Grameen Bank on Joy's letter
Sajeeb Wajed Joy, son of Prime Minister Sheikh Hasina, has riddled
Grameen Bank with allegations of tax evasion, fraud and illegal
activities under its founder Muhammad Yunus, prompting the microlender
to issue a firm rebuttal.
In a statement yesterday, the "Bank for the Poor" disputed Joy's
letter, published in a section of the press and said the "news
contains a number of inaccurate facts and appears to be misconceived".
Joy, who lives in the US, has written and signed an open letter full
of rants against the Nobel-winning organisation. In the letter
initially circulated by email, Joy has identified himself as an
adviser to the prime minister.
"Last year Norwegian Television uncovered documents revealing massive
financial improprieties at Grameen Bank under Muhammad Yunus.
Approximately $100 million in donor funds to Grameen Bank were
transferred out of Grameen Bank to a private corporation, Grameen
Kalyan set up by Yunus," Joy said.
"The government of Norway raised this as a major concern and as a
compromise $30 million was returned. The remaining approximately $70
million was never returned. All correspondence in this regard was from
Yunus himself," he said.
"Just as international lobbying and media is being used in this recent
incident, no doubt Yunus lobbied the Norwegian government as well.
However, their explanation left millions of dollars unaccounted for."
Joy said this became a major issue in Bangladesh and the government
was forced to form an independent committee to investigate. "Yunus
personally gave a press statement (no questions were allowed) where he
announced that he undertook these transfers to avoid taxes, which
constitutes tax evasion."
"However, this makes no sense since Grameen was at the time a
non-profit and paid no taxes. What is clear is that this transfer is
completely illegal and constitutes a criminal offence of 'conversion'
under Bangladesh law."
"Further investigation uncovered other fraud, improprieties and
illegal activity at Grameen Bank under Yunus."
Joy said, between 1998 and 2002 all microloan borrowers were forced to
pay an additional amount labelled "forced savings" which they were
supposed to be paid back. "However, this money was never returned to
the borrowers, who are among the poorest of society! This is fraud and
theft."
He alleged that donor funds were used to invest in a variety of
private-for-profit ventures, all without approval from either the
donors or the government, which owns 25 percent of Grameen Bank.
"In several cases, the equity in these private ventures was held not
by Grameen Bank, but by Yunus and his family members personally. This
is completely illegal and constitutes embezzlement," Joy claimed.
He said loans were made by Grameen Bank to some of these corporations,
which is completely illegal since Grameen Bank is not a regular bank.
"It is lending donor funds and is only allowed to loan to microcredit
borrowers."
Joy also claimed Grameen charges up to 30 percent interest rate on
loans and up to an additional 10 percent in "forced savings" to the
poorest sections of society. "Their collection methods are draconian
and collection officers who fail to collect payment have the
uncollected amounts deducted from their pay."
"There are many documented cases which constitute abuse and the
criminal offence of 'molestation' under Bangladesh law," Joy wrote in
the letter.
He claimed the government, not Yunus, founded Grameen Bank. "Contrary
to the popular perception, Yunus did not found Grameen Bank. The
government of Bangladesh did. Initially the government owned 65
percent of Grameen Bank, which was whittled down over the years by
Yunus. The government still owns 25 percent of Grameen Bank and
retains the right to veto management appointees."
Joy said there is little evidence that showed a link between
microcredit and reduction of poor people. "Despite the hype, there is
no evidence that microcredit has in fact reduced the rolls of the poor
in Bangladesh. Grameen Bank has been in the microcredit business for
30 years, yet Bangladesh remains one of the poorest countries in the
world."
"Furthermore, the private sector investments made using Grameen Bank
money have become quite profitable. Grameen Phone is by far the
largest telecommunications operator in Bangladesh with a subscriber
base of 28 million, annual revenue of over $1 billion and profits of
several hundred million dollars per year. Grameen Bank owns 35 percent
equity in Grameen Phone, so why do they have to charge such high
interest rates to the poor?"
Joy also said the government had tried to retain the respect of Yunus.
"Given his stature as a Nobel Prize winner, the government of
Bangladesh requested that Yunus step down quietly from the post of
managing director of Grameen Bank. He refused and has engaged in an
international lobbying campaign accusing our government and in
particular, Prime Minister Sheikh Hasina of engaging in political
retribution."
"Nothing could be further from the truth. Yunus has no political
stature in Bangladesh. During the brief military regime from 2007-08,
under a state of emergency with all political activity banned and most
political leaders behind bars, even with the help of the military he
was unable to put together a political party and garner any public
support. Politically he is a non-entity in Bangladesh and no threat to
any political leader," Joy said.
GRAMEEN BANK'S REPLY
Grameen Bank responded to each issue in Joy's letter. It referred to
one of his allegations that "approximately $100 million in donor funds
were transferred out of Grameen Bank to a private corporation, Grameen
Kalyan set up by Yunus". The microlender insisted that Grameen Kalyan
is not a private corporation set up by Prof Yunus.
"Grameen Kalyan was created by the board of directors of Grameen Bank
[Board Decision 42.8, dated April 25, 1996] for the benefit of Grameen
borrowers and employees [90 percent of whom come from low income
families]," Grameen said.
"Empowered by a board decision and executing an agreement between
Grameen Bank and Grameen Kalyan, an endowment to the extent of around
Tk 3,917 million was created by simultaneous notional 'transfer' of
fund. Grameen Kalyan was never given the control and possession of the
funds," the microlender said.
Grameen said Joy's claim that the government was "forced" to create an
"independent investigation committee" was highly misleading, as the
government appointed a "review committee" to look into the operations
of Grameen and its associated companies.
According to Grameen, Joy's claim about tax exemption does not take
into account the tax exemption practice prevailing at that time.
"There are perfectly legal ways to minimise tax liabilities. They do
not constitute 'evasion'," it said.
The claim that "Grameen was, at the time, non-profit and paid no
taxes" is simply not true, the microfinance institution insisted.
"Grameen Bank was never a non-profit organisation. Following the
expiry of Grameen Bank's tax-exempt status on December 31, 1996, it
did not receive notice of tax-exempt status until 2000, when the
government retroactively issued tax-exempt status to Grameen Bank from
1997 onwards," it said.
Grameen brushed aside Joy's claim that from 1998 to 2002, "forced
savings" were taken in members' names and not returned to them.
"From the beginning of Grameen Bank's operation, members have been
required to maintain a savings account containing five percent of
their loan disbursement amount in order to provide for their emergency
needs," Grameen said.
"This money is credited to the borrowers' savings account, which is an
interest bearing account and Grameen Bank has been giving 8.5 percent
interest for the savings. The borrowers are enjoying the benefit of
their savings at their convenience and are allowed to withdraw the
entire savings without leaving any balance in their accounts. There is
no question of not returning the money to the account holders,"
Grameen added.
According to Grameen, the allegation of using donors' funds for
private ventures without approval from either the donors or the
Grameen Bank is completely false and baseless. "There had never been
any single incident of using Grameen Bank fund for private venture
with or without approval of the Grameen Bank," it said.
Grameen also refuted a claim that it had charged a high interest rate.
"Grameen Bank charges the lowest interest rate in Bangladesh for
microcredit," the microfinance organisation said.
Joy's letter, according to 'Friends of Grameen', has exposed the very
dynamics behind the attacks on Yunus and Grameen Bank.
On March 15, a full bench of Supreme Court will hear an appeal filed
by the Nobel laureate against a High Court verdict that upheld a
central bank order removing him from the organisation he founded three
decades ago.
* FULL TEXT OF JOY'S LETTER:
http://www.thedailystar.net/suppliments/2011/03/grameen/sajeeb%20letter.pdf
* GRMEEN BANK'S FULL REPLY:
http://www.thedailystar.net/suppliments/2011/03/grameen/Grameen%20response.pdf
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