Grameen Bank Commission of Inquiry Interim Report: 9 Borrower Directors Should Step Down

Bangladesh has made impressive strides in health, education, and poverty reduction over the past few decades. For instance, since 1990, child morality fell by two-thirds. These gains were made possible because a vibrant, effective civil society, in particular, microfinance providers like Grameen Bank, BRAC, ASA Bangladesh, and the 138 other MFIs that reported to the Campaign last year.

Earlier this month, the government-appointed Grameen Bank Commission of Inquiry (this is the Commission meant to release recommendations as to the future of Grameen Bank) released its interim report, which concluded, among other recommendations, that the incumbent directors of the bank’s board should no longer hold office. These are the 9 women borrowers elected by the 8+ million women shareholders of the bank to represent their interests at the highest level.

In addition to the continued attacks on the independence of Grameen specifically, there are broader implications of a potential chilling effect on civil society writ large, which has been instrumental in improving health and fighting poverty.

Professor Yunus and Grameen Bank members [(c) Yunus Centre]

The women on the board of directors have not taken this audacious report lying down, however. They released a powerful response to specific accusations from the interim report (read the translated response). 

Should we just watch from a distance while someone runs away with all the fish from our pond and do nothing about it? We cannot do that!…Nobody can cite a single example where an elected member took advantage of her position in the board. For the last 36 years we have been running the bank with utmost honesty.

Here are the main points from the Grameen Bank Commission of Inquiry’s interim report regarding the future of Grameen Bank:

  1. The incumbent directors (i.e., the nine elected women shareholders) of the Bank’s board should no longer hold office.
  2. The government must certify that all future board members reach certain requirements, including the completion of education equivalent to grade 7.
  3. Various accusations against the current board of directors, such as the board is not functioning properly and that the women board members have not participated in board meetings and discussions.
  4. Grameen Bank is legally a government bank, not a private bank, despite the borrowers owning 97% of the bank’s shares and government owning only the remaining 3%.

In addition to Grameen Bank, the Commission’s report also includes accusations against Grameenphone, an independent company that is part of the Grameen family of businesses. Grameenphone has the stated goal of providing affordable telephone service to the entire population of Bangladesh, and is the country’s largest cellular operator.

The Commission recommends the suspension of Grameenphone’s license and reports that Grameenphone owes Grameen Bank USD 750 million relating to its control of shares of the company.

The reasons behind the suspension of the license (related to the original MOU and, again, disputes over who controls company shares) as well as the reports of Grameenphone owing money to Grameen Bank had never surfaced before the report, despite annual audits conducted within both companies. Like the actions against Grameen Bank, the Commission’s recommendations move Grameenphone in the direction of government control over the company.

The effects of the Commission’s recommendations regarding the future of Grameen Bank and Grameephone could have lasting effects on antipoverty work, civil society space, and investment throughout Bangladesh.

Further, if the government continues to move in the direction of taking control of Grameenphone, it could threaten both current and future investment in Bangladeshi business, beyond just Grameenphone. Telenor, a Norwegian telecommunications company, is currently an investor in Grameenphone. Without assurance that private business is safe from government control, local and foreign investors will hesitate to send investments to Bangladesh, further hampering economic development.

And here is news coverage from Bangladesh:

Thank you to our colleagues at RESULTS for help with this summary.

3 thoughts on “Grameen Bank Commission of Inquiry Interim Report: 9 Borrower Directors Should Step Down

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  2. re: point #4, the commission points out that the issuance of shares by the grameen bank was itself, illegal (since the bank was a public corporation to start with). It was mismanagement on both the govt. and grameen bank side that led to this confusion. Hence the valid point that ownership of the bank has always resided with the govt. of Bangladesh, and that the bank itself is a government concern.

    This is nothwithstanding the mode of marketing engaged by the bank management when presenting their model in forums abroad, which continually presented the bank as “owned” by the borrowers; in truth the bank’s capital was/is derived from deposits from borrowers, but that is all…just like in any private sector or even public sector bank. A implied solution is not nominate the shareholders as non-voting members, who are paid dividends. This is in practice what occurs anyway, and will be legally correct as well.

    As for the business with Grameenphone, and the associated concerns of the Grameen bank…this is murky territory. What is clear is that the methods by which these where established (including securing of the grameenphone license) are suspect, and in fact illegal. If rule of law and standards of transparency were applied – which they must be – many of grameen bank’s activities are questionable to say the least. The fact that the bank-govt. relationship developed partly during periods of autocratic rule in the country is not relevant – even during periods of military rule of Bangladesh, it was only the political leadership that was unelected; the machinery of state, legislative, judicial and otherwise was maintained; there is a clear continuity between People’s Republic of Bangladesh as established in 1971, and as extant in 2013.

    Regarding corruption, there are plenty of other questions re: management of Grameen Bank which merit investigation to say the very least.

    If something like this happened in developed country – say, in western europe, north america, or in japan – the entire operation would be shut down immediately, and the people put on trial. The only relevant question: why harangue Dr. Yunus and the GB management, when there are so many other suspect dealings in that country’s public and private sector?

    Perhaps because misrepresentation of the Bank’s operations, and mechanics of the Bank’s successes. But again, people in positions of power misrepresent themselves all too often, and there are plenty of examples of this in Bangladesh outside of Grameen Bank.

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