Question

Please respond too this statement with 2 paragraphs on why you agree with this statement and providing additional information (Explanation):

How are conventional banks different than the Grameen Bank?--Conventional banks differ from Grameen Bank in many numbers of ways. It begins with the goal of the institution. Conventional Banks’ goal is to maximize profits. They want to create a company and products that are intended to create profit to the company. Grameen Bank is not intended to create profit for the person who created. Mohammad Yunus, the founder of Grameen Bank, wanted to create a social business that is intended to be self-sustaining, but not created to make him rich. They also differ from conventional banks by having the barrowers benefit from the company’s profits. The profits from Grameen Bank go back to the barrowers.

Answer 1

Grameen bank differs from the conventional bank in the sense that the prime object of the Grameen bank not profit but the socio economic development of the poor. The bank intends to extend the banking facilities to the poor men and women, it aims to save the poor people from the exploitation of the money lenders, it tries to create employment opportunities to the poor sections of the society, it brings the poor people into the framework of modern banking system.

The system of Grameen bank is basically differs from conventional banks. The special characteristics of Grameen bank which differs it from conventional banks are the following.

Collateral free system.

The conventional banks lends upon the collateral securities. Every borrower has to surrender securities whose value is equal to the loan amount. But the Grameen bank follows a collateral free system. Each borrower can get loan without any type of mortgage securities.

Low interest rate.

While conventional banks charge high and compound interest on their loans, the Grammen bank charges simple interest and it does not charge interest beyond the principal amount.

Location.

The conventional banks are usually locating in big towns and metropolitan cities. They want to get more market share and huge profit. But the Grameen banks are locating in rural areas which give access to the poor and unprivileged people in the banking operations that help them to eliminate poverty.

Priority to women.

Most of the customers of the Grameen banks are poor and unprivileged women from the rural areas. About 97% of the customers are poor village women.

Profit criteria.

Profit is not the criteria of the operation of the Grameen banks. While conventional banks lend out upon the potential of the borrower, the Grameen banks lend out as privilege of the poor sections of the society. The object of the conventional banks is the maximization of profit. The Grameen bank’s operations are not confined to profit maximization.

Struggling members program.

The Grameen banks have a special program to help the beggars. This program is intended to provide small loans to the beggars. This loan is completely interest free and the repayment period is long than the usual loans and the borrower is covered with life insurance at free of cost.

The conventional banks follow the recovery procedure and punishment on the borrower when he became a defaulter. But the Grameen bank allows the borrowers to reschedule his loans and extend all efforts to overcome the difficulty in repaying the loan amount.

The conventional banks charge interest rate which may exceed the principal amount or more depending on the delay in repaying. But in no case the interest charged by the Grameen bank does not exceed the principal amount. No extra interest is charged above the principal amount whatever be the delay in repaying the loan amount.

In case of the death of the borrower no liability is transferred to the family of the diseased.

The Grameen banks follow a special program known as “Sixteen Decisions” which give some goals to the poor section to achieve. These includes no dowry, education for children, sanitary latrine, planting trees, eating vegetables, arranging clean drinking water. No conventional bank has such a valuable system. No conventional bank has such a program.