Instead of lifting, the cloud over the subcontinent’s micro-finance sector has got bigger with the Bangladesh government initiating an enquiry into the functioning of the Grameen Bank group. This is most unfortunate as micro-finance represents an enormous opportunity for the poor and faith in its foundations will be shaken if its father figure, Muhammad Yunus, comes under attack. The Awami League government of Bangladesh seems to be opportunistically seizing upon a chance to engage in political vendetta when it should be putting the Nobel laureate on a permanent pedestal for leading the world in innovation in a key socially useful area. The immediate provocation is a documentary by a Norwegian public TV channel alleging diversion of aid funds between different entities within the Grameen family to avoid paying taxes. The allegation was investigated by the Norwegian authorities and Dr Yunus and his organisations were exonerated.
There the matter should have rested. But the Bangladesh government has gone ahead and formed an enquiry committee to go into the financial transactions of Grameen institutions. The motives behind seeking to clear the air on the documentary’s allegations are suspect as this has already been done by the donors. The Bangladesh Prime Minister, Sheikh Hasina, has used strong language to decry micro-finance for “sucking the blood from the poor in the name of poverty alleviation”. Dr Yunus first fell foul of the Awami League when, just after winning the Nobel prize, he briefly toyed with the idea of forming a political party for national renewal. He soon gave up the idea but the damage was done in making an enemy out of established politicians. The second and more immediate possible cause for the enquiry to be launched is the face-off between Dr Yunus and Dipal Barua, one of his former students and foremost assistants, which led to the latter’s resignation from the leadership of a Grameen organisation. Mr Barua has close links with senior personalities in the Awami League government.
Apart from Grameen’s specific problems, micro-finance in Bangladesh has been in trouble lately over the issue of high interest rates, as in India, and late last year the regulatory authorities imposed a ceiling of 27 per cent on lending rates. The trouble is that, again as in Andhra Pradesh in India, this is probably being used to settle scores in a turf war. Without seeking to determine who is to blame for the fratricidal conflict within the Grameen family, it is necessary to point out that the poor in whose aid micro-finance came into being, does not deserve this. Those running micro-finance organisations also need to realise — this is particularly true of the Indian situation — that they need hand-holding by the government even in the best of times to produce the best results. So, keeping the government of the day in good humour, without, of course, in any way compromising on professionalism, should get a high priority. Senior politicians in Bangladesh, for their part, need to realise that Dr Yunus is a national asset, not otherwise.