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Bangladeshi Government Plan to Take Over Micro-Finance Program Criticized

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Aleteia - published on 06/20/13

Nobel Prize winner and founder Dr Muhammad Yunus says the move is politically motivated

A recommendation by the Bangladeshi government to split up and take over the pioneering Grameen Bank micro-lending initiative has met with strong opposition from its Nobel Prize winning founder, Dr Muhammad Yunus, who has alleged the move is politically motivated.

Yunus described the proposal, which would see the government raise its stake in the bank from five percent to 51 percent, as an “extreme abuse of government power.” Dhaka claims it would help the institution, the majority of whose 8.4 million members are impoverished rural women, to engage more with the grassroots, as well as improving governance.

The government and Yunus have been involved in a lengthy legal spat over the bank, with officials accusing him of illegally using its funds to promote commercial organizations that he owns. Critics of the government allege however that the conflict stems from an aborted plan by Yunus in 2006 to start a political party which, given his popularity among poor voters, could have gained widespread support.

Dr Akbar Ali Khan, a noted Bangladeshi economist, also believes the takeover plans are the result of political maneuvering. “The government has decided to destroy the country’s best known institution which brought us worldwide fame, only for political reasons,” he said.

The move would see the bank split into 19 smaller organisations that would be separately managed but overseen by a central headquarters. The government says the bank’s structure should become more like a state-controlled industrial bank, but the plans have been poorly received by experts.

“Considering performance of other state-run banks, the Grameen Bank is way ahead in terms administration and helping the poor,” said Nirmol Rozario, former president of Christian Cooperative Credit Union Ltd in Dhaka. “Splitting the bank would hurt its capacity for micro lending and financial viability and affect its borrowers.”

He added that the government’s restructuring of a globally reputed organization like Grameen “will tarnish the country’s image.”

Set up in 1976, the bank has distributed over US$ 11 billion in loans without collateral to the rural poor to help them gain financial independence. Critics have accused it of imposing high interest rates that keep borrowers in a circle of debt. 

In March 2011, the central bank removed Yunus, 70, from the post of managing director for exceeding the mandatory retirement age of 60 for bankers in Bangladesh. A month later he lost a legal battle in the Supreme Court to retain his post.

Originally published by UCANews on June 19th, 2013.

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