Micro finance institutions
As indicative in the name, microfinance institutions are mostly those institutions which provide micro credit to the deserving and the needy people. In the last decade, it is generally observed that the micro finance institutions have achieved some degree of success. Currently, there is a need for institutionalizing the success. Just as in case of the other financial institutions, the micro finance institutions do need to face challenges related to the lack of legitimacy, short track record, cash flow, power, control and transparency. Normally, it is observed that in the industry of micro finance, the person who establishes the firm is considered to be a visionary.
Growth of Grameen Bank A Micro Finance Institution :
The Grameen bank is mainly a community development bank and a microfinance institution mainly established in Bangladesh. It provides small loans to the impoverished people without any collateral. This type of system is mainly based on the idea that the poor normally have skills which are under-utilized. Apart from providing microfinance, the bank also runs development oriented business sectors such as energy, telephone and fabrics. The founder of the organization, Mr. Muhammad Yunus and the organization collectively received the Nobel Peace Prize in the year 2006 for providing a helping hand to the economically disadvantaged people.
Uniqueness of Grameen Bank as a Micro Financing Institution:
More than anything else, Grameen Bank is largely known for its solidarity lending system. The bank has embodied a set of 16 values which it refers to as Sixteen Decisions towards economic prosperity. These decisions are the basis for micro credit. Currently, the self-help group presently works in more than 43 countries. Each borrower is designated into a group comprising of five members. However, it is not mandatory for the group to provide any sort of loan guarantee to its individual member. The responsibility of repayment of the loan is the sole responsibility of the individual borrower. The group has to take responsibility and oversee the fact that each member in the group behaves in a responsible manner and does not entangle himself in repayment problems. Joint liabilities are strictly not entertained in such system. This means that group members need not pay at all for a defaulting member.
The other astonishing factor observed in microcredit is that the loan repayment percentages in the micro finance institutions are higher - as much as 98 % as compared to that of the other banks. In addition, it is estimated that 97 % of the recipients of the loan are women. This figure is significant in nature largely because, in most of the developing nations such as Bangladesh and India, women seldom take loans. Based on a Wall Street Journal Report, more than one fifth of the loans of Grameen bank were overdue for a period exceeding one year in 2001. Micro finance Institutions such as Grameen bank have managed to raise 50 million people from acute poverty. This has raised hopes for impoverished people living in other parts of the world.
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