Bangladesh Forces Microcredit Pioneer
Out of Bank
By LYDIA POLGREEN and VIKAS BAJAJ
Published: March 2, 2011
NEW DELHI — Muhammad Yunus, the Nobel Peace Prize laureate who pioneered microcredit as a way to fight poverty, has been forced out of the bank he founded, the government-appointed chairman of the bank said on Wednesday.
But Grameen Bank disputed the assertion by the chairman, Muzammel Huq. In a statement, the bank said Mr. Yunus was “continuing his office” while it sought legal advice.
Mr. Huq said that Mr. Yunus had been terminated as managing director by the central bank, Bangladesh Bank, because of a technical violation of the law that created the bank. His appointment should have been approved by the central bank, Mr. Huq said, but was not. “He was relieved of his duties for noncompliance,” Mr. Huq said.
Bangladesh Bank sent a letter to Grameen outlining what it said were violations of the law that governs the bank. Grameen’s board discussed the letter on Monday, but the bank insists that the board did not act on the letter. The dispute over Mr. Yunus’s position as managing director is the latest skirmish in a protracted battle to diminish the influence of Mr.Yunus, a celebrated figure on the global stage who has come under harsh scrutiny at home.
Government officials have been examining the bank’s books for months, saying that it lacked proper oversight and governance. But Mr.Yunus’s allies have argued that the government was simply trying to discredit a critic. Mr. Yunus briefly floated a political party in 2007 and had criticized Bangladesh’s politicians as corrupt.
A Norwegian documentary alleged that the bank had improperly transferred $100 million donated by the Norwegian government for housing loans to another nonprofit affiliate of Grameen. A government investigation in Norway confirmed that the money had been improperly moved but said that it was returned to its rightful place and that no money had been stolen or misused.
Bangladesh’s prime minister, Sheikh Hasina, seized on the accusations and in December accused microlenders of “sucking blood from the poor in the name of poverty alleviation.”
A senior financial regulator in Bangladesh, who spoke on the condition of anonymity, said the Bangladesh Bank had notified Grameen Bank and the government that they had to seek the central bank’s permission for Mr. Yunus to remain the managing director of Grameen. But those notifications were routinely ignored by both Grameen and the government.
“Someone like him should have been mindful of the legal pitfalls,” the regulator said. “I feel very sorry about it.”
The dispute is all but certain to plunge Grameen Bank into a period of turmoil. In an interview in January, Mr. Yunus said that he wanted to step aside but that his presence as a steady hand at the bank was necessary to ensure its stability. His sudden departure could trigger a run on the bank, he said. With its 8.3 million borrowers, almost all of them poor women, and $10 billion in loans, Grameen plays an outsize role in Bangladesh’s economic and political life.
Its borrowers own more than 95 percent of the bank, and the government owns the rest. Foreign allies of Mr. Yunus have pressed the Bangladeshi government hard to stop what many see as harassment of a saintly figure who devoted his life to the poor.
Fellow Nobel laureates, former world leaders and global celebrities have spoken out in support of Mr. Yunus. Mindful of the international attention, a Finance Ministry official said that the government planned to meet with representatives of the major foreign embassies and the World Bank in Dhaka to discuss the decision on Thursday.
The move against Mr. Yunus comes as microcredit, the idea he helped popularize, has come under increasing scrutiny. Some economists have argued its effectiveness as a tool to fight poverty is overstated. In Latin America, lenders have been accused of charging usurious rates, prompting repayment strikes. In India, government regulators in the state of Andhra Pradesh cracked down on the industry after a spate of suicides that they claimed were caused by strong- arm collection tactics and overindebtedness by microfinance customers.
“It is certainly a sign of the bad times for the microfinance sector as a whole,” said Vijay Mahajan, who heads Basix, an Indian lender. “In country after country, what was considered a very useful and hopeful thing for poor people — and indeed financially sustainable — is now being reviled as something that is either exploitative or worse.”
Whatever happens to Mr. Yunus, his legacy seems secure, his allies say. “His contribution to humanity is huge,” Mr. Mahajan said. “He singlehandedly proved the veracity of one sentence: the poor are creditworthy."
(source:the newyork times)
(source:the newyork times)
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