Grameen II and Portfolios of the Poor

This MicroSave Briefing Note discusses benefits that clients enjoyed when Grameen Bank of Bangladesh moved to a new model.

Grameen Bank adopted a new model in 2001, called Grameen II, which was more flexible than its original model, Grameen I. The changes that occurred when Grameen Bank moved from Grameen I to Grameen II were captured in research for Portfolios of the Poor. Grameen II helped clients:

• Manage cash flows with passbook savings through withdrawal-enabled savings accounts;
• Build up large sums with more flexible loans and top-up mechanisms;
• Use microfinance loans for various purposes other than productive or return-creating purposes, such as consumption smoothing and funding life cycle expenditures;
• Accumulate large sums of money in commitment savings accounts through Grameen Pension Savings.

Portfolios of the Poor revealed that flexible products tailored specifically to the needs of poor clients can create dramatic positive results. The change from Grameen I to Grameen II helped Grameen Bank transition from a microenterprise lender into a retail bank for poor households. The note recommends that the microfinance sector adopt this flexibility and that Grameen Bank continue to innovate in product design.