A Little More History on Pearl and Grameen

Recently I received this interesting letter, shared with permission. It adds background to my post on Pearl, Yunus, and History:

On March 7, 2010, Syed Zahirul Abedin [email protected] wrote to Mr David RoodmanCenter for Global DevelopmentToMr David RoodmanCenter for Global Development1800 Massachusetts Avenue NW, Third FloorWashington DC 20036Dear Sir,I am a Bangladeshi journalist writing to you from Dhaka. I saw your Microfinance Open Blog on the website and collected the address of Centre for Global Development to write you this email. Since a write-up on the blog contains a reference to a report of late Wall Street Journalist Daniel Pearl, I feel it necessity to tell you that I made such a report more than six months before the report of Mr Pearl's was published in The Wall Street Journal. Since I am a Bangladeshi journalist, my report did not get expected publicity at that time. However, I feel it necessary to tell you about the whole thing.It was my great previlege that I had a meeting with Daniel Pearl back in August 2001 at a hotel in Dhaka. Daniel along with Mariane came to Dhaka to discuss and write an investigative report on Grameen Bank following a report of mine published in The New Nation, a Dhaka-based English daily, on April 23, 2001 under the headline "About-turn in success! Recovery problems hit Grameen Bank."Daniel invited me at a breakfast at the local Sonargaon Hotel to discuss about the report. In fact, my report made the first disclosure about Grameen Bank's loan recovery problems more than six months before Daniel's report published in The Wall Street Journal in November 2001. I have attached the soft copy of that report with this mail and the clipping of that report is still available with me and it is also available at the concerned newspaper archive. At the breakfast table, Daniel highly appreciated me for writing such an investigative report, and said he came to Dhaka to write on Grameen Bank after reading my report. It was really a great thing in my life!Later, Pearl along with Michael Phillips, another WSJ reporter wrote a report in The Wall Street Journal under the headline, ‘Grameen Bank, Which Pioneered Loans For the Poor, Has Hit a Repayment Snag’ that was published on November 27, 2001. Then that tragic and painful incident happened in Daniel's your life when Daniel was abducted, tortured and murdered in Karachi in February 2002. Everything happened so quickly that we did not get any more opportunity to contact with each other.However, my report did not get so much publicity. I had to work very hard to collect information from the Grameen Bank and write the report, although it did not get wide publicity at that time. Moreover, my report was a lengthy one, but my editor did not publish the entire report because of space constraints in the newspaper. It is unfortunate that I don't see any reference to my report anywhere. It is also unfortunate that my report did not get adequate exposure internationally although I somehow became associated with Daniel in my life.We journalists around the world, including Bangladesh always feel for Daniel and pray to the Almighty for eternal peace of his departed soul. We also pray for his family, his parents, son Adam, friends and other well-wishers. Daniel Pearl will always remain a great source of inspiration in my life and career.With many regards,ZahirSyed Zahirul Abedin

The New Nation

Dhaka, Monday, April 23, 2001

Dhaka, Bangladesh

About-turn in success!

Recovery problems

hit Grameen Bank

By Syed Zahirul Abedin

Bangladesh’s globally-renowned micro-credit institution, the Grameen Bank is now in crises with drastic fall in its credit recovery rate and rising trend in classified loans—the two aspects on which the entire system is credited.The February 2001 report containing the latest available statistics received from 15 zones and compiled by the Monitoring and Evaluation Department of the Grameen Bank on March 25 last, also show that the Grameen Bank’s recovery rate has fallen by 27.72 per cent or Tk 2932.1 million.Of the amount, Tk 1813.0 million or 17.14 per cent remain overdue with the borrowers for the last one year, while the rest 10.58 per cent or Tk 1119.1 million have been classified as the defaulted amount of loans.Statistics also show that the overdue amount of credit for a period of one year was 19.65 per cent in same time last year (February 2000) and the defaulted amount of credit reached 9.93 per cent during the same period.On the other hand, the one year’s overdue credit with the borrowers amounted to 22.36 per cent while the defaulted amount of loans was 11.58 per cent in July last year.If any amount of credit remains overdue for two consecutive years, according to the definition of the country’s central bank (Bangladesh Bank), it (the amount) should be considered as defaulted.The Grameen Bank now disburses Tk 1,200 million among poor borrowers each month on an average.The alarming fall in recovery rate has been attributed to the consequences of prolonged floods in 1998, political unrest in the country, overlaps in disbursing credit, use of loans in unproductive sectors, make loans available to borrowers beyond their absorption capacity and emergence of other NGOs in the field of micro-credit with more facilities to borrowers.In some cases, bribing the Grameen Bank staff at the field level to obtain credit has also been cited as a reason for the about-turn in its success.Even officials concerned concede the Grameen Bank may now be at the crossroads and the crises are deepening day by day. “Authorities of the Grameen Bank are seemed to demonstrating a stance of indifference to the brewing critical situation,” said one of the officials, requesting anonymity.Referring to the latest available figures, a high official of the Grameen Bank said the recovery rate had come down to 72 per cent, exposing a ‘very frustrating and grim scenario’ in the overall performances of the internationally acclaimed micro-financing institution.The Grameen Bank provides credit to the poor, particularly in rural areas, without any collateral. It now operates its activities in 60 districts throughout Bangladesh with a total 1,160 branches.Signed by Khondker Mozammel Huque, General Manager of the Monitoring and Evaluation Department of Grameen Bank, the February 2000 report reveals that a cumulative amount of Tk 13366.06 crore (Tk 133.66 billion) was disbursed among landless women and men in the country’s rural areas up to February this year, while the amount disbursed during the month of February 2001 was Tk 150.66 crore (Tk 1.5006 billion).The report shows that higher amounts of loans remain unrealized with five out of 15 zones. These zones are Mymensingh, Tangail, Sylhet, Dinajpur and Narayanganj. And the defaulted amount of loans is also higher in these zones.For instance, one borrower of Tangail zone owes an overdue amount of Tk 20,425 to Grameen Bank till January this year which is yet to be recovered.In the wake of such a worsening situation, Professor Muhammad Yunus, the founder Managing Director of Grameen Bank has directed all the officials, representatives of the 15 zones and leader of Grameen Bank Karmachari Samity (employees association) to gear up their recovery rate and raise it to ‘a desired level of 98 per cent.’It means formidable difficulties lie ahead for the poor borrowers of the Grameen Bank in repaying their loans along with higher rate of interest.When Professor Muhammad Yunus was approached, he declined to make any comment on the matter as he was very busy over his visit to the United States to join a conference of the United Nations Commission on Sustainable Development. Professor Yunus will also be visiting Argentina and likely to return by April 27 next.However, admitting their failures in realizing the overdue as well as defaulted amount of loans from the borrowers, Dipal Chandra Barua, General Manager of the Grameen Bank said it was “their failures, not of the borrowers.”“We want to blame ourselves, rather than blaming others for our failures in recovery of the overdue and defaulted loans,” he said.The Grameen Bank official, however, said that some 2.3 million of their members were affected by the devastating floods in 1998. “At that time we suspended the recovery drive for several weeks because our objective was to save the people first,” he said.The annual rate of interest of the Grameen Bank micro-credit is 20 per cent and the borrowers repay their loans on a weekly installment basis.Dipal Chandra Barua said it could be better if the overall recovery rate would have been possible to raise up to 98 per cent from the existing 72 per cent. “We would feel satisfied if we can raise our recovery rate up to 98 per cent,” he said.Barua also felt the necessity of brining down the defaulted amount of loans at 2 per cent from the existing 10.58 per cent.Another major problem facing by the Grameen Bank, having 12,000 officials and employees, is brain-drain. Many officials deserting the Grameen Bank have already joined the Ansar-VDP Bank, another newly created micro-lending institution, receiving the commitments of better prospects.“Every year around 1,000 staff of the Grameen Bank are leaving for other NGOs and banks with better prospects. There is also a system in the Grameen Bank that any of the officials willing to leave can do so on completion of ten years of service by receiving pension according to his age and salary structure. With the departure of 1,000 officials a year, we get fresh and energetic young people. So, we don’t feel any threat for it,” said Barua.Khondker Mozammel Huque said the Grameen Bank, the largest rural credit institution in Bangladesh, disburses minimum Tk 3,000 to maximum Tk 15,000 among its borrowers for pursuing income generating activities. Generally credit facilities are extended to those poor people who are considered as risky borrowers and deprived of loans by mainstream banks.Grameen Bank, having 503,316 groups and 68,439 centres, has so far disbursed micro-credit among 2.4 million landless poor members of 40,275, out of the country’s 68,000 villages. Some 95 per cent of its members are women.The Grameen Bank emrged out of a research project, called Grameen Bank Project’ initiated by Professor Muhammad Yunus, the then Head of Rural Economics Programme at the University of Chittagong, in Jobra village of Chittagong, close to the campus in 1976. Under the project, tiny credit facilities worth a few dollars were provided to a small number of poor people without any collateral which enabled them to set up small income-generating businesses.The Grameen Bank initiated its formal operation as a separate bank after being formally incorporated with the central bank, from October 2, 1983. The landless people own 93.28 per cent shares of the Grameen Bank while the central bank 6.72 per cent.The Grameen Bank micro-credit model has so far been replicated in more than 60 countries, both developed and developing, throughout the world.