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Financial Planning > Charitable Giving

Grameen Bank's Muhammad Yunus Caught in Microcredit Controversy

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Controversy is raging over microcredit, those miniscule loans, some less than $100, that were intended not to be a profit center but rather a way to help the poor in developing countries start businesses and become self sufficient. At issue are some microcredit commercial lenders who are reportedly taking advantage of borrowers.

The ideal is lofty: to lend very small amounts of money to help poor individuals—mostly women—in developing countries start businesses that become self-sustaining. But problems with some lenders have tarnished the reputation of some of the founders of the industry, and thrown microlending into chaos, notably in Bangladesh and India.

Nobel Laureate and Grameen Bank Founder Muhammad Yunus (left), who won the Nobel Peace Prize in 2006—with his Grameen Bank—was a pioneer in microlending. Now he's fighting to stay with the bank he founded, as reports of his ouster circulate.

The Financial Times reported Thursday that the central bank in Bangladesh, Bangladesh Bank, had ordered him to leave Grameen Bank. Yunus has refused, and a statement on the Grameen Bank website on Wednesday stated:

“Today’s media reports about Prof. Yunus’ ouster from Grameen Bank are untrue. The reports are based only on statements made by Board chairman Muzammel Huq, a former employee and vocal critic of Prof. Yunus who was appointed chairman of the Grameen Bank board by the Bangladeshi government in January. The Board has rejected his calls for Prof. Yunus to resign, and Prof. Yunus will stay on as managing director, according to the rules of the Bank and with the full support of the vast majority of its Board, while the legal issues surrounding the Bangladesh Bank's claims are examined. For more information, see:

Can the Ideal Recover?

Problems started when some institutions reportedly began to “commercialize” microlending, allegedly lending more than was necessary, at high interest rates. Yunus called some of the commercial microlending institutions “loan sharks,” in an article in The Times of India on Feb. 21, adding "If you want to commercialize, please choose a different name … Real microfinanciers are not commercially mindedGrameen Bank and all my enterprises are not commercial entities but social businesses." 

Yunus is expected to speak on March 7 at the launch of the State of the Microcredit Summit Campaign Report 2011, according to a release from the Microcredit Summit Campaign on Wednesday.  The FT article reported that Secretary of State Hillary Clinton (left) would talk with Yunus in Washington on Feb. 8.

The New York Timesreported in an article in January on some of the controversy with microloans and issues with a $100 million donation to Grameen’s program from Norway. The Times reported that in December, Bangladesh’s Prime Minister, “Sheik Hasina Wazed, who had championed microloans alongside President Clinton at talks in Washington in 1997, turned her back on them. She said microlenders were ‘sucking blood from the poor in the name of poverty alleviation,’ and she ordered an investigation into Grameen Bank.” 


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