Fund for the poor, Grameen Bank, donors' role

Maswood Alam Khan
The National Norwegian Television, NRK, aired on November 30, a documentary titled “Caught in Micro Debt” where it was alleged that Dr Muhammad Yunus, ‘the banker to the poor’ and the 2006 Nobel Peace Prize winner, took resort to a ‘forgery’ back in 1996 by putting the donors’ grants meant for Grameen Bank, amounting nearly Taka 7.0 billion (US$100 million), to Grameen Kallyan, which had nothing to do with microcredit operation. According to the documentary, he transferred the amount later to Grameen Bank as loan ostensibly to deprive the government of tax revenues and to lend the grant-turned-borrowing to the poor at a rate of interest which is as high as 30 per cent per annum.

Such a transfer of fund, as the documentary sought to drive home, was a breach of the agreement between Grameen Bank and the donor agencies and was alleged to be a ‘naked’ forgery — known as ‘window-dressing’ in the parlance of accountancy. Had the grant been used as revolving fund as was stipulated in the agreement, the amount could easily be lent to as many as 280,000 helpless Bangladeshi women with Taka 25,000 loan per head in the year of 1996 and the same revolving fund subsequently could be lent to an additional 1.0 million poor people during the last 14 years at a lesser rate of interest than the normal high rate of Grameen Bank, say at 2.0 per cent per annum to cover the administrative costs, as the grant was interest-free and is never to be paid back to the donors.

However, in its response on December, 2010 to the documentary, the Grameen Bank (GB) termed it (documentary) and the reports appearing in the media on the same, as “a total fabrication and baseless”. It stated that the subject of the documentary, related to the use of the stated grant fund, was an old one, dating back to as far back as in 1996. “Our whole background story was given in Professor Yousus’s letter of January 08, 1998”, the GB stated.

A comprehensive audit can now help to clarify on how and why the grant was given to Grameen Kalyan, a not-for-profit company under law that was created by the GB Board on April 25, 1996. The public and private agencies who were supposed to monitor and audit the utilization of the grant, may also be involved now in the process. The core issue here is whether there was any deprivation of micro-credit benefits for the poor due to any accounting manipulation and charging of high rate of interest on loans, derived from the afore-mentioned grants.

Meanwhile, many people would like to see proper investigations into the patterns of fund disbursements from the Grameen Kallyan Account and to examine whether any portion of the fund from this account was flown outside Bangladesh in the name of internationalizing the micro-credit programme. Fairness, transparency and accountability demand that the whole matter should be scrutinized and examined, fairly and objectively.

Had Dr Yunus explained the whole episode and faced Tom Heinemann, the director of the documentary film that was premiered on November 30 last by NRK TV before it was made, things could have been different. Tom Heinemann did reportedly make several attempts to talk to Dr Yunus for the last six months but failed. This has created a serious misgiving.

But it is all the more surprising why the donor agencies of Norway, Sweden, the Netherlands and Germany and the functionaries of the government of Bangladesh kept their mouths shut for such a long time, if irregularities, as mentioned in the documentary, had really been committed, allegedly flouting the terms and conditions that were stipulated in the agreement signed in 1996.

Furthermore, how did the learned chartered accountants of Grameen Bank and Grameen Kallyan and the auditors of certified audit companies who approved Grameen balance sheets, keep mum about the alleged irregularity for all these years?

The comments by C.T. Karim, an adviser to the last army-backed-caretaker government of Dr. Fakhruddin Ahmed, on the afore-mentioned documentary (the comment is available on the Blog page of do not provide a sound rationale. He wrote: “The donor fund was not utilized in the exact model as stipulated in the Agreement; it does not suggest that Dr. Yunus personally took any part of the money out for his benefit. If there are facts to suggest that funds were embezzled from “Grameen Kallyan” that would constitute “corruption” charges. A “breach” of a Donor Agreement does not equate to an act of “corruption”.

This scribe would like to recall here that back in 1977 when he attended his foundation training course in Agrani Bank Training Institute, he was appalled to learn from his trainers that the most serious crime, much more dreadful than any pecuniary embezzlement, is accounting manipulations like ‘window-dressing’. This is a deceptive practice of using accounting tricks to make a company’s balance sheet and income statement appear better or worse than they really are, with an ulterior motive to deceive the stakeholders. Window-dressing, a form of creative accounting involving the manipulation of figures, is done to inflate or deflate, as and when convenient, the financial position of a business.

If the Grameen Bank has committed any window-dressing by putting the grant in Grameen Kallyan and transferring the same fund as loan for financial gains, that is a kind of “sale and leaseback”. It is a serious form of fraud, which is worse than other common methods of window-dressing like ‘changing depreciation policy’, ‘including intangible assets’ or ‘changing stock valuation policy’.

It is perhaps known to many people in Bangladesh as to how non-government organizations (NGOs) do harshly recover loans by charging, on flat-rate basis, at 30 per cent per annum from the poor, notwithstanding 15 per cent interest rate published in their brochures. Their slow weekly loan recovery benumbs the poor borrowers’ feelings on interest burden.

On the other hand, the government-owned banks, contributor of 80 per cent collateral-free micro-credits in Bangladesh, charge loans to the rural poor only at 8.0 to 10 per cent for agricultural loans and 2.0 per cent for some special products; those micro-loans, moreover, are allowed waiver of interest at the behest of the government whenever there is a natural calamity. But, nobody hears of waiver of interests on loans dispensed by any NGO.

Back in 1978, the then government of Bangladesh introduced an epochal programme called SACP (Special Agricultural Credit Programme that through all the state-owned banks disbursed Taka 1.0 billion (100 crore) — a huge amount for that time — as mostly collateral-free micro-credits to the poor. Grameen Bank had perhaps replicated the idea of poverty alleviation through micro-credit from a pilot project at Jirabu Branch in Chittagong of Bangladesh Krishi Bank, one of the state-owned banks that were responsible for materializing the Special Agricultural Credit Programme.

SACP, deemed the trailblazer of the present micro-credit revolution, saved Bangladesh from becoming a Somalia. For that matter, the architect of SACP and all the state-owned banks in Bangladesh merit a special recognition as the pioneers of micro-credit operations.

Dr Yunus has earned huge prestige globally. He captivated millions of people around the world by his famous statement that “poverty was created, not by poor people, but by deficiencies in the financial systems”. Nothing should be done with any ill motive of tarnishing his image. But it is also befitting at this stage that Dr Yunus makes all-out efforts to dispel any ‘misgiving’ about the Grameen Bank and all other related organizations and to correct the deficiency, if there is any, in their accounting system.

There are great people, who also had committed some follies in their checkered careers, but could also somehow salvage their image by an exercise in damage control before it was too late.

The writer is a retired General Manager of a state-owned bank. He may be reached at e-mail: