The Nobel Laureate and Managing Director of Grameen Bank, Dr. Yunus, under intense scrutiny

Shabbir Ahmed

Who could have predicted that one day the Grameen Bank Chief, Dr. Yunus, would be under the magnifying glass undergoing an intense scrutiny? Poverty alleviation through micro lending got a bad name in Bangladesh. This is the handiwork of Grameen Bank under the able leadership of Dr. Yunus.

In late70s or in early 80s, there was a cover story in “Weekly Bichitra” about Dr. Yunus’ plan on micro-credits for the hapless people of Bangladesh. His detailed interview on the proposed bank for the poor along with many of his pictures was published. I had the opportunity to read the cover story. As far as I remember, Dr. Yunus’ proposed plans and programs were very attractive and inspiring. He was able to draw the attention of all the conscious and concerned people, who sincerely wanted to alleviate the poverty and sufferings of Bangladesh’s indigents. In the years after the formation of Grameen Bank, Dr. Yunus’ program on micro-credit for the poor was highly appreciated by many high-ups both inside and outside Bangladesh. If my memory serves me right, the present Prime Minister Mrs. Sheikh Hasina had supported wholeheartedly Grameen Banks’s microloans program when she became the PM of the nation in 1996. If I remember correctly, she even presided over a session for microcredit in New York probably in 1998 and urged donors to support by providing funds for the bank of the poor in Bangladesh when there was a currency crisis all over the globe and a severe recession loomed large.

Many donor countries in the world were impressed with the vision of Dr. Yunus on poverty alleviation through microloan. As a result, Grameen Bank received exceedingly large amount of funds as revealed in the media. At the onset of the activities of Grameen Bank, both the ultra-left and ultra-right forces opposed the micro loan programs. The former group does not believe in any solution in a society based on the capitalistic framework and the latter group does not believe in any solution based on the manmade banking system. The ultra-leftists thought that someday there will be a revolution done by the poor people and then, for them, everything will become fine and dandy. So, they were skeptic and pessimistic about anything done under the present capitalistic system. The ultra-right forces consisting of the fundamentalists were against the programs for providing loans to the poor women. They do not want women becoming fiscally independent. I think that these two forces (ultra- left and ultra-right) are a tiny fraction of the total population in Bangladesh. The vast majority of the population in the central-left and central-right however supported Dr. Yunus and his micro-credit programs for the poor. Accordingly, Dr. Yunus and Grameen Bank enjoyed overwhelming appreciation and support from the great majority of the population including the intelligentsia.

In an unfortunate turn of events, the support of the vast majority of the population started eroding, especially, because of the exorbitant interest rate, harsh method of loan recovery, and tough payment schedule for the installments of loan repayment applied by Grameen Bank to the poor people. In addition to the interest rate as high as twenty five percent (or higher as reported in the newspapers), Grameen Bank charged different fees from the poor borrowers. If the compounding (not simple) interest rate is applied to the principal, then it will increase as an exponential function with time (years). For an interest rate of twenty five percent, the principal will become double in less than three years if the interest is applied to the account in every month. Above and beyond all other considerations, how will the poor people get a return more than twenty five percent to prosper and get out of poverty? In fact, these poor people will be entangled in a vicious cycle of loan.

The recent program broadcasted by Norwegian television channel revealed stories that are not at all positive about the success of Grameen Bank. Dr. Yunus started his microloan experiment in the village named Jobra. The television program revealed that only about four families out of about sixty families were benefitted by the Grameen Bank loan. Almost all the families in the Jobra village are still very poor. One gentleman of the Jobra village gave a very dismal view on the success of the Grameen Bank’s loan program. If the data from the Jobra village is collected and analyzed, then it can be proven that Grameen Bank’s microloan program is not working effectively. In reference to the interview of the villager, the proportion of success is estimated at about seven percent (4 out of 60 families who received the microloan). This is statistically insignificant because this small percentage of people could prosper even without Grameen bank’s microloan just like a small percentage of sick people could recover from a disease without taking any medicine or taking placebo instead of therapeutic compounds. It appears that the information of the successes was spread widely to promote the programs of Grameen Bank while the information of the failures was kept out of view and scrutiny.

Despite all the controversies vis-à-vis the “success” of Grameen Bank on poverty alleviation, Dr. Yunus became very popular, especially after winning the Nobel Peace Prize. His role for bringing peace in Bangladesh is not clear. On any major chaotic issues in Bangladesh (such as fighting in Chittagong Hill Tract, movement against military dictator Ershad, grenade attack on Prime Minster Mrs. Sheikh Hasina, over five hundred bomb blasts by the Islamic terrorists, and killing of a former finance minister Mr. S. A. M. S. Kibria), Dr. Yunus maintained a deafening silence. There would not be any question if he remained reticent on all the issues except the microcredit programs. This however is not the case with Dr. Yunus. In the aftermath of the takeover of power by the military-backed Caretaker Government, Dr. Yunus became very active and vocal to form a new party while keeping all the leading politicians in jail. He became noted for his vocal protests against all the politicians in Bangladesh. His gross remarks against all the politicians in general were helping the brutal regime to unleash torture upon the democracy loving Bengalis at that time.

We all watched his prudent remarks in the television while many conscious people were tightlipped in a controlled environment under emergency rule. One with an iota of knowledge about emergency rule under martial regime should understand that his remarks did not do any damage to the really corrupt politicians. However, these types of gross remarks by a supposedly responsible and respected person like Dr. Yunus certainly damaged the reputation of the honest politicians, who worked for the people and wanted to do good by dedicating their time and sacrificing their own comfort. The ex-military rulers and their hired intellectuals used to make such thoughtless remarks like the ones Dr. Yunus made during the time of the military-backed caretaker regime. A perception about him being a perfect individual was given by some of his followers during those dark days. Now that some violations have been revealed on transferring funds from Grameen Bank to Grameen Kalyan, it is quite normal that he would be under close investigation. Simply as a consequence of the scrutiny, it was found that Dr. Yunus was continuing his job as the managing director by violating the rule of the Grameen Bank. It is woeful to watch his lack of understanding the rules under which he should continue his job. It is irrelevant whether he is a Nobel Laureate or not in regard to his managing director position. His lawyers were arguing (as reveled in the newspaper) in the High Court for his job by portraying him as a Nobel Laureate. It is not about him winning the Nobel Peace Prize, it is about the terms and conditions as laid out in the service rules of the Grameen Bank. As an example, a U.S. President may win a Nobel Prize but this will not let him contest in the election and continue more than two terms.

As reported in various newspapers, Dr. Yunus received full support including funding from the government of Bangladesh for establishing the Grameen Bank. We now know that it is operated under some rules set by Bangladesh Bank even though there exist a board of directors full of poor women with no institutional and technical knowledge on finance, economics, and banking processes. The state bank could certainly investigate using independent experts and fix the shortcomings so that the poor people can get better service from the Grameen Bank. Despite all the shortcomings of the bank’s current loan process, microcredit will still be helpful to improve the quality of the life of the millions of poor people in Bangladesh if the interest rate is kept low and if a mechanism of protection is provided for those who would fail to pay off the loan for good reasons (deaths, droughts, flood, hurricane, etc.). Advertisement and propaganda will not work always and will not improve the life of the millions of poor people in Bangladesh. Microloan at a very high interest rate will not alleviate poverty and that is for sure. Rather, the poor people will be mired in a vicious process of fees, loan, and interest. One does not need to be a Nobel Laureate in economics to understand this simple axiom.