Examining The Gremeen Bank Economics Essay

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In 1976, the economics professor Dr. Muhammad Yunus starts the Gremeen Bank research project in the village of Jobra, Bangladesh. In 1983 the research project is transformed to an official bank that is Gremeen Bank, it is the first bank specially provides loans to the poor for self-emplyment in the world (Papa at al., 2006).

Gremeen bank has reversed traditional banking practice, its aim to alleviate poverty through credit and improve the lifestyle and well-being of the poor, so it mainly serves to and owns by the poor, particularly the poorest of the poor women (Khalily at al., 1995), also it provides the micro-loans to poor without collateral and legal instrument, and creates "a banking system based on mutual trust, accountability, participation and creativity" (Gup, 2003). The Gremeen Bank believes the poor also have the fundamental human right to possess credit ability.

In addition, the initial requirement is the borrowers need to form a group of five people who have similar economic background and objectives (Costa & Noble, 1999). Taub (1998) believes the group can provide the moral support, encouragement and advices to each other; also group social pressure can encourage repayment, because defaulting by one group member leads to loss of access for all members.

Gremeen Bank is more than only a bank. It sets up the conditionality which is Sixteen Decisions (Appendix 1) to the borrowers to prompt sustainable social development, such as sanitation and health. These decisions also increase worker productivity and income (Costa & Noble, 1999).

The above unconventional approaches of Gremeen Bank increase the probability of prompt repayment and enhance incentive to maintain the success of the bank.

Gremeen Bank is very success to run the micro-credit program in the Bangladesh. In 2009, it provides services in 84,096 villages, covering more than 100 percent of the total villages in Bangladesh (Gremeen Bank, 2009). Nowsaday, the micro-credit mechanism of Gremeen Bank is a popular non-market instutitional form in the world due to its high repayment rate (Mushinski & Pickering, 2001). now there are houndreds of programs in developing and industrialized countries, such as Malaysia, Philippines and Canada (Anderson & Looney,2002). The United Stated was the first industrialized country which uses this mechanism to address the recipients of public assistance and to reduce poverty (Anderson & Looney,2002; Friedman et al., 1995). It is very spacial and attractive idea that a rich country can learn the worthable knowledge and experience about making wealth from a poor country. However, there are some cultural problems and impacts when the micro-credit program applies in the United Stated.

Firstly, the micro-credit mechanism is came from the third world, Bangladesh, so the American elites are difficult to accept that, because even the successful policies or strategies from the close countries, such as Canada, Grermany and England, the American people also accept reluctantly (Yunus & Jolis, 1999). The most sociologists, economists, bankers and communalist deem that the experience in Bangladesh is not related to eliminate the poverty in the United States, they think self-employment is just a perpetual primitive concept in the third world, the American people do not need it (Yunus & Jolis, 1999).

Secondly, since the programs is first introduction in the United States, the staffs are unfamiliar with the local customers and local people, also the staffs are white and not rural in background. Historically, the white people, especially in the South, have not been known to make the micro-loan in the interest of low-income African Americans (Taub, 1998). So they lack the skills and experiences to deal with the poor.

Thirdly, in the United States or the world, they usually use the gifts and welfare grants to help the poor, they feel strange about proving the loan to help the poor reducing the poverty (Taub, 1998).

Fourthly, base on the population densities, employment habits, and community expectations, borrowers is difficult to form a group with four friends who want to start a similar businesses (Taub, 1998). The group is consist of four to five strangers who have known each other in the few weeks trainning. This grouping reduces the function of group prssure, Edgcomb et al.(1996: p.41) supports that,

Group-lending approaches in the United States do not carry with them the efficiencies anticipated by the performance of peer programs in the developing world.

In addition, groups in the United States tend to break down because of "lack of social capital", "individuals with a good credit record can get loans on their own" and "the fortunes of members diverge through time" (Schreiner & Woller, 2003: p.1568, 1570).

Fifthly, the disincentive is due to welfare payments to either borrow or repay loans (McDonnell, 1999). United States is a welfare state, different welfares provide to the citizen, includes the poor people. The borrowers have an effective social security net to fall back on, unlike borrowers in Bangladesh where defaulting borrowers are reverted to poverty, so this social protection indirectly causes a high default rate in the United States. Also, Disincentives to borrow loans are caused by the welfare laws which ensure that once a person earns above a certain amount of income, the benefits received from welfare payments decrease.

Sixthly, there have abundant wage jobs and an effective social security net which decrease the motivation to credit for self-employment in the United States (Schreiner & Woller, 2003). Also, the economy of United States is well-integrated with global markets; the micro-enterprises are difficult to compete with the large companies or chain stores, because they lack the capital and support to survive in the fierce competitive market. Moreover, income from micro-employment is often low because most poor entrepreneurs choose the business with low levels investment and low barriers (Bates, 1997). Besides, accepting public assistance or doing the wage jobs are less effort and risk than self-employment, if failing the business, they will bear a liability and become more poverty.

Base on the culture difference, although Gremeen bank is very successful in the Bangladesh, it also has some problems when adopting in other countries, such as United States. The Gremeen Bank program is an effective method to alleviate poverty, so according to the local culture background making some adjustments to the program before adoptation, it will apply success in all countries.

Literature Review

This assessment is focus on Hofstede, Trompenaar and Herskovits' cultural dimensions to elaborate the culture difference in different countries.

Hofstede undertakes an enormous questionnaire survey of 116,000 IBM employees in 50 countries to understand how basic values underlie organizational behaviors and attitudes (Deresky, 2000). He proposes four value dimensions: (1) power distance, (2) uncertainty avoidance, (3) individualism versus collectivism, and (4) masculinity versus femininity.

Trompenaar spends 10 years in exploring value dimensions by researching 15,000 managers from 28 countries, representing 47 national cultures (Deresky, 2000). He proposes seven value dimensions: (1) universalism versus particularism, (2) neutral versus affective, (3) specific or diffuse, (4) achievement versus ascription, (5) individualism versus communitarianism, (6) time, and (7) the environment.

Herskovits (1995) offers five values to distinguish the United States culture from other contemporary cultures. The five values are (1) individualism, (2) informality, (3) materialism, (4) change, and (5) time orientation.

From the above three main theories, the author proposes to combine the theories of Hofstede and Herskovits into Trompenaar's seven dimensions. Because Hofstede just researches the IMB which is an information technology company, and Herskovits is base on American people to define his dimensions, both of their researches seem very narrow. Also, Sondergaard (1994) pointes that data collected to Hofstede's study between 1968 and 1973 are no longer valid, it is not suitable to use one company as a basis for conclusions about national dimensions, and the use of attitude surveys does not constitute a valid basis for this type of research. Others, like McSweeney (2002) argues the Hofstede's cultural dimensions are based on flawed assumptions. In addition, the world is changing, since Hofstede's studies in the 1970s, Trompenaars pay much effort and time in the different cultures research, and he does a comprehensive and update study to assess national cultures in 1993, the seven dimensions.

The first of these cultural dimensions is universalism versus particularism. According to the theories of Deresky (2000), universalism beliefs that ideas and practices can be applied everywhere in the world without modification, the universalistic approach is more objective and focus on the rules, systems, contract and personal obligation. This dimension is in direct contrast to particularism. Particularistic approach is more subjective and focuses on relationship; it is more common in Asia.

The second dimension is neutral versus emotional, the focus is on "emotional orientation of relationships" (Deresky, 2000). In high neutral culture countries, such as Japan and British, people try not to show their feelings. While in high emotional countries, such as China and Mexicans, people are enthusiastic, they openly express emotions even in a business situation.

The third dimension is specific versus diffuse, the focus is on the "involvement of relationship" (Deresky, 2000). In specific cultures, people clearly separate the work personal issues and relationships, they share only with close friends and associates, and they are more open, confrontational and extroverted, such as United States and Austria. Conversely, in diffuse cultures, the public and private spaces are similar in size, which means the work and private life usually are closely linked, people tend to indirect and introverted, such as China and Spain.

The fourth dimension is achievement versus ascription, it examines "the source of power and status in society" (Deresky, 2000). In achievement culture, the status is base on how well people perform their functions, thus everyone has equal opportunity to attain positions base on their achievements and abilities, such as United States and Austria. In ascription culture, status is base on whom or what a person is, such as their class, age, gender and so on, such as China and Indonesia. Hofstede's masculine dimension also concerns on the power, money and status. Herskovits's materialism dimension mentions certain physical objects represent the status in the western.

The fifth dimension is individualism versus communitarianism, Hofstede, Trompenaar and Herskovits, all of them propose that the cultural dimension includes individualism. Individualism refers to the "tendency of people to look after themselves and their immediate family only and neglect the needs of the society" (Deresky, 2000). In countries high on individualism, such as United States, Great Britain and Canada, democracy, individual initiative, accomplishment, achievement and wealth are highly valued and motivated. This dimension is in contrast with communitarianism, this dimension like the Hofstede's collectivism, people regard themselves as part of a group, such as China and Malaysia. Hofstede finds that richer countries were higher on individualism and poor countries were higher on collectivism.

The sixth dimension is time; there are two approaches in the time issue. In sequential approach, people do only one activity at a time; prefer to step by step to do the work and keep the appointment strictly. Herskovits' time orientation dimension, it mentions the western perceives "time as resource and an extremely one", so they emphasize the effective use of time, they are "very fastidious about making and keeping appointment" (Herskovits, 1995). In synchronous approach, people tend to multi-task and view appointment as approsimate. Herskovits mentions the Eastern culture view time as an "unlimited and unending sources", so they are quite casual to keep appointment. Also, people view time as present oriented or/and future oriented, such as United States focus on future, Indonesia focus on present, France focus on both.

The final dimension is the environment which includes inner-directed and outer-directed. In inner-directed societies, such as United States and Australia, people believe in controlling outcomes. In Herskovits' change dimension mentions that Western people believe they have the capable to manipulate and change the environment. In outer-directed societies, such as China and many Asian countries, people believe on letting things take their own course. Also Herskovits points non-Western people view change as "a phenomenon that occurs naturally".

Although Hofstede's cultural dimensions are criticized by several critics, the dimensions is popular in the world. And Herskovits's cultural dimensions is base on United States to develop, it is tend to the America, so the dimensions may has bias, but this assessment is to analyze the culture difference between the Asia and United States, so it may useful in there. Therefore, it is very suitable for using the theories of Hofstede, Trompenaar and Herskovits in this assessment.

In summary, Trompenaar identifies the United States as an individualistic nation, high in universalism, specific, achievement and inner-directed, focus on sequential approach and future time, similar in neutral and emotional dimension.

Besides, Trompenaar identifies the Asia as a communitarianistic nation, high in particularism, emotional, diffuse, ascription and outer-directed, focus on synchronous approach.


The Gremeen Bank in Bangladesh is an international icon of grassroots poor organizing, which motivates the poor, homeless, landless, and vulnerable rural populations to come together, earn income through self-employment, and improve their socioeconomic conditions (Auwal & Singhal, 1992; Fuglesang & Chandler, 1988; Yunus & Jolis, 1999). The mechanism of Gremeen Bank has become very popular in the United States as a tool to "move low income people off welfare" and to become a micro-entrepreneur (Taub, 1998). However, some of the cultural problems should be tackled to ensure the program succeed in the United States. The below analyze and evaluate the problems which come from the culture difference between Asia and United States.

Firstly, when the American people hear to apply the micro-credit mechanism which come from the Bangladesh, they scoff and deem the mechanism is impossible to operate in the United States. Because United States is defined as having individualistic, achievement dimensions. They seek status, money and power. So they are difficult to accept the Third World's mechanism, acceptance means they identify the Bangladesh is outperform than them. Their self-respect do not allow them to accept that. mechanism.

Secondly, since the staffs are the white and sourth Amerian, they usually live in the city and tend to rich. The borrowers live in rural area and are poor. They live in different environment. So cultural background is different that lead the staff difficult to understand local customers and local people. In Bangladesh, they has rich experiencement and well understanding the local people, so they run the program easily and smoothly. In addition, the American people are individualism, they usually look after themseleves, so they are unfamiliar to help others. While Asian is collective, they tend to look after people.

Thirdly, the United States is inner-directed in the environment demension, they believe they can control the environment and outcome. Also, United States with high universalism, they follow the formal rules and legal system objectively. Thus when the micro-credit program introduce in the United States, it is strange, they fear that they cannot control the program, and the program is conflict to the consistent polices, they are not get used to prove the loan to help the poor, because they always distribut the gifts and grants to help the poor, so the program let them cannot follow.

Fourthly, the United States is high on individualism, they tend to look after themselves, motivate individual initiative, accomplishment, and they prefer to work independently, so they are difficult to work in a group. Deresky (2000) mentions American people "tend to perform less when working as part of a group than when working alone". Thus the grouping system may not sutible in the United States. While the Asia is high on communitarianism, they focus on the will of group rather than that of the individual. So the grouping system is effective in the Bangladesh. In the other hand, Low population density is a problem to form group, but if people join the micro-credit program to improve their living condition and create the working opportunity, then they do not need to leave their village and so the population density can increase. United States is international market, so the people can choose many type of job, and they will expect more than the people in the Third World. They unlike the Bangladeshi, they can easy to form a group in their community. Also, the individualism let the American people stand alone, so they are difficult to form a group with five friends who want to start a similar businesses. Whereas Asian is particularistic and communitarianism, they are more willing to share the information and trust each other. They focus on the group and relation. So the group form and group pressure are work well in the Bangladesh. In addition, the individualism and achievement dimensions, the American people work hard individually to achieve their goals, so "the fortunes of members diverge through time" (Schreiner & Woller, 2003: p.1568, 1570).

Fifthly, United States is a welfare state, it provide an effective social security net to the people. So the poor people are not willing to take risk to borrow the micro-credit for self-employment. United States high on individualism, the American people only take care themselves and neglect the society. Because they do not care others and only focus on their own benefit, so they may default the loan, then let other members cannot receive the loan. Therefore, the government need provide more welfare and safety net to protect them. Whereas Asia high on communitarianism and particularism, the Asian view themselves as a part of group, they have interpersonal trust and obligation to help others. So in the community, they tend to help each other, the Gremeen Bank helps and owns by the poor people, there is another form to help each other, they do not need the government assistance. Base on the United States and Asia hold different cultural dimensions, so the Gremeen Bank program is more difficult to operate in the United States than the Bangladesh or other Asia countries.

Sixthly, the United States and Asia are low uncertainty avoidance, they may eager to accept risk, but the American people are not willing to take risk for self-employment through credit. Because the individualism, the American people are individual and independent, so they lack the technical and emotional support from others or the community. Self-employment is new concept to them, they are unfamiliar the self-employment form. Also, if they earn money they will decrease the welfare payment. So they are unnecessary to take the risk to credit the loan for self-employment. They think that it would be better to pay less effort and risk to accept the sound social welfare. But in Asia, they have their members to help and support them; also self-employment is not just benefit themselves, also benefit the society, it can promote the business activities.

Trompenaar's seven cultural dimensions are mainly used in the above analysis, the author only use four dimensions, there are two dimensions, specific versus diffuse and time, are not used in this situation.

Conclusion and Recommendations

Different countries have different culture, the culture conflict or difference will influence the cross country business and communication. Even if the United States and Asia have different background and culture, but their objective is same, both of them want to reduce the poverty and improve their socioeconomic condition. Whereas Gremeen Bank model successfully help the Bangladesh to alleviate the poverty and improve the life quality. Also the mechanism of Gremeen Bank acquires other countries' adoption. So the mechanism also is suitable for the United States. In order to successful and effective operating the mechanism in the United States, there should need some adjustment to deal with the cultural problems. There are some recommendation to solve the culture problems in United States and Asia.

American people should visit the Bangladesh to observe and study their practices and condition. Also they can share the experience and view to clearly understand the operation and successful factors. Then they can summarize the culture difference between the two countries thereby to find out the solution.

Moreover, United States is a developed country, it has high technology and talents, it can develop many good things to improve or upgrade their life quality, but most of that are not used for the poor. Although Bangladesh is a developing country, it is truly understand the need and want of the poor people, so it can develop the effective mechanism to help the poor. So American people should accept the true and learn from the Bangladesh.

Furthermore, American people seek the wealth and personal achievement, they always omit others. Nowsaday, United States is one of the most rich country, the American people should put more concern to others, to develop a good social relationship.

In addition, the welfare police should modify. Because it block the poor people to develop their micro-enterprise. For example, the welfare organizations should provide a specific time frame for the new self-employment people to try their business, in the period they will not lose their welfare.

Finally, the size of group should more elastic. Base on their capacity and background, they can choose to credit individually, or by group, also the number of members in group are not fixed.

In concluded, culture is very related to our life and work. Understanding different cultue help to get along or communicate well with others, also help to succeed in business.