Microfinance

Policies and regulations

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The Grameen Bank in Bangladesh 

The Grameen Bank is a pioneering the possibly most well-known micro-finance institution in Asia, if not the world. It was started in 1976 and aims to provide small loans to households on favourable terms, notably a low interest rate. In 2009 its total revenue was 209 million USD. It is considered a success due to its low default rate, ability to keep interest rates low and borrowing terms flexible, and it does not rely on international donor funding or national government contributions and is therefore totally self-sufficient.  

In 1984 the Bank introduced housing loans. These are perceived as very attractive by low-income households and consequently there has been consistently high demand. The loan period is five years, repayments are weekly and the interest rate is fixed at eight per cent. Between February 2010 and January 2011, 7,215 houses were built using the loans, which amount to 1.16 million USD. The houses are modest yet flood resistant, important in Bangladesh’s river delta geography. With the loan, a household buys a kitset house: four pre-cast concrete columns, a sanitary slab and 26 corrugated iron roof and wall sheets and they construct it themselves. So far 130 million USD has been dispersed in housing loans. Title is invested with the borrower and in 96 per cent of cases this is a woman.  

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