Bank Takes Hope to Bangladesh Villages

MOGRAPARA, Bangladesh —  Safura Begum starts her day early to finish the housework before the sun is up and get her children ready for school. Then, along with her neighbors, she awaits an “every-morning” visit from her bank manager.

He arrives with a smile and asks if the boys have new books or the girl has recovered from illness. Any discussion about banking comes much later.

“This is how we operate,” said Arshad Alam, manager of the Mograpara branch of the Grameen Bank. “By the time the villagers have finished their breakfast, I have trekked six or seven miles to get to them.”

Alam, in an interview at his office 25 miles from Dhaka, compared the role of a Grameen Bank official with that of a rural schoolteacher who sets out every morning to check on pupils.

“We talk hygiene, education, agriculture and domestic problems before getting down to business,” he said. “And this trick has so far proved highly successful.”

The idea for the Grameen (Rural) Bank was conceived by Mohammad Yunus, a professor of economics at Chittagong University whose dream is to revolutionize Bangladesh’s rural economy.

The award-winning economist set up the first branch of the Grameen Bank on an experimental basis in 1976 not far from his university.

Most rural villagers, who account for 85% of Bangladesh’s 100 million people, live in dire poverty. The country’s annual per capita income is only $170.

Villagers told Yunus they had no money to deposit with conventional banks nor had they any idea of earning interest.

So Yunus thought of a bank with a difference that would provide the landless and mostly illiterate women with credit facilities from funds he borrowed from a local bank.

Since then the Grameen Bank has come a long way. With 632 branches, it has a clientele of more than 630,000 people in 14,310 villages.

After initial successes, funding came from the Bangladesh central bank, the International Fund for Agricultural Development and other sources.

The bank has loaned about $160 million and received back more than $130 million. “The rate of (loan) recovery is spectacularly high compared with other banks,” Alam said.

Before granting loans to individuals, the bank forms borrower groups, each with five villagers, and gives them mandatory training for two weeks.

The first loans, for a maximum of 10,000 taka (about $320) each, go to two group members. If they repay the loans regularly, two more come on the list. After a month or so, the fifth member, who is the group’s chairman, gets credit.

Borrowers are free to use the loans to buy cattle, build a house or start a small business. But they must repay the loans, with interest, within a year by weekly installments before another loan is granted.

More than 75% of the bank’s stock is owned by the landless members and the rest is retained by the government.

Borrowers’ savings account for 10% of the total loans disbursed.

The bank has started a savings scheme for children. The money is used for hiring teachers for them and buying books and clothes.

The bank also operates a social development program. Called “Sixteen Decisions,” it helps motivate members with discipline, unity and hard work to improve their living standards.

To improve standards of health, all bank members must have sanitary latrines at their homes. Any house built with a bank loan must stand on concrete pillars, supplied by the bank from its own plant, to withstand flood or cyclone.

“Banking is not our primary goal. We want to change every aspect of an individual’s life,” Alam said.

“Now we look forward to a golden future,” said borrower Ahmad Hussain.

To make it easier for the borrowers, bank officials go from door to door to collect loan payments. “People feel greatly encouraged by such gestures,” Alam said.

The bank operates in 38 of Bangladesh’s 68 districts.