Grameen Bank, Bangladesh
Need/Objective: To empower the poor there is a need for fair access to finance. Since conventional banking makes lending decisions based on a borrower's existing assets (collateral), those who have nothing get nothing. 50 percent of the population of Bangladesh lives on less than USD 1 per day. If they needed money, they traditionally had to turn to local money lenders who charged extremely high interest rates and frequently entrapped the borrowers in a spiral of debt. Broadly the objectives of Grameen Bank are as follows. * To promote financial independence among the poor by extending 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 * Impart Financial Literacy among rural poor * 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’
Social business solution: In 1976, Prof. Yunus lent USD 27 to 42 people - focusing on the poorest of the poor. This led to the innovation of micro finance and the foundation of the Grameen Bank in 1983. This Bank lent money without collateral, at very small amounts and at comparatively low interest rates almost exclusively to poor women. Why women? Grameen discovered that women are more reliable in paying back and that they use the loans more wisely than men. The Grameen Bank is the first social business. Interestingly, it gives the poor not only access to capital, but allows them to be the owners of the bank and thereby benefit from any dividend payments. Additionally education is a central part of Grameen Bank. Scholarships are awarded every year to the highest performing children of Grameen borrowers.

Triple Bottom Line 1. Outreach
The higher outreach is about scaling-up the microfinance operations by bringing in more and poor and very poor households in the microfinance interventions. In case of the Grameen bank, the operations of the finance are based on the mutual trust. It follows the social collateral approach. The services of the banking is provided at the door step of the borrowers. The staff workers meet the borrowers personally the two million borrowers. Grameen Bank has 2565 branches and works in 81,379 villages. The bank does not takes any collateral for issuing the micro loans which increases the outreach. Grameen bank has clear eligibility criteria to identify the poorest of the poor, who are landless or nearly landless. The bank gives the priority to the women, with 96% of the total borrowers. Grameen bank has taken the special programme in order to increase the outreach to the beggars those are disabled, blind and the retarded persons, also covers the old people suffering with ill-health. The total loan disbursed is Tk, 162.60 million for such poor people. Many of such beggars have left begging and have joined in the main stream borrowers. Grameen Bank has a separate scheme to support the housing for the poor people. Such loans are charged the low interest rate of 8% and the flexible weekly repayment cycle is there for such poor borrowers. It provides the loan for opening up the micro enterprises are the affordable interest rates. Grameen Bank has alos the facility of flexible loans in case of non-payments which increases the outreach. Below table shows the outreach in terms of statistics: Outreach indicators | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | | Number of branches | 1,735 | 2,319 | 2,481 | 2,539 | 2,562 | 2,565 | 2,565 | 2,567 | 2,567 | | Number of members (In millions) | 5.58 | 6.91 | 7.41 | 7.67 | 7.97 | 8.34 | 8.37 | 8.37 | 8.54 | | Number of active borrowers (In millions) | 5.05 | 5.96 | 6.16 | 6.21 | 6.43 | 6.61 | 6.58 | 6.71 | 6.74 | | Number of active borrowers per branch (year-end) | 2,912 | 2,571 | 2,482 | 2,448 | 2,508 | 2,578 | 2,566 | 2,613 | 2,625 | | Number of loan officers | 9,166 | 12,048 | 14,561 | 14,000 | 13,262 | 12,613 | 12,537 | 12,779 | 12,826 | | Percent of women members | 96.27% | 96.70% | 96.85% | 96.88% | 96.79% | 96.39% | 96.12% | 96.23% | 96.21% | | Average loan balance per borrower (Taka) | 5,563 | 5,578 | 5,901 | 7,147 | 8,514 | 10,034 | 11,442 | 11,972 | 12,522 | | Average loan balance per borrower (USD) | 85 | 80 | 86 | 104 | 123 | 143 | 144 | 149 | 161 | |

2. Sustainability
As the no collateral lending, Grameen Bank forms the homogeneous groups of 5 people, and gives loan only to the 2 people at a time. The different schemes run by the Grameen Bank has the good recovery rate. Even the scheme for the struggling members the recovery rate is 80%. In order to sustain the business operations, new branches which are opened are required to fund themselves entirely with the deposits they need to mobilize. No external grant or funding is lent to them. The new branch is expected to break-even in its first year of operations. A majority of the branches are operating in profit and with 40% annual growth in the savings or deposit helps in getting the funds to disburse loans. Also, the overall recovery rate is quite high, around 96.67%. Below are the financial ratios which defines the sustainability of the Grameen Bank:

Sustainability indicators | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | Return on equity (ROE) | 2.93% | 10.63% | 8.98% | 21.22% | 25.83% | 1.79% | 21.21% | 5.64% | 10.74% | 8.97% | 17.10% | 13.65% | Operating self-sufficiency (OSS) | 102.00% | 111.10% | 109.88% | 115.65% | 117.41% | 101.02% | 112.20% | 102.63% | 104.46% | 103.31% | 106.17% | 105.15% | Financial self-sufficiency (FSS) | 99.60% | 107.88% | 105.70% | 110.40% | 112.28% | 94.84% | 106.07% | 99.21% | 99.20% | 95.79% | 99.62% | 99.59% | |

3. Impact
Empowerment: Of the total borrowers, 96% are women. In rural Bangladesh, purdah norms isolate women. Grameen meetings provide a socially accepted excuse to gather and to talk. The impacts are both psychological and economic; not only do women feel less isolated, but they also strengthen their support networks
Social capital: The most important non-financial service of Grameen is social intermediation as it builds trust amongst members and that of members with the bank. It also reduces the cost of monitoring.
Struggling members’ programme: This exclusive programme for beggars has attracted 111296 beggars. Of them, 19678 beggars have left begging and make a living as door to door sales persons. Among them 10185 beggars have joined Grameen Bank groups as mainstream borrowers.
Housing: The housing loan with interest rate of 8 percent has led to construction of 690737 houses.
Micro enterprise: Many borrowers have taken micro enterprise loan which helps them in income generating activities especially because it has no restriction on loan size. So far, 3590923 members have taken micro enterprise loans.
Education: Every year, Grameen Bank gives scholarships to the high performing children of Grameen borrowers with the priority on girl children. Up to 2011 133031 children have received scholarship at various levels of school and college education.
Poverty: The biggest impact of the bank has been on pulling people out of the clutches of poverty. As per an internal survey, the bank has brought 68% of its borrowers’ families out of poverty.
Challenges in Grameen Model
The Grameen Model has been seen as a benchmark in creation of an innovative solution to the social problem of meeting the financial needs of the poor. It has been awarded the Nobel prize for the impact created and has been replicated in many developing countries as a solution to the credit problem at the bottom of the pyramid. However, the model is not without challenges. According to us following are the major challenges in the Grameen model: 1. Minimalist Approach: Grameen Model essentially focusses only on provision of credit. This is a minimalist approach to microfinance. The major drawback of this approach is the assumption that the provision of credit will enable the poor to utilise it is a sustainable manner to provide long term solution to the problem of poverty. However this is not always true because factors like capability and market linkages play an important role in utilisation of credit in a sustainable manner. This also has implications on the sustainability of the model itself, because if the borrowers are unable to return the funds borrowed due lack of cash flows generated then the model may collapse. Hence even the loan for struggling members, some amount of support is provided y the bank in terms of activities that could be taken up as well as adoption of such members by other members of the bank. 2. Delinquency Management: The model works on the basis of social sanctions and there are no legal obligations created on the group to repay. This model works best when the avenues of credit for the members are limited and there is a continuous dependency on the bank for credit for all members. However as is shown by the experience of other Grameen based MFIs, where the members are exposed to multiple sources of credit and their bargaining power of individual members is also high, the model may fail and lead to non- repayment because short term gain seen by such members. This short term repayment also has a domino effect where entire villages become bad due to high degree of social element in the method. Thus maintenance of Grameen model require meticulous monitoring of which members are inducted into the process, high degree of integrity to the process by both the members and the field executives of the company as well. 3. Replicability: The issue of replicability arises due to the fact that culture and leadership cannot be replicated easily. Both of these elements play vital role in keeping the model sustainable because any laxity in the process such violation of 2-2-1 rule, improper formation of the group, or adverse selection of members can lead to rise in the PAR leading to sustainability issues. In order to keep the process intact, a culture of attention to details has to be developed and emphasised by the top management and the leadership as well as in the external environment of the organisation. Such a culture is difficult to develop which has given rise to various tweaks in the grameen model such as imposition of JLG method or use of coercive methods of repayment. 4. Cost of operations: The Grameen model requires doorstep service, that too in frequent and cyclical manner. Such last mile model has high cost of operations. Also members are graduated to higher amounts of loan. This means that funds are utilised through giving small loans to high number of members. Also members are such that they have to be acquainted to the company’s way of working and required training in order to do so. The 2-2-1 loan also has implications regarding the time taken for each new group to be fully functional. Delinquency management is also another area where greater cost is incurred as constant monitoring is required because the model operates in the sensitive area of social space. 5. HR problems: The operationalisation of the model requires high quality manpower and in large numbers even at the bottom level of field officers. This is because they are the touch points of the company for the borrower. These borrowers belong to lower strata of the economy and are generally gullible to mal-practises if undertaken by any field officers. Such a loss of integrity at the field level may lead to huge amounts of loans going bad and an increase in PAR. In addition, adverse selection of members may also result in similar situation. Thus the field officers who are the ones selecting members, collecting repayments and monitoring the functioning of the group have to highly trained as well as motivated employees. This may be extremely difficult to achieve especially in the absence of an appropriate culture and leadership. 6. Sustainability: Group lending mechanism is an effective strategy for borrowers who newly introduced to formal lending sources or those who have to shift from informal t formal sources of credit. This is because they generally belong to the lower start of the society and do have the capacity to get loans from other institutions like bank. However once such members start availing loans from MFI institutions like Grameen Bank, the slowly build up the capability to avail loans from regular banks due to enhancement in standard of living, increased awareness as well as possession of assets. This means that as the credit requirements of the borrowers change, grameen model does not cater needs of higher loan amount or individual needs. This raises fresh question of sustainability of the model after the most basic credit needs of the borrowers are met. Thus the model must evolve and have innovative products such that it can retain its customers once they have graduated from their current economic status to the next level.
Conclusion
The Grameen bank has catered to that need of poor people which neither state nor market could fulfill. It has brought about a lot of innovations to make its products suitable for the poor so that everybody can avail financial services. Since its inception the bank has lifted many people out of poverty with the help of its model. Certainly, the model has many limitations but with its dedicated efforts on innovation it is bound to deal with them. As per the analysis, the bank has been able to maintain a good balance of outreach and sustainability. Also, the important thing is that it has been able to achieve its objectives to a large extent.