ATENEO GRADUATE SCHOOL OF BUSINESSAteneo-Regis MBA Program

ENTREPRENEURSHIPSection R27

Special Report: Grameen Bank

ByGERARDO P. GUTIERREZ

Presented toPROFESSOR JORGE SAGUINSIN

Jan 17, 2012

Outline:

Introduction

History of Grameen Bank

Grameen Bank Objectives

16 Decisions

Microcredit Process

10 Indicators

Microfinance in the Philippines

References

Traditional BankingNanay Celia, 48 years old

• Unemployed husband • 4 children• No savings• Good cook

• Nanay Celia decides to start a small catering service at home

• Nanay Celia goes to the bank and makes a demand for a loan at her bank

Nanay Celia’s DEMAND IS REJECTED3

Why are people excluded from certain financial services?

• Lack collateral or guarantors• A bad credit history• Gap in the communication / lack of confidence in the Banks• Doubt of the bank of the repayment capacity • Lack of access to financial infrastructure and services in remote areas

WHAT IS THE ALTERNATIVE?

MICROCREDIT

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Yunus’ idea

How did all start?

On the field Prof. Yunus saw that• Even poor people and women need loans• They can have an activity and repay

• Set up financial institutions with a social mission• Listen to the needs and constraints of the

excluded & offer them adapted financial tools to empower themselves ( solidarity groups)

Spirit: SUSTAINABILITY

Brief History: Muhammad Yunus and Grameen Bank

- born in 28th June, 1940 in Bathua, in Hathazari, Chittagong.- 3rd of 14 children- Influence by his mother, Sufia Khatun, who always helped any poor that

knocked on their door, inspired him to commit himself to eradication of

poverty. - In 1976 Professor Muhammad Yunus, Head of the Rural Economics

Program at the University  of Chittagong, launched an action research

project to examine the possibility of designing a credit delivery system to

provide banking services targeted at the rural poor.- In 1983, The Grameen Bank Project (Grameen means "rural" or

"village" in Bangla language) came into operation. - 2006 The Norwegian Nobel Committee has announced the Nobel

Peace Prize for 2006, divided into two equal parts, to Dr. Muhammad

Yunus & Grameen Bank.

Grameen Bank Objectives:

- extend banking facilities to poor men and women.

- eliminate the exploitation of the poor by money lenders

- create opportunities for self-employment for the vast multitude of

unemployed people in rural Bangladesh

- bring the disadvantaged, mostly the women from the poorest

households, within the fold of an organizational format which they can

understand and manage by themselves.

- reverse the age-old vicious circle of "low income, low saving & low

investment", into virtuous circle of "low income, injection of credit,

investment, more income, more savings, more investment, more

income".

Grameen Bank:

- Owned by the poor: 95% of the equity is owned by the borrowers, 5%

is owned by the government

- No Collateral, No Legal Instrument, No Group-Guarantee or Joint

Liability

- 97 per cent Women: Total number of borrowers is 8.35 million, 96 per

cent of them are women.

- Recovery Rate Over 97 per cent: Loan recovery rate is 96.67 per

cent.

- 100 per cent Loans Financed From Bank’s Deposits: Grameen Bank

finances 100 per cent of its outstanding loan from its deposits.

How members are accepted: 16 Decisions: Members study the decision and are tested accordingly before they are accepted as member

1.We respect the four principles of the Grameen Bank - we are disciplined, united, courageous and workers - and we apply them to all our lives. 2.We wish to give our families good living standards 3.We will not live in delapidated houses. We repair them and work to build new ones. 4.We cultivate vegetables the whole year round and sell the surplus. 5.During the season for planting, we pick out as many seedlings as possible. 6.We intend to have small families. We shall reduce our expenses to a minimum. We take care of our health. 7.We educate our children and see that they can earn enough money to finance their training. 8.We see to it that our children and homes are clean. 9.We build laterines and use them. 10.We only drink water drawn from a well. If not, we boil the water or we use alum. 11.We will not accept a marriage dowry for our son and we do not give one to our daughter at her marriage. Our centre is against this practice. 12.We cause harm to no one and we will not tolerate that anyone should do us harm. 13.To increase our income, we make important investments in common. 14.We are always ready to help each other. When someone is in difficulty, we all give a helping hand. 15.If we learn that discipline is not respected in a centre, we go along to help and restore order. •We are introducing physical culture in all centres. We take part in all social events.

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44 Final Repayment 12 weeks later

Demand for a 2nd loan over

Php 1500 to buy a fridge)

22 Purchase of the ingredients

Start of cooking & sale

(Daily benefits amount Php 100)

11 Visit of Nanay celia to the MFI

Meeting wit the Loan Officer

Convinced, reception of a loan of

Php 1,000 (+ Php 30 interest rate)

33 Weekly Repayment ( 86 Php)

Remaining money is used to buy food

Regular contact and Regular contact and follow up between the follow up between the MFI and the clientMFI and the client

Grameen Microcredit Process 5 Member group is requiredFirst 2 borrower repay in 6 weeks before next borrower is allowed to take a loan.

How to Monitor Progress: 10 Indicators a member is considered to have moved out of poverty if her family fulfills the following criteria:

1. The family lives in a house worth at least Tk. 25,000 (twenty five thousand) or a house with a tin roof, and each member of the family is able to sleep on bed instead of on the floor.

2. Family members drink pure water of tube-wells, boiled water or water purified by using alum, arsenic-free, purifying tablets or pitcher filters.

3. All children in the family over six years of age are all going to school or finished primary school.

4. Minimum weekly loan installment of the borrower is Tk. 200 or more.

5. Family uses sanitary latrine.

1 USD = 83.68 Takas1 PhP = 1.90 Takas

How to Monitor Progress: 10 Indicators a member is considered to have moved out of poverty if her family fulfills the following criteria:

6. Family members have adequate clothing for every day use, warm clothing for winter, such as shawls, sweaters, blankets, etc, and mosquito-nets to protect themselves from mosquitoes.

7. Family has sources of additional income, such as vegetable garden, fruit-bearing trees, etc, so that they are able to fall back on these sources of income when they need additional money.

8. The borrower maintains an average annual balance of Tk. 5,000 in her savings accounts.

9. Family experiences no difficulty in having three square meals a day throughout the year, i. e. no member of the family goes hungry any time of the year.

10.Family can take care of the health. If any member of the family falls ill, family can afford to take all necessary steps to seek adequate healthcare.

Poverty in the Philippines

In terms of the magnitude of the poor families, there was an increase of about 185,000 from 3.67 million in 2006 to 3.86 million in 2009. On the other hand, the magnitude of poor population increased by almost 970,000 Filipinos from 22.2 million in 2006 to 23.1 million in 2009.

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The latest official poverty data indicate that a Filipino needed Php974 in 2009 to meet his/her monthly food needs and Php1,403 to stay out of poverty. Both food and poverty thresholds increased by 26% from 2006 to 2009, compared to only 22% between 2003 and 2006.

Consequently, a Filipino family of five needed Php4,869 monthly income to meet the basic food needs and PhP7,017 to stay out of poverty

Gov’t Poverty Reduction Program

• Asset Asset ReformReform

• Human Human DevelopmeDevelopment Servicesnt Services

• Employment Employment and and LivelihoodLivelihood

• Security and Social Protection

• Participation in GovernanceParticipation in Governance

MICROFINANCE/MICRO-ENTERPRISE

Microfinance in the PhilippinesThe National Anti-Poverty Commission (NAPC) was created by virtue of Republic Act 8425 or the “Social Reform and Poverty Alleviation Act” that became effective last June 30, 1998.

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www.grameenfoundation.org/asia/philippines

www.microfinancecouncil.org/

References

• www.grameen-info.org

• www.grameenfoundation.org/asia/philippines

• www.microfinancecouncil.org

• www.nscb.gov.ph

• www.napc.gov.ph/about_napc.htm

Thank You