Bangladesh: Grameengate and Beyond.

Jan 10, 2011

Father of microcredit and microfinancing Muhammad Yunus ended 2010 embroiled in a financial scandal. Is something wrong with Bangladesh's much-feted economist and his Grameen Bank?

The hottest topic in Bangladesh as 2010 drew to a close is the allegation against Nobel laureate Dr. Muhammad Yunus of diverting foreign aid from Grameen Bank to another sister company called Grameen Kalyan.

The objective of Grameen Kalyan is to provide financial support in the form of loans and grants to the staff and members of Grameen Bank and their families. An investigative documentary by Danish filmmaker Tom Heinemann titled “Fanget i Mikrogjeld” or “Caught in micro debt” was aired last Tuesday on the National Norwegian Television (NRK).

Heinemann took a critical look at microcredit operations in Bangladesh, saying many loan receivers “had multiple loans in various micro credit banks and organisations and had a hard time trying to pay back their loans”. In addition he stumbled into some documents from the archives of the Norwegian aid agency Norad, which tells that Grameen Bank shuffled donor money to Grameen Kalyan without prior permission of the donors to avoid potential government tax of 40%.

In an exclusive report the secret documents were published by, the largest online news agency in Bangladesh. The local media jumped on this story and the bloggers are divided on this issue.

The Grameen Bank denied any wrongdoings.


342 Grameen Bank founder Muhammad Yunus at the World Economic Forum in 2009 (Photo by / Remy Steinegger)


Asif at Unheard Voice provides the outline of the arrangement of Grameen Bank and discusses about the impact of the documentary:

1. Donors (Norad et al) gave a large cash grant to Grameen Bank (GB)

2. Instead of paying back interest or principal, GB was to put aside 2% of those funds for employee welfare projects (SAF)

3. GB was afraid of a regulatory change levying 40% tax on that outflow and wanted to give SAF the “attention it deserves”

4. So GB created Grameen Kalyan (GK), gave them a large amount of cash and borrowed it back at 2%

Norad‘s problem was that:

1. GB never told them about this particular piece of legerdemain they happened to find out almost by accident (the bdnews24 story has a few PDF files of those communications)

2. Their memorandum of understanding was with GB and the Bangladesh Government about the use of the 2% for SAF, not with GK, so this left things in the kind of vacuum they wouldn’t be comfortable with

The documentary claimed as much as US$100 million had been siphoned away and – notwithstanding Norwegian claims that Yunus is not corrupt – led to lurid claims in Bangladesh media like Yunus “siphoned Tk 7bn aid for poor”. GB’s detailed riposte notwithstanding, the damage has been done.

Journalist and blogger Maskawaith Ahsan defended Dr. Yunus in a post titled “In a media coup by Norway Dr. Yunus killed in Dhaka”:

(translated into English)

He did not build a palace in the Mediterranean, it was invested instead.

The accusations against Dr. Yunus of transferring European money to a sister concern is the result of his sensitiveness with finance. He did not build a palace in the Mediterranean, it was invested instead. Still it was against the agreement with the donors.


Baki Billah writes:

(translated into English)

This could be a procedural fault, but is there any reason to malign him with theft of money? The documentary maker Tom answered the question simply by saying that he could not contact Mr. Yunus for his response after repeated attempts (editor’s note: for six months). How did he try?


In another post of Maskawaith Ahsan, a commenter named Netpoka comments:

(translated into English)

The accusation of transferring donor money is being directed to Yunus only. But Grameen Bank is run by a big management committee where reputed people like Rehman Sobhan are also there. The accountability should be demanded from each one of them.


And did he ever spend a Taka for his own self? I heard that he even does not own a house - he stays in a flat provided by Grameen Bank. And now they accuse him of corruption.

Everybody knows why Norway and Telenor are after him. Then why are we making him the villain?

It may be noted here that a few years ago Yunus had a fight with Norwegian Telecoms giant Telenor (majority owned by Norwegian government) over management control of Grameenphone, Grameen Bank's joint venture. Yunus wanted to convert Grameenphone, the leading and profitable Telecommunication company in Bangladesh, to a social business enterprise [where profits are reinvested in the company rather than taken out], but Telenor did not accept. The Norwegian Telenor was later caught in a labor scandal.

Shuvashish Das posts a detailed analysis [bn] on this issue trying to explain why after 12 years the issue has been exposed to media:

(translated into English)

CIDA and NORAD started again in mid 2010 to pressure Grameen Bank to transfer the donor loan from Grameen Kalyan. 608 million Kroner (300 mill by NORAD) was moved from Grameen Bank but only 170 million Kroner was refunded till to date. The rest of it still lies with Grameen Kalyan.

22nd August 2010 Grameen Bank explained in an email -

The money was transferred to provide support to the staff and members of Grameen Bank and their families.

Grameen Bank did so not to avoid taxes because Grameen Bank operations are exempted from tax since 1983.


In the end Shuvashish asks some valid questions:

Microcredit minimises poverty upfront, but prolongs it.

Many microcredit organisations (editor’s note: not only Grameen) claim interest from 20% to 100% from the poor loan clients. Microcredit minimises poverty upfront, but prolongs it.