The Grameen Bank has improved the lives of several million poor people in rural
Bangladesh by providing them with credit. Using an innovative group lending program,
the bank has been able to recover 97% of its loans. This dissertation is an attempt to
understand the intricacies of the Grameen Bank's credit program and to throw light on
those features of its innovative institutional set-up that make it so successful in recovering
its loans. The dissertation is divided into six chapters and organized as follows.
I first describe the institutional set-up of the Grameen Bank and its group lending
program. I draw on material obtained from interviews with bank staff and borrowers
during a field-trip to the Konokdia branch of the bank in Patuakhali. This is followed by
an economic analysis of the bank's lending program. I analyze the multifaceted role of
group lending in achieving the dramatically low default rates on loans. The emphasis is on
isolating the specific ways in which the incentives created by the requirement to form
groups affects group composition and the incentives for peer support, peer supervision,
and loan repayment.
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