The rise and fall of the godfather of microfinance
The removal of Yunus, the Nobel laureate and the darling of the international development set, and the weakening of the Grameen Bank, would give these competitor NGOs an advantage to recruit 'credit-worthy' members, and to create more power and resources for themselves. It is this toxic brew of power and envy that has embroiled Nobel laureate Yunus in a legal dispute with the current government. In the western fetishisation of this iconic individual, the real issue—the ever-deepening debt crisis for poor women—is forgotten, writes Lamia Karim
THE rise and fall of Nobel laureate Muhammad Yunus is a tragedy of Shakespearean proportions. In the Bengali culture of irsha (envy), it was only a matter of time before the ire of the prime minister would fall on the Nobel laureate. After all, Professor Yunus, the darling of the international development set of multinational aid organisations, heads of states, CEOs, philanthropists, went to places that no Bangladeshi had gone before—Oslo for a Nobel, Davos, meetings with state leaders, and his personal friendship with the Clintons. He is the most celebrated Bangladeshi who has brought fame and recognition to this fabled land of floods. He is also a global leader of the microfinance movement, and his removal may send shudders throughout the industry, especially in Bangladesh. His contributions are many, and they should be recognised. While I find the forced removal of Professor Yunus disgraceful, to say the least, I want to pose some questions from a different angle.
In the past few months, there has been a flurry of news reports on the negative consequences of microfinance in South Asia. The Grameen Bank, the paradigmatic institution of microfinance, and its charismatic founder, Professor Yunus, have been in the midst of this furore. The bank and its founder are winners of the 2006 Nobel Peace Prize. On March 2, 2011, the Bangladesh Bank sacked Nobel laureate Professor Muhammad Yunus as the managing director of the Grameen Bank. The bank is owned 25 per cent by the government of Bangladesh. Despite that, the Grameen Bank has always operated as an independent entity. According to a parliamentary watchdog committee, the bank does not follow the 2006 Microcredit Regulatory Act (bdnews24.com). That is to say, there are countless differences in how the Grameen Bank is operationally distinct from government banks, and of its autonomy.
The unravelling of Professor Yunus began with the airing of Caught in Debt, a Norwegian documentary in 2010. The documentary showed that in 1996 Yunus transferred $100 million meant for Grameen borrowers to one of the bank's subsidiary companies, Grameen Kalyan, without knowledge of the Norwegian donors. While the Norwegians now claim that there was no wrongdoing on his part, the Bangladesh government began an investigation. At present, there are three cases pending against Professor Yunus and the Grameen Bank for fiscal and other irregularities that are considered by many as largely frivolous.
The online news agency bdnews24.com reported that Professor Yunus had given the printing contract of the Grameen Bank to his family business. In a kin-based society, it is not surprising that Yunus favoured his family over an outside contractor. While his supporters note that no dividends or profit came to the family, one has to raise some difficult questions about his judgement. Surely, this large contract helped the family business financially. It is equally important to remember that historically the Grameen Bank did not place field officers in their native villages to prevent nepotism, but should we not note that the same rules did not apply to the bank's founder? While Professor Yunus and the bank's advocates claim that the bank is owned by the poor women as shareholders, one has to ask whether these women shareholders were consulted about this huge award to his family (and if so, how), and whether it was in the best interest of the shareholders.
Like its founder, the 'miracle' stories of microfinance empowering poor women in Bangladesh have also come under scrutiny in recent news reports. What is curiously absent in the writing by his supporters is the mention of the dire consequences often faced by women when they cannot repay their loans. The fear is that an institution that has spawned millions of members and has created thousands of jobs may fall apart. And that is a genuine concern that should be addressed seriously. If the current government was earnest about the welfare of its poor citizens, then why did it take to so long to regulate the industry? The Microcredit Regulatory Act came into existence in 2006 when the industry had been in business over 30 years. In 2001, Aminur Rahman wrote Women and Microcredit in Bangladesh, a compelling critique of the bank that was published by Westview Press (USA), and one that our esteemed UPL would not publish because it would unsettle a great institution. While knowledge can be censored for some of the time, in a globalised digital world, it is no longer possible to do so. There is ample evidence in more recent research (Ahmed 2007), and in the vernacular press, that microfinance does not live up to its rhetoric of empowerment. Yet the government had not taken any action until now, and unfortunately, in a manner that is hardly beneficial to the women borrowers of MFIs.
In my research, I have documented how the failure to pay back microfinance loans had resulted in heightened shame and pressure on poor women in Bangladesh. For example, I found that in 90 per cent of cases, the users of these loans were their husbands. But the women remained responsible for the loan repayments. Default by a lone woman resulted in friction among group members who were collectively held responsible for individual loans. Women who could not pay due to unforeseen circumstances (illness, poor investment decisions, theft of property) were subjected to public shaming by microfinance institutions.
In a face-to-face society like Bangladesh, the conduct of women is strictly controlled, and women are the custodians of family honour. Shaming women publicly brings dishonour on men, and the family. Hence, poor women bear the social costs of microfinance, often with negative consequences. Moreover, the interest rates on the loans are astronomically high (the Bangladeshi government capped it at 27 per cent in 2010), and loans often come with product tie-ins, such as hybrid seeds and breeder chickens. These are troubling aspects of a model touted as bringing empowerment to poor women! When poor women are unable to repay loans due to unforeseen catastrophe, who advocates for these hapless women? In my book, I have recounted stories from some of the earliest members of the Grameen Bank who suffered greatly because their businesses could not take off as planned. Yet, no one came to advocate for them in international newspapers!
Turning to the question of Professor Yunus's sacking by the Bangladesh Bank, the attorney general of the country in a recent televised press briefing said that if anyone should win the Nobel Peace Prize in Bangladesh, it should have been the prime minister, Sheikh Hasina, for signing a peace accord with the Chakmas in the Chittagong Hill Tracts who had fought an insurgency since the 1970s. In fact, Hasina's supporters tried to nominate her for the Nobel Peace Prize in the late 1990s.
Remember that in 1996, Yunus was a member of the caretaker government that may have given him a window into the functioning of government, and how he could rid government of corruption, inefficiency bureaucracy. Thus in 2007, he attempted to form a political party with those objectives, a decision he later recanted. The majority of his supporters were diasporic Bangladeshis who saw the Nobel laureate as endowing their country with global stature. His play for power caused ire from Hasina who saw him as a possible political adversary, and one who had won international renown that she had not received. Thus, when the Norwegian documentary was aired, it gave the prime minister the ammunition to humble Professor Yunus by removing him from power. Yet at 70, he is ten years beyond the mandatory retirement age of 60 in Bangladesh. Surely we must ask: why did it take the government ten years to wake up to that fact? And why did Yunus himself not realise it, and step down gracefully? So, the question is, why now? In 2013, Bangladeshis will again vote in national politics. What better time to send a warning signal to any uppity NGO leader of the dire consequences of acting against the interests of the ruling party? In this respect that it is important to remember that NGOs have been politicised since their participation in the Gono Adolon that led to the downfall of military dictator Ershad, and they routinely help their members to run for public office or to elect union council officers.
With over nine million borrowers, the resource-rich Grameen Bank is a formidable vote bank. If its charismatic leader goes into politics, he can take away votes from Hasina's ruling party, although he cannot undermine the party. Moreover, government bureaucrats, such as the director of the Bangladesh Bank, find Professor Yunus as a law unto himself because of his international stature. Bureaucrats feel that the Grameen Bank (and other NGOs) receives donor funds that should go to the government. In 1993-94, NGOs and bureaucrats had a face off, with the NGOs winning that round due to donor intervention. Things have changed substantially in the political domain. No longer can Western envoys pressure the government to rescind its actions against their favoured clients, i.e. NGO leaders. Hence, the procedural questions of Yunus's firing as the head of Grameen will trundle through the courts. One can only hope that the justices are impartial and above party loyalties.
Finally, there are ongoing turf battles among the largest microfinance NGOs in the country. The removal of Yunus, the Nobel laureate and the darling of the international development set, and the weakening of the Grameen Bank, would give these competitor NGOs an advantage to recruit 'credit-worthy' members, and to create more power and resources for themselves. It is this toxic brew of power and envy that has embroiled Nobel laureate Yunus in a legal dispute with the current government. In the western fetishisation of this iconic individual, the real issue—the ever-deepening debt crisis for poor women—is forgotten. And that is the saddest part of the story.
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Lamia Karim is associate professor of anthropology at the University of Oregon. She is the author of Microfinance and Its Discontents: Women in Debt in Bangladesh (University of Minnesota Press, March 31, 2011).
http://newagebd.com/newspaper1/op-ed/12659.html
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