Bangladesh : What is Grameen Bank Controversy ?

Muhammad Yunus is the founder of Grameen Bank of Bangladesh and is a Nobel Peace Prize winner of 2006.

• He is best known for developing the concepts of microcredit and microfinance.
• He was awarded Nobel Prize for his efforts in making Grameen Bank as a microfinance organization and community development bank that provides small loans to the impoverished.
• The Microfinance model of the Grameen Bank has been replicated all over world.

The bank has been criticized for charging exorbitant interest rates. Recently, a Danish documentary maker Tom Heinemann alleged that Professor Yunus and his associates diverted nearly 100 million dollars of grant money to another sister company, Grameen Kalyan, which was not involved in micro-credit operations. It was alleged that this fund diversion was done to evade taxes. The documentary maker alleged that he travelled to Bangladesh , India and Mexico to find out whether micro-credit loans have really helped the poor and he found out that poor people are getting into more and more debt because of micro-credit loans.

The Grameen Bank as well as Muhammad Yunus have denied these allegations.

Later, Bangladeshi Prime Minister Sheikh Hasina called for an investigation into the allegations. She also appeared highly critical of the very high interest rates, bank charged to the poor clients. The Grameen bank says that the did so under an understanding with the Norwegian Government (the donor) and diverted the funds in "due deliberation, good faith, and with good intentions to benefit the poor".

Comment: The westerners are always known to go hyper when it's a matter of finance related to the third world. The allegations that the diversion of the funds would not help the poor may not be correct. The diversion may be for the purpose so that the sister organization may offer the loans at normal bank market rates. What needs to be found out in this case is that whether the money was diverted to some family business at very low rates. The chances seem to be scarce. (View is personal)