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Dear Sir:

Your report "Microcredit System Comes Under Fire" (May 21, 2002) definitely does not do justice either to microcredit or to Grameen Bank (GB). It gives wrong information and creates wrong impressions. Microcredit is a serious subject, it deserves to be reported with seriousness in a globally admired financial newspaper like FT. You have reported that competitors in Bangladesh offer more competitive rates which is wrong. GB is the cheapest microcredit in Bangladesh. GB's interest rate ranges from 5 per cent to 20 per cent, calculated on a declining basis. Its repayment rate is 98 per cent. GB is perhaps one the most researched organizations in the world today. Researchers report extensively on the impact of GB on the borrowers and their families. More than 90 per cent of the Grameen children are either in school or have finished schools. Some already are in universities, medical, engineering and other professional schools. GB provides scholarships and education loans to the students. Child mortality in GB families has declined by 37 per cent. Adoption of family planning practices is twice as high as the national average. Studies report consistently that Grameen borrowers are steadily moving out of poverty. World Bank study reports that 5 per cent of the GB borrowers move out of poverty each year. If none of this is reflected in the national data, that is not GB's or microcredit's fault.

It is sad that one casual remark gets global attention through your esteemed paper, while years of painstaking research findings are ignored totally.

Your report mentions that GB's rescheduled loans are actually bad-debts. It fails to mention two related information on this. First, the repayment rate of rescheduled loans is over 95 per cent. Second, bad debt reserve of GB is big enough to write off the entire amount of rescheduled loans. Even in the extreme situation of zero repayment rate for rescheduled loans, GB will not face any financial problem.

GB has stopped taking loans from external and internal sources. It does not need to. It will not need to borrow in the future either. GB generates enough deposits, mostly from the borrowers, to carry out its existing credit program and future expansion.

Your report is absolutely wrong in giving the impression that GB gives financial assistance to the Grameen companies in the field of telecommunications, fisheries, dairy products, and textile. It doesn't. They are all independent companies with independent sources of finance.

You are wrong again to say that GB is reluctant to allow any form of outside scrutiny or regulation. GB is created under an exclusive law passed by Bangladesh Parliament. It is monitored and audited by the central bank. It is audited every year by two internationally reputed audit firms of the country. It publishes its balance-sheet every year. It is audited by the Auditor General of the Country. If you run an organization which is continuously researched by researchers of all disciplines and orientation, if you had received foreign aid for 16 years out of your 26 years of life, you would know what outside scrutiny means, and you'll not envy it.

GB's board is made up of 9 elected representatives of the borrowers (who own 93 per cent of the shares), and three representatives from the government, including the chairman. Present chairman of the board is an economist of international repute. His predecessor was the Secretary of Finance, Government of Bangladesh, who served as chairman for long six years.

Microcredit is a very effective tool in eliminating poverty once for all. It is operated in the business format, not in the charity format. If we are serious about achieving the 2015 goal to reduce poverty by half, we should all get into action and help set up strong microcredit programs, instead of wasting time and energy in writing reports based on hearsay and casual observations.

Muhammad
Grameen Bank
May 28, 2002