Compare and Contrast Between SKS Microfinance Model with the Grameen Bank Model

Compare and Contrast Between SKS Microfinance Model with Grameen Bank Model

Introduction

Grameen Bank is an organization engaged in SKS Microfinance and contributing significantly to the development of society. Its activities began in Bangladesh where the bank began providing small loans (known as microcredit) to poor people without any claim to the guarantor. The system is based on the idea that the poor are able to repay the loan plus rule capabilities that are not sufficiently utilized (Pickup, 2012). The Bank also provided standard banking services and collaborates with other companies focused on sectors such as textile manufacturing, infrastructure, telecommunications, energy, etc.

The potential of this program was reflected during the years 1976 - 79 with the help of the central bank and commercial banks, as the government supports this project in 1979 in many areas of the country. On the basis of a government decision the bank changed into an independent institution (Labarthe, 2011). Today, the bank basically owns the rural poor, who also serve. Borrower's banks own 90% of the shares, and only 10% owned by the government.

Provision of Microcredit

Microcredit system is based on the fact that the Bank provides money-member group of borrowers. If any member of the group violates the commitment, it can be very difficult to get another loan. This gives groups of borrowers' incentive to behave responsibly. There is involvement such as if a member fails to pay the debtor groups, others with a commitment not increased. Grameen Bank, in addition to providing microcredit also addresses a number of programs designed to contribute to reducing poverty. It is aimed at providing small loans to beggars, which are governed by slightly different banking rules:

Loans do not bear interest

Maturity may be arbitrarily long.

Borrower provides free life insurance

Other Initiatives of the Grameen Bank

Provide banking services to the poor

Reduce the influence of money lenders on the exploitation of the poor

Create opportunities for self-employed large numbers of unemployed villagers

Bring disadvantaged people (especially women from the poorest households) pattern some organizational structures that would understand and be able to lead themselves

Convert an existing problem model “low income = low savings and low investment “and create this model:” low income credit “injection” = more income, more savings, more investment, more income”

Building Activity - Grameen Bank

Grameen Bank has changed the standard banking practice by removing the need to guarantee the loan granted and gave rise to a new banking system based on mutual trust, creativity, participation and accountability. In January 2007, the Bank had 6.95 million borrowers, of whom 97% were women (Labarthe, 2011). This was regarded to all 2,343 branches of Banks that provides services to 75,359 villages, about 90% of all villages in Bangladesh. Positive impact on the bank's community development was observed in several independent studies conducted by foreign institutions such as the World Bank (Jayashankar, 2012).

Criticisms

Development Analyst say that the constant loans to poor people can turn into eternal debt or trap; microcredit as it stimulates spending rather than ...