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Gaeddu College of Business Studies was created in 2001.
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2 Many analysts criticized Grameen Bank for its style of functioning Analyze the drawbacks of the Grameen Bank model?
Answer: Grameen Bank model was criticized by many analysts mainly due to improper monitoring of how loans were utilized. Grameen Bank credits loans were given mainly to the womens and were used largely for the consumption rather than for investment purpose. No any proper monitoring of how the loans are been utilized by the borrower, the bank did not gave any concern about the utilization of loans. So this borrowed loans were mainly utilized for consumption purpose and not for investment which was gain for only for short term because no capital was generated such as under investment. And the another drawback of Grameen Bank is that the accounts maintained and the method of accounting was not in accordance with industry standards and the bank didn't provided full details about the financial position and loan repayments position. This may be because the institution is mainly service oriented rather than profit motive since the grameen Bank was started with the objectives of financing the rural areas and to reduce the poverty, so that it may not be following the principles and standards of accounting and also not providing full information as they are concern with helping the poor people in reducing poverty. There is no difference between usurers( Yunus) and corrupt people. The interest charged by Grameen Bank is very high as compared to commercial banks. Especially for the poor people, it is very difficult to repay the loan with high interest rate. Grameen Bank is economically not viable and depends on subsides in order to operate, this essentially becomes another example of welfare. These are the two main drawback of the institution that has been criticized by many analysts and economists. The other minor draw back includes that they didn't provide training of basic skills needed in business and not extending the market facilities nor undertaking activities to improve the literacy rate and health conditions of the members of the institution. By. Mani Kumar. B.com 2nd "D" Gaeddu College of Business Studies.
1 According to analysts Grameen Bank was successful because of its unique working model Analyze the working model of Grameen Bank and discuss how it differs from the traditional commercial banking?
Answer: Since the Grameen Bank was one of the Bank who financed to the poor people with the aim of reducing poverty and upgrading living standard particularly of rural population/ people. We know that the Garmeen bank model was one of the most widely researched micro-finance models all over the world because of it's unique working models. This Grameen bank had got four levels of structures, the lowest level being branch office and the highest level being the head office of the bank as a whole. The branch office supervised all the ground activities of the bank such as organizing the target groups, supervising the credit process and sanctioning loans to the members. This can be explained in more detail below.The four tiers of Grameen Bank model are;head officezonal officearea office andbranch officeThe communication starts from the branch office successively till the head office. The reports are prepared through branch office which is to be submitted to the area office then to the zonal office and finally to the head office. Under head office in Dhaka, it has many zonal offices looking after around 10-13 area offices. This area offices are entitled to supervise around 10-15 branch offices. there are 15-22 villages under each branch office. Utilization of loan and their recovery are supervised by the area office. All important issue related to the organization are raised from the branch office till the head office.Grameen bank operates on the principle of mutual trust , supervision, accountability and members' participation. Unlike other commercial banks, which granted credit on the basis of collateral security, where as the Grameen bank did not demand any such security for extending/ lending credit (loans). This encouraged the poor group of people who does not posses such mortgage assets to borrow the loans from the banks. Thus most of the poor people depend upon the Grameen bank for assistance. The interest charged by Grameen bank was relatively higher than that charged by the other commercial banks, but it was it was lower than the interest charged by the money landers. They charges less than the moneylenders mainly to avoid the exploitation of the poor people by the moneylenders. And it was also to reduce the operational cost of the bank .Grameen bank encouraged and landed the loans to help thousands of poor Bangladeshi women to improve their living by extending cheap loans to them just to start their own enterprises. Looking at those unique working model of the bank, the model was replicated (copied) across the world both by the developing and developed countries like USA ,England, etc.. So these are the things which make Grameen Bank different from the traditional commercial banks and of great success in the functioning till now.By. Mani kumar. B.com.(2nd"D")Gaeddu College of Business Studies.
