The Defamation of Muhammad Yunus

The mere thought that the Grameen Bank might be taken over by the government of Bangladesh and that Muhammad Yunus, its Nobel Peace Prize-winning founder, might be forcibly retired, is shocking. But senior people inside the world’s best-known microfinance institution fear that this may happen, perhaps quite soon. Already, senior Grameen staff have had to phone each of the bank’s branches to refute press reports that Mr Yunus had resigned, reports that had threatened to panic savers into withdrawing their money and borrowers to stop repaying loans.

This was triggered, as Matthew helped report in The Economist, by a Norwegian documentary that reported a dispute over the handling of aid money from Norway that took place, and was resolved to the satisfaction of the Norwegian government, over 12 years ago, in 1998. Yet this old nothingness has been seized upon by Sheikh Hasina, the prime minister of Bangladesh, where Grameen was founded and built its pioneering reputation. She has personally unleashed a tirade of abuse against Mr Yunus, and against microfinance more broadly. Her finance minister was apparently responsible for the resignation story. Various other old allegations against Mr Yunus have also been dug up, and he is now due to appear in court on January 18th on libel charges for comments he made in 2007 to the effect that politicians in Bangladesh only work for money. The prime minister has already launched an official investigation into Grameen Bank.

It is hard to object in principle to such an inquiry, provided it is not a witch hunt. Indeed, a properly constituted inquiry, staffed by respected, politically independent people (ideally including some foreign statespersons), could help clear the air and Mr Yunus’s name. So far, however, there is no reason to think that this is the sort of inquiry there will be. Besides, as Grameen Bank points out, it is regularly monitored by the central bank of Bangladesh, which consistently gives it a clean bill of health.

There are many in Bangladesh who suspect that this is essentially some sort of personal vendetta against Mr Yunus by a prime minister who is jealous of his Nobel Prize and fearful that he might enter politics, as he briefly proposed to do when the country was under military oversight a few years back, and perhaps also part of her efforts to consolidate power following her election on the return to democratic rule.

Sources very close to Mr Yunus fear that the government may increase its stake in the bank from the current 25% to majority control, at the expense of the borrowers who currently own a majority of the shares in Grameen Bank. It may also increase its board seats from three out of 12 to a majority, which would be followed swiftly by the dismissal of Mr Yunus. (The fact that the government of Bangladesh is as involved in the bank as it is, and that it used to have such a majority stake, is rarely mentioned in the articles celebrating Grameen Bank as a private-sector social enterprise.)

It has always been a miracle that social enterprises such as Grameen Bank and BRAC have been able to thrive untouched by the corrupt politics of Bangladesh (which ranks a lowly 134 out of 178 countries on the 2010 Transparency International Corruption Perceptions Index). Alas, that miracle now may be over, though hopefully common sense will prevail. As Nick Kristof puts it in an excellent blog post, “Let’s hope this is all a tempest in a teacup. If not, and if Grameen is turned into a state bank, that would be a catastrophe — above all for the impoverished people who depend on it.”

One leading mainstream banker who has lent to microfinance institutions wrote to us this week, asking “aren’t you surprised that the political motivations of some of these politicians in countries like Bangladesh, Nicaragua, the Punjab in Pakistan and Andra Pradesh aren’t more questioned? Certainly a sector that has grown at the pace that it has in some markets needs greater infrastructure (credit bureaus, etc) and appropriate oversight and supervision, but there appear to often be possible other motivations for criticism that don’t seem to be directly linked to client protection issues, such as the sector dis-intermediating state sponsored programs and patronage opportunities, money-lenders, etc.” Indeed.

The attack on Mr Yunus is part of a far wider backlash against microfinance, and businesslike approaches to helping the poor, that we predict will grow around the world this year. That is one reason why there is no delight to be had in the ironic similarity between the abusive language the prime minister has used against Mr Yunus – whom she called a “bloodsucker” – and the equally intemperate language used by Mr Yunus recently against for-profit microfinance firms such as BancoCompartamos in Mexico and SKS Microfinance in India. Grameen Bank is the poster child for a movement: there is a great deal at stake here for the entire movement, which is at the heart of philanthrocapitalism.