3rd December, 2010
Grameen Bank's Response to Recent Press Reports
We are sorry that many friends and well-wishers of Professor Yunus and Grameen Bank around the world were subject to mental agony because of the inaccurate and misleading news report published globally regarding an alleged "siphoning off" of a large amount money by Professor Yunus through one of his organizations, or "Stashing of $100 million by Nobel Laureate Professor Yunus", as one news organization put it. The media reports were triggered by the documentary "Fanget I Mikrogjeld" shown on Norwegian TV on Tuesday 30 November and by report that appeared in bdnews24.com on 1 December.
We wish to assure all readers that these reports are a total fabrication and baseless. Our whole background story was given in Professor Yunus’s letter of January 8, 1998 .This letter has been circulated by the news agency along with their report. Any reader will immediately know how baseless the report is. We are including this letter along with this rejoinder.
There was no wrong doing in the agreement between Grameen Bank and Grameen Kalyan. Decisions were taken by Grameen Bank Board, with due deliberation, good faith, and with good intentions to benefit the poor. The actions taken by the Board were viewed as the best use of the funds at the time, a way to ensure Grameen Bank would remain financially accountable for the money while still ensuring that the borrowers received the most possible benefit from donors’ grants.
For the grant that Grameen Bank received from Norad and other donor agencies under its 3rd extension phase, Grameen Bank and donors agreed that a 2% interest rate would be fixed on the grant and that interest would be used to create a Social Advancement Fund (SAF) for the welfare of Grameen Bank borrowers and employees. The creation of SAF was our suggestion, donors happily agreed to it.
Grameen Bank believed that if the SAF was kept within Grameen Bank and managed by Grameen Bank then it would not receive the attention it deserves. The core activity of Grameen Bank, the lending program, would always get precedence. Grameen Bank may not pay sufficient attention to create welfare based programs for its members and employees.
Moreover, Grameen’s tax exemption period expired on 31st December, 1996. At that time it was uncertain whether the government would extend the tax exemption period after 31stDecember, 1996. If the government would not extend the period then the contribution to the Social Advancement Fund as expenses would not be considered as an expenditure of Grameen Bank. As a result, 40% tax would have been imposed on contribution to Social Advancement Fund. It might compel Grameen Bank to reduce or stop charging 2% interest on revolving fund to contribute to SAF which would be a violation of the agreement with donors. Professor Yunus explains this in his letter dated January 8, 1998 which we attach with this statement. Under these circumstances, the need for a new organization emerged. This led to the creation of Grameen Kalyan as the dedicated organization to utilize the interest income.
Grameen Kalyan was created by the Grameen Bank board (Board Decision 42.8, dated April 25, 1996) in 1996 for the benefit of the Grameen borrowers and employees (90 percent of whom come from low income families), after taking into consideration the opinion of the renowned chartered accountant firm of Bangladesh named Rahman Rahman Huq and Co of Bangladesh, affiliated partner of KPMG.
Grameen Kalyan is a not- for-profit company under company law. No individual owns any share of this company. The profit of this company is not divisible and can only be recycled into its operation to maximize its stated objectives of providing primarily healthcare and education services of Grameen Bank’s members and employees.
Empowered by a board decision and executing an agreement between Grameen Bank and Grameen Kalyan under which, an endowment to the extent of Taka 3917 million 014 thousand was created by simultaneous notional "transfer" of money. Grameen Kalyan was never given the control and possession of the fund. This simultaneous transfer and Grameen Bank receiving it back in the form of a loan, created an opportunity to charge interest on this loan. That interest income was ear-marked to finance borrowers Social Advancement Fund (SAF) as agreed by the donors earlier within the Bank. It was a financial innovation to benefit the poor. Grameen Kalyan received 2% per cent interest on the money. This money was to be used to provide education and other services to the borrowers and employees of Grameen Bank.
The programs run by Grameen Kalyan with the interest accumulated in the SAF included:
1.0 Provide support for higher studies for the academically accomplished children’s of borrowers
2.0 Scholarship programs for the academically accomplished children’s of borrowers
3.0 Provide healthcare services to the borrowers at low cost through healthcare centres in the villages. Currently it operates 51 health centres throughout the country.
4.0 Medical expense loans and assistance programs for the employees and their family member
5.0 Provide assistance for the employees’ household loan program
The actions taken by the Board, which is comprised of 9 elected representatives of Grameen Bank borrowers, and three senior representative of the government, were viewed as the best use of the funds, a way to ensure Grameen Bank would remain financially accountable for the money while still ensuring that the borrowers received the most possible benefit from donors’ grants. Afterwards not only Norad’s money, but the 100% of all donor's money to the extent of Taka 3,474 million 501 thousand was "transferred back", from Grameen Kalyan to Grameen Bank, although money was always in the Grameen Bank’s account. Only SAF fund money amounting to Taka 442 million 512 thousand remained with Grameen Kalyan as it was created out of the interest.
Some print and electronic media stated that Grameen Bank transferred 7 billion Taka to Grameen Kalyan which is absolutely false. Grameen Bank transferred to Gameen Kalyan Taka 3917 million 014 thousand as mentioned before and transferred back Taka 3474 million 502 thousand which is stated earlier. These can be verified through Grameen Bank’s annually audited accounts.
If we convert the aforesaid amount at the prevailing exchange rate of 1996, then the ‘transfer’ stands at about US $ 96 million and the ‘transfer back’ stands at approximately US $ 85 million. Thus all the donors money was transferred back and only US $ 11 million remained with Grameen Kalyan as it was created out of interest. So the report where it mentions that Grameen Bank transferred US $ 100 million and transferred back only US $ 30 million is completely false.
All necessary entries had been taken in the books of accounts of Grameen Bank to replace the transfer, though no physical fund transfer took place, as the fund was with Grameen Bank all along. The fund in question never went out of the Grameen Bank's account and the question of Professor Yunus siphoning this amount is false and baseless. All these talk about siphoning off are just empty words for sensationalism.
According to the management and board of Grameen Bank there was no violation of any provision of the agreement with Norad. It was a matter of differing views on the subject. Norad considered it a departure from the provision of the agreement, while Grameen Bank thought it was done within the agreement. Grameen Bank did not want go into battle on this issue and so jeopardize our excellent relationship. Grameen Bank reversed its decision and restored the status quo.
The concerns brought up by Norad and the Norwegian government were treated with the utmost seriousness by Grameen Bank and Professor Yunus, and both sides worked to resolve the differing interpretation of a clause in their initial Agreement and arrive at a solution in a satisfactory manner. By restoring the status quo the matter was amicably resolved. It never came back since then. None of the parties involved felt aggrieved.
This is an excerpt from the Norwegian Embassy's letter dated 26 May 1998: H.E. Ambassador Hans Fredrik Lehne and Einar Landmark write "The Embassy highly appreciates your cooperation in solving this issue, and is pleased to have arrived at a solution which is satisfactory for Grameen Bank as well as the embassy". Reports gave the impression that these transactions were somehow secretive. There was nothing secretive about. It was a matter of honest disagreement.
Grameen Bank’s decision making has always remained very transparent. Grameen Bank’s board is always chaired by a distinguished citizen of the country appointed by the government. Government appoints two high officials as members of the board besides the Chairman. Grameen Bank which was created by an ordinance. It requires Bank to be audited by two chartered accountant firms every year and submit the accounts to the government as well to the tax department. Grameen Bank also sent these reports every year to all donors. In addition it is inspected by the central bank annually. Besides all audited reports of Grameen Bank, from 1983 to 2009 displayed in Grameen Bank’s website in addition to all current statistics relating to the operation of the Bank. Moreover Grameen Bank regularly publishes "Grameen Bank at a Glance" monthly and post it in its website which introduces Grameen Kalyan in the following way.
Grameen Kalyan (well-being) is a spin off company created by Grameen Bank. Grameen Bank created an internal fund called Social Advancement Fund (SAF) by imputing interest on all the grant money it received from various donors. SAF has been converted into a separate company to carry out its mandate to undertake social advance activities among the Grameen borrowers, such as, education, health, technology, etc".
Grameen Bank is Nobel Prize winning bank. We take pride in our transparency and our service to the poor.