Many times when I mention that I work with something connected to microfinance people get a frown on their face and say something along the lines of: “Oh, that’s the thing that guy from Bangladesh invented right? Wasn’t he accused of corruption or something?” This is unfortunate in two aspects, first, that allegations of misbehavior of Muhammad Yunus and the Grameen bank in Bangladesh have made people distrust both him and his bank, even though the investigation found no proof of any irregularities. Second, that people seem to directly connect the actions of one of the main spokespersons of microfinance, Muhammad Yunus, with the ability and performance of microfinance itself. In order to bring some nuances to this story, I will now present a number of details that offers a different perspective to this story.
Things are often not as simple as they seem, especially when it comes to economy and politics. The controversy around Muhammad Yunus and the Grameen bank arose as Norwegian aid was discovered to have been transferred from the Grameen bank to a branch of the Grameen foundation called Grameen Kalyan in 1996. There was no clear reason for this transaction and there were suspicions of fraud and tax evation from the side of the Norweigan Government. These allegations led to an investigation in 2010. Adding to these controversies were the fact that in May 2011 Muhammad Yunus was forced, against his will, out of the position as Grameen Bank’s managing director .
At first sight, it may seem that these issues are connected, but that may be a hasty conclusion. The allegations from the Norwegian foreign aid agency were dropped as it was found that Grameen had done nothing wrong. And the demands that Mohammad Yunus resign came mainly from the Bangladeshi government, holding a 3 of the 12 board seats in Grameen Bank at the time. They claimed that according to the law, Muhammad Yunus was too old to run a commercial bank. However, Muhammad Yunus himself claimed that the real reason for the government demands were the fact the he had considered to politically oppose the sitting Prime Minister of Bangladesh. No matter who you choose to trust, it would seem that the motives of the Bangladeshi government are not completely transparent. The fact of the matter is that Muhammad Yunus has not been found guilty of any misbehavior, other than being too old, and that the government in Bangladesh is prone to place the Grameen Bank under a bigger magnifying glass than many other institutions in Bangladesh. Muhammad Yunus has recently released a statement regarding the latest government investigations where he expresses his worries about the future of the Grameen Bank and Bangladesh.
The second point to make clear is that any allegation of Muhammad Yunus and the Grameen Bank, or any other microfinance institution (MFI) for that matter, is not by definition a charge against microfinance itself. The Grameen Bank must be seen as just one institution of many. The methodology of any MFI must be run appropriately and adapted to the local cultural, economic, and societal environment. Thus, allegations of a concept must always be seen in relation to the specific actions of the defendant and its context, and cannot be used to make broad general statements about the legitimacy of a whole sector. Criticizing microfinance on the basis of allegations of the Grameen Bank or Muhammad Yunus would be like refuting the whole field of physics because some people believe that the moon landing never took place.
Microfinance is not black or white. It can do both good and bad depending on how you use it. If it is used responsibly it has the potential to financially include the unbankable and create the financial infrastructure that is needed for a wide and sustainable growth. So, next time someone looks at you suspiciously when you state your support for microfinance, ask them if they always wear a helmet in case gravity stops working.