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Saturday, March 26, 2011

Yunus Says Borrowers Are Core of Grameen Bank

Photo: Agence France-Presse/Getty Images/Muhammad Yunus, center, outside the high court building in Dhaka where he to contested the decision to remove him from Grameen, March 3, 2011TOM WRIGHT

Bangladeshi Nobel laureate Muhammad Yunus is facing challenging times.

ON MARCH 2, Bangladesh's central bank ruled that he must step down as managing director of Grameen Bank, the institution he founded in the 1970s to get small loans to poor farmers without collateral. The success of Grameen won Mr. Yunus international acclaim and helped spawn the global microfinance industry. The bank and Mr. Yunus shared the 2006 Nobel Peace Prize.

But Mr. Yunus is facing pressure at home. Some analysts say Bangladesh Prime Minister Sheikh Hasina is angered by Mr. Yunus's move in to politics in 2007, citing an attempt to clean up corruption.

Others say Grameen, with 8.3 million borrowers and scores of other businesses from telecoms to dairy products, has become too powerful in the eyes of Bangladesh's politicians.

In its ruling, the central bank said Grameen had failed to get its approval, as required by the law that formally set up the bank, when it reappointed Mr. Yunus managing director in 1999. A high court upheld the ruling.

Mr. Yunus, who remains at Grameen's helm for now, challenged that decision in the Supreme Court, which is expected to rule by the end of March.

Ms. Hasina, the prime minister, has cashed in on a recent wave of bad publicity for microfinance banks, accusing them publicly in December of "sucking blood" from poor borrowers. The global microfinance industry has faced criticism for doing little to alleviate poverty and saddling rural borrowers with high debts.

Grameen, which is majority-owned by its borrowers, has largely avoided such bad publicity. Support for Mr. Yunus continues to pour in. Robert Blake, U.S. Assistant Secretary of State for South and Central Asian Affairs, wound up a trip to Bangladesh this week by urging a compromise over the Grameen standoff. The U.S., he said, was "concerned about the dampening effect this will have on civil society in general and on the integrity and effectiveness of Grameen Bank in particular."

Mr. Yunus, 70 years old, has offered to Bangladesh's finance ministry that he stand down from running operations if he can remain chairman of the board to ensure a smooth transition of leadership. Bangladesh's government has the right to own 25% of Grameen and appoint a nonexecutive chairman under a 1983 special law that turned the lender into a formal bank.

Mr. Yunus answered questions by email from The Wall Street Journal about the rift with the government, what it means for Grameen's future, and plans for succession.

WSJ: What are the risks to Grameen of the current stalemate? What could happen to the bank?
Mr. Yunus: My only concern is for the future of Grameen Bank's 8.3 million borrowers, almost all of whom are low-income rural women. It is for their sake that I have repeatedly urged caution so that the transition to a new managing director can be a smooth process that doesn't create any disturbance or loss of confidence. The real issue at stake is the right of the bank's 8.3 million borrowers to control their own financial future or whether they will be forced to cede their control to outside authorities. Grameen Bank has succeeded due to the fact that it is the borrowers themselves who have been in control of the bank. It is a unique institution. If the borrowers lose control over their own bank, who will look after their interests?

WSJ: How much is politics playing a role in this saga? It seems odd that Sheikh Hasina would see you as a political opponent given that you are not formally in politics.
Mr. Yunus: I have stated many times that I have no political ambitions now and I am sure that the prime minister does not see me as a political threat to her. I am not a political threat to anyone, let alone Sheikh Hasina, twice elected prime minister by the people of Bangladesh, and whose party won a great majority in the last election. But if the PM has any issues with me, either with respect to the operations of Grameen or otherwise, I would be honored to sit with her to find a solution.

WSJ: Is it rather that politicians see Grameen's borrowers as a potential vote bank?
Mr. Yunus: Grameen Bank borrowers are voters like any other citizen in the country. I don't think anyone can influence them to do anything against their own wishes as they are capable enough to take their own decisions.

WSJ: Has the development of Grameen into a major business encompassing cell phones and yogurt helped to create a perception that the bank is a power center in itself and how has that affected relations with the government?
Mr. Yunus: Grameen Bank is a strong financial institution. It is an institution of 8.3 million empowered women and men who together own a thriving bank with $1.4 billon in deposits.
But whatever they are today is because of their hard work and diligence. It is their success. The borrowers of Grameen Bank have proved to the world that they are bankable and creditworthy and capable of controlling a major institution, and they have been the inspiration to millions of people all over the world, so why not a power center.
But whatever I or Grameen Bank has achieved, is the result of the efforts of the borrowers.
Grameen Bank has always been on good terms with the government and has viewed the government as the bank's partner from the start. The government holds a 25% share of the bank, and has always been a strong supporter of the bank in its fight against poverty.
Even the chairman of Grameen Bank is a government appointee, as are two other directors of the board. The relationship has always been a very friendly and cooperative one from both sides.
I don't know why the present crisis could not have been resolved amicably.

WSJ: What is your response to claims that there has been no succession planning at the bank and a number of high-level executives have left.
Mr. Yunus: Grameen Bank's legal framework lays down the method of selecting the managing director of the bank. There is no uncertainty about it? As for some high-level executives leaving, yes, some went on early retirement and some left for other reasons. But this is nothing out of the ordinary. In fact, Grameen has many dedicated high-level executives who have been with the bank for many years and are perfectly capable of taking over the bank's leadership.

First published in The Wall Street Journal, March 24, 2011

Tom Wright is a journalist with The Wall Street Journal. He could be reached at

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