Reimagining Rural Development:
How Gramen Transformed Bangladesh

the interim government in Bangladesh) founded Grameen Bank, and brought this vision to life. His bank now lends to over 9 million low-income borrowers—most of them women—from the country’s 78,000 villages. According to Professor Yunus, Grameen is projected to earn more than $20 million in profit this year. The bank currently serves 9.5 million families, representing around 80% of Bangladesh’s impoverished population. Yunus developed the principles of the Grameen Bank from his research and experience. Grameen Bank is Bengali for "Rural" or "Village" Bank.​​​

 

​It was conceptualised to provide financial services to the

rural poor, particularly women, who were traditionally

excluded from the formal banking sector.

 

Grameen Bank stands as one of the most transformative experiments in global development. It was conceptualised to provide financial services to the rural poor, particularly women, who were traditionally excluded from the formal banking sector. By doing so, the bank catalysed a global movement that redefined how poverty could be tackled at its roots. In his own words :“People were poor not because they were stupid or lazy. They worked all day long, doing complex physical tasks. They were poor because the financial institutions in the country did not help them widen their economic base.”

 

The seeds of Grameen Bank were sown in 1976, when Muhammad Yunus, then a professor at the University of Chittagong, began a research project to understand rural poverty. Disturbed by the conditions he witnessed in nearby villages, Yunus started offering small loans to poor women so they could purchase supplies and start small businesses. These loans were  offered without collateral and were repaid reliably, defying conventional banking wisdom. Yunus believed that making such loans available to a larger population could stimulate business and reduce the widespread rural poverty in Bangladesh. This later evolved into the “Grameen Bank Project” which was then experimented in Jobra, a village in Bangladesh and other neighboring villages. Yunus made a small personal loan of 27 USD to a group of 42 families, as start-up money so that they could make items for sale, without the burdens of high interest under predatory lending (Giridharadas & Bradsher, 2006).

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This success led to the formal creation of Grameen Bank in 1983, with the official support of the Bangladeshi government and international organisations. It was built on a simple premise: credit is a fundamental human right. Through an ordinance of the Bangladesh government dated 2nd October 1983, the project was formally converted into the Grameen Bank. Bankers Ron Grzywinski and Mary Houghton, of ShoreBank, a community development bank in Chicago– helped Yunus incorporate the bank under a grant from the Ford Foundation.

 

The bank has also played a role in the empowerment of women. Fertility rates have halved and the average family size has shrunk. According to Grameen Bank's own surveys, 58% of borrowers have crossed the poverty line.

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Grameen Bank’s approach is unique in several important ways. Unlike traditional banks, it does not require any collateral or legal guarantees from its borrowers. This makes credit accessible to the poorest individuals, who are typically excluded from conventional financial systems. 

A key focus of the bank is on empowering women—over 90% of Grameen’s borrowers are female. This emphasis stems from research showing that women are more likely to reinvest their earnings into their families and communities, thereby generating broader social benefits. A 2012 study of 100 Bangladeshi women assessing micro-credit services of Grameen Bank found that  81% of the members are satisfied with their credit facilities. “Most of the members think that their lifestyle improvement started after receiving and using microcredit.  Majority of the respondents (74%) said that their socio-economic condition has improved after taking microcredit which has made them more confident and reliant” (Kumar et al., 2012).

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Unlike traditional banks, it does not require any collateral or legal

guarantees from its borrowers. This makes credit accessible to the

poorest individuals, who are typically excluded from conventional financial systems.​

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The bank also employs a group lending structure, where borrowers form small support groups. These groups help ensure accountability and create a sense of shared responsibility. The resulting peer pressure and mutual trust have led to an impressively high repayment rate, historically, exceeding 95%. In addition, Grameen borrowers participate in weekly meetings, where they make loan repayments, receive training, and discuss their business and personal progress. These gatherings promote discipline, build solidarity, and reinforce a sense of community among members​

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