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Guidelines for Grameen-style microcredit programs
Category: Microcredit | By CMC-2011, 8-Oct-2011 | Viewed 3536  Comments 0
Guidelines for Grameen-style microcredit programs
More than 1.1 billion people live on less than $1 per day, in conditions of intense hunger, squalor, poor health and hopelessness. Most governments and civil society organizations in developing countries of the world are fighting poverty through a variety of strategies, such as agricultural and rural development, employment promotion, programs in health and education, and social services. 

Microcredit has been recognized as one of the most effective strategies in poverty alleviation. It involves the giving of very small loans to poor people, particularly women, without requiring any collateral. The purpose is to enable borrowers to establish individual income-producing enterprises.

Grameen Bank of Bangladesh is a microcredit pioneer. It began as an action research project in 1976 and has since grown into Bangladesh's largest bank, as of October 2010 providing microloans to more than 8.3 million borrowers. Grameen Bank has achieved dramatic success through its carefully crafted methodology and systems, administered with rigorous discipline and anchored in a clear-minded philosophy that understands the plight of the poor and believes in them. One of Grameen Bank's greatest contributions to the worldwide microfinance movement is that it has demonstrated beyond any doubt that the poor are bankable. And by standardizing and simplifying its banking methodology so that it is tailored to the needs of the poor, Grameen Bank has made it possible for thousands of social entrepreneurs in numerous other countries to successfully replicate or adapt the model. 

The Grameen Bank together with its founder, Professor Muhammad Yunus, are renowned in the field of microcredit. In 2006, they were jointly awarded the Nobel Peace Prize for their extraordinary contribution to the expansion of the microfinance concept and the alleviation of poverty. 

As the recognition grows that microcredit is one of the most powerful and productive tools in the fight against poverty, many organizations across the world have sought to develop their own microfinance programs. Many have sought to use the Grameen Bank approach as a model. They borrow from its methodology, systems and policies while at the same time tailoring their programs to their particular environment.

The Guidelines for Establishing and Operating Grameen-style Programs is a work based on the experiences of the Grameen Bank, Grameen Trust and the Grameen Foundation microfinance partners around the world. It offers the reader a how-to guide, from philosophy to strategy and implementation, for the creation—or scaling up—of a Grameen-style microfinance program. It is intended primarily for social entrepreneurs interested in establishing a Grameen-style program and for practitioners desiring to learn more about how Grameen Bank implements its microcredit, savings, insurance and social development programs. The Guidelines may also be useful to trainers, academics, donors and general development practitioners interested in better understanding Grameen Bank and the Grameen banking system, as well as the experiences of various microfinance programs that have adopted the model in other countries.

Section 1 offers an Introduction to Grameen Bank, its philosophy and objectives. It also provides an overview of the evolution over the last 30-plus years of the Grameen approach, from the initial Grameen Classic to the current Generalized System, now known as Grameen Bank II (GB II). 

The main focus of this Guideline is discussed in Section 2, which presents Grameen's principles of targeting the very poor and promotion of group formation via self-selected groups. It also discusses the motivation, training and formation of centers in order to establish a well-disciplined base of members on which to build a microfinance institution. The loan proposal, issuance, utilization verification and credit discipline processes are described in this section, all within the context of a group's collective identity and responsibility for mutual success, even as it holds each individual member primarily liable.

Section 3 discusses Grameen Bank's financial products and compares those previously offered under the Classic System to the current offerings under GB II. The section presents the terms and conditions of loans, voluntary and obligatory savings accounts, pension funds and insurance options. The section also explains the rationale behind the evolution of the products so they better meet the current needs of borrowers.

Section 4 discusses Grameen's Social Development Services, including its programs to promote health, nutrition and education among members, as well as its Destitute Members program. It also discusses the Sixteen Decisions, which are central to the Grameen philosophy that microfinance is only one component of poverty alleviation. All Grameen members must adopt and adhere to the Decisions, which provide the cornerstone of the Grameen social program. The Decisions provide concrete guidance to members, committing them to work toward improving their daily lives as part of the broader, ongoing effort to break the cycle of poverty.

Section 5 reviews the human resources structure at Grameen Bank and offers insight into its recruitment processes, staff management, training and motivation. Although the presented material describes the functioning of a mature microfinance institution, the basic principles, essential to building a strong foundation of human capital, are applicable to both start-up and established programs.

Sections 6 (Branch-level Accounting System), Section 7 (Monitoring and Reporting System), Section 8 (Internal Control and Audit), and Section 9 (Planning) discuss the accounting and management systems critical to a microfinance program's success, drawing from the experiences of Grameen Bank and other programs.

The concluding section, Section 10 (Starting up a Grameen-style Program), discusses the processes involved in establishing a microfinance program, drawing from the contents in the earlier chapters. It provides a practical guide for social entrepreneurs interested in setting up a Grameen-style program.
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