Grameen After Yunus

With Muhammad Yunus apparently about to be driven from an operational role at the institution that he founded and which provides micro-financing to as much as 20 percent of Bangladesh’s population, what path will Grameen Bank take without him?

Bangladesh Prime Minister Sheikh Hasina Wajed for months has been waging a campaign to drive the Nobel Peace Prize laureate out of the bank, apparently, according to widespread reports in Dhaka because of jealousy. Although the lower courts have ordered Yunus out of the bank because he has passed the statutory age limit, the Supreme Court has yet to make a final decision. The court is expected to deliver its ruling on April 4.

The action against Yunus has stirred concern among international investors, who have only relatively recently begun to look favorably on Bangladesh because of its economic reforms and with the health and welfare of its 140 million citizens steadily improving. In particular the country has become a center for garment assembly and re-export, totaling $12.3 billion in FY2009.

In an interview with Asia Sentinel late last year, Yunus said simply that Grameen Bank is an institution that will go on now without him. The bank today has the equivalent of US $1.4 billion in deposits and more than 8.3 million borrowers, amazingly 97 per cent of them women. The bank maintains over 2,560 branches in 81,373 villages. With staff of nearly 22,250, the bank has disbursed 576.83 billion Bangladesh takas (US$9.87 billion) as loans to the poorest.

More than 75 percent of the shares in the bank are owned by poor Bangladeshi women. Their support and cooperation will be vital for the bank’s identity and character. Without Yunus somehow connected to the institution, it could well lose its credibility. The banker has suggested that the present deputy Managing Director, Nurjahan Begum, who he said has already proved herself to be an efficient, competent administrator, should be elevated to the post of managing director.

"I have all concern for the 8.3 million Grameen borrowers. Their interest should not be ignored at any level," Yunus said. However, he added that Grameen has what he called efficient and dedicated officials who would run the institution fairly well.

In fact, he said, he sought a graceful exit from the bank as early as March of 2010, sending a personal letter to the Finance Minister AM Muhith, saying he was ready to "hand over the responsibility of this organization to the second generation."

In his letter, he proposed two options for the transition of power. In the first option, he offered to step down from the post of managing director to be appointed non-executive chairman of the bank board.

It appears the Dhaka government may be seeking such a compromise, in which Yunus would remain with the bank but in a different capacity.

The controversy over Yunus is assuming a wider political dimension, with Sheikh Hasina’s Awami League seeking to gather support from the millions of Grameen family members, while her bitter opponent, Begum Khaleda Zia, the head of the Bangladesh Nationalist Party, is vying for the Grameen constituency to try to drive Hasina from power. The gigantic Grameen family remains a potential threat to any political party in Bangladesh. Yunus has attained near godlike status with the poor and ex-poor Bangladeshi families.

Yunus earned Hasina’s enmity when he announced plans to form a political party called Nagarik Shakti (citizen’s power) in 2007 and appealed for the populace to come forward to create a corruption free and prosperous Bangladesh. However, the plan didn’t work and Yunus gave up politics almost as soon as he started.

"I am no longer interested in politics. The chapter is totally closed today," Yunus told Asia Sentinel. He is no longer a political threat to anyone in Bangladesh, he said. When a Norwegian television station broadcast allegations, since disproved, of shady cross-corporate lending practices in the Grameen family of companies, Hasina pounced.

Micro lending, originated by Yunus, has spread rapidly across South Asia, particularly to India. After experimenting with micro lending on a small scale, he created Grameen, literally meaning village bank, in 1983. The bank gained popularity and attracted the attention of economists, civil society groups and the international media, giving collateral-free small loans, offering ownership to the beneficiaries and insisting on social empowerment of the borrowers.

The bank enjoys a recovery rate as high as 97 percent. The 25 percent of the bank that is not owned by the poor is held by the Bangladesh government. The borrowers are also empowered to elect nine of the bank board of directors.

The bank offers four interest rates comprising 20 percent for income-generating loans, 8 percent for housing loans, 5 percent for student loans, and interest-free loans for beggars, called struggling members.

Under the struggling-member scheme, the bank offers loan to the disabled, blind and older people who sell various items door to door. Since 2002, Grameen bank has disbursed more than T153 million, of which 78 percent has been paid back. To date, nearly 20,000 beggars of 112,232 beneficiaries have left begging for other income-generating activities.

The scheme has spawned a powerhouse of interlocking companies to include Grameen Phone Ltd, Grameen Telecom, Grameen Communications, Grameen Cybernet Ltd, Grameen Solutions Ltd, Grameen Information Highways Ltd, Grameen Bitek Ltd, Grameen Udyog, Grameen Samogri, Grameen Knitwear Ltd, Grameen Shiksha, Grameen Capital Management Ltd, Grameen Trust, Grameen Health Care Service Ltd, Grameen Shakti, Grameen Fabrics and Fashion Ltd. All are registered under the country’s Companies Act and pay their taxes and duties.

Micro lending, regarded as a panacea for the poor, has lost some of its luster, particularly in eastern India, where for-profit lenders have used it as a cover for nothing more than loan-sharking, generally charging annual interest as high as 40 percent. Although that compares favorably with village moneylenders, it is far greater than unsecured personal loans from commercial banks. The dilemma for poor borrowers has sparked a wave of suicides across poor Indian states such as Andhra Pradesh and triggered the passage of an ordinance regulating the lenders.

The controversy over Yunus has stirred media attention from across the world, with international organizations and individuals appealing to the government to withdraw the removal order. Friends of Grameen led by former Ireland president Mary Robinson and former World Bank president James Wolfensohn have vowed to save the bank from the government action. The US government issued a statement saying that "Dr Yunus is a Nobel Prize winner, Medal of Freedom winner (2009) and Congressional Gold Medal Winner (2010). His public service is widely recognized and respected (worldwide) and civil society organizations because the Grameen Bank plays an important role in Bangladesh's development and democracy."

The US assistant Secretary of State for South Asia Robert Blake recently visited Dhaka and after meeting the Bangladesh prime minister, Blake in a written statement said, "Prof Yunus has brought great honor for Bangladesh, and we in the United States have been deeply troubled by the difficulties he is currently facing."