Battle over a bank

Print edition : September 21, 2012

Prime Minister Sheikh Hasina. She said that the government had had no role in removing Muhammad Yunus from the Grameen Bank.-MARK LENNIHAN/AP

The conflict between the Sheikh Hasina government and Muhammad Yunus over the Grameen Bank is only helping the governments opponents.

AGAINST the backdrop of the continuing conflict between the government and the Nobel laureate Dr Muhammad Yunus, the answers to the following questions are not easy to come by: Is the government of Prime Minister Sheikh Hasina out to damage the reputation of Yunus? Does it want to curtail the autonomy of the Grameen Bank, which he founded? Did Yunus indeed violate the law of the land or engage in malpractices? Did he engage in international lobbying to influence his countrys politics to his benefit?

Some Bangladeshis blame their government for its deliberate attempt to dishonour the Nobel laureate by removing him from the position of Managing Director of the Grameen Bank and for its subsequent actions. Others criticise Yunus for violating banking laws as he failed to justify his claim in court. They are also of the view that owing to his international standing, Yunus may be engaged in a campaign to malign the government to the advantage of its political adversaries. Still others express their frustration at both the government and Yunus for prolonging a non-issue. Nevertheless, the row that began in 2011 over the removal of Yunus from the Grameen Bank for allegedly flouting banking rules continues.

There is no doubt that the founder of the Grameen Bank elevated the issuing of microcredit to the rural poor without collateral to new heights. From the day the bank was founded in 1983 through a martial law ordinance, the Grameen Bank Ordinance, Yunus had been its Managing Director. It was established with an initial paid-up capital of Tk.7,20,00,000 (one taka is Rs.0.68), 25 per cent of which came from the government and the rest from borrower shareholders. The main objective of the bank, inter alia, is to support the landless poor, particularly rural women.

In 2006, Yunus shared the Nobel Peace Prize with the bank, to the jubilation of his countrymen. Sheikh Hasina was among those to hail Yunus although he was facing criticism over his alleged loan business and his loan recovery process.

The ordinance stipulates that the Managing Director of the Grameen Bank will be appointed by its board with prior approval of Bangladesh Bank, the countrys central bank, and will be a whole-time officer and chief executive of the bank. It is therefore highly irregular for a man of international repute to continue to act as the Managing Director as this violates the ordinance. One wonders why successive governments and the central bank allowed this rule to be violated for so many years.

The trouble first surfaced in December 2010 after a Norwegian television documentary claimed that Yunus had channelled seven billion takas of aid money meant for the Grameen Bank to a sister concern. The allegation, which was later disproved, was widely reported in Bangladesh. Yunus critics and ideological adversaries got an issue on which to launch a new campaign against him. Then, a year later, Bangladesh Bank served notice of his removal from the position of Managing Director. Yunus went to court and lost a series of legal battles. Finally, in the Supreme Court, he lost his hold on the institution.

MUHAMMAD YUNUS AND U.S. Secretary of State Hillary Clinton on May 6, when she was on a visit to Dhaka. She urged the Government of Bangladesh not to do anything that could undermine the effectiveness of the internationally acclaimed Grameen Bank, founded by Yunus, a Nobel laureate.-AP

There was a desperate bid at home and abroad to keep Yunus influence over the bank intact even after his ouster. However, the government seemed adamant. It refused to accept a suggestion that the proposed search committee to appoint a new Managing Director be headed by the Nobel laureate. Finance Minister A.M.A. Muhith said: Mr Yunus is a Nobel laureate, certainly a very dignified and respected man. We all are proud of him. But a former Managing Director of the Grameen Bank cannot appoint his successor. This is totally unacceptable.

The government believed it was misunderstood by the pro-Yunus campaign, which has remained strong, particularly in Western capitals. Asked why the government was trying to keep Yunus away from the Grameen Bank, Muhith said, We are not; he has detached himself [from the Grameen Bank]. Muhith, who was also the Finance Minister in General Ershads regime, during which the Grameen Bank was founded, said he had proposed making Yunus emeritus member of the bank before the issue of his removal went to the Supreme Court. But Dr Yunus did not accept, he said.

There is a perception in the ruling party that owing to his intimacy with many Western leaders, including the Clintons, Yunus is maligning the secular democratic government of the country. Muhith alleged that Yunus was carrying on an unnecessary campaign, which had tarnished the countrys image. He claimed that the Grameen Bank had done much better in the past one and a half years after Yunus removal than in the previous decade. The government claims that the bank disbursed Tk.10,854 crore in loans and recovered Tk.9,965 crore last year. In 2010, the disbursement was Tk.9,615 crore. A ruling party spokesman, Mahbubul Alam Hanif, alleged that the main opposition Bangladesh Nationalist Party (BNP) was trying to get into power using Yunus as a lobbyist.

New dimension

The conflict took on a new dimension on August 2, when the Cabinet asked the Banking and Financial Institution Division to inform it, in consultation with the central bank, how much salary Yunus had drawn after he became 60 years old and what allowances he had availed himself of. It also directed the concerned body to be clear whether the withdrawal of such salary and allowances was done legally. Directives were also given to the National Board of Revenue to assess whether there was any evidence of tax evasion in the case of any income he had shown as having been earned in foreign currency.

The same day, the Cabinet approved a proposal to amend the Grameen Bank Ordinance to give its Chairman more powers in choosing its Managing Director. However, a clarification came from the government later. According to the rules, the board of the Grameen Bank, not the Chairman, would appoint the Managing Director, Cabinet Secretary Musharraf Hossain Bhuiyan said. The clarification did not satisfy the pro-Yunus group, which saw the latest moves as further examples of harassment. Yunus supporters said that allowing the government a say in the appointment of Managing Director could lead to politicisation at the decision-making level of the institution. The government is also under sharp criticism from leading media groups and civil society leaders, who see the move as a step to tighten the governments control over the bank.

Yunus has expressed deep shock. I had expressed my apprehension at the very beginning now my fear has started turning into a reality, he said in a statement, and called upon the people to come forward to save the asset of the poor, adding that the governments decision will ruin the bank.

The United States, a strong backer of the Nobel laureate for many years, has expressed deep concern over the latest government move and urged it to ensure transparency in the selection of a new Managing Director.

Patrick Ventrell, a spokesperson of the U.S. Department of State, said in a statement that the move would diminish the role the largely female borrower-shareholders play in shaping the direction of an institution that has made a difference to millions of impoverished women in Bangladesh, and indeed around the world. The U.S. feared that the latest actions could threaten the future of the bank and called on the government to respect the banks integrity, effectiveness, and independence.

Another State Department spokesperson, Victoria Nuland, said in Washington, D.C., recently: We remain deeply concerned about recent actions by the Government of Bangladesh to give the government-appointed Chairman of the [Grameen] bank control over the selection of the new Managing Director.

Earlier on June 27, 17 women senators of the U.S. urged the government not to interfere in the Grameen Banks autonomy and allow its board of directors to appoint a competent and permanent Managing Director. U.S. Secretary of State Hillary Clinton, a personal friend of Yunus, heaped praise on him during a visit to Dhaka in May this year and urged the government to maintain an environment where civil society groups operate freely. Hillary Clinton urged Prime Minister Sheikh Hasina to take no action that would undermine Yunus and the Grameen Bank.

Yunus has got substantial support at home, too, from civil society, professionals and political parties. The BNP strongly condemned the governments move to amend the ordinance and said it had taken a step that would destroy the Nobel-prize-winning institution. The party, led by former Prime Minister Khaleda Zia, further alleged that the government was hatching a conspiracy against the Grameen Bank and its founder. It announced that if the BNP was voted to power (in the next election) it would give Yunus national recognition.

That Yunus has support was also evident when a group of 58 leading women professionals and leaders of Bangladesh condemned the governments move, saying it would deprive the real owners of the bank of their role in managing their bank.

There is another aspect to Yunus vs government. Many in the ruling party believe that ever since Yunus initiated the microcredit scheme, he has enjoyed the support of the military and quasi-military regimes.

A WOMAN COUNTING money on the stairs of a Grameen Bank branch in a village near Dhaka. A file photograph. The main objective of the bank is to support the landless poor, particularly rural women.-PARTH SANYAL

According to a leading English daily, in the August 2 Cabinet meeting where the decision to amend the Grameen Bank Ordinance was made, the Prime Minister alleged that Yunus had been constantly lobbying against the government both at home and abroad though her previous government had helped him launch Grameenphone, the countrys premier mobile company, and given him several other facilities. The Prime Minister, who said the government had had no role in removing Yunus from the Grameen Bank, also said, Rather, it was he who had to quit the job after losing the legal battle. Foreign Minister Dipu Moni also believes a wrong message has been sent to the U.S. regarding the Grameen Bank issue.

World Bank

In the midst of the government-Yunus row, the World Bank declared that it was withdrawing its $1.2 billion credit for the countrys ambitious Padma Multipurpose Bridge Project, citing credible evidence of corruption. The promised credits from the Asian Development Bank and the Japan International Cooperation Agency have also become uncertain following the World Banks decision.

One of the Ministers that the World Bank believes is involved in corruption, Communications Minister Syed Abul Hossain, resigned and a government probe into the issue is under way, but the Sheikh Hasina government is frustrated with the World Banks decision. Not only the government but also a sizable segment of the population believes that the World Banks decision has undermined Bangladesh. There is also a perception that the withdrawal of the much-sought-after credit may be the result of an international campaign.

On the one hand, the loan was a dream project designed for a radical economic uplift of the countrys southern region. On the other, it was politically important for the ruling party. The $2.9-billion project, a 6.2-kilometre bridge over the Padma river, was to connect Dhaka and Chittagong port with the 16 south-western districts through a highway and a railway line.

The U.S.

The relations between the U.S. and Bangladesh have increasingly been under strain over issues such as Yunus, the Grameen Bank, the delays in signing the Trade and Investment Cooperation Framework Agreement (TICFA) and other treaties, allegations of labour rights violations in Bangladesh, and the governments reluctance to shelter the Rohingya refugees from Myanmar. Dan Mozena, the U.S. Ambassador to Bangladesh, was clear when he said that Bangladeshi ready-made garments would not be accorded duty-free entry into the U.S. market, a major importer, if the treaties were not signed and the labour rights violations continued.

A former American Ambassador, William B. Milam, wrote in The Wall Street Journal: The U.S. and European governments will have to threaten to cut off bilateral assistance programmes and other aid through multilateral institutions like the World Bank. Milam, now a senior scholar at the Woodrow Wilson International Centre for Scholars, said the politicians of Bangladesh wrongly believed that Yunus was a long-term threat to their interests .

Crucial election

Sheikh Hasina is facing a crucial election at the end of 2013 or in early 2014. She has many enemies to deal with and many fundamental issues to resolve. Her priorities obviously include confronting religious extremists and the enemies of greater regional understanding and connectivity, and the ongoing crucial trial of those accused of the crimes against humanity during the nations war of liberation in 1971. The protracted conflict between the government and Yunus, the anti-government resentment being aired by the U.S., and the withdrawal of credit by the World Bank are boosting the morale of Sheikh Hasinas political opponents.

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