09 / 1995
Origin of the Grameen Bank
Grameen Bank was conceptualized in 1976 in Chittagong University as an action research project to test the thesis that if financial resources are made available to the poor with reasonable terms and conditions, they can generate productive self-employment without any external assistance. The need for a separate credit institution was felt in view of the limitations of the traditional system in servicing petty loans in reaching the rural poor.
The project was formally launched in November 1979 in Tangail District with financial support from the Bangladesh Bank. Encouraged by its initial success in April 1982, the project was extended to 4 other districts with financial assistance from the International Fund for Agriculture Development (IFAD). In September 1983, it was transformed into a specialized financial institution called Grameen Bank with an authorized capital of Takas 100 million (US$ 3,030,000)with 40% of the share paid by the government, 40% by member-borrowers and member loaners and 20% by other banks.
For de poor, the house is not only a place to live but also a place of work. When the economic conditions of the people improve a little they start improving their homes. For this, the Bank provide their members housing loan packages.
Grameen Bank found that the poor needed to pay annually Takas 300 - 2000 (US$ 9 - 61)for the repair of their thatched roofs. For the poor, the house not only serves as a shelter but as a place for income generating such as a store, a shop or a home factory. In response to this need. Grameen Bank started its housing loan program in 1984. As of May 1990, the number of houses financed were 79,193 units. Between 2,000 to 3,000 loans were granted every month. By May 1992, there were around 133,733 new houses were built through the program. Majority of the borrowers are women.
Grameen Bank introduced its housing loan scheme with an initial loan ceiling of Takas 15,000 (US$ 500)which was subsequently raised to Takas 16,000 (US$ 600). Most of the loans given out by ranges between Takas 8,500 (US$ 283.33)to Takas 18,000 (US$ 600)per loan.
Loans up to a maximum of Takas 20,000 (US$ 606)were to be paid within a period of 20 years at an interest rate of 5%. So far, Grameen Bank has utilized the government housing fund with a 3% interest rate for its housing loans.
Payments is through a weekly installment of Takas 25 (US$ 0.75)for the first year and Takas 40 (US$ 1.20)from the second year onwards. The manager discusses with the applicant ways in which payment is made easier by recommending some feasible income generating activities like planting papaya tress and selling the fruit or acquiring and selling pigeons which multiply every 2 month.
The house needs to be completed within 1 month and must have a permanent roof of corrugated iron sheets costing between Takas 8,500 - 9,000 (US$ 258 -273)and a sanitary pit latrine of Takas 170 (US$ 5). Safe drinking water is subsidized by the government.
Basic Housing Loans
In 1987, due to the devastating flood in Bangladesh, Grameen Bank introduced a new type of housing loan called "Basic Housing Loan" which provided only the most basic of a house, that is 4 reinforced concrete pillars and a roof made of galvanized iron roofing with wooden frames. Each house has a sanitary slab with 5 to 6 rings.
The Basic Housing Loan was originally set at Takas 7,000 (US233.33)in 1987. Due to the increase in the cost of the building materials, this was raised to Takas 8,000 (US$ 266.66)in early 1988 and to Takas 10,000 (US$ 333.33)by the en of 1988.
Grameen Bank is a phenomenon which many countries are trying to replicate. It has shown that the poor are good payers. It has also shown that loans combined with other programs like literacy and women development can substancially improve the living conditions of people. Grameen Bank uses very simple procedures which makes its very accessible to the poor. It also uses very creative ways of motivating people, thus inculcating discipline and hard work.
Data card carried out for the governmentT/NGO cooperation project in the field of human settlement.
ANZORENA,Eduardo Jorge, SELAVIP, Housing the poor, the Asian Experience, ASIAN COALITION OF HOUSING RIGHTS, 1993/01 (PHILIPPINES)