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               Wednesday, March 2, 2011

    Letter From Europe

    Defending Grameen

    Chaklader Mahboob-ul Alam

    I still remember the day when I met Professor Muhammad, founder of the Grameen Bank for the first time. It was, I think, in 1998. He came to give a lecture at the University of Madrid, Spain. The huge conference room of the Medical College, where the event took place under the chairmanship of the queen, was packed to its full capacity.

    There were hundreds of students, teachers, journalists and social workers at the meeting. I must confess that I had never seen so much enthusiasm among the students to listen to a banker from a third world country, and they were not disappointed.

    Prof. Yunus started by saying: "The reason we have so much poverty in the world is because we have not addressed the issue of poverty right." Then he went on to challenge the basic assumptions of the capitalistic system that credit was a neutral tool, that the entrepreneurs were a small group of especially talented people, and that profit maximisation was the fundamental principle which underpinned the whole system.

    He declared in his gentle but firm voice that without social conscience economics could not be considered as a social science He said that credit created power, therefore, should be made available to the poor as well. In his opinion, given the right opportunity everybody could become an entrepreneur -- a self-employed businessman.

    Then he went on to explain that Grameen was not merely a micro-lending organisation which gave small loans to the poor without collateral. It was much more than that. Achieving economic independence through micro-credit was important but it was not everything. Grameen was a social project -- its central purpose was to restore human dignity to the poor.

    He felt that there must be a few basic principles like discipline, unity, good spirit and work which should guide a person throughout his or her whole life. Prof. Yunus talked about a sixteen-point code of conduct which was discussed and debated at borrowers' meetings at the village level in the presence of Grameen officials.

    Answering a specific question from a female student about the sex and marital status of the borrowers of the bank, Prof. Yunus said that over 90% of them were married women -- often with young children. In my opinion, this in itself it was a huge achievement, particularly so in a predominantly Muslim country. Needless to say, this reply was greeted with a thunderous applause from the audience which was dominated by female students.

    Many years have gone by after that meeting, but I remain convinced that all this taken together was and still is the Grameen concept -- Grameen is not a charity, not a government-run institution, not a profit-maximising organisation, it is a social project run with the help of capitalistic tools. Grameen is largely owned by its customers. It is also a non-profit organisation because every year its profits are given back to its borrowers in the form of dividends who maintain savings accounts with the bank. It is indeed a noble as well as a novel concept.

    The problems start when there are deviations from the original concept, and in my opinion most of the recent criticisms levelled against micro-credit in general and Grameen in particular are due to the fact that the critics have ignored this basic prerequisite for a proper analysis of the situation.

    It is unfortunate that the terms micro-credit and Grameen have been misappropriated or hijacked by unscrupulous for-profit commercial organisations in India, Mexico, Nicaragua, Bolivia, and some other developing countries. The principal objectives of these commercial organisations have been fast growth and profit-maximisation by hook or by crook. In the process they have brought the system itself into great disrepute.

    These are serious deviations from the original Grameen concept. But Prof. Yunus can hardly be blamed or held responsible for the activities of these loan sharks who are not really interested in helping the poor to get out of their poverty.

    The government of Bangladesh has started a wide-ranging inquiry into the activities of Grameen Bank. What is the motivation behind this inquiry?

    There have been accusations that micro-credit was "sucking blood out of the poor." Do we have any evidence to support such a serious accusation? In any case, if that is true, what have the micro-credit regulatory authorities of Bangladesh been doing all these years?

    Whether one likes it or not Grameen Bank "has become an indispensable part of Bangladeshi social and economic fabric." It is an enormously successful social project whose future is of great importance to millions of Bangladeshis. Everything should be done to ensure its independence and good governance. In my opinion, time has come for Prof. Muhammad to think of a capable successor who will be able to continue with his good work.

    The writer is a columnist for the Daily Star.


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