MICROCAPITAL STORY: Russian Delegation Visits Grameen Bank of Bangladesh in Efforts to Scale-Up Microfinance Industry and Mitigate Financial Crisis

Bangladeshi news source The Daily Star reported that a high-profile Russian delegation visited the Grameen Bank in Bangladesh to examine how the country regulates its relatively saturated microfinance industry. The delegation observed the operations and legal structure of Grameen Bank in hopes to replicate the structure in Russia. The four-day visit came as Russia explores ways to scale-up its microcredit program to fill a void left by the global financial meltdown. “The global financial crisis has affected many small businesses in Russia while the conventional banks are not willing to finance them for risk involvement in such financing,” said delegation leader and Russian Deputy Minister for Economic Development, Anna Popova, at a joint press conference with Muhammad Yunus in Dhaka City.

MicroCapital has frequently reported on the resilience of the microfinance industry to financial crises and its utility in post-financial crisis recovery. Three particularly relevant MicroCapital articles include two paper wrap-ups, “Fitch Ratings Report: Microfinance – Testing its Resilience to the Global Financial Crisis” and “Microfinance Still Hums, Despite Global Financial Crisis,” and the story “World Bank Sees Microfinance as Strong Asset Class in Midst of Financial Crisis.”

The Russian delegation, comprised of 10 individuals, included senior representatives from the Ministry of Finance and the Ministry of Economic Development, President of National Association of Microfinance Market Stakeholders, senior representatives from the Moscow government and Association of Regional Banks. Beyond meeting high-level bank managers, the Russians took part in a Grameen training program, visiting bank branches and holding discussions with borrowers. A variety of international training programs are offered to the general public via the Grameen Bank website.

According to the 2008 “Russia Microfinance Analysis and Benchmarking Trends Report” produced jointly by the Microfinance Information Exchange (MIX) and the Russian Microfinance Center (RMC), Russia has approximately 2000 microfinance institutions (MFIs) serving approximately 700 thousand customers (borrowers and savers). The report estimated the aggregate loan portfolio of non-bank Russian MFIs to be USD 625 million, and the aggregate loan portfolio of microfinance banks to be between USD 2.4 and 3 billion at the end of 2008.

Despite the numerous MFIs operating in Russia, they are far from fulfilling the demand estimated for microloans, estimated by the report to be USD 10 billion. As explained by Mikhail Mamuta, president of National Association of Microfinance Market Stakeholders, the demand is concentrated in rural parts of the country: “In Russia there are many remote rural areas where the existing banking system is not so effective. Microfinance can be effective in those areas.”

The Grameen Bank (“village bank” in Bengali) was established by Professor Muhammad Yunus as a research project in 1976 to serve rural areas of Bangladesh with microfinance. In 1983, the MFI was transformed into a commercialized bank, with 90 percent of its equity owned by its borrowers and the remaining 10 percent owned by the Government of Bangladesh. As of January 2009, the bank had 7.7 million borrowers, USD 662.7 million in outstanding loans, and USD 938.9 million in deposits from both borrowers and non-borrowers. Its total assets in 2007 amounted to over USD 1 billion. In 2006, the Grameen Bank and Muhammad Yunus were jointly awarded the Nobel Peace Prize “for their efforts to create economic and social development from below.”

Upon leaving, the visiting delegation invited Professor Yunus to attend a national microcredit convention as chief guest in November of this year.

Additional Resources:

Grameen Bank: Home

Grameen Bank: International Training Programs

MicroCapital article, January 26, 2009: “PAPER WRAP-UP: Fitch Ratings Report: Microfinance – Testing its Resilience to the Global Financial Crisis by Sandra Hamilton”

MicroCapital article, January 26, 2009: “PAPER WRAP-UP: Microfinance Still Hums, Despite Global Financial Crisis, by Jeremy Caplan”

MicroCapital article, February 9, 2009: “World Bank Sees Microfinance as Strong Asset Class in Midst of Financial Crisis According to the New York Times; A Target $600m Fund Managed by BlueOrchard, ResponsAbility, and Cyrano Management Will Be Launched to Support MFIs”

Microfinance Information Exchange (MIX): Home

“Russian Microfinance Analysis and Benchmarking Trends Report 2008” by Maria Baum and Ralitsa Sapundzhieva, the Microfinance Information Exchange (MIX) and the Russian Microfinance Center (RMC): November 2008

Russian Microfinance Center: Home

The Daily Star: “Global Financial Meltdown: Russia to Intensify Microcredit to Offset Adverse Effects Says Russian Minister”

The Independent: “Bangladesh May Face Lasting Global Economic Recession Impact Professor Yunus Predicts”