Grameen Bank to operate in India from next month

The Grameen Bank of Bangladesh, acclaimed worldwide for its success in micro-financing, is starting its operations in India next month.

The bank is understood to have secured regulatory permission to set up a liaison office in Mumbai.

Dr Muhammad Yunus, the founder of Grameen Bank, will be in India's commercial capital to kick off the organisation's operations in the country.

The Indian chapter will be called Grameen Trust of India. It will conduct its business through its associate Grameen Trust, which already has a presence in 33 countries.

To begin with, the office will expand the Grameen type of micro-finance on a build, operate and transfer (BOT) basis in the northeastern region of India, mostly among the tea

garden workers in Assam state.

It will also monitor and evaluate 20 organisations modelled on the Grameen Bank, already in operation in India.

The Grameen Trust will provide the initial seed capital to various eligible NGOs and micro finance banks. Additional free loans will be extended to farmers owning less than half an acre of land or generating equivalent amount of income from their land.

Besides, it will also assess the needs of the grassroots level personnel and conduct workshops to train them. It is also considering independent funding and is awaiting the approval of the Reserve Bank of India and Indian government.

The initiative of Grameen Bank is the first of its kind by a foreign entity in India. All other foreign participation in micro-financing sector is in the form of non-banking financial institutions, mostly arms of foreign banks in India.

According to an estimate, the preferred form of micro-finance loan in India is lending to Self Help Groups and only seven percent of this finance is to individuals.

The competition in the field of micro-credit in India has gone up and there is a pressure to reduce interest rates. Given the fact that operational costs for the lender are expected to be lower in the case of individuals, it is time for Indian micro-finance practitioners to move beyond group lending, suggested an expert.