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The Grameen Saga: A Nation's Bank of Pride

REAZ AHMAD recounts the success story of Grameen Bank and stresses that the fate of several million borrowers of the bank has been jeopardised due to the recent amendment of the Grameen Bank Ordinance.

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There were times when peasants used to be at the mercy of the Mahajans (non-formal money lenders) in our parts of the world. At the time of sowing seeds in every cropping season, the rural farmers, particularly the small and marginal ones, had to take loans from the Mahajans at high repayment rates. They would charge them very high rates of interest on the loans. While many of those Mahajans of yesteryear earned the reputation of loan sharks, the trade of money-lending thrived for many years in absence of better alternatives. Rural poor had no or little options but to agree to hard terms of loan offered by the Mahajans. The Mahajans' rate of interest would at times amount as high as 120 percent. Come harvesting time, the poor and marginal farmers used to find them in the soup they would end up giving away all their produces' sales proceeds to the Mahajans as loan repayments. Along with family members they would then go hungry, unfed many would sell out their last remaining pieces of land holds and migrate to urban growth centres to live the life of paupers.

Then with the growth and expansions of formal banking structures having provisions of giving credits to the farmers and the rural poor, things started to take a new turn. No sooner the people had started saying good-byes to the Mahajans, they realized that 'all is not well' in the so-called formal money lending system too. Initially it was too graft-riddled. The loan takers would have to grease palms of so many hands in getting their loans sanctioned from the banks that it would become a burden for them from the day one. Many of the loan takers would end up being unable to repay the loans' interests on time and a clique of bank touts and middlemen would offer them fresh sanction of new credits so that they could repay the previous one. And each time they would get much lesser an amount than what used to be officially recorded in loan sanction papers. Thus they used to be fettered in a vicious cycle.

Eventually they would end up facing certificate cases, used to be filed against them for defaulting on the farm credits. But as politicians are known for their abilities to 'do' the 'undo' and 'undo' the 'do' and as they belong to a special breed that hardly can bear the miseries of the commoners, they would give waivers to the borrowers. They wouldn't mind putting a further dent to the state coffer. Come election time, it has almost been an established norm for political parties to promise loan waivers to the credit takers, who have been the victims of a graft-ridden loan sanction system in the first place. Over the years we're now getting over with that culture of rampant graft practices and short-cut political problem solution formula like loan-waiver.

The changes do not come by in a day, it rather comes over time. And there is no denial of the fact that something of a change has happened over time having a lot of bearings on the formal and informal money lending systems that have been in vogue for many years in Bangladesh. What is that?

That has been a pleasant departure from what was in practice for long. It has been a system of providing the rural poor with micro credits - putting a very transparent system of loan repayment in place - so that the recipients can repay the loan and relatively easy-to-bear interests in installments, and making it sure that they do not have to pay any 'extra' to get those micro loans granted. Its pioneer Prof Muhammad Yunus, who would later receive a Nobel for successfully fighting poverty using micro credit as a tool, has made sure women get the loans and help supplement their male counterparts' constant fight for a better livelihood. With those small loans women recipients try to build up new assets through small entrepreneurial ventures so that their family can graduate one notch up on the economic ladder by tearing off the shackles of poverty.

Seeds that Dr Yunus sowed nearly four decades back have borne fruits in bounty. Later years Dr Yunus and his Grameen Bank venture have won much acclaim both at home and abroad for the role they have played in the economic emancipation of the otherwise hapless people. The pathfinder role that the unique micro credit bank has been playing in helping millions of rural women to break social taboos and join the formal socio-economic activities is something very dramatic and have stirred the welcome change in the social fabric of rural Bangladesh for ever.

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Grameen Bank Project was born in the village of Jobra, Bangladesh, in 1976. In 1983 it was transformed into a formal bank under a special law passed for its creation. It is owned by the poor borrowers of the bank who are mostly women. It works exclusively for them. While borrowers of Grameen Bank own 97 percent of the total equity of the bank, the remaining 3 per cent is owned by the government. More than 96 percent of its over eight million borrowers are women making its clearly distinct in clientele nature. Its loan recovery rate is 96.67 per cent.

More than two decades after the establishment of Grameen Bank, its managing director Prof Muhammad Yunus and the bank - both shared the 2006 Nobel Peace Prize. Since Bangladesh's emergence as an independent nation in December 16, 1971, probably October 13, 2006 was the happiest day for this country. It was a great moment for the whole nation. Announcement came on that day that Grameen Bank and Dr Yunus received the Nobel Peace Prize, 2006. It was a rare moment of pride and joy for every citizen of the country and for all the Bengali-speaking people throughout the world.

Our leaders irrespective of their political divides welcomed the news and showered both the individual (Yunus) and the institution (Grameen Bank) that brought the rare glory for the nation with accolades. They were in all praise of Prof Yunus and Grameen as the world gave him recognition through this prize.

Four years down the line what exactly went wrong that that euphoria lost stream. Or to put it a bit differently, a section within our political class started finding faults with Grameen's "business as usual." Prime Minister Sheikh Hasina dubbed Dr Yunus as a 'blood sucker' at a press conference on December 5, 2010.

Prime ministerial tirade came at a time when merely 10 days back (Novermber 30, 2010 to be precise) a documentary titled “Fanget i Mikrogjeld” or “Caught in Micro debt” had been aired on Norwegian Television, NRK, depicting allegations of some irregularities against Grameen, which of course, were later nullified by the Norwegian government as to be unfounded.

The following months saw Grameen and Prof Yunus passing busy time facing regulatory and legal battles over issues concerning legality of his 'extended' tenure as MD in the bank and other nitty-gritty. Government appointed a new chairman for the bank in January 2011 and few months later Yunus apparently lost court battle and remained no longer the Grameen Bank's MD.

But things did not die down there rather the Grameen saga has been dragged to this far that till date debates are on over what prompted the government to amend the Grameen Bank Ordinance.

The amendment that has been brought in the Grameen Bank Ordinance this August is unwarranted to many. They simply wondered why it was necessary to further empower the government-picked chairman in choosing a new MD for the bank while its board that is comprised predominantly of its women borrowers was sufficient to do the job of getting an MD. They argue that it is only natural and simply logical that the bank's women board members, who represent 97 per cent shareholders of the bank, should have a louder voice on running its affairs and not the government, not the chairman.

As the government took this hasty move of bringing in such an important change in the ordinance, the bank's founder and micro credit guru Dr Yunus wondered "What has Grameen Bank done to deserve this treatment?"

He noted that the government has obliterated the unique characteristics -- one of which is the bank being owned and run by women -- which made the institution universally lauded and a Nobel Prize winner. "Thanks to the amendment, the institution has been rendered into another cookie-cutter public organisation. I cannot bear the sorrow," said Yunus.

While such unpleasant developments centring Grameen Bank show no sign of early resolution, people tend to relate the topsy-turvy government-Grameen relationship with some of the happenings of 2007-08 periods when Bangladesh was being run by a military-aided 'longer-than-normal' duration caretaker government and Prof Yunus had a brief yet apparently unsuccessful stint in politics. They say seasoned politicians did not like any adventures by some 'new entrants' in an otherwise dynastic political culture of Bangladesh, especially at their 'bad time' when many of them were put behind the bar.

Though Prof Yunus was quick to backtrack from formation of a political forum called - Nagorik Shokti - some politicians, many consider, are still being haunted by a perceived threat of the Nobel laureate's 'political return.'

The amendment in Grameen ordinance has drawn many statements from all fronts of intelligentsia both supporting and opposing the move. Even a section accused the Nobel laureate of putting pressure on the country through “super power” and donor agencies, exploiting his personal relations with them.

Unfortunately in this whole melee, some tend to miss out the most vital point - that is - Grameen is a nation's bank of pride but also at the same time it's a model that nations across the world look up to emulate. So it's only natural that any hint of Grameen being affected, in any form, would attract concerns not only from within Bangladesh but also from all over the world, wherever the micro credit and Grameen phenomenon have had their marks, inspirations.

Grameen Bank needs to go from strength to strength not only for its own success but more importantly for the sake of other successfully-run micro credit initiatives throughout the world that heavily draw from the Grameen model.

Critics never get tired of pointing finger at "high" interest rates Grameen Bank charges to its borrowers. Grameen, however, made it clear many a time that its interest rate is functionally lower than the one set for the government-run micro credit programmes.

At the very outset of this article I have tried to give an overview for better understanding about the context under which the Grameen way of micro credit operations have got wider acceptance. Rate of interest is definitely a factor but not necessarily the only factor. This is about a whole culture of maintaining transparency and accountability starting from rolling out loans to their effectuations to timely repayments. The idea is to empower women, help the poor build assets and pay the shareholders (5.5 million out of a total 8.4 million Grameen Bank borrowers are its shareholders) their due dividends.

As things stand today the current concern over Grameen Bank's future seems unlikely to be allayed anytime soon unless the millions of beneficiaries are made to rest assured that the majority shareholders (that's the borrowers themselves) have their say in the running of the bank's affairs.

Reaz Ahmad is News Editor, The Daily Star.