The predicament of Grameen Bank does not bode well for Dr. Yunus
I first met Dr. Muhammad Yunus in April 1971 in Dayton, Ohio when he was a struggling pedagogue in a small college in eastern Indiana and I was a lowly graduate student in Cincinnati, Ohio. The military crackdown of Yahya regime on the wee hours of March 26, 1971 had greatly disturbed a few of us in America; therefore, a hastily arranged meeting was called by Prof. Aminul Islam of Wright State University in Dayton. There were only 6-7 participants in that meeting and Dr. Yunus was one of them. My take on Dr. Yunus was that he was very over ambitious. He told us that he would like to be the ambassador of Bangladesh in Sweden when Pakistanis will be booted out by our freedom fighters. Hearing this quip I laughed because Dr. Yunus was hardly in his early thirties at the time. They don't appoint a young man as an ambassador lest the position loses its gravitas.
Dr. Yunus returned to Bangladesh in the seventies to take up an academic position in Chittagong and there he started his great experiment with micro credit and what a remarkable journey he charted for himself and for Bangladesh.
In the early1980s CBS 60 Minutes – a news magazine – did a segment on Dr. Yunus and the newly founded Grameen Bank, which catapulted him to western world in a big way. He gave a glowing report on the success of his bank to change the lives of many women in Chittagong, a port town in southeastern Bangladesh. There was no independent audit or verification to the Bank's financial statement or Dr. Yunus's exaggerated claim that micro-lending could be a panacea for hapless women in rural areas of Bangladesh.
Dr. Yunus is always very crafty with his words when he talks about the success of his micro-lending practice in rural Bangladesh. He tied the operation of Grameen Bank with poverty alleviation especially for womenfolk. This was the selling point. The gullible western press fell for the bait and they glorified both Dr. Yunus and Grameen Bank while giving glowing encomiums to his brainchild – the bank for the poor. Nowhere was mentioned the exorbitant finance charge that pale the interest rate levied by Kabuliwalas (the Kabuli men from Afghanistan were roving moneylenders of Bengal during British Raj) or the Mahajons (traditional Hindu moneylender).
By 1990s Dr. Yunus had morphed into a towering figure allover the world. When he talked everyone listened. The western press had various monikers for him. They lovingly called him "the banker for poor folks." While the adulation and encomiums poured in, many economists in Bangladesh were puzzled about Grameen Bank. Is it a commercial financial institution? You bet. But many people erroneously thought it was an NGO solely devoted to poverty alleviation and in particular for womenfolk. I never thought Dr. Yunus clarified this issue for once and all. This dual identity of Grameen Bank had served Dr. Yunus rather well. For, he never allowed any outside auditors to examine the Bank's book. Why so? Because Grameen Bank was not exactly a commercial bank. That is the impression one gets when Dr. Yunus glowingly talked about the noble goals of the bank for poor. Also, he helped created Grameen Foundation allover the globe. The foundation did the fund raising in the West but we never fully understood whether Grameen Bank had benefited from the donations collected by the foundation.
Lately, I have learned that Grameen Bank and its employees had never paid a dime to Bangladesh treasury as income tax. Dr. Yunus became a smart businessman while trying to be a social engineer as he always maintained that he started Grameen Bank to uplift the financial lot of indigent womenfolk in Bangladesh. He used this mantra over and over again to Grameen Bank become the nation's number one cellphone company. Bangladesh's Prime Minister, Sheikh Hasina, has quipped in December 2010 that while she was the PM during 1996 through 2001 Dr. Yunus convinced her that his company should get the license to operate a mobile phone business because this would empower womenfolk of Bangladesh. A very convincing argument one might say. Dr. Yunus precisely knew that he could sell almost anything to the nation (read government) provided he invokes the mantra of poverty alleviation. Who could in the right frame of mind argue with Dr. Yunus about his various enterprises that were involved in uplifting the lot of indigent womenfolk?
During 1996 the world experienced a severe downturn in global economy that affected the Asian countries too alongside with the western nation. The Grameen Bank was in liquidity crisis then. Luckily, help was underway from Scandinavian nations. About 100 million dollar grant was given to Grameen Bank – a very successful commercial bank as touted by Dr. Yunus throughout 1990s. This did not chime in with what Dr. Yunus had always said about the success of Grameen Bank. Now bizarre revelation had filled the media. This is true that when the grant money was given to Grameen Bank (read Dr. Yunus) by the donor nation, the money did not go to Grameen Bank but it was deposited to another entity by the name Grameen Kalyan created single-handedly by Dr. Yunus. This is a serious breach of terms and conditions imposed by Swedish authorities who made the grant. Dr. Yunus may say that all the grant money was deposited to Grameen Kalyan and this may be true but this is a fact that the contract was breached. How come an erudite economist did not see it? Dr. Yunus's detractors have said this was done to avoid taxes due to Bangladesh Treasury.
The Bangladesh Bank is now actively examining all the documents pertaining to this grant given by Swedish authorities in 1996. Dr. Yunus thinks no irregularity will be unearthed and that will vindicate his name. There is an intense media interest in this developing story and trust me there will be fallout from this investigation which is being done by Bangladesh Bank.
I read in the media that when Swedish authority found it out about the irregularity done by Grameen Bank right after the grant money was handed out to Dr. Yunus, they questioned Dr. Yunus. In return Dr. Yunus wrote a letter to Swedish authorities begging them not to disclose the irregularity to anyone in Bangladesh. The inquiry was hushed up. However, in this day of WikiLeaks the news of Dr. Yunus's crafty move resurfaced again. Had this story surfaced in 1996, this would have squished any hope for getting the Noble Peace Prize in October 2006.
Dr. Yunus and his Bank are under microscope now and this does not bode well for him and Grameen Bank. The news of tyranny done by Grameen Bank's agent allover Bangladesh to the Bank's clients who could not come up with interest payment is everywhere in the Internet and print media. The fact that Grameen Bank could not even make a dent in poverty alleviation will be established for once and all. Someone had euphemistically said that Grameen Bank is a "Death Trap" for indigents who borrowed some paltry sum from them.
The axiom that says you cannot fool all the people all the time will be established again now that a full-scale probing is underway by Bangladesh Bank.
Dr. A.H. Jaffor Ullah, a researcher and columnist, writes from New Orleans, USA