Last week the Bangladeshi Parliament, the Jatiya Sangsad, passed an amendment to the Grameen Bank Ordinance that will drastically alter the way the Nobel Prize-winning Bank appoints its managing directors in future. As the latest development in an ongoing conflict between the Prime Minister’s Awami League party and the Grameen Bank, the new law leaves the Bank’s poor female clients (who also constitute the majority of its ownership) with an uncertain future.
The Grameen Bank is known around the world as one of the institutions that pioneered the use of micro credit as a tool for poverty relief in the 1970s, and its contribution to the growth of microfinance was recognised in 2006 when the Bank and its founder Muhammad Yunus were jointly awarded the Nobel Peace Prize. Since 1983 the Bank has operated outside of normal regulation for banks and has been governed by a special institution-specific law: the Grameen Bank Ordinance. This is an unusual situation and, while the Government has only ever owned a small share of Grameen, the Bank has always been subject to some degree of government oversight. The government appoints the Chairman of the Board, although the power of this individual has always been balanced by the composition of the Board, which includes representatives of the Bank’s poor female clients. It is the clients of the Grameen Bank who actually own the institution through an innovative system that allows them to buy shares.
Recently, however, a public conflict between the Bangladeshi Prime Minister Sheikh Hasina and Muhammad Yunus has resulted in the Bangladeshi Government attempting to assert greater control over the running of the institution. Muhammad Yunus was ousted last year as Managing Director, allegedly because he had passed the mandatory retirement age in Bangladesh, and the post remained vacant until now.
Over the summer, the Government started taking steps to address the situation by drafting an amendment to the Grameen Bank Ordinance of 1983. This amendment, which received cabinet and presidential approval last month, was passed by a session of the Bangladeshi Parliament last week at which almost no MPs from opposition parties were in attendance. The main opposition party was absent as part of an ongoing protest against the government, leaving the sole independent MP Fazlul Azim as the only dissenting voice. Azim expressed his displeasure with what he sees as a government grab for control of Grameen, saying “No other financial organisation is running as well as Grameen Bank. Money has been looted from Sonali Bank. But without arresting anybody involved in the Sonali Bank scam, the Government is out to grab Grameen Bank”, before leaving the chamber in protest.
The new law gives the government-appointed Chairman the right to appoint a panel that will, in turn, recommend a new Managing Director. The current Chairman has appointed a panel of reasonably well-respected individuals, but the risk is that this new procedure gives the Government an inordinate amount of indirect influence over the operations of the Grameen Bank.
Ultimately, it is the clients of Grameen who will lose out if the Government takes control since it is these clients who not only benefit from the services the Bank offers but also profit as shareholders from its success. These women are not wealthy but have worked hard to make better lives for themselves and engage with the Grameen model. Past evidence has shown that government-run microcredit programmes often become tools for state patronage and corruption, and it would be a tragedy if this is to be the destiny of the Grameen Bank. For the sake of the Bank’s clients, we hope it isn’t.