Guidelines For Establishing And Operating Grameen-style Microcredit .

Transcription

GUIDELINES FOR ESTABLISHING ANDOPERATING GRAMEEN-STYLEMICROCREDIT PROGRAMSBased on the practices of Grameen Bankand the experiences of Grameen Trustand Grameen Foundation PartnersM. Nurul Alam and Dr. Mike Getubigwww.grameenfoundation.org

Grameen Foundation USA, 2010

Guidelinesfor Establishing and OperatingGrameen-style Microcredit ProgramsBased on the practices ofGrameen Bankand the experiences ofGrameen Trustand Grameen Foundation partnersMohammad Nurul Alam and Mike Getubig, with contributions from Andrea Findley,H.A. Shah Newaz, Joseph Mwangi-Kioi, and other colleagues atGrameen Bank, Grameen Trust and Grameen FoundationDesign by Lloyd Greenberg Design, LLCwww.grameenfoundation.org

Contentswww.grameenfoundation.org

ContentsList of Tables and FiguresviiiList of AnnexesxiList of AcronymsxForewordxiPreface and AcknowledgementxiiiSECTION 1: INTRODUCTION1I. Introduction1II. About the Grameen BankA. How Grameen BeganB. Grameen’s Achievements334III. The Grameen Bank ApproachA. Philosophy and ObjectivesB. An Overview of the Grameen SystemC. The Evolution of Grameen: from the Classic to the Generalized System5567IV. Worldwide Replication ExperienceA. What Do Grameen-style Programs Have in Common?88V. Conclusion911I. Introduction11II. TargetingA. Basic PrinciplesB. Examples of Cost-effective Targeting1. Grameen Bank’s “Means Test”2. The CASHPOR Housing Index and Asset Test3. SEF’s Participatory Wealth Ranking4. Grameen Foundation’s Progress out of Poverty IndexTM11111414151616III. Group FormationA. Concept of Group and its ImportanceB. Criteria for Group FormationC. Process of Group FormationD. A Special Note on the Issue of Group Joint ines for Establishing and Operating Grameen-style Microcredit ProgramsSECTION 2: BASIC CONCEPTS AND PROCESSES OF THE GRAMEEN METHODOLOGYi

E. A Word of Caution in Group FormationF. Techniques for Motivating Poor WomenGuidelines for Establishing and Operating Grameen-style Microcredit Programsii1920IV. Continuous Group TrainingA. ObjectiveB. Duration and PlaceC. Special Considerations1. Punctuality and Attendance Record2. Compulsory Savings3. Selection of Leadership4. Verification of Poverty StatusD. Core Contents of Group Training212121212122222222V. Group RecognitionA. What is the Group Recognition TestB. ObjectivesC. ResultsD. Limits to the Number of Groups2525252526VI. Establishing and Managing a CenterA. The Center and its ImportanceB. Duties of the CenterC. Factors to ConsiderD. Fixing the Time and LocationE. PlaceF. FrequencyG. Procedure and Agenda1. Timely Attendance2. Sitting Arrangements at a Center Meeting3. Formal Start of the Meeting and Attendance4. Loan, Interest and Savings Collection5. Loan Proposal Process6. Discussion on Development Issues7. Formal Meeting ConclusionH. Election of Members to Leadership PositionsI. Duties and ResponsibilitiesJ. Role of the Center ManagerK. Role of the Branch Manager26262727272829303030303131313132323434VII. Creating and Maintaining Credit DisciplineA. What is Credit DisciplineB. Creating Strong Credit Discipline1. Proper Targeting2. Good Group Formation3. Continuous Group Training4. The Verbal Contract—Attendance, Repayment and Collective Responsibility5. Thorough Group Recognition Test6. Admission of New Groups to the Center7. Center Discipline8. Strict Adherence to Loan Proposal ion.org

9. Cost-effective Loan Utilization Check10. Group Support/Pressure and Collective Responsibility11. The Sixteen DecisionsC. Supporting Strict Credit Discipline1. Transparency in All Transactions2. Management Should Provide Close Supervision, Especially of Fieldwork3. Appropriate Personnel Policies4. Monitoring and Evaluation with Follow-up Action5. Some Form of Security Net or Insurance Fund for Members in DifficultyD. Maintaining Credit . Loan Utilization Verification Policy46X. Supervision of Field OperationsA. IntroductionB. Supervision FormsC. Essential Areas of Field-level SupervisionD. Branch Manager’s Supervisory FunctionsE. Area/ Zonal Office Supervisory Functions474748485354XI. Delinquency ManagementA. IntroductionB. The Concept of SolidarityC. Common Cases of DelinquencyD. How to Deal with DelinquencyE. Delinquency Management575757585859SECTION 3: GRAMEEN BANK’S FINANCIAL PRODUCTS AND SERVICES61I. Introduction to Grameen’s Classic and Generalized Systems61II. Grameen Bank’s Loan and Savings ProductsA. Loan Products in the Grameen Classic System vs. the Generalized SystemB. The Basic Loan—Terms and ConditionsC. The Basic Loan and the Flexi-LoanD. Housing Loan1. Requirements for a Housing Loan2. Housing Design3. Types of Housing uidelines for Establishing and Operating Grameen-style Microcredit ProgramsVIII. Loan Proposal, Disbursement and Monitoring ProcessA. Loan Proposal ProcessB. Loan Approval ProcessC. Loan Disbursement ProcessD. Loan Utilization Monitoring1. The Importance of Proper Loan Utilization2. The First Phase in Loan Utilization Verification—the Role of Center and Group Leaders3. The Second Phase in Loan Utilization Verification—the Role of Grameen Managers4. A Note on the Cost-effectiveness of Loan Utilization Checks

E. Higher Education LoanF. Mircoenterprise LoansGuidelines for Establishing and Operating Grameen-style Microcredit Programsiv6869III. Grameen Savings and Pension FundsA. Personal Savings AccountB. Grameen Pension Savings (GPS)C. Loan Insurance Savings Fund (LISF)D. Fixed DepositsE. Other Voluntary Savings697071717373IV. Life Insurance75SECTION 4: GRAMEEN BANK’S SOCIAL DEVELOPMENT SERVICES77I. Introduction to Grameen’s Social Development Agenda77II. Grameen’s Sixteen Decisions77III. Programs for Promoting DevelopmentA. Special Workshops for MembersB. Education ProgramsC. Health ServicesD. Program for Destitute MembersE. Disaster Management ProgramF. Rehabilitation Fund78788082828385IV. Measuring Poverty AlleviationA. IntroductionB. Grameen Bank’s “Poverty-free Indicators”C. Grameen Foundation’s Progress out of Poverty IndexTM86868687SECTION 5: HUMAN RESOURCES91I. Introduction91II. Organizational and Staffing StructureA. Grameen Bank’s StructureB. Initial Staffing Structure in a Start-Up Program919192III. Staff Recruitment94IV. Field Staff TrainingA. GB Field Staff TrainingB. Grameen Bank Training Design959696V. Staff and Branch Evaluation ProcessA. IntroductionB. Preparing Staff Annual and Action PlansC. Monthly Staff Review MeetingsD. Quarterly Review Meetings9898989999www.grameenfoundation.org

E. Semi-Annual and Year-End Staff Performance EvaluationF. Branch Progress Report100103105105106VII. The Star System: Creating Productive Competition between Branches and Staff107SECTION 6: THE GRAMEEN BANK BRANCH ACCOUNTING SYSTEM111I. IntroductionA. The General LedgerB. The Loan Tracking System111111111II. Accounting StructureA. General LedgerB. Chart of Accounts112112112III. Types of Transactions Handled by a Grameen Bank BranchA. At the Center LevelB. At the Branch Level113113113IV. Recording and Accounting for the Various TransactionsA. Types of VouchersB. Debits and Credits (Double-Entry Accounting)C. Vouchers and the Classification of VouchersD. Voucher Preparation and ReconciliationE. Deposit and Withdrawal EntriesF. Sundry AccountG. Suspense AccountH. Grameen Bank General AccountI. DepreciationJ. Voucher and Entry Book SystemK. Weekly and Monthly Balancing114114114115115116116116117117118118VI. Forms and Formats119VII. Branch Reporting to the Head Office121VIII. Sequential Activities in the Grameen Bank Branch Accounting Process122IX. Conclusion123SECTION 7: MONITORING, REPORTING AND MANAGEMENT INFORMATION SYSTEMS125I. Introduction125II. Types of MonitoringA. Verbal Staff ReportsB. Surprise and Scheduled Field s for Establishing and Operating Grameen-style Microcredit ProgramsVI. Staff MotivationA. Staff Motivation at GrameenB. Developing Incentive Programs

C. Internal AuditsD. Periodic Written ReportsGuidelines for Establishing and Operating Grameen-style Microcredit Programsvi126126III. Branch-level Operational and Financial Reports127IV. Consolidated Operational and Financial ReportsA. Area, Zone and Head Office Monitoring and ReportingB. Report Analyses: Variance, Trend, Ratio Analyses and SEEP Frame Tool128128128V. Management Information System—an IntroductionA. What is MIS?B. Why is MIS Important?C. Prevailing Information Systems in MicrofinanceD Case for Adopting an Automated MISE. Guidelines for AutomationF. What Programs Do Grameen Bank and Other Grameen-style Microcredit Institutions Use?132132132133134135138SECTION 8: INTERNAL CONTROL AND INTERNAL AUDIT141I. IntroductionA. Internal ControlB. Internal Audit141141141II. Internal ControlsA. Administrative ControlsB. Accounting Controls142142143III. Internal AuditA. Effectiveness of Internal AuditB. Duty of Internal AuditC. Role of Internal AuditD. Necessity of Internal Audit in MFI OperationsE. Collaboration of Internal and External AuditorsF. Objectives of Internal AuditG. Other Processes of Internal AuditH. Internal Audit Techniques in MicrofinanceI. Internal Audit Scheduling and ProcessJ. Areas of Internal Audit VerificationK. Internal Audit Reports144145147148148149149149150151153155SECTION 9: BUSINESS PLANNING157I. Introduction157II. Developing a Business PlanA. Developing a Strategic PlanB. Developing an Operational Plan and Financial ModelC. Refining the Strategic and Operations PlansD. Drafting a Formal Business Plan Document157158163163163www.grameenfoundation.org

164SECTION 10: STARTING UP A GRAMEEN-STYLE PROGRAM173I. Introduction173II. Initiating the ProgramA. Identification of a Dynamic and Committed LeaderB. Initial Orientation and Exposure ProgramC. Market Research and Business PlanningD. Legal Structure and Registration RequirementsE. GovernanceF. Development of Policies and ToolsG. Staff Recruitment and TrainingH. Funding173173173174175176176178178III. Establishing a BranchA. Initial Site SelectionB. Securing Baseline InformationC. Initiating Contact with the CommunityD. Setting up the Branch Office and Field OperationsE. Branch Office OperationsF. Structure of a Grameen Bank Branch and Center179179180181183184186IV. Establishing the Head Office188V. Developing a Growth StrategyA. Growing the BranchB. Growing the Program189189190VI. iiGuidelines for Establishing and Operating Grameen-style Microcredit ProgramsIII. Business Planning at Grameen Bank

LIST OF TABLES AND FIGURESTables3.1 Overview of the Loan Products in the Grameen Classic vs. Generalized Systems3.2 Terms and Conditions of Grameen’s Higher Education Loans3.3 Overview of the Savings Products in the Classic vs. Generalized Systems3.4 Grameen Bank Savings Products5.1 Quarterly Action Plan and Implementation Report5.2 Center Manager Performance Evaluation Report5.3 Branch Manager Performance Evaluation Indicators and Scoring System5.4 Branch Manager Performance Grading System5.5 Monthly Targets and Achievement Report Format5.6 Yearly Targets and Achievement Report Format5.7 Grameen Bank’s Star Incentive System6.1 Tasks and Responsibilities of Branch Office Staff7.1 Grameen Bank Reports Generated at the Branch Office7.2 Measurement Guidelines in Variance Analysis7.3 Key Operational and Financial Ratios for Microfinance Institutions9.1 Product-Market Options9.2 Standard Annual Planning Template Used by Grameen Bank9.3 Template for a Grameen Bank Loan Officer’s Annual Plan10.1 Suggested Contents of an Operations 166169177FiguresGuidelines for Establishing and Operating Grameen-style Microcredit Programsviii2.1 Grameen Bank Loan Proposal and Approval Process2.2 Supervisory Functions of a Grameen Bank Branch Manager2.3 Grameen Bank Branch Supervision by Area/Zonal Office3.1 Main Features of the Grameen II Loan Insurance Savings Fund3.2 Flow Chart of Savings Products of Grameen Bank5.1 The Various Levels in Grameen Bank’s Organizational Structure5.2 Organizational Structure of a Start-up Program5.3 Model Organogram of a Mature Microcredit Institution8.1 Structure of an Audit Function Independent of the CEO and Line Management8.2 The Internal Audit Process Map9.1 Number of Borrowers is the Primary Driver of Grameen Bank’s Projections9.2 Annual Plan Projections Sequence at Grameen Bank10.1 Structure of a Grameen Bank Branch, Center and Group10.2 Branch Office Staffing 145152165171186188

LIST OF Annexes1.0 Recommended Reading List2.1 The Grameen Generalized System2.2 Guidelines for Case Studies of Members3.1 Field Visit Reporting Format for Area Manager/Program Officer5.1 Grameen Bank Training Questions for Field Staff5.2 Recommended Job Descriptions and Qualification Requirements for Key Staff Positions6.1 Daily Transactions Record Book6.2 A Model Chart for Voucher Preparation6.3 Master Group Register6.4 Loan Ledger Format6.5 Savings Ledger6.6 Cashbook6.7 Clean Cashbook Format6.8 General Ledger6.9 Subsidiary Ledger6.10 Consolidated Loan Disbursement and Recovery Register6.11 Dead Stock Register6.12 Salary Register6.13 Loan Passbook6.14 Savings Passbook7.1 Weekly Fund Flow Statement7.2 Statement of Loan Disbursement and Collection7.3 Attendance at Center Meetings, Savings/Installment Payments and Defaulting Loanees7.4 Monthly Affairs Report7.5 Monthly Operations Statement7.6 Quarterly Budget Monitoring Report7.7 Quarterly Plan Monitoring 4224225226227227228228229230232233234ixGuidelines for Establishing and Operating Grameen-style Microcredit Programswww.grameenfoundation.org

List of AcronymsGuidelines for Establishing and Operating Grameen-style Microcredit ProgramsxAOAMArea OfficeArea ManagerBMBranch ManagerCASHPORCredit and Savings for the Hardcore PoorCGAPConsultative Group to Assist the PoorCHICMCASHPOR Housing IndexCenter ManagerCCFFHCenter ChiefFreedom from HungerFSMAFundación San Miguel ArchangelGBGBAGrameen BankGrameen Bank ApproachGB IIGrameen Bank II or Grameen Generalized SystemGCSGrameen Classic SystemGFGrameen FoundationGCGroup ChairGPSGrameen Pension SchemeGRTGroup Recognition TestGTCGrameen Technology CenterMIFOSMicrofinance Open SourceMISManagement information SystemPOProgram OfficerPPIProgress out of Poverty IndexPWRSEFZMParticipatory Wealth RankingSmall Enterprise FoundationZonal ManagerZOZonal Officewww.grameenfoundation.org

ForwardThe last 15 or so years have seen phenomenal, worldwide growth in povertyfocused microfinance programs—those that provide credit, savings, insuranceand other related services to the poor, especially poor women. The number ofpoor clients reached by microfinance institutionswas 106,584,679 at the end of 2007, up from7,600,000 in 1997, according to the State ofthe Microcredit Summit Campaign Report 2009.While much of this growth stemmed from themassive scaling up of Grameen Bank and otherlarge-scale institutions that were establishedin the 1980s and 1990s, a significant part wasdue to the establishment of start-up programsthat subsequently scaled up to reach significantnumbers. More microfinance institutions (MFIs)are expected to be established in the coming years,as the microfinance movement gains ground. Theywill have a particularly important role to play inreaching people in underserved countriesand regions.In the past, we would invariably encourage ourpartners, and any other social entrepreneurs whocontacted us, to attend a Grameen Bank dialogueor training program. Such programs provide afirst-hand lesson about the Grameen methodologyfor poverty eradication. Those who attended theprograms have usually found the experience to beextremely valuable, inspiring and of practical value.So we pressed ahead and have now producedwritten guidelines that go well beyond anythingpreviously published in English. We were luckythat two of the first staff of Grameen Foundation,who both joined us in 1999, came with significantexperience in Grameen-style microlending. Thatexperience proved invaluable in writing theseguidelines. Muhammad Nurul Alam had worked atGrameen Bank; Dr. Mike Getubig had worked withan international organization that pioneered thereplication of the Grameen methodology in manycountries across Asia. Alam, the principal authorof these guidelines, came to us with more than16 years of experience managing both Grameenbranches and area offices. Meanwhile, Dr.Getubighad managed the first organized attempts at pilottesting the Grameen Bank approach in Malaysia,the Philippines, Indonesia, India, Nepal andVietnam, from the late 1980s to the mid-1990s,while with the Asian and Pacific DevelopmentCentre in Kuala Lumpur. During GrameenFoundation’s early years, Mike, the then managerof the newly established Grameen Bank ReplicationProgram of Grameen Foundation, asked Alamto start writing up key aspects of the Grameenmethodology, based on his experience at Grameenwww.grameenfoundation.orgxiGuidelines for Establishing and Operating Grameen-style Microcredit ProgramsOur own experience comes from the GrameenBank Replication Program (GBRP) of GrameenTrust, which was established in 1989, and GrameenFoundation, established in 1997. Our years of workwith both start-up and more established MFIshave shown us that most practitioners hunger forpractical guidance. That guidance comes in theform of further training, exposure programs, andestablished guidelines, which can help those MFIsacquire the knowledge and skills necessary tosuccessfully implement and manage theirown programs.Despite that, program graduates frequently wouldlet us know they wanted some sort of writtenguidelines, which could supplement what theyhad already learned and serve as a reference toevery aspect of the Grameen methodology. Theirfeedback helped us realize that there was a need forwritten guidelines on the Grameen methodology—despite longstanding reservations that, if used like achef might use a cookbook, they could be misusedby being taken too literally in a way that stifles localadaptation, innovation and fresh thinking.

and by using documents provided by GrameenBank. Those aspects included Grameen Bank’smethods for targeting and motivating the poor, howit forms groups and centers, its loan processingsystem, and so forth. Our colleagues at GrameenTrust helped refine the text based on their owndeep understanding of the Grameen Bank approachand how it can be applied in other country contexts.In 2005, as Alam compiled and expanded theguidelines, Grameen Foundation commissionedAndrea Findley, a Grameen Foundation consultantworking with two start-up MFIs in the DominicanRepublic that were using the Grameen approach, tohelp edit, add content and shape the material intoa more organized and complete set of guidelines.H.A. Shah Newaz, former Deputy General Managerof Grameen Bank and the current General Managerof Grameen America, contributed to writing up ofthe earlier draft in his capacity as Senior TechnicalAdvisor working with Andrea.Guidelines for Establishing and Operating Grameen-style Microcredit ProgramsxiiAfter a review of the guidelines by both theGrameen Bank and Grameen Trust, this effortheaded into the home stretch. Mike Getubig wasdeployed on a full-time basis to manage thisinitiative and see it through to completion. He spentthe next three and a half months working closelywith Alam in reviewing, revising, editing and addingcontent, all while tapping other program staff fortheir respective areas of expertise. Colleaguesfrom Grameen Bank and Grameen Trust reviewedthe drafts in detail in several stages and providedvaluable comments, editorial suggestions, andupdates of data and practices. The document younow hold is the product of those efforts. It is notperfect, by any means. But it is a good start. Aswe receive feedback from those who read anduse these guidelines in the field, we will certainlyimprove upon them in future editions.These guidelines should be useful to rank-and-fileofficers and management staff alike in employingor planning to adopt the Grameen philosophy,core values, methodology, policies, practicesand systems of providing financial and socialdevelopment services to the poor. Start-up MFIsshould find it especially valuable, but organizationsthat have been in existence for some time are likelyto glean useful ideas and tactics. It should also beof interest to donors, policy makers, academics,board members of MFIs, students and anyonewho is interested in understanding a methodologydesigned for the poor, especially poor women, tohelp them and their families move out of poverty.The Grameen Bank approach to microfinance hasbeen successfully tested over the last two decadesin more than 100 countries. That experience hasdemonstrated it to be a robust, flexible and highlyempowering system of doing business both withand for the poor in a sustainable way. This manualattempts to make the accumulated learnings moreaccessible than ever, so as to accelerate progresstowards the “poverty-free world” for which Dr.Muhammad Yunus has inspired so many of us todream and work.Alex CountsPresident, Grameen FoundationWashington, D.Cwww.grameenfoundation.orgProfessor H. I. LatifeeManaging Director, Grameen TrustDhaka, Bangladesh

Preface and AcknowledgementThis guideline was developed by the Grameen Foundation and GrameenTrust to fulfill a need to support microcredit programs seeking to learn fromthe Grameen Bank approach to develop or scale up programs to providefinancial services to the poor.Grameen Foundation is a US-based non-profit organization that provides financial, technical,technological and human resources support to poverty-focused microcredit programs. Grameen Trustis a non-profit, non-governmental organization set up by Professor Muhammad Yunus in 1989, toshare the success of the Grameen Bank approach around the world. As of October 2010, Grameen Trusthas supported 147 projects in 39 countries in Africa, Asia, the Pacific, Europe and Latin America. Theseprojects have reached almost 9 million poor borrowers and disbursed almost US 7 billion in microloans to their members.Over the years, we have been asked frequently to provide additional information on the particularsof the Grameen methodology and how it functions in the field. While we are opposed to developing“cookie cutter” microcredit programs, and instead encourage country-specific research andadaptations to the local context, we acknowledge that there is considerable value in providingguidelines on the Grameen methodology and operations to serve as inspiration for thoughtfulprogram development.Information contained in this document has been drawn from a variety of sources, includingpublications by Grameen Bank, Grameen Trust and CASHPOR, Inc. (a network of Grameen replicatorsin the Asia-Pacific region), Professor Yunus’ printed speeches and publications, training materialsobtained from Grameen Bank Training Institute, forms and formats used by Grameen Bank andexperiences of Grameen-style programs in many countries around the world.We recommend that every effort should be made to visit and receive training at the Grameen Bankin Bangladesh. There is no substitute for on-the-ground training and observation in GrameenBank branches. For a modest fee, Grameen Trust offers various International Dialogue programsthroughout the year, and training sessions for management and staff can often be arranged throughthe International Training Program. Additional visits to established Grameen-style programs in yourparticular region are also strongly s for Establishing and Operating Grameen-style Microcredit ProgramsThis document is intended to provide detailed information on the Grameen methodology and systems,including experiences from Grameen-style programs. It is intended to provide the reader with agreater depth of understanding about how the methodology works in terms of targeting the poor;group and Center formation; staff recruitment, training, and supervision; establishing and managinga branch; and the development of the microfinance institution as a whole. Practitioners, trainers,development workers, donors and academics should find the guidelines helpful in understanding theGrameen approach to microcredit as a tool for poverty reduction.

So many people have contributed to the development of these Guidelines over the years. MohammedNurul Alam wrote most of the contents of the document, capitalizing on his 16 years of work atGrameen Bank and nine years at the Grameen Foundation as Technical Officer. Mike Getubig,Grameen Foundation Senior Program Advisor, managed and supervised the final stages of thedevelopment of the Guidelines, edited the entire manuscript and contributed substantially to thewrite-up of Sections 2, 5, 7, 9 and 10, drawing on his 23 years of experience working with Grameen-styleprograms around the world. Joseph Mwangi-Kioi, the Grameen Foundation’s Director of Monitoringand Evaluation, contributed Sections 6 and 8 in collaboration with the main author. Andrea Findley,former Grameen Foundation Country Representative in the Dominican Republic, along with H.A.Shah Newaz, former Senior Technical Advisor in the Dominican Republic and current GeneralManager of Grameen America, contributed to the development of the draft in the early stage. SharmiSobhan and Sashi Selvandran edited the initial drafts of the first few sections of the document at theearliest stage of its development.We are particularly grateful to Dipal Barua, Grameen Bank Deputy Managing Director, and ProfessorH.I. Latifee, Managing Director of Grameen Trust, for taking the time to review the manuscript,despite their busy schedules, and for providing invaluable comments, corrections and suggestions forimprovement. We are grateful to Nurjahan Begum, General Manager of Grameen Bank’s Training andInternational Program, for making available the pictures that appear in this document.We wish to thank Messrs. Abul Hossain, Senior Principal Officer, and Golok Chandra Roy of GrameenBank; Messrs. Abdul Hai Khan and Shamsul Alam Khan Chowdhury, General Managers, GrameenTrust; and Messrs. Golok Chandra Roy and Tamim Islam, Assistant General Managers of GrameenTrust, for reviewing the various drafts and providing valuable comments and edits, and for updatingthe Guidelines with the latest documents, circulars, reports, forms and formats in Bangla and Englishavailable from Grameen Bank.Guidelines for Establishing and Operating Grameen-style Microcredit ProgramsxivNicole Iden and Michael Eber of Grameen Foundation Technology Center wrote up the sectionon MIS, while Jeff Toohig of our Social Performance Department wrote up Grameen Foundation’sProgress out of Poverty IndexTM (PPI). Chandni Ohri, GF Regional Director for South Asia, andChristopher Tan, GF Country Representative for the Philippines, reviewed the manuscript andprovided invaluable comments and suggestions for improvement. GF volunteer Pat Saga reviewedthe Guidelines from a layman’s perspective and provided valuable comments and editorial assistance.Mizan Kidane, another GF volunteer, made helpful suggestions, based on his work as a formerexecutive of an MFI in Ethiopia, which we incorporated in the section on Business Planning. AllyBellage and Arianna Levitus assisted us with the development of some of the diagrams and tables in thedocument. Angie Sanders provided valuable assistance and advice in securing the services of the coverand layout designer and printer. Andrew Bridges and Todd Bernhardt edited the document.Last, but not least, we are most grateful to Sal Pappalardo, the Grameen Foundation’s formerChief Operating Officer, for his leadership in giving these Guidelines high priority, for deployingMike Getubig to work on this project on a full-time basis for more than three months, and for beingrelentless in getting everyone involved to stick to the timelines all while providing encouragementand support.We want to express our most sincere thanks to all the people above and our other colleagues inGrameen Bank, Grameen Trust and Grameen Foundation for their assistance, support and moralencouragement to finally see this publication through.www.grameenfoundation.org

Special AcknowledgementThis book would not have been possible without the support of Marshall and Pamela Saunders, whoprovided the funds for its publication. We are most grateful to them for their generous support to thisproject and the numerous occasions they have supported Grameen Foundation in the past.xvGuidelines for Establishing and Operating Grameen-style Microcredit Programswww.grameenfoundation.org

section 1www.grameenfoundation.org

section 1IntroductionI. IntroductionMore than 1.1 billion people live on less than 1 per day, in conditions of intense hunger, squalor, poorhealth and hopelessness. Most governments and civil society organizations in developing countriesof the world are fighting poverty through a variety of strategies, such as agricultural and ruraldevelopment, employment promotion, programs in health and education, and social services.Microcredit has been recognized as one of the most effective strategies in poverty alleviation. Itinvolves the giving of very small loans to poor people, particularly women, without requiring anycollateral. The purpose is to enable borrowers to establish individual income-producing enterprises.Grameen Bank of Bangladesh is a microcredit pioneer. It began as an action research project in 1976and has since grown into Bangladesh’s largest bank, as of October 2010 providing microloans to morethan 8.3 million borrowers. Grameen Bank has achieved dramatic success through its carefully craftedmethodology and systems, administer

ii. grameen bank's loan and savings products 61 a. loan products in the grameen classic system vs. the generalized system 61 b. the basic loan—terms and conditions 61 c. the basic loan and the flexi-loan 65 d. housing loan 66 1. requirements for a housing loan 67 2. housing design 67 3. types of housing loans 67