Grameen Bank: One More View

Publication Date: 2003
Published by: London, UK: Alternative Finance
www.alternative-finance.org.uk
Document Type: Case Study

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Mutual guarantee is collateral for poor people

In this article, the author describes the Mutual Guarantee method, which has helped Grameen Bank in securing the repayment of the credit allotted. This method has been practiced in Israel since the 1920s among Kibbutzim and Moshavim. The author points out three main characteristics of Moshav, which have evolved over a period of time, namely:

• Sixty to Eighty years ago,
  • Small organizations (later known as NGOs) offered credit to the poor without any guarantee.
• Sixty to Forty years ago,
  • Development pace picked up; banks became the source of financing the poor.
  • Mutual guarantee was established among the members for guarantee repayment.
  • Cooperative marketing marked with the formation of Essential Triangle of Production, where Moshav served as the producer, supplier and marketers.
  • The Moshav supplied credit, which was composed of external sources and the members' savings.
• Forty to twenty years ago,
  • Government also started providing credit as 'guided credit'.

• Micro-credit enterprise has vast potential areas for bringing development to the poor;
• Micro-credit institutions, at present, focus on giving credit to the poor and helping them repaying it.