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David Roodman's Microfinance Open Book Blog


It's springtime in Bangladesh, a time when marigolds bloom and a hostile government's fancy lightly turns to thoughts of appointing commissions to investigate banks for the poor. Last year, a commission looked into such issues as whether the Grameen Bank's handling of Norwegian money was nefarious (it determined not) and whether the bank's interest rates were high (no again). Now a new commission has been announced to poke into the relationships between the Grameen Bank and some 54 other "Grameen" entities (Grameen Telecom, Grameen Eduction...)

As I've written before, it's not obviously improper for officers of the Grameen Bank to set up independent organizations with "Grameen" in their names. In fact, that's better than a bank going directly into the solar or phone business, since failure could imperil clients' deposits. Meanwhile, we should worry about how the government is eying with such interest the ~$1 billion in assets of the non-profit Grameen Telecom, which are in the form of shares of GrameenPhone.

That said, an improper transfer of Norwegian aid from Grameen Bank to Grameen Kalyan is part of what got Yunus and the Bank in so much trouble starting in late 2010. So a broader investigation isn't entirely unwarranted in principle.

Not that the government's machinations around the Grameen Bank seem to have much to do with principle.

For all the recent vituperation and praise around the Grameen Bank, Muhammad Yunus appears mostly to have kept his silence on the matter. But last week he issued a statement on the new commissions, first in Bangla, then in English. It's a must-read for people interested in the Grameen Bank. He asks, in a country with so many dysfunctional institutions, why is investigating the acclaimed, democratic, uncorrupt, and evidently stable Grameen Bank such a pressing priority? Could the real motive be the search for a rationale for a government takeover of the entire Grameen family?

Mostly I admire the pungency of his retorts to the government:

...has the Grameen Bank caused a large-scale catastrophe for which a Commission of Inquiry has become necessary? What issue of public importance has Grameen Bank caused that requires an enquiry? In the past all enquiry Commissions that the government has formed have been done after a large-scale mishap has occurred and which had raised various questions in the minds of the people.


The Commission was also asked to provide recommendations on the qualification requirements to be a board member. This is a very unfortunate question. They are owners of Grameen Bank—this is their fundamental qualification. Is the government thinking of creating an elite class among the poor owners? Eighty percent of Grameen Bank owners are illiterate.


To imagine Grameen Bank as a government bank is itself a scary thought. Grameen Bank is an institution built on strict discipline. If Grameen Bank is transformed into a government institution, that discipline will start eroding very fast. Grameen bank has twenty-four thousand dedicated, hard-working employees who travel through the narrow village roads, whilst carrying at least thirty to forty thousand Taka in cash. One can wonder, how much of this money will be deposited with the bank, and how much of it will vanish into thin air when its administration and supervision become weak. Paying bribes for everything may become routine reality—paying bribe to get a loan, paying bribe for buying postings and promotions, paying bribes to enter into a Grameen Bank group, etc. may become the order of the day. Women may no longer be majority of the borrowers any more.


In the past, poor management and allegations of massive corruption led to the privatization of the state-run enterprises. In that background, the thought of Grameen Bank going under government management is a frightening thought.

What will happen? We will see. Surely this government, eager as it is for foreign investment, will pause before expropriating $1 billion in private assets. As for the Bank, I am hopeful that Greg Chen got to the heart of the matter last year: its savings may keep it safe.

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