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Rotterdam School of Management

Academic year 2009/2010

GB-SM_ Leadership and Issues

Fabrizia Bodei 334656

Floris van der Peppel 337261

Raymond van der Zwan 338386

Rita Martins 334724

Issue paper on Access to Credit: focus on Bangladesh

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Table of Content

Executive summary…………………………………………………………………………………………………….…..….4

Chapter 1. The issue of access to credit: focus on Bangladesh......................................5

1.1 Introduction…………………………………………………………………………………………………………………5

1.2 Research method…………………………………………………………………………………………………………6

1.3 Defining the issue: access to credit in developing countries………………………………………..7

1.4 Bangladesh: economical political and social background……………………………………………10

1.5 Access to credit in Bangladesh…………………………………………………………………………………..12

1.6 Trends analysis………………………………………………………………………………………………………….14

Chapter 2. Diagnosis……………………………………………………………………………………………17

2.1 Stakeholders……………………………………………………………………………………………………………….17

2.2 Stakeholders influence on the issue: the Societal Triangle………………………………………….19

2.3 Position of the Issue in the Life-Cycle: Challenges to solve the issue……………………………20

2.4 Blame storming…………………………………………………………………………………………………………..21

2.5 Tensions in the issue……………………………………………………………………………………………………21

2.6 From efficient and ethical to effective………………………………………………………………………22

Chapter 3. Design/Solution…………………………………………………………………………………23

3.1 Focus on Microfinance and Microcredit (Rita with introduction at it)…………………………24

3.2 Stakeholders as part of the solution……………………………………………………………………………25

Chapter 4. Implementation…………………………………………………………………………………27

4.1 Sustainable corporate story: Grameen Bank……………………………………………………………….27

4.2 Arenas of leadership: ‘Social businesses’, improving education and a ‘social stock

market’……………………………………………………………………………………………………………………………..30

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Chapter 5. Evaluation and conclusion…………………………………………………………………31

5.1 Women and access to credit in Bangladesh…………………………………………………………………31

5.2 The poorest of the poor and microcredit…………………………………………………………………….32

5.3 The impact of the informal sector……………………………………………………………………………….33

5.4 The initiatives to solve the issue………………………………………………………………………………….34

Chapter 6. Research……………………………………………………………………………………………35

6.1 Work limitations………………………………………………………………………………………………………….35

6.2 Recommendations for further research………………………………………………………………………36

Chapter 7. Bibliography………………………………………………………………………………………37

Appendix…………………………………………………………………………………………………………….40

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Executive Summary

Nowadays almost half of the world’s population lives with less than $2.50 per day. To

reverse this dreadful situation and contribute to poverty alleviation, access to credit should be

guaranteed to everyone. The problem is that due to poverty however, a large part of the

population has indeed no access to credit. Financial institutions and traditional banks as well,

refuse to give loans to these people since they are not considered creditworthy. As a result, poor

people become a prey for loan sharks who lend against incredibly high interest rates as for

instance it is in the case of the informal sector.

Bangladesh is the primary country where Microcredit was successfully implemented.

Nonetheless it has a developing economical situation, being one of the world’s poorest countries

where over 50% of its population lives in poverty. In addition, the country lacks of natural

recourses and also the education system and access to credit are pretty embryonic. The use of

microcredit is at present a major trend in Bangladesh because of the great influence of the Nobel

prized Dr. Mohammed Yunus that always insisted this type of programs could be effectively

implemented in a country with Bangladesh’s characteristics.

The main stakeholders involved in the issue of access to credit are the poor citizens of

Bangladesh, the credit providers, informal credit providers NGOs, formal financial institutions and

the government of Bangladesh. There are also a number of tensions that can be observed such as

for instance the relation between poverty and access to credit and also between income and

interest rate.

Microcredit was presented as a solution to the issue of access to credit. It was analyzed what

the main stakeholders are doing and concluded that in fact, the government contribution is

smaller when compared with the ones of NGOs. To illustrate the sustainable corporate story, the

Grameen’s Bank case study is used. Starting in a small scale, Dr. Mohammed Yunus provided

microcredit to people from a village in 1976. Now it achieved a major importance and it is a large

bank that took over seven million of people out of poverty. It is a model for other nations and is

supported worldwide. However, just providing credit is not enough to help this people survive.

Therefore, the Grameen’s Bank recognizes and admits this fact and stimulates its members to

send their children to school by also providing loans to ensure they can afford proper education.

Another movement is the social business practiced by companies such as Danone that through a

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partnership with Grameen’s bank have been trying to help (without having profit maximization as

final aim). About 94% of Grameen Bank’s loans go to women and there have been a controversy if

in fact this loans contribute or not to women’s empowerment. Despite the fact of bringing some

benefits to women such as the fact of sharing power in the household, in reality the traditional

mentalities that proliferate among the population diminish those obtained benefits.

Furthermore, there is the fact that often the poorest of the poor lack access to credit

because it is expensive to provide loans by lenders and when they do, they charge a high interest

rate.

The impact on several companies that are being obliged to work from the formal sector to

the informal sector implies that few microenterprises can survive to that environment. They are

charged with a very high interest rate and the lack of policies has some drawbacks on efficiency.

Finally, the movement of companies ‘doing good by doing well’, the social stock market and

supply chain management are initiatives that should be taken into consideration in the future.

Chapter 1. The issue of access to credit: focus on Bangladesh

In this first section of the paper an introduction of the issue is given; after some initial broad

definitions and trends, the case and experience in Bangladesh will be explained as one of the most

representative examples to improve access to credit.

1.1 Introduction

“Everyone has the right to a standard of living adequate for the health and well-being of

himself and of his family, including food, clothing, housing and medical care and necessary social

services, and the right to security in the event of unemployment, sickness, disability, widowhood,

old age or other lack of livelihood in circumstances beyond his control”. This is stated in the 25th

article of the Universal Declaration of Human Rights, adopted by the General Assembly of the

United Nations on December 10, 1948.

Nowadays, the reality is different: poverty is still a condition that infringes all human rights in

most of the developing countries. Indeed, almost half the world’s population — over three billion

people — live on less than $2.50 a day. The poorest 40 percent of the world’s population accounts

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for 5 percent of global income and obtains just 0.2 percent of the world’s credit (Human

Development Report, 2007).

Poverty, nevertheless, is not a matter of statistics and numbers; it is a disease that paralyzes

body and soul with which an increasing population has to cope with. Poverty is a lack of income

which has a bad impact on human dignity.

Access to credit in emerging countries is therefore a truly important issue that needs to be

faced and analyzed; as Muhammad Yunus (economist and founder of the Grameen Bank) argues,

“Credit is vital for relieving poverty. Credit allows households to borrow against future income and

firms to invest, for instance, in machinery and equipment” (Luke Shimek and Rajdeep Sengupta,

2007).

In this paper we will examine the issue of access to credit in all details, focusing on

Bangladesh as one of the first countries that tried to improve the situation through the tool of

microcredit provided to poor entrepreneurs. After looking into Bangladesh’ country

characteristics, a diagnosis is given with respect to the issue of access to credit. In this section the

stakeholders are identified, and theories of the Issue Life-Cycle and the Societal Triangle will be

applied. Next, possible solutions will be identified that are presented by the most important

players in the field.

To illustrate the success of the solution a sustainable corporate story will be proposed as

well as direct actions that should be implemented by the different stakeholders involved with the

question. Finally, the solutions that are offered so far will be evaluated and further initiatives for

the future are given.

1.2 Research method

This dossier paper has been written following the Reflective Circle of Research that consists

in five fundamental steps: problem definition, diagnosis, design/outcome, implementation and

evaluation (Rob Van Tudler, 2007). In order to define the issue and to be able to get through the

circle, a good research design and a good method are mandatory. Research is a continuous choice

process and when time is a scarce resource the choice of the sources is of primary importance

(Ibid).

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Collecting data is basically the most difficult part of a research project because there is

usually an overdose of information about the issue that need to be analyzed; that is the reason

why it is crucial to check the reliability of the sources.

For this work only secondary resources have been used, to find out what kind of literature

was available on the topic of access to credit.

The first step for selecting literature was to specify a list of keywords and synonyms that

could cover the research questions; the main are: access to credit, loan, poor, Bangladesh,

microcredit, microfinance, empowerment, entrepreneur, Grameen Bank, poverty. Through those

keywords it was possible to find out some useful scientific journals and articles from databanks

and specific websites (The most relevant are www.accion.org, www.bangladesh-america.com,

www.cia.gov, www.allbusiness.com, www.indexmundi.com).

As stated before, the source must be reliable and relatively recent , so the method up taken

was the so called “Snowball method” (Rob Van Tudler, 2007): starting from a basic source, in this

case a scientific article, and searching through the list of references, was possible to discover

others relevant sources.

The literature at the base of this paper basically is composed by:

• Journal articles

• Academic papers

• Textbooks

• Websites

• News paper articles

1.3 Defining the issue: access to credit in developing countries

As stated before, credit is a basic need for the sustainable development of emerging

countries. According to the Dictionary of Accounting Terms, a line of credit is “a bank's moral

commitment to make loans to a company or to an entrepreneur for a specified maximum amount

for a given period of time, typically one year. There is usually no commitment fee charged on the

unused line. However, a compensating balance requirement often exists” (www.allbusiness.com,

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2009). While in industrial countries households generally obtain financial support against personal

guarantees, in developing economies, due to poverty, a large part of the population has no access

to credit. Regular banks do not extend loans to poor people because they do not have assets to

put up as collateral. “This situation, combined with the overall lack of information about these

potential borrowers’ creditworthiness, contributes basically to an effective exclusion of this group

of borrowers from formal credit markets” (Thierry van Bastelaer, 2000).

The main consequence of that lack of collateral is that “a significant fraction of credit

transactions in underdeveloped countries still takes place in the informal sector, in spite of serious

government efforts to channel credit directly via its own banks, or by regulating commercial

banks” (Hoff and Stiglitz, 1993). Informal credit market is wide spread in most of the countries

where empirical analysis prove the presence of some common patterns and features in the way

poor people can gain access to credit. According to Ghosh and Mookherjee (1999) these

characteristics are:

• Loans are provided on the basis of oral agreements rather than written contracts, with

little or no collateral.

• The credit market is usually highly segmented, marked by long-term exclusive relationships

and repeat lending.

• Interest rates are much higher on average than bank interest rates

• Significant credit rationing, whereby borrowers are unable to borrow as much as they

want, or some loan applicants are unable to have a loan at all.

Apart from the formal and the informal credit markets, we can identify at least three other

credit arrangements developed in the emerging countries in order to make poor able to take out a

loan without any guarantees ( Thierry van Bastelaer, 2008):

a) Rotating Savings and Credit Associations (ROSCAs): basically “is a group of men and/or

women who contribute to a collective fund, which is at regular intervals distributed—

randomly, by auction, or by collective decision—to one of the group’s members. In effect,

all members of the group (except the last person in the rotation) receive an advance that

they repay through their contribution to the fund for the duration of the cycle. At the end of

a cycle, the ROSCA is dismantled or, more often, reconstituted with the same or similar

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membership. This creates the possibility that well-performing member can move up in the

rotation, providing an incentive for good payment record that spans several rotations,

and—if new entrants are chosen carefully—potentially reinforces the efficiency of the

association. ROSCAs play in important role as a risk management tool” (Besley, Coate and

Loury, 1993).

b) Trade credit: in many countries is the only way for small enterprises to get funds and

consists in trade credit among companies or credit provided by the suppliers; here the

contacts and the relationships in the supply chain are very important as well as the

background of the entrepreneurs involved in the deal itself (ibid).

c) Microfinance Programs: they are the most common way to get credit for poor people as

there is no need of collaterals; the creditors are usually NGOs while debtors are people who

want to start or to improve a business. According to Terry van Bastelaer (2000), the group

lending, is based on the assumption that the poor represent a much lower credit risk than

the formal financial sector generally assumes and that, under specific circumstances, they

can be trusted to repay small uncollateralized loans.

While ROSCAs and Trade credit are very common in countries such as India, Korea, Jamaica,

Ghana and Cameroon, Microfinance programs rose first in Bangladesh and are widespread in

Indonesia and Bolivia. Microcredit will be explained in further detail in the third chapter and after

having framed the phenomena of access to credit in its different expressions, from now on the

paper will be focused on that issue in Bangladesh.

Bangladesh will be the focus of this paper because it is the first county in which - thanks to

the foundation of Grameen Bank by the economist Muhammad Yunus - poor people are able to

get a loan regardless of collaterals. Moreover, this is an interesting and distinguishing case to

analyze, as about the 97% of the collateral-free loans are given to woman (Muhammad Yunus,

2006).

Before checking on the issue of access to credit in Bangladesh and its trends, it is essential to

have some information about the economical, political and social background of the country in

order to be able to comprehend the context and how all the stakeholders involved in the topic are

working to solve the problem and eventually to identify who is to blame

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1.4 Bangladesh: economical political and social background

Bangladesh is nowadays one of the poorest countries in the world with a $1500 per capita

income in 2008 (See trend in Figure 1 below). More than half of the population of an overcrowded

country live in poverty (Gotur, 1991). Many people are landless and forced to live on and cultivate

flood-prone land and there are several environmental issues that plague Bangladesh (CIA

Factbook, 2009):

• Waterborne diseases prevalent in surface water;

• Water pollution, especially of fishing areas, results from the use of commercial pesticides;

• Ground water contaminated by naturally occurring arsenic;

• Intermittent water shortages because of falling water tables in the northern and central

parts of the country;

• Soil degradation and erosion;

• Deforestation;

• Severe overpopulation

Figure 1: Trend of GDP per capita.

Source: Index Mundi, 2004.

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There are also many economical problems that stimulate poverty, like inefficient state-

owned enterprises, delays in exploiting natural gas resources, insufficient power supplies, and

slow implementation of economic reforms (CIA Factbook, 2009):

Furthermore, it should be highlighted that the earning potential for most of the population is

conditioned by their lack of access to education, assets and access to credit. Also the lack of

natural resources and the tendency for natural disasters puts at risk the reversing level of this

situation (Ibid).

Despite these dramatic economical and environmental circumstances, the economy in

Bangladesh has grown 5-6% per year since 1996. Looking at the graph below there is clearly a

positive trend of GDP from 1999 to 2003. According to Index Mundi (2009), in 2008 Bangladesh

was considered the 48th largest economy in the world with a gross domestic product of

US$224,889 million.

Figure 2: Trend Gross domestic product

Source: Index Mundi, 2004.

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Although half of Bangladesh’s GDP come from the service sector, almost two thirds of its

population is employed in the agriculture sector in which rice is the most important cultivation.

Nonetheless, Bangladesh’s population is the 7th in the world suffering from chronic sub nutrition

(Bangladesh-america, 2009).

For all these reasons it can be concluded that Bangladesh remains a poor, overpopulated,

and inefficiently-governed nation. Another imperative issue that makes the situation worse is

undoubtedly the lack of access to credit that plague Bangladesh population. In the next paragraph

we will focus on this issue trying to highlight its characteristics in the country and the efforts

implemented by the different stakeholders in order to improve the situation.

1.5 Access to credit in Bangladesh

“Bangladesh had estimated that more than 40 per cent of its people live below the poverty

line, but the recent food crisis and cost of living increases have added significant numbers to the

poverty list” (Business news, 16 October 2008). The only way to break the poverty trap for these

people is to have access to credit, but the formal credit market cannot help them because it is

mandatory to provide collateral to get a loan. A direct consequence of this evidence is that local

banks are not suitable for poor and maybe none of the public structure and organizations in

Bangladesh were able to cope with this problem. Indeed, before the foundation on the Grameen

Bank and the origin of microcredit, the main option for people in Bangladesh to get financial

support: the informal market. “Lenders were particularly shopkeepers, landowners, traders or

relatives while borrowers were poor people that the creditors knew before; in this way there was

no information asymmetry but the interest rates were however too high because of the lenders

market power” (Lucia Della Pellegrina, 2007: 6).

The first concrete action to face the access to credit issue came from Muhammad Yunus, a

Bangladeshi banker and economist who developed the concept of microcredit and set up the

Grameen Bank in Bangladesh. He became a guarantor for the loans to the poor entrepreneurs,

especially women, not able to qualify for traditional bank loans. We will analyze in detail both

microcredit and the Grameen Bank experience in the implementation chapter, but the main

concept to emphasize is that about all the programs developed in Bangladesh to provide credit to

the population are supported by NGOs. “These enterprises serve close to five million borrowers,

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the vast majority of whom are women, and, in addition to providing loans, some of the programs

also offer education on health issues, gender roles, and legal rights. The new programs also break

from the past by eschewing heavy government involvement and by paying close attention to the

incentives that drive efficient performance” (Jonathan Morduch, 1999).

Apart from Grameen Bank, one of the largest and best known nongovernmental

organizations providing credit to the rural poor in Bangladesh is BRAC, through its Rural

Development Program, with about two million and over one-half million female members.

All what is stated till now seems to support the idea that implementation of microfinance

and microcredit - even if implemented by different organization and different programs – is a main

trend in Bangladesh with regard to access to credit for poor people (See figure 3 below).

Figure 3: Progress of Microcredit Programs in Bangladesh

Source: MyKR, 2008

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The aim of this paper is also to clarify if these enterprises work well and sufficient enough to

solve the problem of access to credit or at least to alleviate it; however, before being able to do

that, it is fundamental to provide a trend analysis of the issue in order to understand the future

development of the case.

1.6 Trends analysis

When examining an issue, it is essential to look at the absolute size of that throughout the

time and to find out trends in the last few years, in order to forecast its future development. To

analyze the flow of access to credit for poor people in Bangladesh it is first necessary to provide an

overview of the Financial System which is present in the country. As several times affirmed, most

of the programs established to give loans to Bangladeshis are supported by NGOs; therefore, our

focus will be on private credit sector.

According to Dr. Sayera Younus (2007), the financial system of Bangladesh consists of

Bangladesh Bank (BB), the Central Bank, four nationalized commercial banks (NCB), five

government owned specialized banks, thirty domestic private banks, nine foreign banks and

twenty nine non-bank financial institutions (NBFIs) as of December 2006. The financial system also

contains insurance companies, stock exchanges and various co-operative banks, microfinance

institutions (MFIs) and credit rating agencies. Among them the commercial banks, NBFIs and MFIs

are widely engaged in the private sector credit disbursement in Bangladesh. Figure 4 below shows

the share of Private Credit sector of the different institutions.

Figure 4: Share of Private Sector Credit of Different Institutions (In percent) Source: Bangladesh-bank, 2007.

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A first trend that can be identified is the rising of the share of microfinance institutions, and

the gradual decline of that of the scheduled banks from 92.35 percent in FY02 to 89.45 percent in

FY07.

The development of the private sector in Bangladesh is still in an early stage, but

Government and Institutions understood the importance of a smooth access to credit for people

in order to achieve the goal of a sustainable growth of the country, both from an economical and a

social point of view (Sayera Younus, 2007). Through figure 5 it is possible to highlight trends in

private sector credit growth in Bangladesh. The x-axis represents the time frame considered in the

analysis, while the y-axis shows the percentage of growth of the components of the private sector

credit in Bangladesh.

Figure 5: Trends in Private Sector Credit Growth in Bangladesh (In Percent)

Source: Bangladesh Bank Quarterly, PAU, BB, 2007

Throughout this graph it appears that from the end of FY06 microcredit institutions provide,

in percentage, more credit than banks and NBFIs. This is in line with what stated in the previous

paragraphs about the programs developed by NGOs: to solve the problems of access to credit for

poor people in Bangladesh, the trends are the development of microfinance and microcredit

enterprises. Whether this is sufficient for a sustainable development of the counties is not easy to

forecast, but in the final session of this paper some additional solutions to cope with this issues

will be provided.

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There is also another point of view from which the trends about access to credit in

Bangladesh can be analyzed; according to Van Tulder with Van Der Zwart (2006), the Societal

Triangle is a useful template able to show which are the primary institutions of society and how

they interact with each other. Three main actors can be distinguished in the triangle: the state, the

market and the civil society(Van Tulder with Van Der Zwart, 2006). Moreover according to this

template, three trends are currently observable: a receding state, an advancing civil society and an

advancing business sector (See figure 6 below).

By focusing on the features of each institution in Bangladesh, it is possible to relate the

current situation regarding access to credit to one of the trends profiled through the societal

triangle.

Figure 6: Possible trends in the societal triangle

Source: Van Tudler and Van Der Zwart, 2006

On the basis of what was stated before, the trend that we can find in the triangle as well as

in the Private credit sector in Bangladesh is an advancing civil society. Basically the county is facing

an empowerment and an emancipation of the civil society because the several programs

developed by NGOs are providing access to credit to poor people without the need of assets to

put up as collateral. In this way, usually small entrepreneurs, especially women, can get a loan and

develop a business in order to improve the quality of their own lives (Shimek and Sengupta,

2007),. Thanks to the microcredit enterprises, in Bangladesh a growing civil society is visible, but

also a growing influence of citizens on society itself, as since 1996 economy has grown about 6%

per year (CIA Factbook, 2009):

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. The expectancy is that this positive trend will last through, but to make it possible all the

stakeholders involved in Bangladesh must cooperate to reduce the tensions generated by the

issue.

Chapter 2. Diagnosis

In the last chapter the problem at hand has been defined. Now a diagnosis will be made on

how the problem have arisen, which parties are involved and how far this issue is on its way in the

issue life cycle. Also, which parties are to blame and which tensions are visible are analyzed. This is

in order to make it possible to come up with possible solutions.

2.1 Stakeholders

In this issue different parties are involved. They all have a stake, they are influenced by the

problem or have an influence on this problem. To get a good oversight of the problem all

stakeholders primary and secondary shall be discussed. As van Tulder and Van der Zwart (2006)

state, primary stakeholders are those who directly influence a company and secondary

stakeholders those who do this indirectly influence the company. In this case it is not about

stakeholders of a company but stakeholders of a problem. Therefore it will be divided based on

whether the stakeholder group is primary involved in this problem or not.

In this chapter the stakeholders will be discussed briefly, in the solutions part of the paper

the exact roles and activities of the different stakeholders will be discussed more elaborately.

Primary stakeholders:

Group with low income in Bangladesh

This group does have a low income therefore; financial institutions are not willing to give any

credit to these people. This is the group that mainly suffers by this problem, as is stated by Shimek

and Sengupta (2007). They cannot leave the line of poverty because there is a lack of access to

financial loans by financial institutions.

Credit providers

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According to Helms(2006) there are four groups of providers of (micro) credit. These groups

are all primarily involved in this problem, all the in Chapter 1.5 stated parts of the financial system

can be categorized in these groups. The credit providers can decide to provide credit to someone

who needs credit or deny it. They can make a profit or lose money and are primarily involved in

this problem.

These groups as stated by Helms(2006) are:

- Informal financial service providers: moneylenders, Su su, savings collectors, money-guards

and ROSCAs. these are groups which provide credit in the informal circuit. There is no tax paid,

and the government is not involved in these activities.

- Member owned organizations: self-help groups, credit unions and different hybrid

organizations. These groups are managed by the poor people themselves and therefore there is a

lot knowledge about the problems but, a low level of power and they have low financial skill.

- NGOs: there are a lot NGOs providing micro credit. In Bangladesh the most important ones

are Grameen bank and BRAC. These are bigger more powerful institutes, they serve a lot of people

without making profit.

- Formal financial institutions: commercial banks, state banks and non-bank financial

institutions. These are more professional, regulated and official institutes. But because of the high

operation cost they often cannot provide services to the poor.

Helms(2006)

Secondary stakeholders:

Government of Bangladesh

The government regulates and navigates the financial processes in Bangladesh through

making laws and imposing taxes. It makes laws and regulations and other initiatives to give access

to credit (Nath 2003)., this is further described in chapter 3.2. The regulation part of the

government is not financial and not directly involved and is therefore a secondary stakeholder.

The state banks are primary stakeholders as is stated above (Helms2006).

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2.2 Stakeholders influence on the issue: the Societal Triangle

The above stated stakeholders all have a different influence on the problem and all the

stakeholders are part of one of the three main groups of stakeholders: State, Market and Civil

Society. If you sum up all influences, the problem can be placed in the triangle that consists of the

three main stakeholder groups. As Van Tulder(2009) states the problem of access to credit is

located in the understated position.

At this moment there is a certain influence of the government, there are lots of laws and

regulations to stimulate the access to credit; 13 departments are aimed on the subject (Nath

2003). But there is a lack of structure in these governmental activities, and therefore the public

sector credit is still in an early stage (Younus 2007). For those reasons the position of this issue is

not so much at the State-side of the Triangle.

Nevertheless, nowadays Civil Society is of a big importance because there are NGOs in the

field which provide micro finance having a big influence on the access to credit in Bangladesh

(Yunus, 2006). The market does have an influence in the sense that the banks give access to the

richer part of the population in Bangladesh, but the banks do not give this credit to the lower

income layers and therefore does not influence the access to credit of the big part of the

population (Helms 2006). Therefore the issue access to credit is situated as stated below in the

triangle.

ACCESS TO CREDIT

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2.3 Position of the Issue in the Life-Cycle: Challenges to solving the issue

Every issue has a life cycle. This life cycle consist of birth, growth, development, maturity and

post-maturity (Van Tulder and Van der Zwart 2006). At this moment this issue is in the growth

phase. There are several things that are happening and that are signs that this issues is in the

growth phase (Van Tulder and Van der Zwart 2006): those first in command fail to address an issue

(financial institutions), there is a triggering event (Yunus who successfully started with solving the

issue) see (Yunus, 2006), there is a lot of media attention and a public debate, the issue is attached

to Yunus and his bank, the NGO’s are active(Yunus, 2006). Because of all these strong indicators,

can be asserted that issue is in the growth phase.

Figure 7: Issue Life-Circle

Source: Van Tulder and Van der Zwart, 2006

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2.4 Blame storming

After having discussed about the main stakeholders involved in the issues of access to credit

in Bangladesh, it is possible to blame the ones that somehow, with their direct actions or with

their passivity, contribute to make the situation worse. In particular they are:

• Financial institutions

Regular financial institutions do not give loans to poor people because they do not consider

them to be creditworthy. Therefore poor people do not have access to credit (Helms,2006).

• Government

It is not possible for poor people to get a loan. The government is to blame as well. If they

use the tax money to provide credit to the poor the problem might be alleviated. The

government can have the function of a financial institution. Next to that it is possible that

the government make regulations on providing loans to the poor people (Nath 2003).

• Low income group in Bangladesh

This is the group that has no access to credit. It could be argued that those people should

be more active in trying to gather money so they do not need any credit or can get credit

because they have collateral. This is a debatable issue, because poor people often do not

have energy because of sub nutrition and cannot help themselves.

2.5 Tensions in the issue

As in all problems in this issue there are different tensions. A tension exists of two different

variables, which contradict each other, this gives tension. There are different types of such

tensions, as stated by Van Tulder(2009), the following types are possible:

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According to this problem the following tensions can be highlighted:

As is stated by Hulme and Mosley (1996) for poor people in Bangladesh it is hard to get any

credit from a financial institution. This is a tension; the higher the poverty rate of a person the

lower is the access to credit. This is a tension as a trade-off. To solve the problem which is present

in this tension, the access to credit must become higher. There must be access to credit even for

poor people.

Poverty

Access to credit

Another tension with respect to this problem is the interest rate of the loans and the income

of a Bangladesh citizen. The lower the income is of a citizen of Bangladesh, the higher is the

interest rate that financial institutions ask for. As Blim (2005) states when people are poor it is

harder to get any credit, therefore loan sharks give them a loans with high interest rates.

Consequently the interest rates are high for people with a low income in Bangladesh. This is a

tension as a trade-off. The lower the income the higher is the interest rate.

Income

Interest rate

2.6 From efficient and ethical to effective

Another way of looking at problems is following the triple E model (Van Tulder 2006).

According to this method there is an efficient way to look at the problem and there is an ethical

way to look to it. But these two ways seems to contradict. But in a creative way of problem

23

solving, the effective way of looking to the problem, the problem can be solved with using the

efficient and ethical way of reasoning.

When the triple E model is applied on the problem of access to credit, the below stated

reasoning can be made. This is out of the perspective of financial institutes.

For a financial institute it is efficient when it makes a lot of money. Therefore risky loans to

customers with a low income must not be given. Or only with a very high interest rate which lead

to exploitation. From an ethical point of view everyone must have access to credit. This seems

hard to combine. But with giving micro credit there is made a profit by giving credit to the low

income customers. Therefore this is the effective solution.

Here microcredit is given as “the” solution. Of course there can be doubts about that, this

will be discussed in later chapters. In the following chapters this solution will be discussed more

deeply.

Chapter 3. Design/Solution

In this section the following is going to be discussed: the topic of microcredit and

microfinance as strategies used to provide a solution through financial aid to poor people giving

them access to credit. Firstly, the meaning of both concepts will be clarified as well as the different

24

functions that these concepts can have nowadays. Finally, an overview of what stakeholders are

doing concerning the access to credit issue will be given as well.

3.1 Focus on Microfinance and Microcredit

According to Morduch (1999) there are around one billion people worldwide living in

families with less than one dollar per day of per capita income. Moreover as was stated before

these low income families’ lack of access to financial loans from financial institutions means that

they cannot leave the poverty trap.

In order to improve the situation the following two concepts appeared during the 1970s:

microfinance and microcredit. Their main objective is providing financial aid to the ones that do

not have access to financial services.

Despite the fact that those two concepts are extremely related, they are often confused in

literature and for that reason two possible definitions are provided that highlight the differences

and also the similarities between microfinance and microcredit:

“Microfinance is defined as the practice of providing financial services – such as loans as low

as $100, savings and insurance – to very poor families, to help them grow tiny businesses or

engage in other productive economic activities. This process enables the working poor to become

more self-sufficient and in turn, improve the lives of family members, communities and whole

societies.” (Acción, 2009)

“Microcredit is loaned to a micro entrepreneur by a bank or other institution and can be

offered, often without collateral, to a group or an individual.” (Ibid)

These prior definitions are suggested by Acción, an organization with more than 45 years of

experience regarding microfinance activity to define the two concepts. This organization suggests

that in the beginning microfinance was only interpreted as microcredit, but that with progress in

time it was recognized that the families targeted by this practice needed not only microloans but

also other type of financial products. Nowadays microcredit developed into microfinance, and

microfinance is broadly comprehended as including a broader range of services, such as loans,

savings, insurance and transfer services (remittances) targeted at low-income clients (Accion, 26

25

October). These services can be provided by several different institutions such as NGOs, credit

unions, cooperatives, private commercial banks, non-bank financial institutions and parts of state-

owned banks (Ibid).

The term microcredit is currently used very frequently to discuss different topics and

different aspects. This is creating misunderstandings because often the arguments used for one

type of microcredit do not apply to the other type. Therefore, and to make this paper consistent

we believe it is important to classify the different types of microcredit according to Grameen

Bank’s source and then emphasize which of them we are considering in our paper.

Among the different concepts of microcredit there is the traditional informal microcredit

that consists in consumer credit in informal market such as loans from friends or relatives; the

microcredit based on traditional informal groups as tontin, su su or ROSCA; activity-based

microcredit through conventional or specialized banks (for instance agricultural credit); rural credit

through particular banks; cooperative microcredit (cooperative credit, savings banks, etc);

consumer microcredit; bank-NGO partnership microcredit; Grameen type microcredit

Grameencredit; other types of NGO microcredit; other types of non-NGO non- collaterized

microcredit (Grameen, 26 October).

For the sake of consistency and reliability of this paper is important to distinguish that will

focus on Grameencredit from now on and we will explain its main characteristics in the next

section of our paper.

3.2 Stakeholders as part of the solution

According to Dhiraj Kumar Nath (2003), the secretary of Rural Development and Co-

operatives Division, since the concept of microcredit appeared in the 1970s the Bangladesh

Government interpreted it as a poverty alleviation effective form of intervention.

Nowadays, not only the Government sector but also hundreds of non-government

organizations have been operating micro-credit programs as a strategy of poverty reduction.

• Microcredit in the Government Sector in Bangladesh

26

The Bangladesh government invested in creating an environment for the growth and

development of microfinance institutions and continues trying to explore sources of funding for

institutional development. Historically, Government has taken action to give access to credit to

poor by ratifying the Land Improvement Act, Agricultural Loan Act, Money Lenders Act and Co-

operative Societies Act (Chowdhury, 1998).

About 13 Ministries/Divisions are nowadays involved in projects of microcredit facilities

expansion in several rural areas around the country. Also, several policy measures have been

taken into account such as expansion of public service, creation of opportunity of employment,

investment of agricultural production, infrastructure development and credit facilities for the poor

(Ibid).

Furthermore, the government of Bangladesh also committed to adopt the declaration of

the world Micro Credit Summit held in Washington in February, 1997 which calls for the

development of a new strategy to reach the poorest people of the developing countries by

effective microcredit programs and savings through experience sharing and networking

(Chowdhury, 1998).

Despite the efforts that have been made, the disproportionate high interest rate, the lack of

regulatory structure, and the inconsequent moves made by NGOs lead to absence of sustainability

of the programs. There is still a lot to improve concerning the capacities required by institutional

and human resources in order to concretize the goals that government has proposed (Ibid).

• Microcredit in the banking sector

During 1970s and 1980s the microcredit programs that were launched were mainly of the

government responsibility. However, in 1990s some microcredit programs have been initiated by

the state owned banking sector. The number of these programs has been increasing. Although

when compared with NGOs and Grameen Bank, the involvement of the banking sector in

microcredit is still less significant. There are some examples that can be highlighted such as BKB

that provides credit support to rural people living in poverty or Sonali Bank that despite offering

diversified products is contributing to the social capital development and empowerment of

women (Chowdhury, 1998).

27

• NGOs and their involvement regarding Microcredit

As it was previously stated, one of the most well known and biggest NGOs that has a

presence in the microcredit area is BRAC through its Rural Development Program, with about two

million men and over half a million female members. “BRAC took a more multifaceted approach to

alleviating rural poverty, with a strong focus on consciousness-raising and non-formal literacy

training” (Hashemi, S. and Schuler S., 1996, pp. 636). The Rural Developing Program in Bangladesh

employs large numbers of field personnel, especially young men, who live in the areas where they

work. When new divisions open the field, staff visit nearby villages and explain that the program

will provide credit to poor, landless women to support income-earning activities. In order to

participate, and to be eligible to receive credit, women are asked to organize themselves into

small groups. There is a mandatory savings requirement, and each woman has her own savings

account and passbook. Loans are repaid and funds deposited at weekly meetings. Loans are made

to individuals, at commercial interest rates. There is no collateral but the group as a whole is

responsible to ensure that each member makes the weekly repayments. The participants

themselves decide how to use the loans. In most cases the loans are used for self-employment

activities such as paddy processing, poultry and livestock, traditional crafts and small trade”

Hashemi, S. and Schuler S., 1996).

• Global firms

There are several global firms that are investing in Microcredit especially through

partnerships that do not have as aim profit maximization. In fact, in chapter 4 examples will be

given to illustrate this and more detailed descriptions of what multinationals are doing in this field.

Chapter 4. Implementation

Bangladesh is the first country where microcredit was successfully applied. Nowadays this

concept serves as a model and has been applied in many developing countries in Asia, Latin

America, Africa and now even in the US. This chapter will cover the history of microcredit and how

Muhammad Yunus’ leadership led to the success of the Grameen Bank and the application of

microcredit worldwide.

4.1 Sustainable corporate story: The Grameen Bank

28

• The development of the Grameen Bank

Muhammad Yunus is the man behind the introduction of large scale providing of

microcredit. Born in Bangladesh, Yunus has seen poor people struggling to make a living, to stay

alive. After Bangladesh became independent in 1971, Yunus came back from the US where he was

teaching economics, to become an economics professor in Bangladesh. During the famine in 1974

he met a poor woman in a village who was selling bamboo chairs and only made 2 penny per day.

This was because was forced to sell her chairs to her money lender who exploited her and charged

a ridiculously high interest rate. This inspired Yunus to give small loans of less than 100 dollars for

reasonable interest rates to help lifting them out of the poverty trap (New York Times, 1997).

Against the advice of the government and other banks, Yunus kept providing microloans to

poor people and he founded the Grameen bank in 1983. At that time he asked the local bank for

cooperation, but the bank managers did not believe that poor people could be credit worthy. Also

the government was reluctant to support his project stating that they already had enough

problems with rich people taking out large loans and not paying back (Yunus, 2006)

Nevertheless, Yunus was persistent and he was going to prove that poor people are

creditworthy. From a poor woman’s perspective, Yunus argues that if anybody trusted her with so

much money, she wants to protect this trust. She works hard to get every penny back without

delay. It turned out that Yunus was right, and two decades later the Grameen Bank provided small

loans to millions of women. Besides the argument of trust, the Grameen system ensures that a

high percentage of borrowers will pay back the loans in time. Borrowers are required to make a

group of five people in order to be qualified to get a loan at Grameen. If one of the group

members defaults, the rest will be cut off as well. In order to make sure that the Grameen bank

functions well, there is a strict selection process for new employees to join the ‘Grameen family’.

For potential employees a training program is set up to select only those who are well capable of

fulfilling the position at the Grameen Bank and have a genuine concern for the poor (A. Dowla,

2006).

• Breaking the cycle of poverty

Just providing credit is merely enough to help the poor citizens survive. Building on his vision

to help poor people break the cycle of poverty, Yunus encouraged his clients to send their children

29

to school to make a change in the family. For many generations, literacy has never been

introduced within such families, this was about to change. Currently 100% of the children of

Grameen families go to school and some of them are becoming top students. This excited Yunus

and he decided to introduce scholarships to reward them. More than 30.000 scholarships are now

available for them and this works as encouragement for other students to do their best. Education

at the higher level was often too expensive for the children of Bangladesh, therefore the Grameen

Bank introduced education loans to cover university expenses (Yunus, 2006).

• Grameen’s performance

From 1976 when Yunus started testing his theory on a small scale with ten members of one

village, the business expanded rapidly when feasibility of the project had been proven. Five years

later in 1981 the bank had expanded to 433 villages and had 24,128 members (grameen-info.org,

2009). The bank became operational as an independent in October 1983 and they started a

Housing Loan Program in 1984. By 1986, 2042 houses were built by Grameen members and the

number of members nearly ten folded since five years back to 234,343. During 1986 the bank’s

profit was close to zero. Over the last five years however, Grameen Bank managed to create over

a million USD of profit each year. With almost USD 19 million in 2008. Since Grameen Bank is a

social business, all profit will be reinvested in the company. As of 2008, the bank has 7,760,203

members, 665,568 houses are built, and 2,539 branches are operating in 83,566 villages (see

appendix).

Microcredit became well known in the world and had a lot of criticism. Critics argue that

microcredit is a good idea that only works for entrepreneurs. According to them the poorest of the

poor do not have capacity to become entrepreneurs and remain trapped in poverty. On the other

hand Yunus believes all human beings are entrepreneurs and are born with entrepreneurial

capacity. The poorest people work the hardest but get the least. Poverty is created by the system

that we have created consisting of institutions and theoretical frameworks (Yunus, 2006)

According to Yunus (2006), banking institutions are to blame for the issue because they

judge people. Bank management are the ones deciding that people are not creditworthy. He turns

it around by asking: are banks people worthy? During a lecture at Boston University he explains

that the Grameen banking system means that no collateral is needed, because the poor have

nothing to offer. There is no need for guarantees, and no legal contracts, because the loans are so

30

small you will not need court protection: no legal instruments are involved. The system is built on

trust, that’s the essence and it works globally. The loans are given for income generating activities

to help poor families move up so their children can go to school. Over 60% of the customers who

have been with Grameen for 5 or more years moved over the poverty line. The aim is to move

100% of Grameen’s clients out of poverty by 2015, and this is feasible according to Yunus (2006).

4.2 Arenas of leadership: ‘Social businesses’, improving education and a ‘social

stock market’

Instead of the type of companies which only aim for profit maximization there is another

type of business aiming to do good for people; it is called a ‘social business’. Yunus (2006) wants to

encourage other companies to engage in social businesses. This resulted in partnerships between

the NGO Grameen Bank and multinational enterprises. Grameen Bank made a joint venture with

Danone in Bangladesh to produce yoghurt, as tasty as it usually is and add micro nutrients that

children miss in their daily diet. The yogurt is sold it for the same price as similar products. The

intention is not to make profit to pay dividend but to help the children to improve their health. In

addition, new jobs are created locally, stimulating employment. This way Danone becomes an

example of companies that utilize an active CSR approach and become ‘part of the solution’.

Moreover, Danone is showing a proactive approach of corporate citizenship – defining corporate

citizenship as “a metaphor for the ambitions of companies to be accepted as responsible actors in

society that show some interest in the fairness of the outcome of the various trade-offs for

citizens” (van Tulder and van der Zwart, 2006). Grameen also signed an agreement with Intel, to

bring information technology to poor to change their lives.

Yunus (2006) believes changes need to be made in current education systems. There is a

need for social MBA programs. Also the stock market needs to change. Yunus suggests the

introduction of a social stock market. In this new type of stock market, investment decisions are

not based on which company will reach high profit but whether they are most effectively and

dedicatedly committed to good results in helping people moving out of poverty and getting

children off the streets. Society should not rely on the government to solve all the issues, people

should do it their selves. With governmental procedures process to change things might get stuck

in bureaucracy. By first testing plans on small scale, they can later be applied on large scale (Yunus,

2006).

31

Chapter 5. Evaluation and conclusion

In this chapter it is going to be discussed if whether or not the initiatives that have been

implemented concerning Microcredit are sufficient. Some of the main issues inside the topic will

be highlighted as well as recommendations of what way the parties involved in this issue should

proceed in the future in order to bring some insight of what kind of solution should be

implemented.

5.1 Women and access to credit in Bangladesh

As was stated before and according to GDRC (The Global Development Research Center, an

independent nonprofit organization) (26 October), 94% of Grameen Bank’s loans go to women.

This number is so large because there are studies that prove that microcredit programs had

significant effect on women’s empowerment in several different dimensions such as by

strengthening their economic roles and increasing their ability to contribute to their families’

support (Hashemi et al., 1996). Many of these programs specifically target women based on the

view that they are more likely than men to be credit controlled, have limited access to the wage

labour market, and have an inequitable share of power in household decision-making (Pitt et al.,

2003).

Nonetheless of the studies mentioned above, there are arguments that defend exactly the

opposite, which means that especially when those programs are not accompanied by minimal

tools of social and supplementary support services, they will not empower women but instead

worsen their situations (Hashemi et al., 1996).

Educationally and traditionally speaking women always were seen as secondary in the

household responsibility matters. Basically they were always interpreted as socially and

economically dependent on men (Hashemi et al., 1996). This long historical assumptions lead to

the fact that women’s potential to generate income is constrained reinforcing its economic

dependence.

Furthermore, there is evidence that in fact a high proportion of women that get microcredit,

see their loans being directly invested by their male relatives while women as having the function

of borrowers, bear the obligation for repayment for the debt (Goetz et al.,1996). In fact, what

32

often happens is that the male control of loans can postpone the appearance of positive social

externalities related with the expectancy of increasing control over household income. Or even

worse; it can demean household survival strategies of consumption or saving purposes when men

invest loans in a bad way and women are forced to mobilize investment funds resources to repay

the debt. Goetz et al. also suggest that two other things can happen: either men take the

responsibility of repayment the loan, but in this case the objectives of lending to women are

neglected, or they refuse to repay it and violence and tensions are intensified in the household

context.

Women’s Empowerment

Access to credit

According to theory and the studies that were already mentioned women were supposed to

be empowered by receiving credit as the blue line in the graph above indicates but in fact, as in

the graph above the red line represents what happens most of the times. Although women have

access to credit, they are not empowered.

In conclusion, and despite the fact that the studies that were mentioned are pointing to the

idea that giving credit to women really empower their living situation, unfortunately in developing

countries such as Bangladesh there is still a long way to go so that in fact achieved results can be

good. The population is still living according to past generations ideals where women had a

secondary role; in order to microcredit programs to be effective, mentalities must change and this

only can happen with the implementation of complete social support and educational programs.

5.2 The Poorest of the poor and Microcredit

According to Underwood (2007), studies have found that it is easier for people that are

much below the poverty line to drop from microcredit programs than for people that actually are

near the poverty line. The last group is more likely to get bigger loans and also have success with

33

their microenterprises. There has been an investment by several organizations to include the

poorest people in their microcredit programs but it has been proven to be extremely difficult to

achieve this goal.

In fact, the reality is that credit programs hardly ever reach the poorest. On one hand there

is the fact that this group of people require really tiny loans which are too small to generate a

significant interest income for lenders and because of that are extremely expensive to deliver and

consequently not profitable for them (Ibid).

On the other hand, lenders that address the poorest do not consider the context regarding

their living standard situation, ending up charging an incredibly high interest rate that frequently

worsens their debt. The problem is that lenders are not able to calculate the productive capacity

that these people are going to achieve (GRDC, 26 October).

To reverse this dilemma, initiatives are needed to first alleviate the problems that the very

poor people face, besides giving them financial aid. Firstly, food should be given, clothing, shelter,

and health care is what these people need. In order to build a successful microcredit program,

primarily the people’s basics needs should be taken care of and then recourses and training to

begin the microenterprise should be considered and delivered.

5.3 The impact of the informal sector in Microcredit

As it was previously stated the increasing importance of the informal sector has been putting

at risk the success of a number of businesses especially in countries such as Bangladesh where

microenterprises are struggling to survive. Despite the fact that the possibility of entering in the

informal sector is absorbing a lot of people that could not have access to formal sector anyway,

actually only wealthier people are taking profit from a business implemented with these

characteristics (GDRC, 26 October).

Furthermore, the policies that surround the informal sector contribute to weaken the

income generation in this sector- the rising costs, the declining of demand and competition from

cheap imports and enlarged entrants (Ibid).

34

The fact is that, nowadays in developing countries, poor people are being obliged to move

from the formal to the informal sector since financial institutions refuse to give them credit as

they cannot provide collateral. In this informal sector, people can give as collateral assets that

banks and other institutions do not accept but sometimes end up not getting the amount of

money they need. Moreover, they have to pay the money back and the problem is that they face

an interest rate that is much higher than the market rate (GDRC, 26 October)

In order to overcome this situation and achieve poverty alleviation, the entrepreneurial spirit

in the informal economy should be encouraged and simultaneously the informal sector should be

more formalized so its main negative characteristics can be diminished. If the microcredit

programs are generalized and spread around the world that issue can be overturned.

5.4 Initiatives to solve the issue

In his book, Yunus (2006) describes how microcredit has gained a lot of support over the

years and has been adapted worldwide and how it’s success in Bangladesh resulted in millions of

people moving out of the poverty trap. Nevertheless, more initiatives are needed in order to fully

resolve the problems in Bangladesh.

The exploiting behavior of profit oriented companies is detrimental to the current situation

in which the poor people live. In order to give the citizens in Bangladesh a fair chance, companies

should be aiming at ‘doing good by doing well’. This can be achieved by encouraging companies to

engage in social businesses. Most essential for stimulating future leaders to engage in social

businesses is by educating them in a social oriented manner instead of profit oriented. Therefore,

besides business MBA programs, MBA students should have an option of studying social MBA

programs as well.

Furthermore, an interesting invention would be a social stock market. This will generate

financial support for social business initiatives without expectations of profit. Companies that are

committed to helping the poor in a sustainable way can expect investment without having to aim

for generating profit to keep shareholders satisfied.

Next to that, a possibility would be for companies to make profit by providing credit. This

can be achieved by letting companies invest in their own supply chain. By giving credit to local

35

farmers and tailors in Bangladesh, they are enabled to start to produce and deliver to the

company. The company can guarantee that the Bangladeshi producer can sell its products, and on

the other side the company is ensured of a low price and an enduring supply. Next to that the local

producers can pay off the loan by the money made during selling the products. This is only suitable

for a few type of businesses, businesses that are able to move the producing part of their supply

chain to little starting Bangladeshi companies.

These are all possible solutions that help solving the problem of access to credit. More

research is required about these opportunities in order to obtain a clear view whether this is

functional and achievable.

Chapter 6. Research

In this section will be described some works limitations that were faced during the research

process. At the end of the paper few suggestions for future research are provided.

6.1 Work limitations

This research project presents several limitations, first of all due to the overdose of

information found on the topic of access to credit and the resulting forced choice to focus the

attention on the issue in Bangladesh. Doing this was easier to figure out a structure of the paper

and to implement it, but of course the problem is not only present in Bangladesh but can be

found in most of the developing countries.

A second limitation was that just a few cases of companies and NGOs were mentioned that

are struggling to solve the problem of access to credit for poor people in Bangladesh; without a

doubt others firms are working in this direction but the scope of our research did not allow a in

depth research of them.

Besides, it might have been more complete to compare the experience of Bangladesh with

another developed country and analyze how loans are provided in both the cases; however we

have chosen to focus on Bangladesh only for this is enough to illustrate the issue.

The last limitation is about the resources used as basis for this paper: it was not possible to

obtain primary data but it would have been interesting to collect information from the original

source of the issue, for instance through a qualitative research (depth interviews).

36

6.2 Areas for further research

In this paper it became clear that micro credit cannot solve the whole problem of access to credit.

Therefore more solutions have to be examined. The possible solutions given in chapter 5.4 can

maybe solve the problem but this has to be researched.

Next to that it was not possible in this research to obtain information from primary sources.

We had to rely on secondary sources. For further research its recommendable to do field research

and obtain information about access to credit. In this way recent and valid information can be

generated.

In this paper it was concluded that the micro credit initiatives cannot solve the whole

problem of a lack of access to credit. But maybe with some policy improvements microcredit can

solve the problem. This is also an area for future research.

Access to credit is a global problem. In more countries than only Bangladesh the problem

exists. But in every country the problem is different, this because of different groups, different

people and different institutions. Therefore a solution for this problem can be different as well. In

this research the focus was on Bangladesh, but in further research other countries with a problem

regarding access to credit should be examined.

37

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Bangladesh-america.com(2009) www.bangladesh-america.com, 25 September 2009.

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info.org/index.php?option=com_content&task=view&id=28&Itemid=108

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in Bangladesh.

40

Appendix

Grameen Bank historical data series 1976-2008 Amounts in millions USD

Performance Indicator 1976 1981 1986 1991 1996 2001 2008

Cumulative Disbursement (All

Loans) 0.001 3.37 56.51 322.43 1691.74 3347.98 7591.32

Disbursement During the Year

(All Loans) 0.001 2.06 18.18 74.35 285.8 287.54 905.81

Year-end Outstanding Amount 0.0003 1.17 10.09 44.43 213.54 194.18 646.05

Housing Loan Disbursement

During the Year - - 0.19 8.46 4.06 1.01 2.21

Number of Houses Built cum - - 2042 118717 329040 545121 665568

Total Deposits (Balance) - 0.26 4.10 38.71 125.14 137.92 933.89

Deposits of GB Members

(Balance) - 0.26 3.76 26.68 90.83 68.58 508.20

GB Members' Deposit as % of

Total Deposit - 100 92 69 73 50 54

Number of Groups - 4818 46869 213286 433791 504651 1210343

Number of Members 10 24128 234343 1066426 2059510 2378601 7670203

Percentage of Female Members 20 39 74 92 94 95 97

Number of Villages covered 1 433 5170 25248 36420 40447 83566

Number of Branches 1 24 295 915 1079 1173 2539

Profit/Loss (For the Year) - - 0.0003 -0.0064 0.46 1.05 18.99

Source: Grameen-info.org