Grameen Bank Reform Worst awaits the best?

A government commission’s plan to recommend breaking up the Nobel-winning Grameen Bank into at least 19 zones evoked strong criticism from anti-poverty campaigners and analysts.
The recommendations by the Grameen Bank Inquiry Commission are seen as the culmination of a well-orchestrated attempt to take control of an organisation that has flourished into a success story over the last three decades.
If the proposal is implemented, it will set the country’s best-known organisation on the path of destruction, warned a number of experts, who have closely followed the developments.
“The government has taken the step to destroy the bank. It is totally a political decision,” said Akbar Ali Khan, former adviser to a caretaker government.
The commission is set to recommend restructuring Grameen Bank in the shape of the erstwhile Bangladesh Shilpa Bank (BSB) or Rural Electrification Board (REB) in order to give the government absolute control over the microcredit organisation.
The recommendations will be unveiled at a workshop, “Future Structure of Grameen Bank: Some Options”, at the Biam auditorium in the capital on July 2.
The move comes at a time when the successful microcredit model of Grameen Bank that won the Nobel Peace Prize in 2006 is being replicated not only in the developing world, but also in developed economies.
Other respected experts joined Akbar in criticising the commission’s suggestions.
Mirza AB Azizul Islam, former finance adviser to a caretaker government, said the recommendations apparently made no sense to him.
“Firstly, the commission must clarify the areas where Grameen Bank has failed in its present structure. What is the justification of changing its status if the commission cannot identify any major flaws?”
“Secondly, Shilpa Bank was one of the biggest loss-making state-run banks in the country. Is the commission planning to recommend turning Grameen Bank into a failed enterprise where the government will have to subsidise funds to run the bank?”
The once state-run Shilpa Bank has been renamed Bangladesh Development Bank through its merger with Bangladesh Shilpa Rin Sangstha, after decades of its struggle with non-performing loans and weak governance.
On the suggestion to restructure Grameen Bank in the shape of REB, Islam said, “The nature of services provided by REB is totally different from that of Grameen Bank. You cannot compare horses with elephants.”
REB, a highly subsidised government enterprise, supplies power to rural areas, and operates through 70 associations.
Islam said if the bank fell into the hands of the government it would be politicised and its performance would decline.
“As a result, it will become a loss-making venture and will be another addition to the huge number of loss-making state-run enterprises.”
Akbar said if the government took control of Grameen Bank and its associated organisations, which are non-profit, they would face an untimely end.
“There is no doubt about it, as no government has been able to run any of its organisations efficiently in the last four decades. The government is only taking steps to destroy the organisation that is running effectively,” he said.
The analyst said he didn’t see any problem in Grameen Bank. “Even the borrowers and members have not complained against the bank.”
Hossain Zillur Rahman, executive chairman of Power and Participation Research Centre, a local research think tank, said it was clear that the recommendations were aimed at making the successful organisation into an ineffective one.
“Political vindictiveness is behind the move. The commission has been formed and many other measures about Grameen Bank have been taken out of political vindictiveness. There is no other reason behind it.”
The finance minister publicly said Grameen Bank was running efficiently. Beneficiary and independent assessments also showed that its performance was up to the mark, he said.
“Even the PKSF [Palli Karma-Sahayak Foundation] has found that Grameen Bank’s effective interest rate is the lowest among all microcredit organisations in the country. The bank’s success is well-recognised globally.”
Rahman, also former adviser to a caretaker government, hoped the government would reconsider its position on the bank and let it run on its own.
Mahabub Hossain, executive director of BRAC, the world’s largest non-governmental organisation, said Grameen Bank had played a key role in expanding the concept of the collateral-free small loans not only in Bangladesh, but also across the world.
“The model heavily relies on trust. If it gets caught in the web of government rules it would be tough to maintain its ability to reach out to its target beneficiaries,” he told The Daily Star.
The noted agronomist said the microcredit model does not match that of any public or private banks. “Government control over Grameen Bank will only undermine its efficiency and productivity in many aspects.”
According to the paper to be presented at the commission workshop, Grameen Bank’s legal structure should be similar to that of BSB.
In such a case, the paper said the government would hold a majority share, not less than 51 percent and the rest would be available for public subscription by GB borrowers. The composition of the board of directors will be designed to ensure that the government maintains a majority under all circumstances.
The commission has also thought of another option of restructuring GB in the shape of REB.
According to that structure, at least 19 independently registered organisations will be created under Grameen Bank in order to decentralise drastically the bank’s operations and management.
Nobel laureate Prof Muhammad Yunus, the founder of Grameen Bank, has termed the commission’s suggestions completely irrelevant.
“The government takeover of a sound financial institution owned by 8.4 million poor women will be a case of an extreme abuse of government power. Options offered by the Inquiry Commission are totally irrelevant and unworkable,” he said.
The government formed the commission last year to review the activities of Grameen Bank and 48 other organisations that bear the Grameen name, and make recommendations on how to run the organisations.

Source: The Daily Star