Grameen Bank

Muhammad Yunus was inspired during the Bangladesh famine of 1974, to lend a total of US$27 to 42 people (mostly bamboo stool makers), as start-up money so that they could make items for sale, without the burdens of high interest under predatory lending. Yunus believed that making such loans available to a larger population could stimulate businesses and reduce the widespread rural poverty in Bangladesh.

Yunus developed the principles of the Grameen Bank through his research and fieldwork at the University of Chittagong. Grameen Bank is Bengali for "Rural" or "Village" Bank. He began a research project with the University of Chittagong and in cooperation with Janata Bank, extending microcredit to test his method for providing credit and banking services to the rural poor. In 1976, the village of Jobra became the first to be served by the project. Over the next two years, the project expanded to other villages in the area. The project, with support from the Bangladesh Bank, was extended in 1979 to the Tangail District (to the north of the capital, Dhaka). The project's services expanded to other districts of Bangladesh over the next few years.

Through an ordinance of the Bangladesh government dated 2 October 1983, the project was converted into the Grameen Bank. Bankers Ron Grzywinski and Mary Houghton, of ShoreBank, a community development bank in Chicago, helped Yunus incorporate the bank under a grant from the Ford Foundation. The bank's repayment rate suffered from economic disruption following the 1998 flood in Bangladesh, but it recovered in subsequent years. By the beginning of 2005, the bank had loaned over US$4.7 billion and by the end of 2008, $7.6 billion to the poor.

In 2011, the Bangladesh government forced Yunus to resign from Grameen Bank, saying that at age 72, he was years beyond the legal limit for the position.

Grameen Bank soon began expanding into wealthy countries. As of 2017, Grameen America had 19 branches in eleven US cities, and its nearly 100,000 borrowers were all women.

In 2024, Professor Abdul Hannan Chowdhury was appointed as the new Chairman of Grameen Bank.

As of January 2025, a proposed law aims to reduce the government's stake in Grameen Bank from 25% to 5%, while amending the Grameen Bank Act of 2013. The changes would lower the number of government-appointed directors from three to one and shift the election of the chairman from the government to the 12-member board. These measures seek to restore the bank's governance to its pre-2011 framework, increasing control for microcredit borrowers and decreasing state involvement.

Grameen Bank is owned by the borrowers of the bank, most of whom are poor women. Initially, of the total equity of the bank, the government owned 60% in 1983. This then dropped over time to a single-digit percentage by the early 2010s. However, by the mid-2010s, this number increased again to 25%.

The bank grew significantly between 2003 and 2007. As of January 2022, the total borrowers of the bank number nearly 9.5 million, and 96.81% of those are women.

The number of borrowers has more than tripled since 2003, when the bank had 3.12 million members. Similar growth can be observed in the number of villages covered. As of October 2007, the Bank had a staff of more than 24,703 employees; its 2,468 branches provided services to 80,257 villages, up from the 43,681 villages covered in 2003. By the end of 2021, the bank's coverage expanded to 81,678 villages out of the country's total 87,223, for a national coverage rate of around 94%.

As of the end of 2021, cumulative loan disbursements since inception reached in excess of 2.5 trillion taka (US$33.767 billion), and the bank claims a loan recovery rate of around 95%. David Roodman has critiqued the accounting practices that Grameen used to determine this rate.

Criticism

Some analysts have suggested that microcredit can bring communities into debt from which they cannot escape. Researchers have noted instances when microloans from the Grameen Bank were linked to exploitation and pressures on poor families to sell their belongings, leading in extreme cases to humiliation and ultimately suicides.

The Mises Institute's Jeffrey Tucker suggests that microcredit banks depend on subsidies to operate, thus acting as another example of welfare. Yunus believes that he is working against the subsidised economy, giving borrowers the opportunity to create businesses. Some of Tucker's criticism is based on his interpretation of Grameen's "16 decisions", seen as indoctrination, without considering what they mean in the context of illiterate peasants.

The Norwegian documentary Caught in Micro Debt claims that Grameen evaded taxes. The Spanish documentary Microcredit also suggested this. The accusation is based on the unauthorised transfer of approximately US$100 million, donated by the Norwegian Agency for Development Cooperation (Norad), from one Grameen entity to another in 1996, before the expiry of the Grameen Bank's tax exemption. However, Norad published a statement in December 2010 clearing Yunus and the Bank of any wrongdoing on this point, following a comprehensive review of Norad's support commissioned by the Minister of International Development.

Yunus denies that this is tax evasion:

There is no question of tax evasion here. The Government has provided organisations with opportunities; we have made use of these opportunities with [the] aim of benefitting our shareholders who are the rural poor women of Bangladesh.

David Roodman and Jonathan Morduch question the statistical validity of studies of microcredit's effects on poverty, noting the complexity of the situations involved. Yoolim Lee and Ruth David discuss how microfinance and the Grameen model in South India have in recent years been distorted by venture capitalism and profit-makers. In some cases, poor rural families have suffered debt spirals, harassment by microfinance debt collectors, and in some cases suicide.