Grameen Bank: The Microfinance Revolution and its Role in Women Empowerment
11-06-2024
Abstract
The Grameen Bank has ignited a global conversation on offering affordable financial aid and its transformative power for women's economic empowerment. The bank's origins, its influence on women entrepreneurs, and its successful replication in India are some aspects covered in this blog. Additionally, the socio-economic impact on women, the challenges faced, and future prospects, emphasizing the crucial role of education and technology in sustaining these efforts are highlighted. Through various studies and personal stories, it illustrates how Grameen Bank continues to uplift women and promote financial independence.
What is the Grameen Bank?
Grameen bank is a microfinance tool that offers loans (generally in small magnitudes) to economically challenged individuals without the requirement of collateral damage. The launch of the Grameen Bank paved the way for easier credit allowance to the poor thus leveraging development opportunities for these people. Founded by economist Muhammed Yunus in 1983, the bank originated in Bangladesh and was authorized by national legislation to run as an independent bank.
The influence of this microfinance bank on the rise of women entrepreneurs is significant as the total borrowers of the bank number nearly 10.56 million, and 97% of those are women, as of April 2024 (Grameen Bank, 2023). Furthermore, Grameen Bank states that nearly two thirds of these women are better thus highlighting the role of the Grameen Bank in women entrepreneurial development.
History of the Grameen Bank
The launch of the Grameen Bank was drawn from Bangladesh’s tragic famine in 1974, a dark time where Bangladesh faced a high mortality rate along with many victims losing jobs. Mohammed Yunus, observed that banks denied giving loans to these victims if they did not have any collateral damage. As a result, Yunus lent a loan of $27 to 42 families with the belief that such loans would greatly contribute to stimulation of businesses thus improving the financial conditions of the poor (Giridharadas & Bradsher, 2006). This was later evolved into the “Grameen Bank Project” which was then experimented in Jobra, a village in Bangladesh and other neighboring villages.
In 1983, the project was then launched as a bank under the administration of the Bangladesh Government which then started to lend small loans on a global scale through the Grameen Foundation, an organization that focuses on aiding the poor, primarily women.
Ever since the success of the Grameen Bank, many more institutions have replicated Grameen Bank’s principles.
Some of the Prominent and Successful Indian Replications of the Grameen Bank are:
Bandhan Bank was established on 23 August 2015 with the bank previously being an NGO. Bandhan was established in 2001 and started its operations in West Bengal as a non profit organization with the motive of providing women empowerment and financial inclusion. Bandhan acquired Bandhan Financial Services, an NBFC in 2006 and later became an NBFC in 2009 and became the largest microfinance institution in India by 2010. In 2015, Bandhan Bank was established with 2523 banking outlets on the day of its inauguration and currently has more than 4000 banking outlets and 1000 branches across India (Our Story| Bandhan Bank, n.d.).
Currently known as Bharat Financial Inclusion, SKS Microfinance was founded in 1997 with the primary aim of supporting poor women from villages and urban slums and eradicating poverty through financial aid. “SKS is currently reaching over one lakh (1,00,000) villages in India with a presence in 15 states and 1,256 branches” (SKS - Finance, 2009)
Apart from granting loans, the Grameen Bank provides financial assistance to women thus highlighting the bank’s motive to end poverty by promoting self-sufficiency. Additionally Professor Yunus in his Nobel Prize acceptance speech stated that “Eradicating poverty through an alternative approach to capitalism” stands as the reason for the establishment of microfinance (Ahmed Chowdhury, T., & Somani, S., 2020) thus emphasizing the social principles of the Grameen Bank that divert from the customary profit maximizing motive of banks by empowering women and breaking the cycle of poverty.
Impact of the Grameen Bank
Consequently, let us look at the impact of the Grameen Bank on the development of women empowerment over the years through evidence from various papers.
Assessing the micro-credit offered by the Grameen Bank, from a 2012 study of a sample of 100 Bangladeshi women, 81% of the members are satisfied with their Grameen Bank credit facilities. “Most of the members think that their lifestyle improvement starts after receiving and using micro credit. Most of the respondents (74%) said that their socio-economic condition has improved after taking micro credit which has made them more confident and reliant” (Kumar et al., 2012). Furthermore, the paper links financial dependency and states that during focus group discussions, the majority of the respondents were given importance for their decision on utilization of micro-credit from their husbands hence increasing financial autonomy and empowerment within the household.
Another similar study published in September 2019 with a sample size of 100 in Bangladesh, states that “64% of Grameen Bank respondents stated that their family income has increased to some extent, 24% said their family income has improved to a greater extent” (Hasan et al., 2019). Additionally, a positive relationship between the Grameen Bank microcredit program and family income exists.
Looking at a study in India published in 2012 in the Cuddalore district of Tamil Nadu, the study used Chi-square tests and t-tests and proved that microfinance helped a sample of 100 women in gaining empowerment (Malathi & Vijayarani, 2012). However, the study also pointed out that the level of education directly affects the level of empowerment. “The result identified that respondents differed in their level of empowerment on the basis of their level of education. Comparing all the levels of education, those who have a high level of education have fully participated and have been greatly empowered” (Malathi & Vijayarani, 2012), thus highlighting the importance of education in women entrepreneurship and empowerment. Furthermore, women empowerment can be defined as a multidimensional concept consisting of the five defining factors - child health, education, selection of spouse of children, purchase of basic goods, and decision of household savings (Khan & Noreen, 2012). Although all five factors contribute to women empowerment of great significance, education is the underlying factor that edifies factors such as household savings and purchase of basic goods along with indirectly influencing spouse selection and child health.
To promote education among women, the Grameen Bank provides scholarships for school and higher education. The Grameen Bank offers 100% scholarships in the following universities - Asian University for Women (Bangladesh), Khazana Asia Foundation (Malaysia), Ewha Women’s University (South Korea) and Glaxo Caledonian University (UK) (Scholarship Program– Grameen Bank, n.d.). “In 2018, 59.7% scholarship was provided to female students encouraging women literacy” (Ahmed Chowdhury & Somani, 2020). Therefore, the Grameen Bank aims to empower women through funding for their education.
Conclusion
By generating employment and instilling entrepreneurship, the microcredit program of the Grameen Bank is playing a significant role in women empowerment. With microcredit available to the poor, it has enabled them to obtain an independent source of income and additionally own assets to stabilize their income and subsequently avoid debt. “Micro credit programs have also empowered the beneficiaries by raising their social consciousness which is reflected among others in their increased participation in local government elections and social mobilization activities” (Kumar et al., 2012). The Grameen Bank has not only uplifted countless women but also the future generations to come by increasing important indicators of women empowerment such as women literacy rates and in Bangladesh.
References
Giridharadas, A., & Bradsher, K. (2006, October 6). Microloan Pioneer and His Bank Win Nobel Peace Prize. The New York Times. https://www.nytimes.com/2006/10/13/business/14nobelcnd.html
Grameen Bank. (2023). Introduction – Grameen Bank. Grameenbank.org.bd. https://grameenbank.org.bd/about/introduction
Hasan, N., Chakraborty, B., & Khan, A. G. (2019, September). Impact of Microcredit Programs on Women Empowerment In Bangladesh. ResearchGate. https://www.researchgate.net/profile/Brishti-Chakraborty/publication/336117594_Impact_of_Microcredit_Programs_on_Women_Empowerment_in_Bangladesh_A_Comparative_Study_of_Grameen_Bank_and_BRAC/links/5d9d70bf92851c2f70f72d25/Impact-of-Microcredit-Programs-on-Women-Empowerment-in-Bangladesh-A-Comparative-Study-of-Grameen-Bank-and-BRAC.pdf
Khan, & Noreen, S. (2012, March). Microfinance and women empowerment: A case study of District Bahawalpur (Pakistan). ResearchGate. https://www.researchgate.net/publication/271190272_Microfinance_and_women_empowerment_A_case_study_of_District_Bahawalpur_Pakistan
Kumar , D., Hossain, A., & Gope, M. C. (2012). Role of Micro Credit Program in Empowering Rural Women in Bangladesh: A Study on Grameen Bank Bangladesh Limited. Asian Business Consortium. https://www.researchgate.net/profile/Afjal-Hossain-2/publication/305095707_Role_of_Micro_Credit_Program_in_Empowering_Rural_Women_in_Bangladesh_A_Study_on_Grameen_Bank_Bangladesh_Limited/links/57c9431a08ae7333923d3892/Role-of-Micro-Credit-Program-in-Empowering-Rural-Women-in-Bangladesh-A-Study-on-Grameen-Bank-Bangladesh-Limited.pdf
Malathi, S., & Vijayarani, K. (2012, August 8). Microfinance and Women Empowerment in the Rural Areas of Cuddalore District of Tamilnadu. Language in India. http://www.languageinindia.com/aug2012/malathimicrofinancefinal.pdf
Our Story| Bandhan bank. (n.d.). Bandhanbank.com. https://bandhanbank.com/Our-Story
Scholarship Program– Grameen Bank. (n.d.). Grameenbank.org.bd. https://grameenbank.org.bd/other-programs/scholarship-program-of-grameen-bank
SKS: Our Work: What We Do: New Initiatives. (2009). www.sksindia.com. https://www.sksindia.com/new_initiatives.html
Ahmed Chowdhury, T., & Somani, S. (2020). Performance Evaluation and Impact of Grameen Bank on Social Development and Women Empowerment in Bangladesh. In International Journal of Social and Administrative Sciences (Vol. 5, Issue 1, pp. 54–73). Asian Economic and Social Society. https://doi.org/10.18488/journal.136.2020.51.54.73
