10120140502016 2

International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),
Volume 5, Issue 2, February (2014), pp. 126-132 © IAEME
126
IMPACT OF GLOBALIZATION IN GRAMEEN BANKS
Soma Nayaka. S1
, Dr. T. Indira2
1
Research Scholar, Department of Economics, University of Mysore, Mysore
2
Administrative Officer, Devanga First Grade College, Sampagirama Nagara, Bengaluru
ABSTRACT
The Grameen Bank is a Nobel Peace Prize-winning microfinance organization and
community development bank started in Bangladesh with dedication to rural area. Micro-credit loans
are based on the concept that the rural poor people have skills that are under-utilized, and with
incentive, they can earn more money. A group-based credit approach is applied to use peer-
pressure within a group to ensure the borrowers follow through and conduct their financial affairs
with discipline, ensuring repayment and allowing the borrowers to develop good credit standing. The
bank also accepts deposits, provides other services, and runs several development-oriented
businesses including fabric, telephone and energy companies. It plays a major role in globalization of
rural banks for betterment of nation development through micro-cerdit system.
Keywords: Globalization; Grameen Bank, Rural, Economics, Micro-credit.
GLOBALISATION
In the 19th century there was a massive growth in the banking industry. Banks played a key
role in moving from gold and silver based coinage to paper money, redeemable against the bank's
holdings. Within the new system of ownership and investment, the state's role as an economic factor
and grew substantially. The Late-2000s financial crisis caused significant stress on banks around the
world. The failure of a large number of major banks resulted in government bail-outs. The collapse
and fire sale of Bear Stearns to JP Morgan Chase in March 2008 and the collapse of Lehman
Brothers in September that same year led to a credit crunch and global banking crises. In response
governments around the world bailed-out, nationalised or arranged fire sales for a large number of
major banks. Starting with the Irish government on 29 September 2008, governments around the
world provided wholesale guarantees to underwriting banks to avoid panic of systemic failure to the
whole banking system. These events spawned the term 'too big to fail' and resulted in a lot of
discussion about the moral hazard of these actions.
INTERNATIONAL JOURNAL OF MANAGEMENT (IJM)
ISSN 0976-6502 (Print)
ISSN 0976-6510 (Online)
Volume 5, Issue 2, February (2014), pp. 126-132
© IAEME: www.iaeme.com/ijm.asp
Journal Impact Factor (2014): 3.2150 (Calculated by GISI)
www.jifactor.com
IJM
© I A E M E

127
GRAMEEN BANK HISTORY
The Grameen Bank is a Nobel Peace Prize-winning microfinance organization
and community development bank founded in Bangladesh. It makes small loans known
as microcredit or "grameen credit" to the impoverished without requiring collateral. The name
Grameen is derived from the word gram which means "rural" or "village" in the Bengali language.
Micro-credit loans are based on the concept that the rural poor people have skills that are under-
utilized, and with incentive, they can earn more money. A group-based credit approach is applied to
use peer-pressure within a group to ensure the borrowers follow through and conduct their financial
affairs with discipline, ensuring repayment and allowing the borrowers to develop good credit
standing. The bank also accepts deposits, provides other services, and runs several development-
oriented businesses including fabric, telephone and energy companies. The bank's credit policy to
support under-served populations has led to the overwhelming majority (98%) of its borrowers being
women. Grameen Bank originated in 1976, in the work of Professor Muhammad Yunus, Professor
at University of Chittagong, who launched a research project to study how to design a credit delivery
system to provide banking services to the rural poor. Based on his positive results, in October 1983
the Grameen Bank was authorized by national legislation as an independent bank.
In 2006, the bank and its founder, Muhammad Yunus, were jointly awarded the Nobel Peace
Prize. In 1998 the Bank's "Low-cost Housing Program" won a World Habitat Award. In 2011, the
Bangladesh Government forced Muhammad Yunus to resign from Grameen Bank, saying that at age
72, he was years beyond the legal limit for the position. Yunus developed the principles of the
Grameen Bank from his research and experience. He began to expand microcredit as a research
project together with the Rural Economics Project at Bangladeshs University of Chittagong to test
his method for providing credit and banking services to the rural poor. In 1976, the village of Jobra
and other villages near the University of Chittagong became the first areas eligible for service from
Grameen Bank. Proving successful, the Bank project, with support from the central Bangladesh
Bank, was extended in 1979 to the Tangail District (to the north of the capital, Dhaka). The bank's
success continued and its services were extended to other districts of Bangladesh. By a Bangladeshi
government ordinance on October 2, 1983, the project was authorized and established as an
independent bank. Bankers Ron Grzywinski and Mary Houghton of Shore Bank, a community
development bank in Chicago, helped Yunus with the official incorporation of the bank under a grant
from the Ford Foundation. The bank's repayment rate suffered from the economic disruption
following the 1998 flood in Bangladesh, but it recovered in the subsequent years. By the beginning
of 2005, the bank had loaned over USD 4.7 billion and by the end of 2008, USD 7.6 billion to the
poor. The Bank continues to expand across the nation and provide small loans to the rural poor. By
2006, Grameen Bank branches numbered over 2,100. Its success has inspired similar projects in
more than 40 countries around the world, including a World Bank initiative to finance Grameen-type
schemes. The bank has gained its funding from different sources, and the main contributors have
shifted over time. In the initial years, donor agencies used to provide the bulk of capital at low rates.
By the mid-1990s, the bank started to get most of its funding from the central bank of Bangladesh.
More recently, Grameen has started bond sales as a source of finance. The bonds are implicitly
subsidised, as they are guaranteed by the Government of Bangladesh, and still they are sold above
the bank rate.

128
Table 1. Grameen Bank Program Characteristics
Characteristics Scoring units Maximum-
Minimum
Obtained
score
Categories of
characteristics
Women
Number
and
percent
Mean Standard
deviation
Age Number of
years
- 16-57 Young (up to 30)
Middle aged (31-45)
Old aged (above 45)
42
48
10
33.85 4.56
Education Years of
schooling
- 0-12 Illiterate
Can sign only (0.5)
Primary (1-5)
Secondary (6-10)
Higher secondary (>
10)
02
12
50
27
9
4.92 2.18
Family size Number of
members
- 2-10 Small family (below
4)
Medium family (5-7)
Large (above 7)
27
52
21
5.36 1.67
Farm size Size in
hectares
- 0.01-1.74 Landless (< 0.02 ha)
Marginal (>0.02-0.2
ha)
Small(>0.2-1.0ha)
Medium(1.0-3.0ha)
Large (>3.0ha)
10
34
36
20
00
0.11 0.05
annual income In Taka (‘000
Tk)
- 15.5-170 Low (up to 30)
Medium (31-100)
High (> 100)
18
71
11
47.35 14.79
Credit
availability
In Taka (‘000
Tk)
2.5-24 Low (up to 7)
Medium (8-10)
High (11 and above)
45
30
25
7.68 3.84
Organizational
participation
Score - 1-16 Low (up to 5)
Medium (6-10)
High (above 10)
63
31
06
3.24 2.19
Communication
with GB
employee and
staff
Score 0-12 2-10 Low (up to 4)
Medium (5-8)
High (above 8)
29
58
13
7.37 3.14
Non-localite
behavior
Medium (15-24)
High (25 and above )
32
54
14
18.94 6.85
Attitude towards
community
Medium (15-22)
41
46
13
16.15 6.37
Attitude towards
micro-credit
program of GB
Score 0-40 10-32 Low (up to 14)
Medium (15-24)
05
53
42
22.46 8.92
Change in
livelihood status
In ‘000Tk - 4-24 Low change (up to 10)
Medium change (11-
17)
High change (18 and
above )
25
62
13
13.94
Source: Field Survey
The characteristics included age, education, family size, farm size, annual income, credit
availability, organizational participation, communication with Grameen Bank employee and staff,
non-localite behavior, attitude towards community, attitude towards micro-credit program of
Grameen Bank and change in livelihood status were described, after involving themselves with
micro-credit program of Grameen Bank.

129
Table 2. Farming community status in the terms of ‘before’ and ‘after’ involvement with
Grameen bank micro-credit
Variables
Average Calculated t-value
with 99 df
Before After
Change of farm and house hold materials
(score)
30.48 32.76 3.67**
Change of housing, health and sanitation
(score)
33.38 37.67 3.14**
Change of annual family income (score) 45.57 51.87 4.54**
Source: Field Survey
The findings indicated that the average beneficiaries increased from 30.48 scores to 32.76
scores after involvement with micro-credit program. The t value with 99 df showed in between
‘before’ and ‘after’ involvement clearly indicated improvement of beneficiaries.
Table 3. Farming community status and their selected characteristics
Dependent
Variable
Independent
Variables
Pearson
Correlation (r)
values with 98
df (n-2)
Tabulated value of (r)
0.05 level 0.01 level
Change in
livelihood
Status
Age
- 0.198
*
±0.196 ±0.254
Educational
qualification
0.270
**
Family size
- 0.017
NS
farm size
0.183
NS
annual income
0.271
**
Credit availability
0.207
*
Organizational
participation
0.108
NS
Communication with
GB employee and
staff
0.197
*
Non-localite behavior
- 0.232
*
Attitude towards
micro-credit program
of GB
0.236
*
Correlation is significant; ** = Correlation is significant at the 0.01 level (2-tailed); and NS = Not significant Source: field Survey
Correlation analysis indicated education, annual income, credit availability, communication
with GB employee and staff and attitude towards micro-credit program. Also, it was found that
family size, farm size, organizational participation and attitude towards community do not show any
GB relationship with change in farmer status.

130
CHALLENGES
As per the rules, the payment of installments and interest starts just within a week of borrowing.
But many borrowers cannot even invest the borrowed money within a week, let alone getting
interest from their investment. So, they face problems in paying the initial installment.
Due to natural disasters or other reasons, sometimes the agricultural investment or investment on
livestock go in vain. In such cases, the Bank do not pressurize much to repay the loan, rather it
reschedules the installments to give the borrowers chances to pay it within a longer period.
Nevertheless, it is an unbearable burden for the poor people who loose their entire investment.
The Bank prefers to lend money to women. So, many people send their wife, daughter, mother or
other female relatives to borrow money for them. However the male guardian of the family is in-
charge of the loan amount. But the woman borrower remains bound with the entire obligation to
pay back the loan. In some cases, when her male supporter spends the money unwisely, it creates
a financial burden on the woman rather than empowering her.
Many of the borrowers opined that 16 per cent interest rate on loan is unjustified.
Table 4. Problems faced by Beneficiaries
Statement of the Problem Extent of Problem (%)
High Medium Low Not at
all
*PCI
Credit disbursement delaying due to
linger process
52 34 10 4 234
Lack of sufficient amount of credit 56 32 10 2 242
Limited for Rural income-generating
activities (IGAs) (Rural IGAs include
postharvest activities, cow fattening and
milking, goat farming, backyard poultry
rearing, pisciculture, agriculture,
horticulture, food processing, cane and
bamboo works, silk reeling, handloom,
garment making, fishnet making, coir
production, and handicrafts etc ).
23 31 28 18 159
Delaying of receiving credit in due to less
responsibility of concern staffs
34 33 28 5 196
High rate of interest 28 44 26 2 198
Belief on dogmatism and fatalism 34 38 21 7 199
*PCI= Problem Confrontation Index Source: field survey
The data in indicated that the problems faced by the beneficiaries of Grameen Bank in respect
of ‘lack of sufficient amount of credit’ was the most serious problems with problem index of 242.
Credit disbursement was delayed due to linger process of disbursement was the second problem with
problem index 234. The problem was ‘belief on dogmatism and fatalism’ with problem index 199.
The problems were ‘high rate of interest’,’ delaying of receiving credit in due to less responsibility of
concern staffs’ and ‘limited for IGAs. postharvest activities, cow fattening and milking, goat
farming, backyard poultry rearing, pisciculture, agriculture, horticulture, food processing, cane and
bamboo works, silk reeling, handloom, garment making, fishnet making, coir production, and
handicrafts etc’ with problem index 198, 196 and 159 respectively.

131
IMPACT OF THE GRAMEEN BANK
Social Wellbeing: The Bank started its journey by giving loans to 42 farmers. By 1980 the
umber of member- borrowers increased to around 15,000; by mid-1984 its membership grew to
nearly 100,000. By the end of 1998, Grameen had a membership of 2.34 million people, where 2.24
million comprised of farmers. At present (2008) the Bank services extends to 7.56 million poor
people, 97% of whom are farmer. The Grameen Bank provides this service through its 24,638 staff
with 2,529 branches in 82,994 villages. It is estimated that the average household income of
Grameen Bank members is about 50 percent higher as compared to the target group under the control
of non-Grameen Bank villages. From Grameen Bank service, the landless have benefited most,
followed by marginal landowners. This has resulted in a sharp reduction in the number of Grameen
Bank members living below the poverty line, that is, 20 percent in comparison to 56 percent non-
Grameen Bank members. Thus, Grameen Bank has not only provided help to the poorest to come out
of abject poverty but also provided employment to thousands of educated young people. Ease of
Service Delivery: Delivery of service at the clients’ door-step is the first principle of Grameen Bank.
Every week the Grameen Bank's staff or officers commonly known as “bicycle banker” meet the
borrowers at their door-step in the villages. Repayment of Grameen loans is also made very easy by
splitting the loan amount in small weekly installments. The Grameen officers visit their clients every
week to collect repayment and to provide assistance with problems related to usage of micro credit.
Transparency and Accountability: Most transactions take place in the presence of the members of the
groups. Further all transactions are well documented and open for scrutiny to the stakeholders.
However all other decisions like the sanction of loans, rate of interest, repayment installments follow
specific rules or guidelines. Thus, the overall banking system ensures high level of operational
accountability. Sustainability: Since its inception, it has made profits every year, except for the years
1983, 1991 and 1992. In 1995, Grameen Bank decided not to receive any more donor funds. Since
then Grameen Bank has become self-reliant. The Grameen Bank today has over 7.5 million
borrowers. Out of which 65 percent has managed to improve their socio-economic conditions and are
able to push them self out of extreme poverty. Grameen Bank takes deposits from its borrowers and
non-borrowers also who have sufficient funds for its operations. Replicability of the Grameen Bank
model is well recognized. In 1976 it started at Jobra, today (2008) the bank functions in 82,994
villages which cover around 95 per cent of Rural Bangladesh. Internationally, the Grameen model is
replicated in some of the African countries, in India and even in Australia.
CONCLUSION
The rural activities like, goat farming, backyard poultry rearing, pisciculture, agriculture,
coir production, and handicrafts which have enough potentiality to increase their socio-economic
conditions. This leads to improvement of their livelihood status. Micro credit availability especially
rural areas had positive correlation with change in livelihood status in the study. Credit is the most
important assets to mobilize in Grameen Bank which ultimately increase livelihood status.
Communication with Grameen Bank employee and staffs gives important way to utilize the credit in
rural areas which increase their income as well as improve livelihood status.
Copy Right: Each manuscript must be accompanied by a statement that it has been neither published
nor submitted for publication, in whole or in part, either in a serial, professional journal or as a part
in a book which is formally published and made available to the public

132
REFERENCES
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CGAP Microfinance Gateway at: http://www. Microfinancegateway.org.
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4. Chambers,R. and G. Conway. 1988. Sustainable Rural Livelihoods: Practical Concepts for the
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Century. IDS Discussion Paper 296, Brighton: IDS.
5. Easton, Tom. 2005. The Hidden Wealth of the Poor. The Economist 377 (8451) (November 5-
11): 3-14.
6. Hulme, D. and Mosley, P. 1996. Finance against poverty, Vol. 1. London: Routledge.
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8. Milgram, Lynne. B. 2001. Operationalizing Microfinance: Women and Craftwork in Ifugao,
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9. Milgram and Lynne. B. 2002. Banking on Bananas, Crediting Crafts: Financing Women's
Work in the Philippine Cordillera. Atlantis 26 (2): 109-117.
10. Rahman and Aminur., 2004. Microcredit and Poverty Reduction: Trade-Off Between Building
Institutions and Reaching the Poor. IN Livelihood and Microfinance: Anthropological and
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11. Rokonuzzaman, M. and Kashem, M.A. 2005. “Changes of housing, health and sanitation after
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12. Rokonuzzaman, M. 2004. Impact of Meghna-Dhonagoda Irrigation Project in Improving the
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13. Yunus, Mohammad. 1994. Banking on the Poor. Dhaka: Grameen Bank. http://www.grameen-
info.org.

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