Many discussions about microfinance begin with the same story. It’s the story of a Bangladeshi economics lecturer who had a novel but compelling idea, and how the organisation he created, the Grameen Bank, became one of the world’s foremost socially-oriented financial institutions. As you read this a new chapter is being written in this story, where the Bangladeshi government looks at loopholes in the Grameen’s founding statutes as a way to seize control of its finances. In doing so the government is threatening the rights of the Bank’s millions of member-shareholders, and putting the futures of both the Grameen Bank and those it serves at risk.

So what happened? The Grameen Bank was granted institutional status in 1983 by the enactment of a special law: the Grameen Bank Ordinance. The Ordinance enabled the creation of a legal entity that would “provide credit… to landless persons for all types of economic activities”, and outlined the relationship that the Bank would have with government and its clients.

Three decades have passed since then, and the Grameen Bank has made loans totalling more than $9bn to millions of poor people. These clients are mostly women, over 5.5 million of whom own shares in the Bank purchased with funds from their Grameen savings accounts. Since 1987 these borrower-shareholders have also sent representatives to occupy nine out of twelve seats on Grameen’s Board of Directors, and this representation gives the poor shareholders significant input into the strategic direction of the Bank. The system was designed to ensure that the Bank retained its original focus on alleviating poverty, as well as its commitment to addressing the needs of its clients.

Grameen’s methodology has been emulated all over the world, but at home in Bangladesh the Bank has recently been under threat following a public clash with the governing Awami League party. Almost two years have passed since the government forced the resignation of the Bank’s founder, Prof Muhammad Yunus, amidst public protests from Grameen employees and clients. And a Commission of government appointees is currently investigating the legal status of the Bank, as well as the rights of shareholders and other issues. The Commission is simply the latest development in the fraught relationship between Grameen and the Awami League government, but the tone of its preliminary findings is particularly troubling.

In an interim report published recently, the Commission raised a number of disquieting points about the legal status of the Bank and its shareholders. The document supports the government’s position that Grameen is ultimately an organ of the state under the terms of the Ordinance, citing as evidence the fact that the Ordinance does not explicitly give ownership of the Bank to its shareholders. Indeed, the Commission notes that the statute does not properly define the rights of the people it describes as ‘member-borrowers’ or ‘shareholders’ at all.

But their role hasn’t been defined for close the thirty years; yet successive governments, central bank governors, finance ministers and government-appointed Grameen Board Chairmen have been satisfied with the de facto ownership exercised by the shareholders. The Commission actually specifically notes in their report that “No clarification about the usage of these terms seems to have been sought by anyone”, presumably because all parties were satisfied with the status quo where the Bank maintained its operational independence and the shareholders dominated the board. Here, members’ status embodies the spirit in which Grameen was created.

The Grameen Bank functions best as an institution that serves the needs of its clients, but at the moment the Awami League government is trying to make it an institution that is run by the State. And that is worrying.

Past experiences in Bangladesh and elsewhere indicate that governments are not always good at operating development finance institutions. For example, previous experiments in state-run microfinance have sadly been used as a conduit for patronage, vote-buying, and associated corruption. In many cases these institutions eventually collapse under the weight of their own mismanagement, leaving a legacy of wasted resources and institutionalised corruption.

If this were to happen to the Grameen Bank it would be a travesty. After three decades of demonstrating the potential for inclusive financial services to change the lives of disadvantaged people for the better, the Bank must be allowed to retain its independence. If the de facto status of the members on the Board of Directors is not properly defined in the Ordinance, then the law should be altered to normalise the situation. Any discrepancies cannot and should not be used as an excuse for the government to deprive Grameen’s members of the rights they have exercised for more than thirty years, and everyone who cares about the work of the Grameen Bank has a responsibility to stop that from happening.