Grameen Bank: Performance and Sustainability

Abstract

The Grameen Bank, in Bangladesh, has attracted worldwide attention by providng small loans to the rural poor and recording high repayment rates. It has over two million members spread over 35,000 villages, 94 percent of whom are women. The paper discusses what the Grameen Bank is, what it does for the rural poor and at what costs, its sustainability as well as its potential for expansion and replicability. The Grameen Bank's success as a bank is only sustainable if it is institutionally, economically and financially viable, and also if it generates sustainable benefits to borrowers that help reduce poverty. Subsidized funds and grants were instrumental for outreach and institutional development of the Grameen Bank. However, over time it has demonstrated its ability to operate with resources from the market, relying less on subsidized funds. The Grameen Bank has recorded loan recovery rates above 90 percent consistently and has had a positive impact on rural wages and poverty reduction, which indicates that the benefits to its borrowers from program participation must be sgnificant and sustainable. The long-run sustainability of the Grameen Bank in Bangladesh ultimately depends on its ability to expand its lending for more growth-oriented activities and achieve cost efficiency on a sustained basis. The Grameen Bank's achievements has led to its many replications in over forty countries and the World Bank has taken the initiative to sponsor Grameen-type schemes. Successful replications would depend not only on subsidized resources initially, but also on committed and dynamic leadership that is able to carve out market niches.

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