Checking up on Grameen II

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At the World Bank-Brooking’s Global Conference on Access to Finance, one of the sessions examined the links between access to finance and poverty reduction. Stuart Rutherford of SafeSave gave an encouraging presentation on the results, at least in Bangladesh, of Grameen Bank’s radical product redesign in 2001. The so-called Grameen II greatly expanded the bank’s offerings to include long-term commitment-savings plans (pensions) and open access passbook accounts, among other services.

A MicroSave research project, led by Rutherford, visited a sample of Bangladeshi households on a biweekly basis to construct ‘financial diaries’ recording all of the families' financial transactions over a period of a year or more. Their most basic finding was that even the poorest households lead active financial lives, even though many of their financial mechanisms are informal.

Also, the group found that Grameen II was a huge success. Grameen managers initially were reluctant to allow borrowers to use the passbook accounts to cover loan payments. Yet experience shows that the borrowers effectively used the passbook savings accounts for day-to-day transactions, even when that meant occasionally making a loan payment from their savings.

The study team found that Grameen’s broader range of very basic services has provided substantial benefits to the poor of Bangladesh. In many cases, borrowers have moved completely out of informal financial mechanisms. For more, read Rutherford’s brief note on the project.

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