Grameen Bank: why people are critical and what it tells about us

Afsan Chowdhury
Published : 21 Dec 2010, 03:54 PM
Updated : 21 Dec 2010, 03:54 PM

The recent furore about Grameen Bank, Yunus and microcredit may not leave us knowing more about the topics but we certainly can know more about ourselves through our reactions. The debate is not restricted to facts and figures but comments and opinions often exposing our prejudices and anxieties. Instant media has also led to creation of an unusual situation where each report, all negative, helped opinion formation rather than knowledge. It is obvious that we are uncomfortable with our success and also our failures. We would rather condemn or praise rather than know what we do and why.

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The 'Grameengate' as some have called it was inaugurated by a Norwegian documentary arguing that money had been siphoned off by Yunus to another account. Before the proverbial ink could dry, most had assumed that here was the proof everyone was waiting for, which is that the Grameen Bank was all about personal wealth making like other banks in Bangladesh. And since a Westerner had done it, this was irrefutable evidence for all to see. Among the chorus was the voice of the prime minister of Bangladesh, not famous for being facts based while adding her two cents that no 'blood sucker of the poor' would be allowed to go free. Her words were based on hearsay and since nothing has been proven, sounded like prejudice. Many anti-Hasina critics say that Hasina had been miffed with Grameen and Yunus for long because whenever she goes on a visit abroad, people praise Yunus but no one bothers about her. Whether true or not, her words certainly were unbecoming a prime minister and it was judgemental before the judgement had even been passed.

Some say Hasina's real rage was because Yunus tried to field a party at a time when others were not free to do so. Moreover, Yunus tried to gather support from the BNP whether due to expediency or choice. All these may be true but that in no way makes Hasina and her assistants any more seemly as far as reactions are concerned. Of course, many are quite willing to allow BNP and AL, all the rights to do politics and make deals at any given time as well as partner anyone for their own convenience but we are far more willing to forgive politicians  for all that they do and Yunus being a would-be-politician-who-failed doesn't really qualify.

BNP supported Yunus because Hasina wasn't doing so — the value and legitimacy of that support is also meaningless. And if Yunus had sought BNP support and Hasina reacted to that, it makes her position even less fortunate for this very serious issue has become a petty tit for tat affair of Bangladesh's political tribalism.

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At no time was Yunus accused of personal corruption and the affected donors have clarified this point. The documentary though criticised by many for its anti-Grameen bias however raises certain points about procedure. They are about accounting procedures and funds shifting from one account to another account all within the Grameen family. Grameen Bank has said that such actions were valid and that they were taken in the interest of the Grameen Bank operations and the poor. That accusation is now under investigation. This action may have violated agreements with the donor or even standard practices of fund management but that's another matter and has nothing to do with the image of a 'blood sucker of the poor' as many are trying to depict Yunus/Grameen Bank as.

Finance Minister Muhith did a major task by going public with a statement about the issue saying that it was not a crime and if there was an agreement about transfer, it was quite normal.  His voice slowed the screeching train of anti-Grameen hysteria and facilitated the environment where investigations took precedence over instant judgement.

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Is the baying for blood against Grameen Bank or Yunus or microcredit? Criticism against one has been used against the other. Media has been deluged with anti-Grameen Bank tirade which mixes all three to make a case against all three. While Yunus is criticised for fund (mis)management, the judgement comes out against microcredit. It is confusing but tells a story about our perceptions of the crisis. Covering microcredit as a journalist for much over a decade, I think the problem with it is how we perceive credit for the poor and what we think are poverty solutions.

Microcredit has been sold as a miracle solution by most development agencies including Grameen Bank instead of what it really is — a simple loan system. So microcredit has raised a lot of expectations, many unreal. Many think that once credit is introduced, poverty will be gone which is not a fact as several other conditions are required for that. It simply lends money to a rural entrepreneur who is part of a group and cannot access commercial bank credit.

Grameen Bank is not just a successful lender but also a genius in public relations. Microcredit produced a lot of publicity and Yunus as an excellent advocate effectively used media to sell the idea. In the process, Grameen Bank and Yunus gathered a lot of mystique and myth but in the process, it became a 'solution' rather than a loan system for the poor based on group dynamics and collateral free delivery.

Responsibility for the media crisis today must be shared by the aggressive pitching of 'the dream' and the inevitable consequences of the shortcomings of a dream when exposed. Yunus obviously overplayed that sales pitch.

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In Bangladesh, there is no effective national system of poverty alleviation. In the absence of that, microcredit has assumed that role though this is not what it is. Microcredit is a small loan model which serves the poor, who already have enough income from another source and can afford to take a loan for supplementary economic activities. It is for those who wish to protect their economic status and prevent dropping into more poverty to a level below. It is not for those who have nothing but for those who have something and want some more. As they have to start repaying within the first months after taking the loan from their savings, pre-loan income is a must. So microcredit operations assume some degree of 'prosperity' of the borrower to start with.

Microcredit's great success is that it has reached far greater number of people with bank services than any other including the government. Rest need qualification.

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One issue that has emerged about microcredit is that of loan recovery and the attendant human rights violation. Such claims are made against every bank that tries to recover loans but since microcredit deals with the poor it has become a major matter. Obviously, this must be an issue and it is imperative to find out how widespread this problem is and what is the percentage of the borrowers affected by such methods. If this is so, it must be addressed and dealt with and this is the responsibility of the Grameen Bank and a review agency but again must be evidence-based and proportionate to the problem. It seems that there are both incidental and systemic issues involved and should be handled accordingly.

There are millions of borrowers and their problems should be treated as a matter of repairing systems rather than targeting a borrowing system.

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Interest rates, payment schedule and a host of other issues affect microcredit but they are serious matters affecting a major tool to support poverty alleviation. It has nothing to do with 'sucking the poor and making oneself rich with donor money'. Microcredit is a globally established assistance tool in exiting poverty and has its own systemic and structural problems that needs to be looked at without any hype or cynicism.

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When Grameen Bank began operations, one of the major critics of microcredit was the World Bank who believed that collateral, free, unsecured loans to the poor could never work but it largely has. Since that critical phase, Grameen Bank has gone ahead and no serious attention has been paid to the systemic oversights that exist and scrutiny is necessary for effective functioning.

Its supporters have spent time praising Grameen Bank and microcredit but not put enough pressure to improve its delivery mechanism. Grameen Bank has also used the hype to turn microcredit into a 'miracle' selling it to many other parts of the world.

But miracles are without flaws but Grameen Bank or microcredit isn't so naturally. If Yunus is guilty of anything, that is in peddling a loan system for the poor as a solution to poverty. Poverty alleviation is a much more complex process and requires a host of factors to contribute to do that and simple loans cannot achieve exit from poverty. The national economy has to grow bigger and systems must be receptive to upward mobility of the poor which is frankly not the case in Bangladesh. Our governments have rarely shown the skills and political will necessary to achieve poverty alleviation. If anything, NGO driven loan programmes are results of the government's lack of interest and capacity to address poverty issues.

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Several types of people are attacking Grameen Bank and for different reasons.

Many people are uncomfortable with the idea of credit delivery to the poor due to the historical experience of poverty in rural Bengal for long and its lack of track record as a poverty alleviating tool. They generally fall back on the British period experience.

The interest rate is considered high by many as it includes both costs for lending and maintaining an intensively monitored loan mechanism. Much of the discomfort with microcredit comes from this cause.

Politicians led by Hasina have attacked because of their own perceived lack of importance in world opinion compared to Yunus and it is probably more envy generated than anything else. Not having done much to alleviate poverty, they are critical of a loan system.

Marxists and mullahs have attacked Grameen Bank because it goes against their belief structure and any solution that includes profit and credit is haram to both. 'Microcredit' is capitalistic but is uncomfortably successful compared to the economic systems advocated by both groups.

Some people are quite simply, uncomfortable with Yunus' success and have taken it out. Most are quite unfamiliar with the loan system but have criticised so one must assume a level or animosity not explained by reason.

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Microcredit is neither a miracle nor a monster but a simple loan system. It existed before Grameen Bank operations began and neither is Grameen Bank the largest supplier of credit. In fact both BRAC and ASA are as big but they run their operations in a low key manner but Grameen Bank is getting the flack as it has always been in media and used it to promote its objectives instead of spending quality time in educating media about the system.

Media focus on Grameen activity however doesn't hide a conspiracy but even if it did, it doesn't matter because people have the right to be informed even if that information needs qualification and is perhaps less than complete.

The crisis today was unavoidable but one should use this as an opportunity to look at poverty alleviation as a whole and the role of microcredit and its operational character. There is a tendency in all quarters to praise or trash far too easily which is what we in media usually do. That needs some repair.

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Afsan Chowdhury is a journalist and researcher.