Case Study

Grameen Bank: Impact, Costs and Program Sustainability

Examining the model's self-sustainability and its effects on household outcomes

This paper suggests that Grameen Bank of Bangladesh is known world wide for its innovative credit delivery to the rural poor. The paper:

  • Presents a description of the Grameen Bank, its program design and targeting, and how it addresses the moral hazard problem of lending in a rural setting;
  • Discusses the financial and institutional development of Grameen Bank to see if it is financially viable and examines the nature and extent of subsidy that is required to support Grameen Bank operations;
  • Estimates whether and how program participants benefit from program participation and also if there is a spill over effect on the village economy;
  • Describes the constraints of Grameen Bank for its expansion in Bangladesh;
  • Discusses the lessons learned for replication outside Bangladesh.

The paper's objective is three-fold:

  • To assess program effects on household outcomes (such as consumption, asset accumulation and poverty reduction) and individual outcomes (such as employment and education);
  • To identify whether the identified household or intra- households effects vary by the gender of the program participant;
  • To estimate the cost structures of Grameen Bank and examine whether it is self-sustainable.

The paper concludes the following:

  • By lending to the poor and especially to women, Grameen Bank has shown that the poor are creditworthy;
  • Grameen Bank needs to be more cost efficient;
  • Higher economic growth is necessary to sustain the economic graduation of both Grameen Bank and its borrowers;
  • Grameen's Bank financial model, based on social intermediation, is replicable in any context with suitable modifications based on innovation and experimentation.

About this Publication

By Khandker, S.
Published