Labor Management

Labour and Management in Development

EThe secrets of success: theGrameen Bank experience inBangladesh

Abu Elias Sarker99-2

Asia Pacific Press at theAUSTRALIAN NATIONAL UNIVERSITY

http://ncdsnet.anu.edu.au

east asia

JourJourJourJourJournalnalnalnalnal

mdLVolume 2, Number 1

Labour and Management in Development Journal, Volume 2, Number 1 2© Asia Pacific Press 2001

The secrets of success Abu Elias Sarker

Abbreviations

HYV high yield variety

NGO non-governmental organisation

© Asia Pacific Press 2001

This work is copyright. Apart from those uses which may be permitted under the CopyrightAct 1968 as amended, no part may be reproduced by any process without written permissionfrom the publisher.

ISSN 1443–6698

ISBN 0 7315 3670 3

Abu Elias Sarker is currently Assistant Professor of Public Administration at the Universityof Sharjah, United Arab Emirates. He has also worked as a faculty member at the Universityof Dhaka, Bangladesh and University of South Pacific, Fiji Islands. His areas of researchinterest include public sector reform, state and rural development, NGOs and rural serviceprovision, governance and development, and decentralisation and local government.



Bangladesh, like many developingcountries, has a vast rural society whichaccounts for about 85 per cent of the totalpopulation. The majority of the ruralpopulation, particularly women, is subjectedto severe poverty, inequalities andunemployment. In spite of decades of stateintervention, no substantive changes in thesocioeconomic conditions of the rural poorhave taken place. This paper argues thatstate development agencies have inherentinstitutional constraints which deny poorpeople access to development resources.Thus, on account of the constant failure ofthe state to act in favour of poor people,alternative institutional frameworks are nowbeing adopted for rural development. TheGrameen (Village) Bank is a well-knowninstitutional framework that has achievedconsiderable success in improving thesocioeconomic conditions of the rural poor,particularly women, in Bangladesh. Basedon the author’s personal experience as wellas secondary materials, this paper identifiesorganisation and management as criticalvariables in the process of ruraldevelopment in Bangladesh. The mostimportant factors behind the splendidperformance of the Grameen Bank are itsunique decentralised organisationalstructure, client-centred delivery system,vision, management culture, and humanresources management.

Most countries in the developing worldhave unequivocally accepted the reality thatno meaningful development can take placein any country unless the standard of livingof the poor is raised. This idea came to thefore because purely growth-orientedstrategies failed to improve the livingconditions of the majority of the people

significantly. It is quite evident that theadoption of the technocratic growth strategy,which was basically directed towardsindustrialisation and held little regard forthe rural economy, resulted in expandingbureaucracies and marginalisation of therural poor. Profound inter-regional andinter-class disparities were observed inmany developing countries (Griffin andKhan 1982; Lea and Chaudhri 1983). Asgross national products increased so didpoverty, inequality and unemployment.Since the early 1970s, however, internationalagencies and national governments havebegun to adopt a new policy framework(Chenery et al. 1974). Harsh realitiesprompted many national governments tochoose policies, strategies and approachesto rural development, that could helpameliorate the often appalling livingstandards of the rural poor.

Bangladesh has been striving to bringabout improvements in the quality of life ofthe rural poor. Many different institutionalapproaches have been pursued over theyears to promote rural developmentactivities (Wood 1984). These approachesand developmental bureaucracy have failedto ensure that the poor can access statedevelopment resources. Since colonial times,local government offices have done verylittle to stimulate rural development.Instead, the rural élites, having asserted theirdominance over local government offices,have misappropriated public resourcesearmarked for rural development. Similarly,various local-level nation-buildingestablishments have not had any substantiveimpact (Feldman and McCarthy 1984; Sarker1991). Increasing attention is now being paidto alternative institutional frameworks that



have established their credibility instimulating rural development inBangladesh in recent times (Chowdhury1989; Asian Development Bank 1993; Sarker1996; Rahman, M.H. 1999; World Bank 1996).

The Grameen Bank is an alternativeinstitutional framework for ruraldevelopment in Bangladesh, which hasachieved considerable success in improvingthe socioeconomic conditions of the ruralpoor. This bank is exclusively for poorpeople and it is directly owned by them aswell. The government has very little materialstake in the bank—it owns 10 per cent of thebank and has three nominated members onthe Board of Directors. The bank itself enjoysfull autonomy in discharging both its policyand operational responsibilities. Untilrecently, however, the Grameen interventionwas still considered an activity of the state,not the poor.

This article analyses the factorsunderlying the success of the Grameen Bank,paying particular attention to organisationaland management issues. It finds that theGrameen Bank’s unique decentralisedorganisational structure, client-centreddelivery system, vision, managementculture, and human resources managementare the most important factors in the bank’ssplendid performance.

The Grameen Bank model of ruraldevelopment

The Grameen Bank (henceforth abbreviatedas Grameen) was the brainchild of ProfessorMuhammad Yunus. He observed thatconventional banking practices had in-builtconstraints and were aimed only at those

who were already well off. In this context,Professor Yunus contemplated an alternativeinstitutional framework that could be usedto raise the wellbeing of impoverishedsections of society (Yunus 1990; 1993; 1994a;1994b). After experimenting on a personalbasis, he undertook a small research projectin a village near the Chittagong University.The project went on to test the hypothesisthat, if financial resources were madeavailable to the poor at reasonable terms andconditions, the poor could generateproductive employment without externalassistance. The pilot experiment wassuccessful and the project was extended toother areas. In 1983, a government ordinancetransformed the project into the GrameenBank, a specialised financial institution forthe rural poor (Yunus 1994a; Hossain 1988).

The Grameen Bank is now a very distinctpoverty-alleviation organisation aimedexclusively at the poor. By definition, it ispurely a bank and provides banking servicesto the poor. Although it is a poverty-alleviating organisation, it is designed to runon commercially viable terms. It extendscredit to the poor to invest in productiveareas such as processing and manufacturing,agriculture and forestry, livestock andfisheries, services and trade. Although itsprimary responsibility is to provide credit,it has involved itself in different socialdevelopment activities as well. Grameen’s‘Sixteen Decisions’ signify its concern forsocial development (see Appendix A). Infact, one author has called the GrameenBank a socially conscious capitalistenterprise (Bornstein 1996:344). Briefly, theGrameen Bank’s main objectives are to

• extend banking facilities to poor men andwomen.



• eliminate the exploitation by money-lenders.

• create opportunities for self-employmentamong Bangladesh’s vast and under-utilised manpower resources.

• bring disadvantaged people within thefolds of an organisational format thatthey can understand and operate,helping them find sociopolitical andeconomic strength through mutualsupport.

• reverse the vicious circle of ‘low income,low savings, low investment, lowincome’, changing it into an expandingsystem of ‘low income, credit,investment, more income, more credit,more investment, more income’ (N.Rahman 1993:70–71).

As of December 1999, 1,149 GrameenBank branches were operating in 39,706villages with 67,691 centres. There were2,357,083 members, of which 2,234,181 werefemale and 122,902 male (Grameen Bank1999). Thus, the majority of the members arefemale. This is not surprising—policymakers at the Grameen Bank haverepeatedly emphasised the importance ofinvolving poor rural women in productiveactivities. Among poor people, women havegenerally suffered the most (Government ofBangladesh 1995). In December 1999, thecumulative amount of money disbursedstood at US$2802 million. The amount ofhousing loans disbursed by then wasUS$184 million, and the total savings in theGroup Fund were US$209 million. Therecovery rate on Grameen Bank loans isoutstanding—almost 98 per cent. Grameenhas now become a gigantic institution withnearly 13,000 employees working atdifferent levels.

The impact of Grameen Bankintervention

Some scholars have raised concerns aboutthe efficacy of the Grameen model to ensurethe economic emancipation andempowerment of women (Kabeer 1995;Todd 1996; Wood 1994; Goetz and Gupta1995). Despite such criticisms, there are clearpositive impacts of Grameen interventionupon the economic as well as sociopoliticalcondition of the rural poor.

A significant aspect of Grameenintervention is the involvement of womenin self-employment. Hossain’s study (1988)shows that the average worker wasemployed for six days per month prior tojoining the bank, but access to Grameenactivities increased their employment to 18days per month. Other studies corroboratethis finding (Bangladesh Institute ofDevelopment Studies 1985; Todd 1996).Along with employment, productivity hasalso increased. Alam (1988) argues thatGrameen members’ increased productivitywas due to their adoption of High YieldVariety (HYV) crop production.

Daily agricultural wage rates have alsoincreased by 30–40 per cent in the areas ofhigh Grameen and other NGO activity(Safilios-Rothschild and Mahmud 1989).Grameen members’ contribution to nethousehold income is more than 50 per cent.More than half of the women surveyed havebeen able to pull their families out of poverty(Hossain 1988; Todd 1996). Once out of thepoverty cycle, these women focused on assetbuilding. This was further augmented by theprovision of housing loans to the poor.Housing is not just a social investment, it isalso a site for production, processing and



storage, thereby contributing to increasedproductivity. Moreover, these housing loansprovide women with legal rights to the landand the house (Islam et al. 1989).

Enhanced economic wellbeing has alsoprompted the women to get involved insocial development activities (Khandker etal. 1995). It is no surprise that a wide rangeof tangible benefits have been found in theareas of health and nutrition, manifested inadequate calorie intake, higher childimmunisation rates, increased use of familyplanning practices and so forth (Rahman etal. 1993; Bornstein 1996; Todd 1996; Schulerand Hashemi 1994; Schuler et al. 1997;Hossain 1988).

Grameen Bank intervention has alsoreduced its members’ dependence upon therural power élites. First, they no longer needto go to the rich for economic help. Second,they do not need the mediation of the ruralélites in dealing with Grameen, which theyneeded in the past when interacting withgovernment offices. Third, since theirparticipation in state-sponsored ruraldevelopment programs is minimal, they cankeep themselves aloof from the formalpower élites in the rural areas. Fourth, whenpoor people are less dependent on the ruralélites, they can exercise their voting rightsindependently. It is apparent that theexpansion of Grameen Bank and other non-governmental organisation (NGO) operationsshould have a positive impact upon localgovernance in general and the rural powerstructure in particular (Wahid and Rahman1993; Sarker and Rahman 1999).

The status of women has also beenimproved through their fruitfulparticipation in Grameen activities. Mizan

(1993) has shown that the opportunitiescreated by the Grameen Bank have made amajor contribution to women’s power infamily decisionmaking. There is alsoevidence that women’s participation ingroups gives them confidence and support,which enables them to assert their rights toeconomic assets (Safilios-Rothschild andMahmud 1989). Ahmed (1985) foundevidence that physical violence and otherverbal abuse against women decreased as aresult of Grameen Bank activity. HelenTodd’s empirical study reveals that GrameenBank intervention has helped develophappy partnerships between husband andwife in terms of decisionmaking regardingfamily affairs (Todd 1996). Schuler andHashemi’s (1994) study reveals increasedmobility and decisionmaking capacityamongst Grameen Bank members. If we putall these variables together we can say thatGrameen Bank intervention has given manywomen a sense of empowerment (Hashemiet al. 1996; Counts 1996).

Grameen’s organisational system

The main factor behind the Grameen Bank’ssuccess has been the way it is organised andmanaged. Grameen’s organisational systemand associated practices have evolved overthe years in response to the specificdevelopmental needs of the target group(Shams 1992). There are fundamentally twoaspects of the organisational intervention ofthe Grameen Bank—the delivery system andthe receiving system. At the receiving end,there are groups and centres, and theGrameen Bank’s own delivery systemcomprises branch offices, area offices, zonaloffices and the head office.



Relations between the group and centreremain the most important institutionaldevice for organising the operating units tocarry out designated activities. Organisingthe groups and federating them into centresare considered the building blocks of theGrameen receiving system. Interestedpersons, poor people with no assets or assetsnot exceeding the value of half an acre ofcultivable land (per family), are asked toform groups of five like-minded people ofsimilar economic standing who enjoymutual trust and confidence. A group canhave only one person from any particularhousehold and relatives must not be in thesame group. Groups have either male orfemale members, not both. The groupmembers select a chairperson and asecretary, and these positions rotate amongmembers on a yearly basis so that allmembers have the learning experience thataccompanies the responsibility of thesepositions. The chairperson is responsible fordiscipline in the group and for supervisionof loan utilisation by the members. Membersconduct business with a bank worker,through the chairperson, at weekly meetingsthat all members are obliged to attend.

A centre is a federation of a number ofgroups. Weekly meetings are held at thecentre level. The group chairpersons electthe chief and the deputy chief of the centrefor a one-year term. This person is requiredto ensure attendance at the general meetings,payment of instalments, and overalldiscipline of the centre members. Bankworkers attend the centre meetings, and allbank business is conducted openly in frontof the members (Hossain 1993:13).

While the organisation of the poor ismainly at the village level, the formalapparatus of the Grameen Bank operates atdifferent levels right from the village to thecapital. Unlike government organisations,however, it basically has a decentralisedstructure, which has been developed overthe years through trial and error in responseto the needs of the clientele.

At the bottom of the Grameen hierarchyis the branch office, which is considered themain operational organ of the bank. It isbasically a profit-responsibility unit. Itserves a cluster of 120–150 centres. It isstaffed by a manager, six or seven workers,two to three trainee workers and anaccountant. The second tier is the area office,which looks after the operations of about 10–15 branch offices. The zonal office, locatedin the district headquarters, is at the top ofthe hierarchy at the field level. It is a supportorganisation and it looks after the activitiesof the area offices. The zonal manager isresponsible for handling accounts andmanaging funds and has also assumedresponsibility for monitoring, evaluatingand supervising the social developmentprograms.

The head office is a secretariat orinformation-clearing house. It is responsiblefor monitoring and evaluation, research anddevelopment, supervision of training, andsimilar activities that benefit from access toinformation from different operational areas.

The 1986 amendment of the GrameenBank Ordinance provides for a board ofgovernors composed of 13 members—nineselected from among the borrower-



shareholders and four appointed by thegovernment. The board approves bankpolicies and serves as the link between thebank, the Ministry of Finance, and othergovernment organisations.

The Managing Director is the chiefexecutive of the bank. The ManagingDirector is responsible for the overallimplementation of the policies and has tomaintain close contact with variousdepartmental heads in the head office andzonal managers to assist in formulation andchange of policies. In an emergingorganisation like the Grameen Bank,however, the Managing Director often doesmore than what his job descriptionstipulates. In the Garmeen Bank, theManaging Director pays periodic visits tothe field at different levels, attendsworkshops, and also maintains close contactwith key figures in the government.

Mode of operations

Grameen Bank has developed distinctivepractices in delivering its services to thepoor. There are specific eligibility criteria,which exclude the non-poor from accessingGrameen Bank services. In delivering credit,priority has been given to women, who areconsidered the most vulnerable groupamongst the poor. The delivery system hasbeen designed to meet the diversesocioeconomic needs of the poor.

Unlike the bureaucratic governmentmachinery where the clients have to comefor services, Grameen officials go the clients.When a group is formed, it is kept underobservation for a month by a bank workerto see whether the members conform to therules and norms set by the Grameen Bank.

Then the members attend a training sessionof at least seven days given by the bankworkers. During the training session, themembers are apprised of different aspects ofGrameen activities, including the rules andregulations of the bank, responsibilities ofthe chairperson, the centre chief and others,group savings, insurance, learning to sign,and social development activities. When thebank worker is convinced that the membersunderstand the operational aspects of thebank, the group is given formal recognition.Not all members are given a loan at thattime. Only two members are given loans. Ifthey pay the instalments regularly duringthe observation period of 6–8 weeks, twoother members are also given loans. Thechairperson is the last person to receive aloan. The procedure is simple and takes only1–2 weeks from the initiation of loanproposal to the disbursement of loan money.The borrowers are not burdened withcomplicated forms to fill out. Loan sizes aremodest, ranging from taka (the Bangladeshicurrency) 3,000 (US$75) to taka 10,000(US$250). The borrowers invest the loan inthe area of their choice. It has been foundthat, in terms of the skills and the marketfor inputs and products, the borrowers aregenerally already familiar with the activitiesin which they want to invest. Consequently,the bank workers do not have to provide anysort of training in relation to the choice ofbusiness. But there is a strict monitoringprocess. The group chairperson and bankworker monitor borrowers to see whetherthey are utilising the money properly.

The centre is the main place whereimportant organisational activities takeplace. Several groups meet together weekly,and bank workers also attend. All loan



proposals are openly discussed, repaymentsare made, and compulsory saving depositsare accepted at the weekly meetings (Barua2000).

No collateral is required for a loan. Whatis required is compliance with the rules andregulations of the bank. The loan has to berepaid in 50 weekly instalments. Borrowersare not eligible for more loans if they havenot paid off their current one. Each membermust save one taka every week in additionto 5 per cent of the loan amount, and thesavings are accumulated in the group fund.The total amount is deposited with theGrameen Bank at 8.5 per cent annualinterest. A member can borrow from thegroup fund for consumption at times ofsickness or social ceremony. With theconsent of the group, group funds can alsobe used for further investment. The loan isinterest free. When leaving, borrowers canwithdraw the total savings but not thecompulsory contribution of 5 per cent of theloan amount, this is non-refundable and ispopularly known as group tax. The groupfund is also a mini-bank. It has grown overthe years and today represents a substantialresource for Grameen and its members. Themembers also have to pay a fixed charge oftaka 5 per thousand for loans in excess ofone thousand taka (Barua 2000).

It is unusual in general banking practiceto provide loans without any collateral. Thiswas the challenge for the architects of thebank—ensuring that banking services canbe provided without asking for collateral.Material collateral has been replaced bysocial collateral. Here the group acts as thecollateral for the loan. Thus, as long as thegroup exists, there is every chance that loans

will be recovered. Members faceconsiderable pressure from other groupmembers when they fail to pay theirinstalments to the bank. This is becausefailure to pay by any member will directlyaffect the ‘fortunes’ of the other members ofthe group. And, by extension, any defaultin payment by a group will also directlyaffect the centre to which group belongs. Ifa member has a genuine problem inrepaying instalments, other members canprovide assistance. If the entire group facesthe similar situation, the centre takes theburden (Barua 2000).

The distinctiveness of Grameenorganisational intervention

The Grameen Bank has generated a greatdeal of enthusiasm among academics,development practitioners and internationalaid agencies. Following previousexperiences of rural development inBangladesh, many argue that small-scaleactivities, close supervision, the dedicationof the bank staff and, above all, theleadership of the founder, MuhammadYunus, are the determining factors for theapparent success of the bank. I have,however, tried to determine the factorsbeyond this orthodox view. Grameen’sunique organisational and managementpractices and enormous institutionalstrength have contributed most to its successin delivering services to the poor. Grameen’sunique strategic positioning has helped. Itsorganisation and management are carriedout differently from to those of its rivals,such as government commercial banks andother non-governmental organisations. Itsvision, organisational structure,



management culture and human resourcepractices are particularly noteworthy in thisrespect.

VisionThe most important aspect of Grameenintervention is that the vision of a poverty-free society expounded by the Grameenleadership has been fostered among theimportant stakeholders—management,operating staff and bank members. They allshare the same vision and values. This visionhas enormous impact upon theorganisational functioning of the system. Allthe stakeholders are convinced that povertyis a man-made phenomenon exacerbated bythe prevailing institutional forces. Povertycould be eradicated if concerted efforts weretaken. This particular vision is really thedriving force for the whole Grameen familyto work with dedication, mutual trust, asense of accountability and creativity.

Decentralised structureGrameen’s organisational structure is highlydecentralised. Authority is devolved to thefield level where the actual work of planningand implementation takes place. The headoffice seldom interferes in plans devised bythe field offices. The field offices are alsoencouraged to send monthly reports directlyto the Managing Director summarisingdifferent aspects of their work. TheManaging Director, with the aid of othercolleagues, reviews these reports andpublishes significant issues, concerns, andsuggestions identified by them in Grameen’sinternal monthly magazine, which reachesall bank officials and workers (Auwal 1996).These methods of communication providefora for dialogues that seek to empower

Grameen employees as responsive,committed, and productive teams (Barzelay1992). On the other hand, Grameen membersenjoy substantial latitude in utilising funds,with little control over their productionactivities by management. The structure ofcontrol is essentially decentralised,participative, and democratic; it emerges notfrom the higher echelon of the organisationbut from the concerted actions of members,based on the philosophy, values or corporatevision provided by the top management(Auwal 1996).

Management cultureThe bank has developed a uniquemanagement culture, based on people’scapacities, learning and innovation,transparency and openness, honesty and soforth (Holcombe 1995). This has provided aframework through which all organisationalactivities are regulated.

The groups and centres have their ownidentity. At the same time, they work withthe Grameen bureaucracy in a veryintegrated way. An institutional fusion hasemerged between the groups and centresand Grameen’s management.

Trust of staff and clients has allowed themanagement to devolve basicdecisionmaking authority to operationallevels, of which both staff and clients are theessential parts. Grameen organisationalboundaries are permeable; clients areeffectively brought into the organisation tomonitor and be held accountable for loansand other functions. The head office bearslittle responsibility except for strategic issuessuch as basic policies and research anddevelopment (Jain 1996; Holcombe 1995).



Grameen’s belief in openness andtransparency is manifested in its actions. Allbanking transactions are carried out in frontof the clients and bank staff. This is madepossible by both the formal and informalinformation systems. Both the systemsoperate in upward and downwarddirections.

Human resource managementGrameen’s success owes much to theoutstanding performance of its personnel.There is high level of staff motivation, andthis is achieved largely through therecruitment and training process. From thebeginning, personnel are briefed in detail onthe necessity of hard work, staying in therural areas, honesty, and sincerity. Rigorousfield-based training is also given. It has beenfound that a large number of people quitduring these stages, and the bank is thus ableto retain those who are really committed.They know they will have to work hard,receiving the same salary as theircounterparts in government organisationsbut under far greater pressure. Moreimportantly, unlike their counterparts, theywill not be able to misappropriate resourcesfor personal aggrandisement (Bornstein1996; Rahman 1993; Holcombe 1995).

Management sustains the motivation foreffective and uncorrupted performanceunder difficult rural conditions using avariety of formal and informal rewards—recognition of work, opportunities for rapidadvancement, pride in being part of anorganisation that performs valued andinternationally-recognised work, and asense of belonging to a distinctive group(Bornstein 1996; Todd 1996; Holcombe 1995;

Hossain 1988). Along with this, bothemployees and beneficiaries of Grameen cansense empowerment (Hashemi et al. 1996).Democratic leadership practices are in placewith the rotation among members of centreand group leadership. At the other end, inthe Grameen organisation system, theclassical hierarchical principle has beenreplaced by the modern team approach(Hossain 1988; Rahman and Islam 1993;Holcombe 1995).

InstitutionalisationIt is interesting to note that, within a shortspan of time, the Grameen Bank hasachieved most of the features of aprofessional institution. As an institution,the Grameen Bank is not the product of ablueprint approach, but of an incessantprocess of institution-building in responseto the demands of the political, social andcultural environment of rural Bangladesh.It has continually followed a learning-process approach, allowing it to relateinnovation to the growing structure ofGrameen. Institutionalisation has beenmade possible because of

• the compatibility of organisationalobjectives and the needs of the targetgroup

• well-tested, easily replaceable operatingsystems capable of achieving theobjectives.

Like many other professional institutions,it has developed a unique approach torunning the system. Within the organisation,a professional managerial approach isemphasised, for which it has been possibleto develop managerial leadership at alllevels of Grameen management. The



managerial structure is well-knit but notmonolithic, remaining very flexible andadaptive. Management processes, such asdecisionmaking, communication andleadership are all practiced contingently,disregarding conventional wisdom. TheBank’s managerial personnel are freshgraduates without any work experience.Professionalisation takes place throughextensive training and executivedevelopment. It aims to combine theoreticalknowledge, practical management skills forapplication of that knowledge, and a uniqueset of professional values to motivate thestaff in accomplishing a challenging task(Shams 1992). Grameen managers atdifferent levels have already demonstratedthat they are capable of planning, organisingand implementing Grameen’s developmentactivities independently. They have notrequired any assistance from the head office.This suggests that Grameen is on soundinstitutional footing and is likely to besustained. Rahman, in an interesting study,has found that the leadership, doctrine,program, resources and internal structure soneeded to be an institution are all present inthe Grameen system (N. Rahman 1993).

Of course, the issue of sustainability is anintricate one. The experience so far isevidence of the sustainability of Grameenas a poverty-alleviation institution. Since itis meant for the poor, institutionalsustainability ultimately depends on theircollective risk-bearing capacity. Poorpeople’s economic well-being,empowerment, political consciousness,organisational strength and organisedactions are the determinants of the bank’sultimate sustainability. The poor own about

90 per cent of Grameen’s capital. Themajority of the board members are fromamong the poor. They will becomeincreasingly responsible for managing thebank’s policies. Once they begin to asserttheir rights of ownership, policies, programsand projects will further enhance theinstitutional strength of the bank and thecollective security of the shareholders(Shams 1992). More importantly, Grameenappears to have contributed to localinstitution-building, thus closing the gapbetween the state and local society (Snow1999). In a sense, its institutional success isa significant step forward for reinventinggovernment in Bangladesh (World Bank1996; Government of Bangladesh 2000;Osborne and Gaebler 1992).

Conclusion

This article has specifically paid attention tothe determinants of success of the GrameenBank with particular reference toorganisation and management. It is quiteevident that the rural socioeconomic andpolitical realities in Bangladesh areproblematic. Low productivity, inequality inthe ownership of the means of production,unequal access to public resources,subordination of women, dominance ofusury capital and intricate power relationsbetween the rich and poor are the featuresof life in rural Bangladesh. State interventionhas done very little to ameliorate the livingconditions of the rural poor in general, andwomen in particular. The state’s incapacityand pressure from international donoragencies have encouraged the adoption ofalternative institutional frameworks in the



rural development process. The GrameenBank, a purely autonomous financialinstitution for the poor, came into being in1983 after a successful pilot project. It startedwith the simple idea that the rural poor canimprove their socioeconomic conditions ifthey are provided with financial resources.In time, it has been proven that bankingservices can be delivered to poor people. Therural poor, particularly women, haveprospered. Grameen has developed aunique organisational and managementsystem—the main factor in its success. Awell-knit delivery system coupled with aflat, participatory receiving structure hasmade Grameen quite comprehensible to themembers. The Grameen Bank is basically adecentralised, participatory organisationwhere both the service providers (operatingstaff of the bank) and the recipients (bankmembers) are actively involved in differenttypes of activities. Its modus operandi isdevoid of any bureaucratic complexities. TheGrameen Bank has developed a vision, andthis vision has been successfully fosteredamong the important stakeholders.Grameen’s management culture—based onpeople’s capacities, learning and innovation,transparency and openness and honesty—remains an important cornerstone infostering trust and stimulating performance.Finally, the Grameen Bank has demonstratedits potential to become a sustainableinstitution championing the cause of therural poor.

References

Ahmed, M., 1985. Status, Perception,Awareness and Marital Adjustment of RuralWomen: the role of Grameen Bank, GrameenBank, Dhaka.

Alam, M., 1988. ‘Special employmentprograms in Bangladesh: an evaluationof major schemes’ in M. Muqtada (ed.),The Elusive Target: an evaluation of targetgroup approach to employment generation inrural Asia, International LabourOrganisation, Rome:37–78.

Asian Development Bank (ADB), 1993. AnAssessment of the Role and Impact of NGOsin Bangladesh, Asian Development Bank,Dhaka.

Auwal, M.A., 1996. ‘Promotingmicrocapitalism in the service of thepoor: the Grameen model and its cross-cultural adaptation’, The Journal ofBusiness Communication, 33(1):27–42.

Bangladesh Institute of DevelopmentStudies (BIDS), 1985. Rural DevelopmentStudy 1985, Bangladesh Institute ofDevelopemtn Studies, Dhaka.

Barua, D.C., 2000. ‘The creation of enablingconditions for the poor: the experienceof Grameen Bank’, Paper presented at theMelton Foundation Alumni’sInternational Conference organised byMelton Foundation, Berlin, March 7–13.

Barzelay, M., 1992. Breaking ThroughBureaucracy, University of CaliforniaPress, Berkeley.

Bornstein, D., 1996. The Price of a Dream,Simon & Schuster, New York.

Labour and Management in Development Journal , Volume 2 , Number 1 14© Asia Pacific Press 2001


Buss, T.F., 1999. ‘Microenterprise ininternational perspective: an overview ofthe issues’, International Journal ofEconomic Development, 1(1):1–28.

Chowdhury, A.N., 1989. Let Grassroots Speak,University Press Limited, Dhaka.

Chenery, H., Ahluwalia, M.S., Bell, C.L.G.,Duloy, J.H. and Jolly, R. (eds.), 1974.Redistribution with Growth, OxfordUniversity Press, London.

Counts, A., 1996. Give Us Credit: howMuhammad Yunus’s micro lendingrevolution is empowering women fromBangladesh to Chicago, Random House,New York.

Feldman, S. and McCarthy, F., 1984.‘Constraints challenging the cooperativestrategy in Bangladesh’, South AsiaBulletin, 4(2).

Goetz, A. and Gupta, R.S., 1995. ‘Who takesthe credit? Gender, power and controlover loan use in rural credit programsBangladesh’, World Development,24(1):45–63.

Government of Bangladesh, 1995.Bangladesh’s Country Paper on theAdvancement of Women to the NextCentury: equality, development and peace,Ministry of Women and Children Affairs,Dhaka.

——, 2000. Report of the Public AdministrationReform Commission, BangladeshGovernment Press, Dhaka.

Grameen Bank, 1999. Grameen Dialogue,Grameen Trust, Dhaka, October.

Griffin, K. and Khan, A.R., 1982. ‘Povertyin the Third World: ugly facts and fancymodels’, in H. Alavi and T. Shanin (eds),Introduction to the Sociology of DevelopingSocieties, Macmillan, London:236–51.

Hashemi, S.M., Schuler, S.R. and Riley, A.P.,1996. ‘Rural credit programs andwomen’s empowerment in Bangladesh’,World Development, 24(4):635–53.

Holcombe, S.H., 1995. Managing to Empower:the Grameen Bank’s experience of povertyalleviation, Zed Press, London.

Hossain, M., 1988. Credit for Alleviation ofRural Poverty: the Grameen Bank inBangladesh, Bangladesh Institute ofDevelopment Studies, Dhaka.

——, 1993. ‘The Grameen Bank: its origin,organisation and management style’ inA.N.M. Wahid (ed.), 1993. The GrameenBank: poverty relief in Bangladesh,Westview Press, Boulder, Colorado:9–21.

Islam, N., Chowdhury, A.I. and Ali, K., 1989.Evaluation of the Grameen Bank’s RuralHousing Program, Centre for UrbanStudies, University of Dhaka, Dhaka.

Jain, P.S., 1996. ‘Managing credit for the ruralpoor: lessons from the Grameen Bank’,World Development, 24(1):79–89.

Kabeer, N., 1995. Reversed Realities: genderhierarchies in development thought, Kali forWomen, Delhi.

Khandker, S.R., Khalily, B. and Khan, Z.,1995. Grameen Bank: performance andsustainability, World Bank DiscussionPaper No. 306, The World Bank,Washington, DC.

Lea, D.A.M. and Chaudhri, D.P., 1983.‘Introduction’, in D.A. Lea and D.P.Chaudhri (eds), Rural Development and theState, Methuen, London:1–37.

Maskerenhas, R.C., 1993. ‘Explainingsuccess in South Asian ruraldevelopment: the importance of routine’,Public Administration and Development,13(5):475–88.



Mizan, A.N., 1993. ‘Women’s decision-making power in rural Bangladesh: astudy of Grameen Bank’ in A.N.M.A.Wahid (ed.), 1993. The Grameen Bank:poverty relief in Bangladesh, WestviewPress, Boulder, Colorado:127–53.

Osborne, D. and Gaebler, T., 1992. ReinventingGovernment: how the entrepreneurial spiritis transforming the public sector, Addison-Wesley, Massachusetts.

Rahman, A., 1999. Women and Microcredit inRural Bangladesh: an anthropological studyof Grameen Bank lending, Westview Press,Boulder, Colorado.

—— and Islam, M.M., 1993. ‘The generalperformance of the Grameen Bank’, inA.N.M. Wahid (ed.), 1993. The GrameenBank: poverty relief in Bangladesh,Westview Press, Boulder, Colorado:49–68.

——, Wahid, A.N.M. and Islam, F., 1993.‘Impact of Grameen Bank on thenutritional status of the rural poor’, inA.N.M. Wahid (ed.), 1993. The GrameenBank: poverty relief in Bangladesh,Westview Press, Boulder, Colorado:97–126.

Rahman, M.H., 1999. Bangladesh NationalInstitutional Review: central and localgovernment. A report for the World Bank,Dhaka as part of the Bank’s NationalInstitutional Review Project, The WorldBank, Dhaka.

Rahman, N., 1993. An Examination of NGOsand Their Poverty Alleviation Strategies inRural Bangladesh, Honours Thesis,Cornell University.

Safilios-Rothschild, C. and Mahmud, S.,1989. Women’s Roles in agriculture: presenttrends and potential for growth, UnitedNations Development Programme andUNIFEM, New York.

Sarker, A.E., 1991. State Intervention in RuralDevelopment: a case study of Bangladesh,unpublished PhD Thesis, University ofLiverpool, Livepool.

Sarker, A.E., 1996. Role of Non-governmentalOrganisations in Rural Development: theBangladesh case, Centre of South AsianStudies Working Paper 1, Monash AsiaInstitute, Monash University, Melbourne.

—— and Rahman, M.H., 1999. ‘Agrarianstructure and the state in Bangladesh’,Social Science Review, 16(2):1–18.

Schuler, S.R. and Hashemi, S.M., 1994.‘Credit programs, women’sempowerment and contraceptive use inrural Bangladesh’, Studies in FamilyPlanning, 25(2):65–76.

Schuler, S.R., Hashemi, S.M. and Riley, A.P.,1997. ‘The influence of women’schanging roles and status inBangladesh’s fertility transition:evidence from a study of credit programsand contraceptive use’, WorldDevelopment, 25(4):563–75.

Shams, M.K., 1992. Designing Effective CreditDelivery System for the Poor, GrameenBank, Dhaka.

——, 1995. ‘Governments must side withthe poor ’, Public Administration andDevelopment, 15(3):303–10.

Snow, D., 1999. ‘Microcredit: an institutionaldevelopment opportunity’, InternationalJournal of Economic Development, 1(1):65–79.

Todd, H., 1996. Women at the Center: GrameenBank borrowers after one decade, WestviewPress, Boulder, Colorado.

Wahid, A.N.M.A. (ed.), 1993. The GrameenBank: poverty relief in Bangladesh,Westview Press, Boulder, Colorado.



—— and Rahman, A., 1993. ‘The GrameenBank and the power of ruraladministrative elite in Bangladesh’ inA.N.M.A. Wahid (ed.), 1993. The GrameenBank: poverty relief in Bangladesh,Westview Press, Boulder, Colorado:155–74.

Wood, G.D., 1984. A Study of GovernmentApproaches Towards the Rural Poor inBangladesh, Dhaka, (mimeo).

——, 1994. Bangladesh: whose ideas, whoseinterests?, University Press Limited,Dhaka.

World Bank, 1996. Bangladesh: governmentthat works: reforming the public sector,University Press Limited, Dhaka.

——, 1990. Anything Wrong? Grameen Bank,Dhaka.

——, 1993. We Can Create a Poverty-FreeEnvironmentally Balanced World If WeWant It, Grameen Bank, Dhaka.

Yunus, M., 1994a. Credit is a Human Right,Grameen Bank, Dhaka.

——, 1994b. We Can Create a Poverty-FreeWorld in Our Life-Time, Grameen Bank,Dhaka.



Appendix A

The sixteen decisions1. We shall follow and advance the four principles of Grameen Bank—Discipline, Unity,

Courage, and Hard Work—in all walks of our lives.

2. We shall bring prosperity to our families.

3. We shall not live in dilapidated houses. We shall repair our houses and work towardconstructing new houses at the earliest.

4. We shall grow vegetables all the year round. We shall eat plenty of them and sell thesurplus.

5. During the plantation seasons, we shall plant as many seedlings as possible.

6. We shall plan to keep our families small. We shall minimise our expenditures. We shalllook after our health.

7. We shall educate our children and ensure that they can earn to pay for their education.

8. We shall always keep our children and environment clean.

9. We shall build and use pit-latrines.

10.We shall drink tube-well water. If it is not available, we shall boil water or use alum.

11.We shall not take any dowry in our sons’ weddings, nor shall we give any dowry inour daughters’ weddings. We shall keep the centre free from the curse of dowry. Weshall not practice child marriage.

12.We shall not inflict any injustice on anyone, nor shall we allow anyone to do so.

13.For higher income, we shall collectively undertake bigger investments.

14.We shall always be ready to help each other. If anyone is in difficulty, we shall all helphim.

15.If we come to know of any breach of discipline in any centre, we shall all go there andhelp restore discipline.

16.We shall introduce physical exercise in all our centres. We shall take part in all socialactivities collectively.

Source: Shams,K., 1995. ‘Government must side with the poor’, Public Administration andDevelopment, 15(3):303–10.

Documents

Labor Management