Micro-credit Management System of Grameen Bank: A Study of Selected Branches

Abstract

What began as a tiny poverty alleviation action research project in 1976, has now become a global phenomenon with the winning of Nobel Peace Prize by its founder Professor Muhammad Yens, Grameen Bank (GB) is a pioneer Micro Finance Institute (MFI) in Bangladesh that provides collateral free credit and Organizational help to the rural poor, mainly women. Till December 2005, Grameen Bank has over 5.5 million members spread over nearly 60,000 villages, 94 percent of whom are women. The most striking feature of the Bank is that it goes to the people, rather than the people are going to the Bank. Grameen Bank (GB) operates its micro finance activities only in the rural areas. The problem of rural credit is very complex in nature. The total amount of credit flow is not only insufficient, but also very little of it flows to the poor and disadvantaged groups, who are the most numerous in rural society. The different agencies that are operating in this field follow different approaches, different terms and conditions for loans and have varying degree of managerial competency. The overall management and condition of the system is weak. Due to lack of timely recovery, mounting overdue and failure to mobilize deposits, the overall viability of the system is found to be in serious doubt. But Grameen Bank and some other MFI are performing very well and maintaining an excellent loan recovery rate. It has been said that the success of these institutes achieved through effective management system. But the ultimate test of any MFI is not whether it is performing or managing well within itself, but more importantly, whether it manages to do something useful for its members or clients. So there is a need to monitor carefully the micro-credit management process and its various components to see their usefulness and impact on the bank's performance. This Thesis discusses the origin and nature of Grameen Bank (GB), its working procedures, management style, supervising and monitoring systems. It also evaluates performance of the Bank as a financial organization. The main objectives of the research are to make a brief review of Grameen Bank and its activities and to examine the credit management systems of the Bank. This study uses both primary and Secondary sources of data and focuses on the process and various elements of Micro-credit management. The field work of this study was conducted in five branch office areas of Grameen Bank of Rajshahi zone. Structurally this Thesis is divided into eight chapters. Chapter one presents introductory points including review of literature. The second chapter contains methodology and conceptual framework. Third chapter exclusively devoted to analyze the nature, origin organiza1ional structure, management style, types and sectors of loans and the growth trend of Grameen Bank11 Fourth chapter deals with the credit delivery model of the Bank and its supervision and monitoring system. Chapter five examines the performance of Grameen Bank as a financial organization. Chapter six is mainly based on field survey and its outcomes. Chapter seven mainly presents observations of the study and revealed some usefulness and criticisms of Grameen Bank. Chapter eight is the summary and conclusion of the study. This chapter also makes some recommendations with a concluding note. Charismatic and committed leadership of Professor Muhammad You we have played a key role in the growth and success of Grameen Bank. It has also developed a decentralized management system. The employees both of the central and the field offices are trained, highly motivated and hard working. In fact, the whole management process of Grameen Bank from planning to control is contributing effectively towards its constant success in Micro credit operations. GB's decentralized system provides oversight and transparent management from field level to the head office. This feat is accomplished through a tightly structured system of check and balance in which GB's staff are responsible for their own actions as well as those operating under them. To achieve organizational goals GB follows effective supervising and monitoring system. An attempt has been mc1de here to measure the performance of Grameen Bank as a financial organization. Analysis of related information reveals that the numbers of branches, members, villaeges covered by GB have been increased significantly. Cumulative loans disbursement has also increased remarkably during the last ten years. Analysis of various financial statements and its key components also represents that as a bank and as a MFI GB has achieved a strong financial position over the years. To measure financial depth, some financial ratios are used. From the analysis of ratios, it has been found that, over the years GB has achieved financial solvency and become more profitable as an organization. A brief profile of the selected branches, results of the field survey and some case studies have been discussed elaborately in chapter six. During the course of study, it has been found that rural credit activities and the performance of these branches are at satisfactory levels. The financial analysis also shows that, they are financially very sound and strong. Rate of recovery of these branches are 100%. They may be considered among the better operational branches of Grameen Bank. Branch offices are acting as key units, maintaining contracts with the borrowers and performing all banking activities. The field workers of GB follow very intensive supervising and monitory system. They are highly motivated as well. The finding of the study also shows that there are significant and positive impacts on the socio-economic conditions of the borrowers. However, from the overall analysis, it can be concluded that the GB has operational success in rural credit management in Bangladesh with special reference to Rajshahi zone. The design of the credit program, excellent implementation mechanism developed on the principle of decentralized and participative management style, are mainly responsible for GB's success. GB has also developed a very strong and effective monitoring system through its monitoring and evaluates division. Moreover, where ever GB finds that the policy and procedures of micro finance programs are not effective or if there is any risk to reach the objectives, the management takes necessary steps as the situation demands. GB has also succeeded in making some positive changes of its members' socio-economic lives through various social activities. But it is important to realize that GB is associated with our economy and organizational culture. As a result, the study identified some drawbacks of micro credit management system. Few of them are as follows; weekly repayment system is not encouraging the income generating projects; GB could not be able to select many of the hardcore rural poor; female borrowers have not much control over loan; interest rates for general loans are high; framing programs at all levels are not well designed; field level workers are overburdened and are less motivated etc. However, the design of the programme, excellent implementation mechanism developed on the principle of mobile, decentralized and participative management style is mainly responsible for GB's success.