Introduction
Grameen Bank (Bengali: গ্রামীণ ব্যাংক) is a microfinance and specialized community development bank founded in Bangladesh. It provides small loans, known as microcredit or “grameencredit,” to poor people without asking for collateral. It is a statutory public authority. The bank began from the work of Muhammad Yunus, a professor at the University of Chittagong, who started a research project in 1976 to design a credit system for the rural poor. In October 1983, Grameen Bank was authorized by national legislation to work as an independent bank.
Awards and Recognition
In 1998, the bank’s Low-cost Housing Program won the World Habitat Award. In 2006, Grameen Bank and its founder Muhammad Yunus jointly received the Nobel Peace Prize. The success of the bank inspired similar projects in more than 64 countries and also influenced a World Bank initiative to support Grameen-type lending systems.
History
Muhammad Yunus was inspired during the Bangladesh famine of 1974, when he gave a small personal loan of US$27 to 42 families so they could make goods for sale and escape exploitative lending. He believed that such loans could support business activity and reduce rural poverty. Grameen means “rural” or “village” bank in Bengali. Yunus, together with a national commercial bank and the University of Chittagong, began testing microcredit in 1976. The first village served was Jobra, and the project later expanded to other villages and then to Tangail District in 1979 with support from Bangladesh Bank. On 2 October 1983, the project was turned into Grameen Bank through a government ordinance. Ron Grzywinski and Mary Houghton of ShoreBank helped Yunus incorporate the bank with support from the Ford Foundation. The bank faced repayment pressure after the 1998 flood in Bangladesh, but it recovered later. By 2005, it had loaned more than US$4.7 billion to the poor, and by 2008 this rose to US$7.6 billion. In 2011, the Bangladesh government forced Yunus to resign because he had crossed the legal age limit for the position. In 2024, Professor Abdul Hannan Chowdhury was appointed as the new Chairman of Grameen Bank. In January 2025, a proposed law aimed to reduce the government’s stake from 25% to 5%, reduce government-appointed directors from three to one, and shift the chairman’s election to the 12-member board.
Funding
Grameen Bank has received funding from different sources over time. In its early years, donor agencies supplied most of the capital at low rates. By the mid-1990s, most funding came from the central bank of Bangladesh. Later, the bank began using bond sales as a source of finance. These bonds are subsidised because they are guaranteed by the Government of Bangladesh, although they are still sold above the bank rate. In 2013, Bangladesh Parliament passed the Grameen Bank Act, which replaced the Grameen Bank Ordinance, 1983 and gave the government authority to make rules for the bank.
Donations
In 2016, Grameen America donated between $100,000 and $250,000, and Grameen Research donated between $25,000 and $50,000 to the Clinton Foundation. During an investigation in Bangladesh related to oversight of a nonprofit bank, Yunus reportedly asked the Clintons for help through their aides. He later stepped down as managing director of Grameen Bank.
Application of Microcredit
Grameen Bank is based on the idea that loans are better than charity for reducing hardship. It believes that every person has the potential for social and economic progress. The bank gives credit to people who are usually excluded from formal banking, including the poor, women, illiterate people, and the unemployed. Loans are offered on reasonable terms, using group lending and weekly instalments with relatively long repayment periods. The goal is to build financial independence among poor people. Yunus also encourages borrowers to become savers so that local savings can fund new loans. Since 1995, about 90% of Grameen’s loans have been financed through interest income and customer deposits. In this system, money deposited in villages is used for loans in the same community.
Women and Empowerment
Grameen Bank mainly serves women, and around 97% of its members are women. A World Bank study has said that access to microcredit can empower women by increasing their access to resources and decision-making power, although some economists argue that the link between microcredit and women’s empowerment is not always simple.
Types of Loans
Grameen has expanded its lending activities beyond general microcredit. It supports hand-powered wells, loans for nearby family enterprises, seasonal agricultural loans, and lease-to-own arrangements for equipment and livestock. These help poor families improve farming and income generation.
Sixteen Decisions
Grameen Bank follows the Sixteen Decisions, later updated to Eighteen Decisions in 2023. Borrowers recite these decisions at meetings and pledge to follow them. These decisions promote discipline, unity, courage, hard work, family welfare, housing improvement, nutrition, tree planting, family planning, education, health, sanitation, safe drinking water, opposition to dowry and child marriage, mutual respect, entrepreneurship, cooperation, careful financial conduct, and regular loan repayment. The decisions also encourage positive social habits, especially sending children to school.
Solidarity Lending
Grameen Bank is known for its solidarity lending system. Repayment responsibility is placed on the individual borrower, and there is no formal legal joint liability. However, in practice, group members often help a member who defaults so that the group can continue receiving credit. The system works on trust rather than written contracts. Borrowers are also required to save small amounts regularly in different funds, such as emergency and group savings, which act as protection during difficult times. The bank has reported very high repayment rates, often over 98%, though there have also been criticisms about overdue loans and accounting practices.
Social Development and Business
Grameen Bank has also entered the area of social business and entrepreneurship. In 2009, the Grameen Creative Lab and the Yunus Centre launched the Global Social Business Summit, which became an important platform for discussions on social business and solutions to global problems.
Village Phone Program
The Village Phone Program allowed women entrepreneurs to start businesses by offering wireless payphone services in rural areas. This program helped Grameen Bank win the 2004 Petersburg Prize for Technology to Development. It created a new group of women entrepreneurs, improved market access for farmers, and provided communication services in thousands of villages. More than 55,000 phones were operating, benefiting over 80 million people.
Struggling Members Program
In 2003, Grameen Bank launched a special programme for beggars in Bangladesh. This was different from its regular group-based lending model and focused on giving very small loans to beggars.
Housing Loans
In 1984, Grameen tried to start a housing loan programme, but the central bank rejected the proposal several times. First, the suggested loan was considered too small to build a proper house. Then, the idea was rejected again because the loans were seen as non-income-generating. Grameen then explained that the borrowers worked from home, so a house also functioned like a workplace or factory. After a third rejection, Yunus personally met the central bank governor and argued that poor borrowers would repay because they had no other chance. After this, Grameen was allowed to offer housing loans. By 1999, the bank had issued housing loans totaling US$190 million and helped build more than 560,000 homes. In 1989, the housing programme received the Aga Khan International Award for Architecture.
Operational Statistics
Grameen Bank is owned by its borrowers, most of whom are poor women. The government initially owned 60% of the equity in 1983, but this later fell to a single-digit share in the early 2010s. By the mid-2010s, government ownership had risen again to 25%. As of January 2022, the bank had nearly 9.5 million borrowers, of whom 96.81% were women. This was a major increase from 3.12 million members in 2003. By October 2007, the bank had more than 24,703 employees, 2,468 branches, and services in 80,257 villages. By the end of 2021, its coverage had expanded to 81,678 villages out of 87,223 villages in Bangladesh, or about 94% national coverage. Cumulative loan disbursement since inception crossed 2.5 trillion taka, and the bank claimed a loan recovery rate of around 95%.
Staff Training
Grameen Bank staff work in difficult conditions. They receive six months of on-the-job training, during which they work under experienced staff from different branches. The training aims to help them understand the potential of poor people and learn how to solve problems in rural banking. After training, they return to headquarters for review before being appointed to a branch.
Honours
In 1994, Grameen Bank received the Independence Day Award, Bangladesh’s highest state award. On 13 October 2006, the Nobel Committee awarded Grameen Bank and Muhammad Yunus the Nobel Peace Prize for efforts to create economic and social development from below. The award recognized microcredit as an important tool in the fight against poverty. On 10 December 2006, Mosammat Taslima Begum accepted the prize on behalf of the bank’s investors and borrowers. Grameen Bank is the only business corporation to have won a Nobel Prize. The award was celebrated widely in Bangladesh, though some critics said it supported neoliberal ideas.
Related Ventures
Grameen Bank expanded into a large family of organizations, including Grameen Trust, Grameen Fund, Grameen Communications, Grameen Shakti, Grameen Telecom, Grameen Shikkha, Grameen Motsho, Grameen Baybosa Bikash, Grameen Phone, Grameen Software Limited, Grameen CyberNet Limited, Grameen Knitwear Limited, and Grameen Uddog. In 2005, Grameen Mutual Fund One was listed as an IPO and allowed both members and non-members to invest in Bangladesh’s capital market. The Grameen Foundation was also created to spread the Grameen philosophy and support microfinance for the poorest people around the world. It supports microfinance institutions in many regions and also provides microloans in the United States. Since 2005, Grameen Bank has worked on Mifos X, an open-source core banking technology framework, which later came under the stewardship of the Mifos Initiative.
Criticism
Some analysts argue that microcredit can push poor communities into debt. Researchers have reported cases where microloans were linked with pressure on families, sale of belongings, humiliation, and even suicides. Jeffrey Tucker of the Mises Institute argues that microcredit banks depend on subsidies, while Yunus says the system helps poor borrowers build businesses. Some critics have also interpreted the Sixteen Decisions as indoctrination. A documentary accused Grameen of tax evasion, but Norad later cleared Yunus and the bank after a review. Other economists, including David Roodman and Jonathan Morduch, have questioned the statistical methods used to measure microcredit’s impact on poverty. Ethicist Peter Singer has also said that microcredit has limited power to transform lives compared with other interventions.
Representation in Other Media
The film To Catch a Dollar (2010) documents the launch of Grameen America in Queens, New York. The documentary Living on One Dollar (2010) also shows Grameen Bank helping rural people in Guatemala start small businesses through microcredit.