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Dhaka’s plans to take over pioneering micro-finance lender draws flak

Dhaka (UCAN): A recommendation by the government of Bangladesh to split up and take over the pioneering Grameen Bank micro-lending initiative has met with strong opposition from its Nobel Prize winning founder, Muhammad Yunus, who has alleged the move is politically motivated.

Yunus described the proposal, which would see the government raise its stake in the bank from five per cent to 51 per cent, as an “extreme abuse of government power.” 

The government in Dhaka claims it would help the institution, the majority of whose 8.4 million members are impoverished rural women, to engage more with the grassroots, as well as improving governance.

The government and Yunus have been involved in a lengthy legal spat over the bank, with officials accusing him of illegally using its funds to promote commercial organisations that he owns. 

However, critics of the government allege that the conflict stems from an aborted 2006 plan by Yunus in to start a political party which, given his popularity among impoverished voters, could have gained widespread support.

Akbar Ali Khan, a noted Bangladeshi economist, also believes the takeover plans are the result of political maneuvering.

“The government has decided to destroy the country’s best known institution which brought us worldwide fame, only for political reasons,” he said.

The move would see the bank split into 19 smaller organisations that would be separately managed but overseen by a central headquarters. The government says the bank’s structure should become more like a state-controlled industrial bank, but the plans have been poorly received by experts.

“Considering performance of other state-run banks, the Grameen Bank is way ahead in terms administration and helping the poor,” Nirmol Rozario, a former president of Christian Cooperative Credit Union Ltd. in Dhaka, said.

He noted, “Splitting the bank would hurt its capacity for micro lending and financial viability, and affect its borrowers.”

He added that the government’s restructuring of a globally reputed organisation like Grameen “will tarnish the country’s image.”

Set up in 1976, the bank has distributed over US$11 billion ($85.3 billion) in loans without collateral to the rural poor to help them gain financial independence.

However, critics have accused it of imposing high interest rates that keep borrowers in a cycle of debt.  

In March 2011, the central bank removed the 70-year-old Yunus as Grameen’s managing director on the grounds of exceeding the mandatory 60-year-old retirement age for bankers in Bangladesh.


A month later he lost a legal battle in the Supreme Court to retain his post.

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