Isobel Coleman

Democracy in Development

Coleman maps the intersections between political reform, economic growth, and U.S. policy in the developing world.

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Bangladeshi Politics and the Grameen Bank’s Uncertain Future

by Isobel Coleman
September 5, 2012

Employees of the Grameen Bank take part in a sit-in protest in front of their central office in Dhaka on April 5, 2011. Bangladesh's highest court rejected on April 4 an appeal by Nobel laureate Muhammad Yunus against his dismissal as managing director of Grameen Bank (Andrew Biraj/Courtesy Reuters). Employees of the Grameen Bank take part in a sit-in protest in front of their central office in Dhaka on April 5, 2011. Bangladesh's highest court had rejected an appeal by Nobel laureate Muhammad Yunus against his dismissal as managing director of Grameen Bank (Andrew Biraj/Courtesy Reuters).

An Economist article from a few months ago noted that if Bangladesh can sustain its annual growth rates of over six percent, it could “contemplate reaching middle-income levels in barely a decade.” That would be quite a feat for a country that was once synonymous with wrenching poverty. But as the Economist warned, the government must stay focused on meeting the country’s economic challenges. Sadly, political infighting instead seems to be winning the day. The leaders of the two main parties–Prime Minister Sheikh Hasina of the governing Awami Party and Khaleda Zia of the Bangladesh Nationalist Party (BNP) appear to be more interested in destroying each other than in leading. Their personal animosity is legendary but in the run-up to next year’s election, Bangladesh’s politics are poised to get even dirtier.

Nobel Laureate Muhammad Yunus and his world-famous Grameen Bank appear to be the latest collateral damage. The government has been harassing Yunus for several years, going back to 2007 when he briefly toyed with putting himself forward as a potential third party leader to move beyond the dysfunction of the Awami-BNP rivalry. That third party never went anywhere, but Yunus has been paying the price ever since. Sheikh Hasina and other government leaders have asserted that the Grameen Bank is mismanaged and have made allegations about Yunus’ own integrity.

In 2011, Yunus was removed from his position as managing director of Grameen Bank on the grounds that he was past the official retirement age. Yunus then began warning that the government was planning a complete takeover of the Bank, and it seems his predictions have come to pass.  Two weeks ago, the government approved an ordinance whereby it essentially gets to choose the Bank’s managing director.

So far, the ordinance—a measure that microfinance expert David Roodman characterizes as “depriving [the board] of what in an independent organization is a board’s most important function: hiring and firing the CEO”—has sparked outrage in Bangladesh and abroad. Former U.S. Ambassador to Bangladesh William Milam condemned the new ordinance, writing, “[The government] ginned up a controversy that micro lenders were ‘loan sharks,’ when the opposite is true: These banks give borrowers an alternative to usurious moneylenders.” Yunus himself released a somber statement condemning the government’s actions. As he said, “This amendment marks the beginning of the end of Grameen Bank’s amazing history…There is no precedent in history, where an institution has gained from such a move by the government.”

Some fear that the new process for appointing a managing director will undermine women’s influence within the board. Nine out of twelve people on the board of directors are women who have borrowed from Grameen themselves. They are elected by the Bank’s eight million members and bring to the table their experiences with poverty, explains David Bornstein, the author of a book about the Bank.  Bornstein worries that the government will try to undermine this aspect of the board as well, writing, “Last year, a government panel concluded that the village women on the board were ill-equipped to oversee a major financial institution, signaling that the government has plans to remove them.” Others, like Ambassador Milam, worry that the government will now have free reign to plunder Grameen’s assets, and use the Bank to lure its millions of members as voters in next year’s election.

For sure, microfinance as an industry has had its fair share of problems. But trailblazing Grameen—and its millions of poor women owners –deserve better than a politically motivated government takeover.

Post a Comment 7 Comments

  • Posted by Alex Counts

    Thanks for this excellent article, Isobel. For those interested in more background on this sordid matter, check out http://www.friendsofgrameen.com/dl/2011/02/GrameenBankFactSheet-August20121.pdf

  • Posted by Mansur Ahmad

    Grameen Bank has developed the lives of village women in Bangladesh in a miracle way since its formation from Zobra by Prof Dr. Muhammad Yunus. He is the main architect of Grameen Bank who introduced micro credit to the village women of Bangladesh without any guarantor. With the passage of time Dr. Yunus has changed the lives of grameen women of Bangladesh. 97% share holders of Grameen Bank are the women. They’ll nominate the Board of Directors of the Bank. Board will nominate Chairman & M.D. But very unfortunately present Government nominated their people as Chairman & Chairman will select M.D by his power delegated to him. This decision on the part of present Government is highly detrimental to the interest of the 97% women share holders of Grameen Bank. I personally condemn the decision of Government. Government should withdraw the decision to nominate Chairman. 97% share holders should take their decision to select Board of Directors & Board will select the M.D of Grameen Bank.

  • Posted by Farzana Zerin

    An informative article.This type of articles are necessary mostly for the people of Bangladesh who doesn’t have clear understanding about GB.

  • Posted by Isobel Coleman

    Thank you for reading!

  • Posted by Peter Graves, Canberra, Australia

    Thanks for your comments, Alex. Given the current controversies over the Grameen Bank, it is also useful to highlight the links between microfinance lending and good health.

    A 2010 report by the World Health Organisation “Protecting Health: Thinking Small” (WHO Bulletin 2010:88:713-715), demonstrated the value of linking microfinance lending with a package including health-care subsidies, training and interventions for social inclusion.

    A further February 2011 study by Leatherman et al in Health Policy and Planning Journal titled “Integrating microfinance and health strategies…” concluded that ‘worldwide, current public health progams and health systems are proving to be inadequate to meet populations needs. The microfinance sector offers an underutilised opportunity for delivery of health-related services to hard-to reach populations”.

    The evidence is in. Using microfinance lending to invest in the good health of Bangladesh women is a hand up – not a hand out.

  • Posted by Sue Packham

    The current Prime Minister, Sheikh Hasina Wazad has stated on the Government website, her determination for the eradication of poverty. She was originally particularly interested in the development of micro credit programmes which have now been recognized worldwide as an effective tool in fighting extreme poverty. In fact, she was co-chairperson of the Microcredit Summit Campaign in February 1997. She gave the opening speech at the Summit and Muhammad Yunus was on the organizing committee and also co-chaired the Council of Practitioners. What a proud and united team from Bangladesh!

    It is stated that the Prime Minister was a champion for the rights of women in her country and in 1997, enabled 14,000 women to take up local government positions.

    Initiatives to protect women and children from violence had also been taken. Education of girls had been prioritized as a result of her leadership.

    With so much for her and Bangladesh to be proud of, why now in 2012, do we see a devastating development, which encompasses all of her previous interests and achievements? The current actions against the Grameen Bank will put her government, in the eyes of the global community interested in the democratic way and the reduction of poverty, to shame and wonderment.

    I urge Prime Minister Sheikh Hasina to keep Bangladesh’s reputation safe – as a proud nation working extraordinarily well to give the poorest families hope and opportunities through micro loans and other financial services with the Grameen Bank – seen by the world as a the jewel in the crown of Bangladesh.
    Sue Packham, Woolamai, Australia

  • Posted by Claire O'Leary, NSW, Australia

    Isn’t it typical that when a social institution such as Grameen proves to be more effective at helping lift its participants out of poverty rather than the ineffectual efforts of a corruption-riddled government that that same government would seek to destroy that institution. And what really sticks in the craw is the hypocrisy of alleging it is over concerns that the bank isn’t being run effectively.
    It is demoralising to have to acknowledge that a woman would stoop to this level simply to make political points against her opposition. Shows that no matter whether male or female, absolute power corrupts absolutely.

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