Yunus Says Borrowers Are Core of Grameen Bank

Thursday, March 24, 2011

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 short-lived move into politics in 2007, citing an attempt to clean up corruption. Mr. Yunus floated a political party for a while but it never got off the ground.

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.”

Source: The Wall Street Journal (link opens in a new window)