A rigorous analysis of the institutional structures underlying Grameen I yields some interesting economic insights. The essential idea is that an appropriate institutional design can help in tapping into the informational pool available at the local level among the borrowers themselves and something that may not be accessible to outsiders. We argue that such simple and unconventional contracts can harness market efficiency, even though formal and conventional contracts may fail to do so. This paper tries to demonstrate how exactly innovative features like joint liability lending, sequential lending, contingent renewal, etc, can serve the purpose.