Sketch: Woman feeding calf
Micro Leasing:
The Grameen Bank Experience

Asif Dowla
Associate Professor of Economics
St. Mary's College of Maryland

In 1992 Grameen Bank started its experimental leasing program by leasing power looms to weavers in the Ariahazar area of Dhaka Zone. Later in the Zonal Manager's conference of 1994, decision was adopted to expand leasing to all Zones. At the end of year 1997, Grameen Bank leased 8,411 items in 111 different categories. The program has enabled 96 male and 1118 female members to complete the leasing contract and own assets in the process. It has created huge excitement among the Grameen Bank members, and is quite popular among the member as revealed by the rapid expansion of the outreach of the program. As of December 1997, the leasing program has booked Tk. 237.67 million worth of leases, or an average of Tk 28,000 (*US $ 623) per lease. The leasing program is in operation in all Areas of the bank, however, not all branch have a leasing program. The total disbursement of Grameen Bank is Tk 6240.70 million at the end of December 1997. This makes the share of leasing close to 4 percent of total portfolio of the Bank.

The objective of this paper is to critically examine the leasing program. Since the program is relatively new the exercise will entail a preliminary evaluation of the program. Instead of a full-fledged impact assessment study, we will examine the terms and condition of the leasing program, evaluate its success in terms of outreach, repayment rate and asset ownership.

The plan of the paper is as follows. In section 2 we will examine some studies that deals with the types of activities funded by the leasing program. The operational aspect of the Grameen Bank's micro leasing will be discussed in section 3. Section 4 reports the experience of a Grameen borrower with leasing. In section 5, we will examine the leasing program and evaluate its success and failures. Section 6 concludes the paper along with suggestions to improve the efficacy of the leasing program.

First Draft - July 1998

This paper was written while the author was spending his sabbatical leave as a Visiting Scholar at Program for Research on Poverty Alleviation of Grameen Trust (PRPA). American Institute of Bangladesh Studies (AIBS) and Grameen Trust's sabbatical program provided funding for the project. The author is grateful to Professor Syed Hashemi Director, PRPA and Mr. Dipal Barua, General Manager of Grameen Bank for their help. The usual caveat applies.

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