A Cost‐Effectiveness Analysis of the Grameen Bank of Bangladesh

Abstract

Reports of the success of the Grameen Bank of Bangladesh have led to rapid growth in funding for microfinance. But has the Grameen Bank been cost‐effective? This article compares output with subsidy for the bank in a present‐value framework. For the timeframe 1983–97, subsidy per person‐year of membership in Grameen was about $20, and subsidy per dollar‐year borrowed was about $0.22. Although the article does not measure consumer surplus for Grameen users, the evidence in the literature suggests that surplus probably exceeds subsidy. The Grameen Bank — if not necessarily other microlenders — was probably a worthwhile social investment.

A typology of social entrepreneurs: Motives, search processes and ethical challenges

“…Other have followed in Grameen Bank's footsteps by offering micro-credit to disadvantaged nascent entrepreneurs around the globe (Gangemi, 2005). Schreiner (2003) observes that Gramaeen Clones have appeared and thrived in North America (Taub, 1998), Europe (Rogaly, 1996), Latin America (Thomas, 1995), Africa (Wall Street Journal, 1998) and Asia (Hulme, 1990).…”

Microfinance Complementarity and Trade-Off between Financial Performance and Social Impact

“…7, No. 11; business, service more poor households and therefore alleviate poverty (Schreiner, 2003;CGAP, 2003).…”

Great Expectations: Microfinance and Poverty Reduction in Asia and Latin America

“…A further look at the effectiveness of Grameen is provided by Schreiner (2003), who calculates the subsidy-lending ratio at 0.22 over the period 1983-97. This is not directly equivalent to the ratios in Table 5, but assuming the same return to borrowing as in Khandker (1998) these figures can be converted into a broadly equivalent ratio of cost to gains to the poor of 1.15.…”