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August 21, 2001

Yunus,

Mike Phillips seemed anxious to hear what you had written (I read it to him over the phone) and wanted to get the exerpt forwarded to him. He said the piece hadn't been written yet and would need to go through an editor before publication which wouldn't happen this week. I think your questions gave him something to think about.

That said, I think you need to realize that there is nothing wrong with having an 80% repayment rate (in other words having a problem) so long as you are fixing it. But to say 95% repayment when it is 80% is seen s false advertising and really feeds into the people who would like to ee Grameen tarnished, and those people are out there (competing MFIs, donors who have been slammed by you, journalists looking for dirt, etc.)

What's worse, people who have praised Grameen (I am thinking of columnists and other journalists who want to make a difference and have written positive stories) or people who have funded Grameen (I am thinking of Chip Raymond of Citigroup) may feel betrayed by the perceived deception.

Again, there is nothing wrong with a problem, but there is something wrong with looking like you are hiding it. For example, if I could havesaid to Phillips that there will be an Associated Session at the meeting in Puebla where Grameen staff will outline the problem with repayment and what they are doing to fix it so that others might learn from it, that would defuse all the potential heat. Do see what I am getting at?

It's like comparing apples and organges, but if someone said to me that six years ago there were 100 global RESULTS chapters in the US and today there are 50, I would say, "yes that's right and can I send you the e-mail I sent to the Executive Committee this week on one proposed solution."

I will talk with Phillips again.

I treasure our partnership.

Best,

Friend

From Professor Yunus:

Friend

My computer was on the blink. I just got your mail. I hope I am not too late for responding to your letter.

Don't feel apologetic about Grameen. There is nothing to worry about its health.

Daniel and his wife Mariane saw me on the day they were leaving. We had some pleasant discussion. He raised the question about repayment problem....

I told him that it was more of a problem created by us than the people. Our accounting and other rules were at fault. We did not adjust them to the needs of the people....

Any way, you can ask the following questions to Mike Phillips. If they have answers to these questions they should incorporate these answers to their report. If they do not have answers to these questions they should revisit Grameen to collect answers, because these are veryimportant questions for their report....

The questions to ask are:

1.0 Is the repayment sitauation worse today than in December, 2000?

2.0 Do they feel it will be worse in December 2001, than it is today?

3.0 Does Grameen look finacially vulnerable?

4.0 Do they see any chance Grameen will default on its loans from its local and international lenders?

5.0 Do they see any possibilty that deposits with Grameen are at risk?

6.0 Is the morale in Grameen down?

7.0 Are the members leaving Grameen to join other programmes?

8.0 Does Grameen look organizationally and financially stronger today than it was one year back?

9.0 Do they think Grameen will return to its normal healthy shape in a year from now (I think it will there by July, 2002)?

10.0 Do they see steady improvement in the overall situation every month?

11.0 Is there enough money in the bad debt reserve to cover 100 percent of the amount overdue?

Obviously answers from my side is "NO" for questions from 1 through 7, and "YES" for questions 8 through 11.

Repayment rate right now (as we always define it against overdue loans over two years)is 90 percent. If you take the amount over one year it is just about 80 percent. By the end of this year the first one will reach 94 percent, the second one will be 90 percent.

Any way, morale in Grameen was never higher in its entire history. By June, 2002 we'll have the strongest Grameen anybody ever saw. We'll have new wave of visitors to see how it all happened. New Grameen is being built in a way that it can face any disaster situation without getting into crisis situation, it will be entirely self-reliant finacially, without needing any loans from the market.

Our repayment problem was temporary but has been very educational. In a way I am happy that it hit us. That gave us the opportunity to build it in a way which makes it stronger than ever.

Have a session with Mike and get his views, if you want. We are okay, no matter what they wish to write. Don't you worry about us a bit. Feel absolutely strong, and move on with your mission.

Warm regards.

Yunus

From : Professor Muhammad

Dear Friend

Thanks for your prompt action.

I was thinking about my letter to you last night. I thought I should add two more things:

1.0 Repayment problem that we had was like a bad cold with high fever. Definitely it was not a serious disease.

2.0 You can ask WSJ whether they would like to do a negative report on the basis of partial or biased information now, or do an excellent positive report which will be useful to many people around the world, in March or July next year?

Yunus