Case Study

The Grameen Bank Micro-credit Model: Lessons for Australian Indigenous Economic Policy

Exploring the problems faced by indigenous communities in accessing credit
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This paper explores the capacity to use micro credit models to extend credit to small entrepreneurs and lists the problems faced by them in accessing credit:

  • Indigenous women have credit access problems because of limited credit records and no collateral;
  • Restrictions to lending large loans has excluded large numbers of potential borrowers from access to credit.

The paper describes the Grameen Bank model's application in indigenous communities in extending small credit to entrepreneurs that do not qualify for commercial lending. This discussion paper:

  • Explores key features of the Grameen Bank model;
  • Examines lessons that can be learnt from its replication in other countries;
  • Suggests that the lessons may be helpful in formulating policy to enable indigenous people, in particular women, gain access to credit.

The paper identifies the key elements to the Grameen Bank micro-credit model:

  • Loan defaults are overcome by a system of mutual accountability;
  • Credit risk is reduced by the process of self select;
  • Penalties imposed on defaulting members include loss of material goods and reputation.

The paper discusses the problems that may be encountered if the model is adopted by indigenous communities in Australia:

  • Problems associated with low population density;
  • Welfare disincentives, investment opportunities;
  • The interdependence present within Aboriginal communities.

The paper concludes that various key elements are pre-requisites for successful replication of a Grameen Bank micro-credit model.

About this Publication

By McDonnell, S.
Published