Thursday, March 31, 2011

Lamia Karim: The fall of Muhammad Yunus and its consequences for the women of Grameen Bank.

In 2006 the Grameen Bank of Bangladesh won the Nobel Peace Prize for its innovative microfinancing operations. In March 2011, Grameen Bank founder Muhammad Yunus was ousted as head of the microfinance lender by the Bangladesh government, which owns 25% of the company. The government claims Yunus, 70, is far past its country's mandatory retirement age (60). While Yunus's ousting has captured worldwide attention and the government's motives remain under scrutiny, author Lamia Karim (Microfinance and Its Discontents) asks what will happen to the women who obtain these microcredit loans.

A Grameen borrower, identified as Grameen Phone Lady, with her Telenor cell phone in 2007.

BY LAMIA KARIM
Associate professor of anthropology at the University of Oregon

The rise and fall of 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, Yunus, the darling of the international development set of heads of states, CEOs, and philanthropists, went to places that no Bangladeshi had gone before—Oslo for a Nobel; Davos; meetings with heads of states; not to mention his personal friendship with the Clintons! Yunus is most famous person in Bangladesh and has brought fame and recognition to the country. He is also a global leader of the microfinance movement, and his removal may send shudders through the industry—especially in Bangladesh.

In the last few months, there has been a flurry of news reports on the negative consequences of microfinance in South Asia. Grameen Bank, the paradigmatic institution of microfinance, and its charismatic founder, Yunus, have been in the midst of this furor. 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 managing director of the Grameen Bank. The bank is 25% owned by the government of Bangladesh. Yet it has always operated as an independent entity. According to a parliamentary watchdog committee, the bank does not follow the 2006 Microcredit Regulatory Act. That is, there are countless differences in how the Grameen Bank is operationally distinct from government banks.

The unraveling of Yunus, also known as the godfather of microcredit/microfinance, 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 Yunus’s part, the Bangladesh government began an investigation. At present, there are three cases pending against Yunus and Grameen Bank for fiscal and other irregularities that are considered by many as largely frivolous.

The online news agency bdnews24.com reported that 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 favored his family over an outsider. While Yunus supporters note that no dividends or profit came to the family, one has to raise some difficult questions about judgment. Surely, this large contract helped the family business financially. It is equally important to remember that the Grameen Bank did not historically place field officers in their native villages as a means of preventing nepotism. While Yunus and the Grameen 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 Yunus’s family, and whether it was in the best interest of the shareholders. These questions are curiously missing from his supporters.

Like its founder, the “miracle” stories of microfinance empowering poor women in Bangladesh have also come under scrutiny in recent news reports. In my research, I have documented how the failure to pay back microfinance loans has resulted in heightened shame and pressure on poor women in Bangladesh. I found that in 90% 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 honor. Shaming women publicly brings dishonor on men and the entire 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% 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 one that empowers poor women.

When poor women are unable to repay loans due to unforeseen catastrophe (death or illness in the family, loss of business due to theft, etc.), does the Grameen Bank forgive their debt? Has it ever? 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 Yunus’s sacking by the Central Bank: Yunus has never been a supporter of Sheikh Hasina, the current Prime Minister of Bangladesh. In 1996, Yunus was a member of the caretaker government as the country prepared for national elections. So he is not completely new to politics. 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 fought an insurgency since the 1970s. In fact, Hasina’s supporters tried to nominate her for the Nobel Peace Prize in the late 1990s.

Matters only get more complicated. In 2007, Yunus attempted to form a political party—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. Yunus’s 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 aired, it gave the Prime Minister the ammunition to humble Yunus by removing him from power. Yet at 70, Yunus 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 realize it, and step down gracefully? The question remains, why now? In 2012, 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?

With more than 9 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 Yunus as a law unto himself because of his international stature. Bureaucrats feel that Grameen Bank (and other NGOs) receive donor funds that should go to the government. Finally, there are ongoing turf battles among the largest microfinance NGOs in the country. The removal of Yunus and the weakening of 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 fetishization of this iconic individual, the real issue is that 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 author of Microfinance and Its Discontents: Women in Debt in Bangladesh. Read an excerpt from the book, published to our blog earlier this month. You can also check out a recently published video interview with University of Oregon Today.

"It is precisely because the microcredit mantra has been so endlessly repeated, often in place of actual empirical documentation to back its claims, that Microfinance and Its Discontents is so compelling. This is an outstanding, courageous, and path-breaking piece of scholarship; one that will doubtless unsettle the microcredit establishment, and by extension, key presumptions of neoliberal research agendas."—Kamala Visweswaran, University of Texas, Austin

2 comments:

  1. Hi Lamia, there is much in your article that I agree with. However, some points need to be made.
    1. In relation to the packages contract. You are right to say that this was an error of judgment, just as you are right to say that the the company owners (the family) have as yet made no financial gain from the contract. Perhaps though the fundamental point about this contract is that it was made 20 years ago - yes 20 years ago - and there have not been any other legitimate stories suggesting nepotistic financial gains.
    2. You say, as a statement of fact 'Yet at 70, Yunus is ten years beyond the mandatory retirement age of 60 in Bangladesh.' There is no mandatory age requirement in the country. For public servants it is 57, for private bank managers it is 65, for grameen Bank workers it is 57, for judges it is 67. In relation to whether Yunus was or was not above his retirement age depends on the interpretations given to the 1993 Grameen Bank staff regulations. Does the word 'Kormi'(worker) - for whom the 60 year retirement age retired - include the position of managing director, which is separately defined in the staff rules, and where the managing director is responsible for the employing the 'kormi'. The argument of GN lawyers is that there was no intention for the staff rules to apply to the managing director. The govt argued that it did apply to him, and the appellate division agreed with them (though we dont know the reasons). The key point I want to make (and I am not going to get into the politicisation of the judiciary here) is that it is very debated point about when Yunus was supposed to retire, with arguments on both sides, and perhaps you need to make clear when you write about this that this is not a black and white issue, as your article seems to suggest.
    3. I have not read your research, and sure I do need to do this, but perhaps it would be fairer if you alluded to lots of other research that does not paint such a negative picture of microcredit as your own. Amongst 8 million or whatever borrowers you will no doubt find examples of problems with the borrowing or the paying back, but you will also find examples of great successes. Even if you found 100,000 with problems, lets say, that is a zmall proporition of the total borrowers. The broad research findings suggest that it might not be the silver bullet to eliminate poverty but relatively cheap credit is very helpful for the poor in many different ways, and for some a way out of poverty altogether.
    4. The three cases pending: one is for alleged involvement in food poisoning, one is for defamation, and the other is for over-billing on a phone bill. None of them are for fiscal matters. Not just frivolous ... I think there are other words that describe these better. False and harassment cases.

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    Replies
    1. Re: Your 2nd Point

      Now that a reasoned Judgment regarding the status of Dr. Yunus as a 'public servant' (shorkari kormi) has been passed by the Appellate Division of the Supreme Court, I think it is pretty black & white that he is subject to the 60-year age limit.

      But that doesn't matter much to you does it? If the Supreme Court had ruled in favour of Dr. Yunus, you would have said that the rule of law was being upheld but as they didn't, you will insinuate that the Appellate Division is politicised and thus demean any judgment passed by it.

      If you or GN lawyers honestly believe that the Bench of the Supreme Court that passed such a judgment was biased or acted in breach of natural justice, then issue a writ petition stating such. Prove it through constitutional means rather than resorting to smear tactics.

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