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Mainstream, Vol XLIX, No 15, April 2, 2011

Bangladesh: Before Accusing Sheikh Hasina Government Need for a Close Look at Yunus’ Grameen Bank

Friday 8 April 2011, by Amitava Mukherjee

It is difficult to predict what denouement the spat between the Sheikh Hasina-led Bangladesh Government and Mohammed Yunus, the Noble Laureate, would ultimately reach but it has undoubtedly brought to the fore many pitfalls of the micro-credit system which has so far been hailed as a panacea for poverty alleviation not just in the Third World countries but in many developed nations too. It may be a bit unfair to portrait Yunus as one who has only committed all kinds of wrongs but at the same time it would be similarly unfair to hail Yunus as one who can do no wrong, as has been done by Mahfuz Anam in his obeisance to the former teacher of the Chittagong University.

First of all let us admit that Mohammed Yunus is a worldly wise man. Subsequent developments proved that this ‘drop-out from economics’, as he described himself once, did not make any mistake when he decided to take a plunge into the world of micro-credit rather than devoting his time in the far-off and nondescript Chittagong University. A Fulbright Fellow having a doctorate from the Vanderbilt University, Yunus had just come to join the academic world in Bangladesh when a terrible famine had struck the country led by Mujibur Rahman in 1974.

And the controversy starts from this point. According to the Yunus camp followers, the Noble Laureate had founded the Grameen Bank (GB), an assertion which the Sheikh Hasina Government hotly contests. It would, however, be prudent to admit that the idea of advancing very small loans to the poor was Yunus’ brainchild. It is said that in 1976 Yunus took out from his pocket Rs 856 and advanced the amount as loans to fortytwo poor women of Jobra village, situated close to the Chittagong University. The repayment arithmetic was encouraging and from there the idea of micro-credit and self-help group took roots.

But supporters of Mohammed Yunus wittingly or unwittingly commit one mistake. They portray the micro-credit ‘guru’ as the founder of the Grameen Bank which is far from the truth. He can be called a pioneer who conceptualised the idea of micro-credit. But since the inception of the Grameen Bank, the Bangladesh Government, with its substantial contribution to the capital base of the bank, was very much present in its structure and Yunus is bound by law to respect the government’s views. It is an entirely different matter that for a long time successive governments in Bangladesh chose not to adopt any active role in the management of the GB. But that does not make Mohammed Yunus the proprietor or founder of the institution.

The controversy has generated a lot of heat and dust. Rehman Sobhan, the renowned economist of Bangladesh, has opined that the large numbers of shareholders of the GB should be the ultimate deciders of the bank’s destiny. Sobhan’s argument is logical but more logic lies in the fact that there is a thing called the rule of law in Bangladesh and the affairs of the GB should be investigated by an independent authority as a serious controversy has cropped up. This independent investigation is certainly more important than the shareholders’ view.

THE idea of the Grameen Bank took shape in Bangladesh at a time when Mohammed Yunus, in search of funds for his micro-credit concept, was fed up with bureaucratic red-tapism. This was in the early 1980s. The time is significant. Ziaur Rahman was in power in Bangladesh and he was leaving no stone unturned to steer Bangladesh away in every sphere from the allegedly pro-India path charted out by Mujibur Rahman that had imprints of a state-controlled economy. A columnist of Bangladesh avers that Yunus enjoyed good equations with Zia. It is difficult to say to what extent the columnist’s assertion is correct but that the government readily agreed to participate with 65 per cent equity in the Grameen Bank project is interesting. More interesting is the fact that over the years successive Bangladesh governments allowed its equity participation to be whittled down to 25 per cent. After the project successfully took off the government naturally lost its leverage in the policies and administration of the GB with a reduced equity.

Today the government has a considerably small contribution to the Grameen Bank’s total capitalisation while 30 to 40 per cent of the annual development budget is earmarked for poverty alleviation. This gives one a fair idea about the government’s sleeping partnership in the GB. Then why has the Hasina Wazed-led government suddenly woken up to the Grameen Bank’s ‘anomalies’ after such long a time? That’s a million dollar question which the Bangladesh Government should answer. To all intents and purposes, Mohammed Yunus has violated the service rules by continuing as the Managing Director of the Grameen Bank even after he reached the age of superannuation. But his continuation in service, certainly indefensible, was okayed by the Board of Directors of the Grameen Bank where the Bangladesh Government has three representatives. And this too happened in 2000 AD when Hasina Wajed was in power.

In all probability relations between the Awami League and Yunus deteriorated after the latter contemplated and then publicly announced his wish to form a political party. It will not be wide off the mark to state that Mohammed Yunus belongs to the Right-of-Centre political grouping in Bangladesh. He has excellent equations with the USA and other Western capitalist countries including Great Britain. His main supporter in the present US Administration is Hillary Clinton, the Secretary of State, with whom and with whose husband, Bill Clinton, Yunus maintains extraordinarily good terms. Perhaps Obama does not know much about Yunus but Hillary’s presence has made the Yunus issue an international affair. At her insistence US officials are reported to have threatened Hasina that the US would suspend high-level diplomatic interactions with Dhaka and that she would not have the chance to meet Obama when she visits the US in April.

This US overdrive has certainly complicated Yunus’ case although from the US side it is quite understandable. Taking a cue from Yunus’ concept, the US has launched several urban poverty alleviation programmes in different parts of that country. Yunus himself is a member of six high-powered committees in the US. Certainly this is not likely to endear him to any Awami League-led government which still cannot forget the role played by the US during the Bangladesh liberation war.

Votaries of Yunus’ micro-credit concept are always ready to run down the state’s poverty alleviation programmes. There are perhaps grains of truth in it. Bangladesh being one of the most corrupt countries in the world, failure of the state sector is perhaps unavoidable. But the same logic should apply to Mohammed Yunus’ micro-credit operation also. There are allegations of mismanagement, high interest rates and ruthless recovery mechanisms against the Grameen Bank. This is a very common allegation against the micro-credit system in India too.

There are also other charges to which Yunus must respond. As per rules, the Grameen Bank can only lend money to the landless poor and its function is limited within this periphery. However, a large number of companies/corpora-tions have come up under the umbrella of the Grameen group that sometimes get guarantees or receive loans from the Grameen Bank. This is the arena of transfer of funds where Yunus was nailed by Norwegian media exposures. He tried to wriggle out of the situation by admitting that he had done so to avoid payment of taxes. A pathetic admission of guilt by someone bestowed with the Noble Prize. But then the Grameen Bank has been enjoying tax exemption for a long time. Obviously Yunus’ answer had very weak legs. The amount transferred stood at a staggering US $ 100 million. Yunus ultimately returned $ 30 million. But what about the rest $ 70 million?

Sajeev Wajed Joy, son of Hasina Wazed and an advisor to her government, has brought another serious charge against Yunus. In his e-mail message Joy has accused Yunus of charging 30 per cent interest from the micro-credit borrowers. Moreover, according to Joy, between 1998 and 2002 the same borrowers were compelled to do ‘forced savings’ of additional 10 per cent which they were supposed to get back at a later date. But, as Joy avers in his message, the hapless borrowers have not got it back.

It may not be an overstatement to say that lack of democratic functioning within the Grameen Bank had led to many erroneous decisions. The streets of Dhaka are now rife with stories of alleged irregularities committed by the Noble Laureate. There are allegations that the Grameen Bank has undertaken a Managing Agency on behalf of one Packaging Corporation Ltd which is in fact owned by Mohammed Yunus’ father, Dula Miah, and where two of Yunus’ brothers, Mohammed Ibrahim and Abdus Salam, are Directors. The two institutions are slated to share their losses on a 50:50 basis and the Packaging Corporation will have access to loans from the Grameen Bank.

It would have been better if Yunus was able maintain a dividing line between family and professional life even if some of his relatives are extremely competent. But at the same time it may not be prudent to search for nepotism in most of his actions. After all, he has given birth to a new idea in the area of poverty alleviation. Policy-makers in Bangladesh should now put on a thinking cap and find out if it has gone a bit haywire.

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