthened its arguments that poor people do have the skills and ability to manage loans and businesses and that it is the policy environment and the procedures of banking institutions which create obstructions and prevent the poor from accessing loans. Grameen argued that it is the inherent potential of individuals which determines their creditworthiness and that all individuals, irrespective of their socio-economic strata, are eligible to access loans and credits. To Grameen, access to credit is a fundamental right.

Organized in small, informal solidarity groups, Grameen borrowers operate in a close-knit environment. Groups serve as support mechanisms for the members; the background of the group members, which is generally cohesive and homogeneous, provides further assurance and encouragement to work collaboratively while each of them manages her or his own business and loans. Interdependability and reliability work as bonding agents among the members. Instead of any legal bindings, the borrowers are connected to each other and with Grameen through a shared vision. The rigorous consultation and discussions among and between the group members and Grameen staff, which is an inherent practice and held periodically, provide further insights and offer a troubleshooting mechanism, enabling borrowers to make informed decisions and Grameen to remain focused. Beyond meeting monitoring requirements, the periodic meetings and consultations offer a great opportunity to address emerging issues and concerns; they also serve as a mechanism to gather knowledge and evidence of the relevance and adequacy of the Grameen products and services and provide a way to verify the effectiveness of its policies and procedures to deliver on its mandate.

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