Prize-winning Pariah

Microfinance pioneer and Nobel winner Muhammad Yunus is embattled in his homeland Bangladesh over graft charges. Open invited him to have his say.

Dhaka-based Professor Muhammad Yunus, pioneer of ‘microcredit’ loans to the needy, won the Nobel Peace Prize in 2006. Soon after, he and other Bangladeshi activists began speaking out against government corruption. In 2007, he even proposed his own political party, a decision he maintains prompted the Sheikh Hasina government to fire him this year as Managing Director of Grameen Bank. Now aged 71, he had stayed on well past the bank’s mandatory retirement age of 60, says the government. Charges—politically motivated, say some—of levying ‘usurious’ rates of interest and misappropriation of funds have also been levelled against him, all of which he denies. He spoke to Shailendra Tyagi of Open via email:

Q Microfinance in South Asia seems under attack.

A This is unfortunate. The recent trend towards commercialisation of microcredit is one of the reasons behind these problems. In some cases, organisations have been claiming to provide microfinance in the spirit of Grameen Bank and have been doing so with faulty ethics or a profit-maximising approach. But Grameen Bank has stayed true to its original ethics and values, as have many micro finance institutions (MFIs). All of Grameen’s funds come from deposits. More than half these deposits come from borrowers themselves, who are required to save a little every week. I urge MFIs to operate as social businesses instead of earning profits for investors. They need to remain true to their core mission—to eliminate traditional moneylenders and provide credit on fair, affordable terms to poor people. If not, they shouldn’t call it microcredit.

Q You won the 2006 Nobel Peace Prize, yet Bangladesh Prime Minister Sheikh Hasina has characterised you as a ‘bloodsucker of the poor’. How do you react to that?

A The Nobel Committee had their reasons to select me for the prize. The honourable prime minister has her’s for her remarks. Grameen Bank is owned by its borrowers. So, there is no way to ‘suck’ [their] ‘blood’. The profits of Grameen Bank belong to borrowers; they get dividends. In the year 2006, 2007, 2008 and 2009, Grameen Bank has disbursed 100, 30, 20, and 20 per cent dividends, respectively. From 1997 to 2005, it did not pay any dividend as there was a restriction imposed by the government on paying any dividend. Instead, profits were transferred to a rehabilitation fund created to help borrowers [if faced with] natural disasters.

Q There are genuine concerns that Indian MFIs charge usurious interest rates. The inability to pay has led some borrowers to commit suicide. How do you think things can be set right?

A Grameen Bank charges four interest rates: 20 per cent on income-generating loans (one of the lowest rates in the world for microfinance), 8 per cent for housing loans, 5 per cent for student loans, and 0 per cent for beggars. Clients seem very happy with these rates and studies indicate that many of them are making steady progress towards a poverty-free life. Organisations involved with microcredit should remember that their work has to be carried out with utmost compassion towards poor people; otherwise, it will not be successful. Then, other problems [like] overlending and lack of transparency may be replaced by focusing on the poor. Microcredit should be focused on income-generating activity. And there should be a microcredit regulatory authority to keep watch.

Q Your 2007 proposal to start a political party is widely believed to have caused a government backlash against you. Do you plan to be active in politics in the future? 

A I have no intention of joining politics again.

Q Now that the Bangladesh Supreme Court has ruled that you can no longer remain managing director of Grameen, will you appeal the decision?

A We have appealed to the Supreme Court again. [By Bangladesh news reports, a couple of review petitions are currently pending.]

Q Do you believe retaining your post at Grameen is necessary to achieve your larger goals?

A The issue is not about me continuing as the managing director. It is about ensuring a friendly transition to a new management. I want to make sure that the responsibility of Grameen Bank is handed over to a person who commands the respect and trust of the staff and owners of the bank, and the character and mission of the bank are not disrupted.

About The Author

Shailendra Tyagi