The Grameen Model and its applicability in developed countries

This post has been contributed by Asif Kalam, Associate lecturer at Birkbeck College (University of London) and Kings College London.

The issues

A series of policies have been developed worldwide by governments and civil society organizations to respond to poverty in areas such as promoting agriculture, creating jobs, investing in health and education and countering social exclusion (Lipton and Ravalion, 1995). There has been an ongoing movement to surmount the challenges of poverty, often under the banner of microfinance, with a view to beat the curse of poverty and leave it behind forever.  The movement has been geared to access small credit to overcome poverty, with provisions of financial services to low-income clients. It has received ever-increasing global prominence for its role in poverty alleviation.

The United Nations (UN) designated 2005 as ‘International Year of Microcredit’. The Nobel Committee awarded the 2006 Nobel Peace Prize to Muhammad Yunus and the Grameen Bank (GB), declaring that microcredit is “an ever more important instrument in the fight against poverty” (, 2006).  In the 1970s, Yunus invoked a novel experiment of offering small loans to local villagers in Chittagong (Bangladesh). This was recognised as a pioneering effort to eradicate worldwide poverty and social exclusion. Very few people at the time could imagine the enormous implications it would have for microfinance movement.  As a person who has spent a good part of his life in Bangladesh, it was exciting to see Grameen successfully expanded its operations around the world.

The Grameen model has also been used at various periods in the context of developed countries such as UK and the USA. The central research focus of this study is thus understanding the institutional challenges of adopting this model from the perspective of developing nations juxtaposed with that of developed countries.  The subject has engrossed my interest as research could potentially unveil the complexities of adopting a model in a radically different context to what it is known to be used for. As the work has progressed, it became apparent that the subject was inadequately explored. The multiplicity of logics involved in the operations of Grameen-based organizations also means that the conceptual themes are interdisciplinary in nature drawing from a range of theories from subjects as diverse as management, economics, development studies and sociology. This enhanced the appeal of the research topic. The subject is also of topical interest, as there have been recent initiatives across the Atlantic, in the UK and USA, which are bent on adopting the model to suit their respective contexts.

Institutional theory was used for understanding the experiences of the case study organizations from two major conceptual elements: Institutional Complexity and Institutional entrepreneurship (Greenwood and Suddaby 2006; Tracey et al, 2011). Organizations experience institutional complexity “whenever they confront incompatible prescriptions from multiple institutional logics” (Greenwood et al, 2011: 375). Institutional entrepreneurs have been defined as ‘‘agents who initiate and actively participate in the implementation of, changes that diverge from existing institutions, independent of whether the initial intent was to change the institutional environment, and whether the changes were successfully implemented’’ (Battilana et al., 2009: 72).

This is an interesting and a unique way of analysing the case studies as the microfinance institutions (MFIs) implementing the Grameen model have been forerunners in the field of community finance in the context of industrialized economies and tackled the dual logics of community development and sustainability which may seem rather challenging to reconcile and hence confronted institutional complexities. In this theoretical backdrop, the nature of institutional challenges of adopting the Grameen model in the UK and the USA and why GA has been able to overcome such challenges was explored.

The approach to gathering evidence

The evidence is drawn from nine case studies in the UK and USA which have attempted to adopt Grameen model. Primary data was collected through 20 semi-structured interviews with the institutional entrepreneurs who endeavoured to adopt the model and key decision makers within case studies chosen for their knowledge of the strategic management processes, group dynamics, and interaction.

Research findings

The findings indicate that that one or more core enabling elements were missing, either by design or imposed upon by the milieus leading to heightened institutional complexities in the UK experiences. As a result, for some MFIs, this has caused a change in organizational identity, framing and nature of alignment with partners. Such a situation has been worsened by an unfavourable environment for adoption of the model including the individualist nature of communities and regulatory distortions. Due to all such problems, organizations have generally struggled to secure legitimacy. 

In the US, most MFIs confronted similar complexities to the UK case studies in adopting the model in their respective contexts, resulting either in discarding of the peer group technique or ceasing operations. One organization, Grameen America (GA), stands out distinctive as it has revived the effective use of the Grameen model, widely perceived as archaic in the US industrialized contexts. Unlike most MFIs, GA has been particularly successful in doing so, as it has upheld the core elements of the original model and aided by favourable socio-economic environments.

Policy Implications

One of the fascinating revelations was that several MFIs had strayed from the core aspects of the model to suit their respective contexts. However, this heightened institutional complexities.

The findings suggest the following policy implications:

  • Members should be allowed to self-select each other from tightly knit communities enabling the social collateral process to be effective.
  • Weekly meetings should be made mandatory to facilitate dialogue and enhance discipline.
  • Savings mobilization should be made compulsory with specified minimal contributions as it may be helpful for loan recovery and instilling discipline into borrowers.
  • There should be a gender focus on female borrowers as findings suggest that this may have beneficial effects on loan recovery and outreach.
  • Outreach should be predominantly based on the Grameen principle of “going to clients” or direct approach.
  • Client training methods should focus on internal procedures and be used as way of augmenting discipline
  • Regulatory distortions should be minimized to facilitate the lending process including homes visits or community-based outreach.
  • The nature of problem framing and organizational identity should resonate well with that of the parent organization as this may be important for attaining procedural legitimacy.
  • Significant changes in organizational identity may be contemplated in order to overcome regulatory impediments. GA’s organizational aspiration to become a credit union is an example of this which if successful will help it to mobilize funds and help towards operational self-sufficiency.
  • It would require broader policy changes such as enhancement of welfare to work incentives for MFIs to successfully recruit indigenous clients.


Battilana, J., Leca, B., & Boxenbaum, E. (2009). 2 How Actors Change Institutions: Towards a Theory of Institutional Entrepreneurship. The Academy of Management Annals, 3(1), 65-107.

Greenwood, R. and Suddaby, R., 2006. Institutional entrepreneurship in mature fields: The big five accounting firms. Academy of Management journal49(1), .27-48.

Greenwood, R., Raynard, M., Kodeih, F., Micelotta, E. R., & Lounsbury, M. (2011). Institutional complexity and organizational responses. The Academy of Management Annals, 5(1), 317-371.

Lipton, M. and Ravallion, M., (1995). Poverty and policy. Handbook of development economics3, .2551-2657. (2006) Muhammad Yunus, Available at: (Accessed: 3rd June 2014).

Tracey, P., Phillips, N., & Jarvis, O. (2011). Bridging institutional entrepreneurship and the creation of new organizational forms: A multilevel model. Organization Science, 22(1), 60-80.


Asif Kalam is an Associate lecturer at Birkbeck College (University of London) and Kings College London. Asif has been engaged in research at Birkbeck where he has previously received a scholarship to study at the School of Business, Economics and Informatics. Asif’s research at Birkbeck centers on the viable adaptability of the Grameen model of microfinance in the context of developed countries.

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