The Grameen Bank of Bangladesh comes to India

Grameen Bank of Bangladesh, which revolutionised micro-finance and empowered millions, has obtained regulatory permission to open a liaison office in Mumbai. It will be headed by senior Nabard official, BM Kulkarni.

The Indian operations, christened Grameen Trust of India, will expand the grameen type of micro-finance on a build, operate and transfer (BOT) basis, mostly in the North-East region, among tea estate workers in Assam. It will also monitor and evaluate the 20 replicas of Grameen model which are already in operation in various parts of the country. The initial seed capital is provided by the Grameen Trust to various eligible NGOs and micro-finance institutions.

Collateral-free loans will be given to farmers owning less than half a acre of land or generate equivalent amount of income that the land would generate. Besides, it will also access the training needs of the grassroots personnel and conduct workshops to train them. Subsequently, it is considering independent funding pending the RBI and government’s approval.

Grameen model-- A bank unit is set up with a field manager and a number of bank workers, covering an area of about 15 to 22 villages. The manager and workers start by visiting villages to familiarise themselves with the local milieu in which they will be operating and identify prospective clientele, as well as explain the purpose, functions, and mode of operation of the bank to the local population. Groups of five prospective borrowers are formed; in the first stage, only two of them are eligible for, and receive, a loan.

The group is observed for a month to see if the members are conforming to rules of the bank. Only if the first two borrowers repay the principal plus interest over a period of fifty weeks do other members of the group become eligible for a loan. Because of these restrictions, there is substantial group pressure to keep individual records clear. In this sense, collective responsibility of the group serves as collateral for the loan.

Micro Finance: Issues & Recommendations