Grameen Bank and Hasina’s make-believe world

Socialists believe that the way to paradise is for governments to own “the means of production”. Across the developed world governments have nationalized banks whose survival was in doubt.

But Bangladesh, which resembles a world seen through a distorted mirror, likes to do things differently. Here the Grameen Bank which has never suffered investment losses and is fully sound, now faces permanent nationalization by a government whose own solvency has been called into question.

Many economists and opposition politicians fear the government’s intention is to raid the poor women’s funds to fill a widening fiscal hole. “A legalized robbery”, one may call it. The bank was set up in 1984 by Professor Muhammad Yunus, now a Nobel Laureate who is also the 6th man in the world and the first Muslim to have received both the highest U. S. national awards. It was a kind of initiative that saw Prof. Yunus set up a private entrepreneurial scheme in which poor women pay contributions into individual savings accounts. His scheme inspired people to choose between staying idle or invest to earn in a productive way. Now they have 8.4 million accounts and assets of TK. 290 billion in cash. They are among the largest investors in Bangladesh’s depleted capital markets. Their demise will be a serious blow to the already shrinking economy.

Ideological hostility to the private investment played its role in Sheikh Hasina’s left dominated government’s decision to scrap the scheme. Four decades ago her father Sheikh MujiburRahman nationalized considerable swathes of the country’s economy in the name of “social justice”. That did not work. Once Asia’s biggest industrial plant ‘Adamjee Jute Mills’ was nationalized then in its flourishing state. After twenty years of governmental corruption and plunder it was sold as scraps. Today’s neo- socialists are smarter than their predecessors. Instead of outright takeovers, they are now achieving much the same goal through governmental regulations. Grameen Bank is a prime example. Details of the policies regarding its operation will be dictated by governmental decrees. About the only thing the bank will have any autonomy over –will be the bank’s corporate logo. In this new socialist Bangladesh fiscal need may have been a bigger motive behind the Grameen Bank’s takeover. It looks the government wants to use poor women’s money for paying the bills of government’s extravagance. In the run up to the parliamentary election it has stepped up public spending.

Now the government is strapped for cash. It had relied so long on taxes on imports of consumer goods and loans from nationalized banks. Because of the unbridled corruption, the government run banks are short of liquidity and imports have gone down. At the same time the Awami League government, in its two terms, has issued 42 insurance licenses and 22 banks to people with connection to the ruling party on political consideration and not on the quality and performance of the sponsors. With four deficit budgets in a row, World Bank’s cancellation of the soft term loan for the Padma Bridge, Share market scandal, the Hallmark and the like, the government will not be able to roll over the accumulated debt because investors’ lack of trust for the government has led them to demand higher interest rates.

By taking over the Grameen Bank Sheikh Hasina could solve her cash flow problem for the remaining months of her tenure in a swoop. It would put Grameen Bank’s assets worth about 3 percent of GDP at the government’s disposal. After the takeover, government could do everything on terms of its own choosing. Of course, all this money belongs to the Bangladeshi women, not the government. But according to government’s decision, it would be administered by government officials. They are likely to give priority to the short term claims of the public finances at the expense of impoverishing the Bangladeshi people and their children in future and destroying a unique institution which has been acclaimed worldwide as a model of micro -credit operation. By proposing the nationalization of the august institution of which 97 percent shares are privately owned, Sheikh Hasina has further undermined faith in her government’s solvency and integrity and in property rights. If it takes place, account holders will deluge the courts with lawsuits. None knows where the government is going to stop. Today they are going to takeover the world reputed Grameen Bank which co-shared the Nobel Peace Prize in 2006 with its founder. What is going to be the next?

The writer was a Member of Parliament from 1996 to 2006.

Source: Weekly Holiday