Grameen Founder Appeals Mandatory Retirement

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March 27, 2011; Source: The Times of India | This article by the world-renowned Indian economist Jagdish Bhagwati in The Times of India criticizes the Nobel Prize winning Mohammed Yunus with cranky sarcasm, referring to Grameen’s founder as “the saintly Yunus” and suggesting that critics of the Bangladeshi government that are trying to dislodge Yunus have been “inflating [the credentials]…of Yunus.”

Yunus was removed as head of Grameen Bank recently on the grounds that he had stayed past the legal retirement age of 60, but supporters say his forced departure was politically motivated. He has had a “tense relationship” with the Bangladeshi government ever since he tried to set up a new political party and enter politics in 2007, according to the BBC.

But the root issue of the controversy is a burgeoning critique of microfinance attached to the persona of Yunus, whose programs Bhagwati insinuates haven’t been quite the success that much of the world believes. The underlying critique of Grameen includes these charges:

  • Other microlenders are regulated and “seek…no special dispensations,” while Grameen is highly dependent on foreign investment. (Bhagwati)
  • Unlike the poverty-fighting success of India’s governmental reforms of the economy, “Yunus's Grameen Bank puts at best a microeconomic finger in the leaky dyke of Bangladesh's largely unreformed macroeconomic policies.” (Bhagwati)
  • “Interest rates for microfinance are higher than that of the commercial finance industry…[but] there is little explanation why these rates are higher and why there is significant variation in interest rates among different institutions in the industry” (South African development finance expert Dolapo Adejuyigbe asking for improved microfinance transparency)
  • Charges of financial irregularities at Grameen and other microlenders concerning use of foreign aid from Norway and elsewhere (Bhagwati and Rupert Walter at FinanceAsia)
  • Questions about the motives and impacts of for-profit microlenders, now with even Wal-Mart providing microfinance services in Mexico
  • Whether microlending is as good in its effect “on the incomes and poverty rates of microfinance …[and] on measures of social well-being, such as education, health, and women’s empowerment” as it is on supporting microbusinesses (economist Katherine Odell for the Grameen Foundation)

Some 129 million people received microloans in 2009. It is now a big sector, with 60 percent of the industry controlled by commercial banks and only 35 percent by NGOs. The “banker to the poor” will be appealing his mandatory retirement in front of the Bangladeshi Supreme Court this week. But beneath the surface, the issue isn’t Yunus’s age. The question is whether microfinance really works. For Americans, who imported and adapted microfinancing as a strategy some years ago, pronouncements in Dhaka might reverberate for these nonprofit microlenders in the States.—Rick Cohen

  • Alex Counts

    Professor Bhagwati

  • rick cohen

    Dear Alex: Thanks so much for the additional information. I hope you’ll keep Nonprofit Quarterly readers up to date on developments with Yunus and Grameen.

  • Remo Shakil

    I dont know whether or not Prof. Bhagwati regrets writing this now as it played not only to undermine his standing, it also played direct into the hands of Prime Minister Hasina. In Bangladesh, we know the whole Yunus issue is nothing but a political vendetta by PM Hasina. The band and wagon of Awami League, except few with conscience, jumped into bulldozer to flatten Dr.Yunus. Shamefully, she is doing it using the highest court of the country which is nothing but a den of her cohorts. Prof.Bhagwati, in the process, hit a bigger blow to the poverty eradication process in Bangladesh and beyond. I would only humbly ask if Grameen is overtaken by the government and turns it into a corruption ridden state give aways, what benefits it will bring to the almost 9 million borrowers of Grameen. This is the first time I was disappointed with a writing of Professor Bhagwati, hope this will be last.