Page 2 of 2 Grameen's Yunus in cash scandal
By Syed Tashfin Chowdhury
He added, "The issue of adding interest can be reviewed if deemed appropriate
by the lending and borrowing organization." Through the decision, "more
efficient and prudent fund management and accountability on the part of GB"
would be ensured.
Yunus admitted in the letter that while the foreign grant money had increased
the liquidity of the funds that could be used for micro-credit loans, GK's
establishment through endowment funds had widened the scope for initiating new
projects through which poverty alleviation could be addressed, which was the
initial purpose of the Social Advancement Fund which had accumulated through
grants from Norway, Sweden and Germany and of which
the 1.9 billion taka revolving fund was a part.
However, Bdnews24.com highlighted his statement in the letter where he
mentioned: "With gradual higher interest rate charged, (…) more and more money
will have to be paid out as taxes in future," leading to the controversy.
Not being totally satisfied with the letter, the embassy wrote to the
government of Bangladesh alleging that Grameen Bank transferred money from
Norad and other international donors to various enterprises outside Grameen
Bank. Following this, Yunus wrote in a personal letter to Norad director
general Tove Strand Gerhardsen on April 1, 1998: "We are struggling to resolve
it. But I think it is not making much progress."
Yunus went on: "If the people, within and outside government, who are not
supportive of Grameen, get hold of this letter we'll face real problems in
Bangladesh."
Informing Gerhardsen about a visit by Yunus to Oslo on April 29 and 30, 1998,
where he was invited by Norwegian telecoms group Telenor and the Worldview
International Foundation to discuss a joint venture project in mass education
in Bangladesh, Yunus requested a meeting with Gerhardsen "for a few minutes so
that I get a chance to explain the seriousness of the matter." He concluded the
letter with: "Sorry to bring up all these matters to you. But I have no option
left."
The investigative documentary says after revealing the documents and the
incidents: " ... And Norad, the Norwegian Embassy and the Bangladeshi
authorities kept their mouths shut."
The documentary was directed by Tom Heinemann, a Danish award-winning
journalist, who told Bdnews24.com that although he had tried to talk to Yunus
for the past six months, "he didn't want to talk to me."
While Grameen Bank has declined to comment on the fund transfer claims, staff
speculated that the incident is a "conspiracy by a certain influential group
which still bears a grudge against the Nobel laureate for his intentions to
launch a political party soon after returning to Dhaka after receiving the
Nobel prize in 2006." Yunus later dropped the idea of entering politics.
Following the television documentary, Norwegian authorities told the BBC that
they have no suspicion of tax fraud or corruption committed by Grameen Bank.
International Development Minister Erik Solheim told the BBC that he had asked
the Norwegian Agency for Development Co-operation for a full report on the
matter. "At the same time it is important to stress that we are firm believers
in micro-finance as a tool in the fight against poverty," he said.
The vicious micro-credit cycle
Through the innovation of micro-credit innovation, the poor, who lack capital,
employment, collateral or credit history, are given tiny loans through which
they can start small businesses. As the business improves, the loan-taker is
supposed to repay the loan in instalments.
The micro-credit revolution began soon after the organization that became
Grameen Bank gave out its first micro-credit loans in 1976 to Sufia Khatun at
Jobra village in Chittagong, Bangladesh. It gained global popularity after
Yunus with Grameen Bank won the 2006 Nobel Peace Prize "for their efforts to
create economic and social development from below".
While micro-credit has spread to other parts of the world,
the non-government micro-finance sector in Bangladesh has grown to be dominated by
GB, the Bangladesh Rural Advancement Committee, the Association for
Social Advancement and Proshika. Some commentators and financial experts believe
that due to the lack of accountability, these institutions are gradually
becoming profit-making loan-sharks.
Heinemann told Bdnews24.com that he stumbled on the fund transfer information
after gaining interest on micro-finance. Along with his film crew, Heinemann
travelled to most of the villages described in Grameen Bank's publicity
literature as "success stories".
He told Bdnews24, "In Jobra, we meet the daughter of the famous original loan
taker, Sufia Begum. In 'Hillary Village', where the former first lady of the
USA [and now US Secretary of State] Hillary Clinton declared her support for
both Mohammad Yunus and Grameen Bank, the crew meets poor people who have
gained nothing but more debt due to micro-credit.
"Each one had multiple loans in various micro-credit banks and organizations
and had had a hard time trying to pay back their loans. Some had sold their
house, others had their tin-sheets pulled off their houses to cover the weekly
payments," he said, while adding that noted social scientists such Thomas
Dichter, Milford Bateman and Jonathan Morduch have all converged on one notion:
"After 35 years of micro-credit there is no evidence that [it] lifts millions
out of poverty."
Heinemann told Bdnews.24 that the international version of his documentary will
contain interviews from Andhra Pradesh in India, where numerous suicides have
been reported amongst micro-credit loan takers, leading to question the success
of micro-credit in alleviating poverty.
In a feature about the shady side of micro-credit, published in the Bangladeshi
daily New Age on August 28, 2009, Mohiuddin Alamgir wrote about the fate of
Sufia Khatun, the first Grameen Bank loan taker. "Last year, her [Sufia's]
funeral was conducted through generous contributions of fellow villagers as she
had nothing left after paying the interest for the loan when she still
breathed."
In the same feature, Alamgir pointed out that the average interest rate charged
by the micro-financing institutions in Bangladesh for small loans ranged from
25% to 35%. Criticizing micro-credit institutions in Bangladesh for having
political ambitions and business interests, economists and experts who were
interviewed further expressed their concerns that micro-credit loans are
actually leading to more poverty for the loan-takers.
In the documentary, Dr Qazi Kholiquzzaman Ahmad, an economist and chairman of
Palli Karma Sahayak Foundation (PKSF), a body that monitors micro-finance,
described micro-credit as a "death trap" for the poor.
Professor Abu Ahmed, of the economics department in Dhaka University, blamed
the government for the irregularities of the micro-credit organizations.
"Although Yunus through GB had initiated the micro-credit revolution, the
irregularities increased over the past decade as, while new organizations began
operations, there was no government body overseeing their operations," Abu told
Asia Times Online. "Rather than slandering Dr Yunus's image, government
policies need to be analyzed, as it has let the micro-credit sector mutate into
a 'micro-credit industry'."
Anu Mohammad, professor at the economics department of Jahangirnagar University
in Bangladesh, told Asia Times Online that although most micro-credit financing
institutions had become "corporate successes by initiating businesses following
the combination of foreign grant funds with the unprecedented amount of capital
accumulated", they all failed at achieving poverty eradication, the primary
motives behind micro-credit financing.
Citing his own research, he said, "Only 5-10% of loan-takers consist of success
cases. However, these households cannot be described as impoverished as they
have other sources of income.
"Over 50% of loan-takers have been plunged into serious financial quagmires as
weekly instalments are regular and repressive, when these households are
usually facing deficit income. Most loan-takers ultimately seek further loans
from village loan sharks to repay the micro-credit loans."
Fearing the controversy surrounding GB and Yunus will very likely tarnish the
global image for Bangladesh, he added: "This was inevitable. The lack of
transparency and accountability always gave these organizations the leeway to
operate in the ways they wished. Their operations and transactions are always
shrouded in mystery. However, through their local and international influence,
such organizations always manage to keep intact their public image as society's
saviours. That phase is gradually coming to end though."
Syed Tashfin Chowdhury is a senior staff writer at New Age in Dhaka.
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