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Source link: http://archive.mises.org/5861/microcredit-or-macrowelfare-the-myth-of-grameen/

Microcredit or Macrowelfare: The Myth of Grameen

November 8, 2006 by

Pundits left, right, and center appear to love the Nobel Prize winning bank and its founder. The literature on Grameen is an echo chamber of hurrahs. Not even the Nobel Committee bother looking more deeply. Actually a closer look at this institution shows not a success but precisely the sort of flop you might expect from a government-subsidized program that is predicated on the view that money alone is the answer to poverty. What Bangladesh needs is not more personal indebtedness but radical economic reform. FULL ARTICLE

{ 66 comments }

N. Joseph Potts November 8, 2006 at 8:29 am

How do people in areas lacking electricity recharge their cell phones (said to be impossible in the article)?

They recharge them from vehicles, whose engines don’t even need to be running at the times the phones are recharged. They recharge just fine from the vehicles’ batteries, just like our phones (and the phone of the person quoted in the article?).

Vehicle batteries form a sort of pseudo electrical grid in such places all over the world. The current South African movie Tsotsi shows (very briefly) a stereo being connected to a vehicle battery.

I recommend the movie, by the way. Much of it takes place in Soweto.

M E Hoffer November 8, 2006 at 9:14 am

“How do people in areas lacking electricity recharge their cell phones (said to be impossible in the article)?”

a simple dynamo attached to a bicycle tire/wheel, accomplishes the same thing-ability to produce electricty to recharge batteries.

U$D 5 option in the “third” World, U$D 500 option on “exercise” bikes in the “first” World.

Jayant Bhandari November 8, 2006 at 10:23 am

“…dynoma…” and “…vehicle batteries…”

I wonder how many of the poor in Bangladesh have access to a dynoma or vehicle batteries.

Jeffery: A great piece.

Vince November 8, 2006 at 10:37 am

Very good piece Mr. Tucker. You’ve uncovered the nasty underpinnings of altruism!

Deane November 8, 2006 at 11:03 am

interesting, i long habored reservations as to the market viability of this project myself. But the article seems to be focused on just that proving Grameen and other micro credit initatives are not examples of profit making enteprises.

Is there any evidence to suggest that the people who borrow from grameen are fact do not benefiting from the grameen scheme? if they do, and they grow into better shape than they were on their own feet then microcredit will still have its place, because that’s inevitably better than government hand outs and other poverty alleviation schemes. even though the institution would be more like a charity, an NGO if you will, itself depending on lending by various sources.. so that isn’t such a bad thing right?

J.K. Baltzersen November 8, 2006 at 11:06 am

Thank you, Mr. Tucker, for this article from the home of the Nobel Peace Prize.

Paul Marks November 8, 2006 at 11:21 am

A very good and important article. I hope it is widely circulated.

Chris Anguelov November 8, 2006 at 11:52 am

The main reason why the Grameen Bank came into existance was Bangladesh’s small and underdeveloped financial sector, dominated by state-owned banks whose main owner and regulator was ….. the government. The banking industry in that country has been plagued for years by poor credit discipline, an outdated loan recovery system, corruption, inefficiency and unionization.
An entrepreneur saw an opportunity and acted on it. I am talking about Dr. Mohhamed Yunnus, the founded of the Grameen Bank. No. He did not do it out of altruism as some people may think. He was not even lending money accoridng to Islamic law (where a lender is not allowed to charge interest but is granted an opporunity to share the profits generated with his money). The Grameen Bank not only charged an interest rate ranging between 15% and 33%, which is fine, because it was the only financial institution providing access to financial services to the poorest people in Bangladesh. It is a very profutable business venture and not a foundation-like institution, which is how it been presented.

Chris Anguelov November 8, 2006 at 11:56 am

I apologize for the spelling errors in my previous post but I am doing this during work hours :)). I hope they don’t take away from the validity of the point I was trying to make.
Cheers!

jeffrey November 8, 2006 at 12:03 pm

Chris, it is apparently true that the banking sector is riddled with problems–as is every banking sector that is state protected from failure (e.g. as in the US). It was and is mixed between private and state-owned banks.

But in what respect were banks prohibited from loaning to the poor? If they were prohibited from doing so, why was Yunus not? If Grameen’s banking ventures were economically viable (profitable) why did he seek and received state support? Why would he seek out government protection? For that matter, why if the state restricted loans to the poor would it then subsidize Yunus’s projects? Why would it be a major owner of the bank’s assets?

Your story doesn’t really make sense as you tell it.

Chris Anguelov November 8, 2006 at 12:48 pm

I can only speculate as to why banks did not loan to the poorest consumers in Bangladesh. Grameen originated in the 1970′s and I do not have any information on Bangladesh’s financial market’s conditions at that time. My guess would be that banks did not loan out to the poorest because:
- They were too big of a (financial) risk. Banks had problems with credit discipline even when lending to middle class (I’m using this term very broadly) borrowers.
- Banks may have been doing OK serving only a smaller and wealthier segments of the population and it may not have been feasible for them to incur the extra costs and risks of serving poor people.
- The Grameen bank is not economically viable. Its model is not sustainable. This does not mean, however, that it did not generate “profits”. It did not generate economic profits but it did generate profits for its owners. As you mention yourself, Yunnus and his team managed to convince everyone that his institution is performing charitable work. That’s why donations and soft loans make up the bulk of his funding and are the main source of his so called “profits”. Why do you think the Grameen Bank set up in the U.S. (On Vermont Avenue, NW in Washington, DC) an agency called “Grameen Foundation – USA”? Under these circumstances why wouldn’t he try to extract some money from the government of Bangladesh? The state never restricted any lending to the poor. I was referring to the state-owned bank as a major reason for the inefficiency of the financial sector.
In what way is the state subsidizing the Grameen Bank? Do they own shares of it or do they give it soft loans, or something? If I know more about I this I could try and address that point, as well.
I hope you’re interpreting my words correctly. I am not arguing that the Grameen Bank’s model should be (or even can be) replicated. I’m simply trying to provide objective information and compare what I know with what you know.

Gia Jandieri November 8, 2006 at 1:03 pm

Thank you Jeffey.
Thank you very much also for mises.org.

Chris Anguelov November 8, 2006 at 1:26 pm

Let me add something here. Yunnus started the Grameen Bank on a very small scale and with his own money. He took a chance but if there was no real profit to be made I doubt that he would just waste his money. The point I am trying to make is that, I really doubt whether the Grameen Bank’s model (especially considering the fact that Grameen is not entirely self-sustainable) can be replicated successfully in other places. I also don’t want to say that anywhere a branch or a replication of the Grameen Bank opens up, it is going to make profits.
Since there is no restriction in Bangladesh on banks to lend money to the poor, then why is it that Grameen is pretty much the only institution that is doing so? If banks are not doing it because it is not economically feasible and Yunnus is doing it without using tax payers’ money, then I don’t care whether his institution is self-sustainable or not. If he is using tax payers’ money (as you seem to suggest), then that is am entirely different issue.

averros November 8, 2006 at 9:29 pm

The Grameen “business” of getting low-rate loans from governments and lending at higher rates may or may not be profitable – who cares?

What matters is that this “business” is a direct benefactor of the extortion machine run by the governments.

So he figured out how to parasite on parasites. Surely, that deserves a Nobel prize.

M E Hoffer November 8, 2006 at 9:45 pm

“The Grameen “business” of getting low-rate loans from governments and lending at higher rates may or may not be profitable – who cares?

What matters is that this “business” is a direct benefactor of the extortion machine run by the governments.”

Has anyone compared Grameen’s “Bank” to the US GSEs?

I wonder if Franklin Raines feels slighted(?)

Garm November 9, 2006 at 2:57 am

Q: How many Chicago School economists does it take to change a light bulb?

A: None. If the light bulb needed changing the market would have already done it.

Dr. Farhad mahbub November 9, 2006 at 4:09 am

I am afraid that the writer has any practical idea on Bangladesh! Dr. Younus is a person who believes in implementation not in theory. I know its true that lending money to the poor is not the solution to get rid from proverty but that is the begining. One more thing mobile phone really used in rural areas. Pls come bangladesh to see how they charge their phone batteries… You will really amazed

Dr. Farhad mahbub November 9, 2006 at 4:09 am

I am afraid that the writer has any practical idea on Bangladesh! Dr. Younus is a person who believes in implementation not in theory. I know its true that lending money to the poor is not the solution to get rid from proverty but that is the begining. One more thing mobile phone really used in rural areas. Pls come bangladesh to see how they charge their phone batteries… You will really amazed

Farhad mahbub November 9, 2006 at 4:16 am

Visit bangladesh to see how the poor people are using mobile phone where there is no electricity!

Marco Saba November 9, 2006 at 4:39 am

Younus would have done a better job by teaching to the people how to print their own money – complementary currencies with seigniorage withheld and redistributed inside the same community. Instead, he is only a pusher for micro-usury.

David November 9, 2006 at 7:14 am

Not having known much about Grameen beyond some semi-complimentary comments by PJ O Rourke some years ago, this article was a real eye-opener for me. Thank you.

Since Bangladesh came up, that country is a prime example of a nation whose potential was and is completely smothered by its government.

It has arguably the most fertile earth on the planet, being located at the confluence of several rivers and hence continually being topped up. It has ( or had) pretty good literacy levels and such other nice things too. warm, friendly people, etc etc.

At one time, their economy was dependent almost entirely on jute, a decidedly second-rate fibre. When global demand for jute plummeted, the government (predictably but) insanely rushed to support it to keep it going. With tax money, and also with aid money I would imagine. But its economy collapsed in the 1970s all the same.

But all that lovely fertility continued, and continues, to be used to grow huge amounts of fibre that has all but become obsolete, swallowing up ever more resources. And the Ministry of Jute ( yes there is one, apparently) just feebly tries to ‘promote’ jute as a useful product to a market that doesn’t even listen anymore.

Imagine the boutique, high-margin niches that could be filled by growing, say, high-end greens, tropical fruit, and other produce for the supermarket shelves of Europe? Packaged and shipped with slick logistics to go from farm to shop within 2 days? Its not too far away.

But sadly, the chokehold the government has on any sort of economic activity probably makes it impossible for anyone with any entrepreneurial spirit to get out of the starting blocks.

Greg P November 9, 2006 at 9:06 am

Thank you for a very interesting article, a nice follow-up to the piece in the New Yorker, which I also read recently.

I have for some time been suspicious of the idea that credit is the solution to global poverty. I think it is indicative of a global problem that sees only financial solutions to some very intractable real world problems. Credit is a very large and growing problem in the developed world. Extending credit to the poorest of the poor will only serve to put these people at the bottom of the credit pyramid, adding insolvency and nasty debt collection techniques to their general daily struggles.

The microcredit movement has it backwards in my opinion. Instead of more credit to the poor, the poor would benefit far more from less credit to the rich. It is the money-creating process of issuing credit from nothing that keeps the poor in poverty. The product of hard work is consistently devalued as more US dollars flood the system. New US dollar issuance is used to inflate assets of developed countries and to speculatively trade commodity futures markets, keeping prices of commodities suppressed and further disadvantaging the poor who produce those commodities and who already struggle for access to protected markets. US dollar debts of third world nations allow Western institutions to dictate economic policy in those countries – often to their own advantage – even as the US is by far the biggest debtor in the world.

To be sure, the third world economies have many domestic issues of corruption and economic mismanagement to blame for their predicament. But I would argue their credit disadvantage is an international issue that goes to the heart of an increasingly dysfunctional US dollar credit bubble. Credit and finance are very much in vogue these days. I doubt this will be the case one or two decades from now. We can only hope that the Nobel Prize to Younus and Grameen Bank don’t entice the poor countries of the world deeper into this mess.

David C November 9, 2006 at 10:14 am

So the fiat credit money system ends up locking in the rich and screwing over the poor. And so to solve this problem, do they switch to gold money? Noooooo, instead they get the government to push credit on the poor. Even worse, is that the tax payers get to eat the risk that none of the private bankers are willing to take. Now they not only have a poverty problem, but have a poverty and debt problem. So then, do the economists revolt in outrage as the poorest of the poor dig themselves deeper into debt. Noooooo, they pass out Nobel prizes. The whole thing makes me sick.

DELGADO November 9, 2006 at 11:08 am

Thank you for this paper, it explains very well and clearly all the faces of the problem of microcredit in third world countries. I red the article after having red another article on french newspaper “Le Figaro”. Well, I don’t explain it, something really empty, empty of economical sense…Just emphasizing about the “notoriety” of the author of microcredit Yunus, with the visit of the president of “Danone”, the sportsman “Zinedine Zidane”, and Yunus, to a factory created via microcredit in Bangladesh.

Peter G. Klein November 9, 2006 at 1:33 pm

Deane asks: “Is there any evidence to suggest that the people who borrow from grameen are fact do not benefiting from the grameen scheme?”

There have been many empirical studies of microcredit, and the evidence is mixed. Several studies find a positive, but very small, effect, and other studies find no effects. In short, there is absolutely no scientific evidence to support the wild claims made by Grameen enthusiasts.

I link to some of this evidence on my blog:

http://organizationsandmarkets.com/?s=grameen

Deane November 10, 2006 at 4:26 am

Thank you Peter.

you make valid observations, i too agree microcredit may not be a silver bullet solution to poverty. Having said that, I’ve visited bangladesh and saw some of the sucessful garmeen induced businesses. you could never convince them that microcredit doesnt work. that could very well be a minority.. But you gotta admit that in an abstact sense, the grameen model looks good, To the point that i’m not entirely convinced that it just a dud.

M E Hoffer November 11, 2006 at 11:14 pm

pursuant to the mention of Jute, here are a couple of links:
http://www.jute.org/prod_gallery_1.htm

and:

http://www.jute.org/prod_gallery_14.htm

As well, in response to the mention, above, of cell phone usage in the hinterlands: I was wondering if they were like this:
http://www.europe.nokia.com/A4145131

With Nokia’s partnership with Flickr, illuminating our trade routes, from beginning to end, has never been easier. That they remain occluded, in the murky mists, from the great many is more than unfortunate.

I wonder, if after hopping a flight to PROC, one would be able capture candids of WMT’s concentrated production camps. Or, would they be considered “trade secrets” ?

M E Hoffer November 12, 2006 at 11:20 am

Deane,

Grameen’s focus on; “microcredit”, as opposed to “microequity”, should be telling.

Deane November 14, 2006 at 2:07 am

Apologies for bringing up the discussion again, But I’ve come across this Report from the globalisation institute which makes for a very interesting read. it addresses some of the issues discussed here.

the report is titled Microfinance : harnessing enterprise to fight poverty
can be download from http://www.globalisationinstitute.org/publications/microfinance.pdf

The report argues that while its true that real problems for poverty in countries are corruption, excessive regulation, and lack of property rights, it’s not immediately clear as to what we can do about it, and microfinance can act as a catalyst for change in govts.

i will quote a single paragraph, but the full document is well worth a look.

[Page 9 - Critisisms of Microfinance]

“..So – while bad governance is a fundamental cause of poverty in the developing world it is not at all obvious what we can do about it. Therefore to criticise microfinance on the grounds that it does not address the problem hardly seems fair. Indeed, it is at least arguable that successful microfinance programmes will have some effect on government. We have already seen that microfinance seems to make people richer. The richer a person gets the more seriously his government will take him and his
concerns. It is very easy for corrupt leaders to simply ignore the great mass of poor people they rule over, but as their citizens get wealthier they become more vulnerable to them. Microfinance, like any scheme which empowers people and allows them to help themselves, should not be ruled out as a way of encouraging better governance. ”

cheers
Deane

santosh November 14, 2006 at 9:03 am

Before going on with my comments, I express my alarm over the way this article has been relayed in internet. It seems that proponents of micro-credit bashing for valid and invalid reasons are pushing their views and distorting the picture.

————————————————
While the details of micro credit are studied over many documents easily available online, this debate has gone beyond micro credit to private initiative bashing and a hidden support for the ‘Washington Consensus’. At least free market proponents can laud private initiative of Dr. Yunush despite its shortcomings. Not being a Bangladeshi and not knowing the local situation, I am not in position to say Yes or No for micro credit. What I can certainly say is that advocating the big institutional changes in a country lacking a basic political stability and under continuous threat from natural calamities is a far cry. Please read the news that two Bangladeshi begums are fighting so hard that the whole country is in mess.

—————————————–
“The dominant issue right now is how best to build institutions that are genuinely market viable as verses subsidy dependent”. This for me is the most important remark in the article and I thank the author for showing negative sides of Grameen initiatives. Its useful here to remark that Grameen’s history wherein US promoted micro credit to counter growing communist threat in the 1970s. Greg P’s comment about asset prices is a very interesting remark.

———————————————
If you want to help Bangladesh, you better up free trade. FYI, thousand of garment workers were sacked after the end of Multi Fiber Agreement and trade protectionism is to blame for such messes. The whole affair of quota forced simple laborers to gain peanuts while the quota owners profited from the arrangement. Where are the Washington consensus zealots? I don’t understand why these Ivy League stamped academics and professionals dictating a global policy can’t stand local initiatives such as Grameen.

Faisal November 14, 2006 at 3:31 pm

I was all praise till the last subparagraph of your article. Having worked in a MF bank for around 4 years in a very similar environment as to that of BD, I don’t agree with the so-called free market solutions that you suggest. Poverty cant be reduced with such subjective terms as free markets either. Can you tell me one, just one example of a free market anywhere in the world, except may be somewhere in the African jungles where the traders are no affected by state legislations as in the US and EU. Frankly, for me to get rid of poverty is to get rid of the North. No to globalization, no to WTO, no to Bretton Woods, no to euro and dollar…We live in a dirty world of slavery!

Amal December 10, 2006 at 9:37 pm

just wondering, but how exactly would you implement free trade and other great free market ideas in a country which is one of the most corrupt in the world?

i agree that he is mooching money out of Grameen Phone and his other business ventures, he is no mother teresa thats for sure.. In an impoverished country like ours, i (and many others like me) would take anything… hey atleast he is (sort of)trying right?

Vince December 10, 2006 at 10:10 pm

Amal asks;

“just wondering, but how exactly would you implement free trade and other great free market ideas in a country which is one of the most corrupt in the world?”

How indeed? But what exactly is meant by corruption? Often defined in terms of government officials abusing their positions for personal gain, it is pretty clear that government power is the problem, not free markets. Real free-market businesses do not use government means to achieve market ends.

In other words, the only thing necessary for the free market to work its magic is to get rid of government and its interference in the lives and industry of the people.

Prateek Mishra December 11, 2006 at 10:06 am

Silly article that illustrates deep ignorance of actual conditions in poorer parts of india and bangladesh. Unsurprisingly, part of the wrath is reserved for any “socialistic” principles that Mr. Yunus advocates, even though that is at a complete tangent to the main story.

The author seems completely unaware that Mr. Yunus’s target “market” consists of illiterate women. These are people, who if they were to walk into a bank, would be laughed out of there (more likely given a good shouting and sent packing!). These are people with no status and no assets in a deeply status conscious society.

Yunus is no god, but he has actually developed a methodology to work with this group. He has found a way to make them responsive to repayment schedules, to reduce risk, to make practical suggestions, to serve as a positive authority figure in contrast to their drunken husbands and the local mullah.

Its an enormous achievement. It deserves careful analysis and scrutiny, not some close-minded and ignorant analysis based on paranoia against “socialism”.

jeffrey December 11, 2006 at 10:38 am

Prateek again avoids the main issues I’ve tried to raise. 1) If Yunus is engaged in enterprise, what is the source of the market failure that caused (and continues to cause) mainline banks to overlook the profitable opportunities for lending to the poor; 2) if Yunus is really engaged in market-based entrepreneurship, why the history of dependency on government grants and loans? and 3) why are we under the impression that advances on money that needs to be paid back at high interest (by US standards) are the key to making the poor better off?

billwald December 11, 2006 at 11:51 am

Compare to the USofA. Before the Govt learned how to inflate the money system, interest rates were legally restricted and poor people could not get legal credit so they went to the MAFIA.

Now days the people who can’t get low interest credit go to the “payday loan” stores and borrow ar MAFIA rates. In other words, our owners have learned to work both sides of the aisle.

Micro Credit December 13, 2006 at 9:22 pm

NOBEL-MAN’S UN-NOBLE CORPORATE NEXUS
by
Omar Tarek Chowdhury

Dr. Muhammad Yunus, the self-proclaimed ‘banker to the poor’, has been awarded Nobel Peace Prize 2006 and following the announcement of the award mainstream media created an euphoria throughout in Bangladesh. The mainstream academia has also jumped on the bandwagon. The unrestrained wave of delight created by the mainstream of society representing the ruling class in the wake of Yunus’ adornment with the coveted prize, has given it a ploy to camouflage its hollowness, intellectual shallowness and failure to govern the society it dominates. This ruling class is rotten to the core and morally and intellectually bankrupt. No wonder that in the era of neo-liberalism the opinion-makers and the dominant media, controlled by capital as they are, will be hyper-active to make people forget their woes and ‘feel good’. The award has provided a very good opportunity to them. The merriment-deluge washed away the sense of necessity that makes one analyze the significance of this world famous laurel which has been bestowed upon the founder-head of the Grameen Bank (GB).

Except a very few skeptics none will disagree that no other person has been adorned with so many awards and honorary degrees than Dr. Yunus, the teacher-turned-banker. The person advocating credit for the poor has so far won 68 awards, 28 honorary degrees and 15 felicitations from his motherland and other countries. Along with him the GB, his much acclaimed creation, has been awarded 8 national and international awards including Nobel Peace Prize 2006. These are, in a real sense, a recognition of his efforts to contain the poor in a way that helps to maintain the status quo and identify an effective alternative institutional method for profitable investment of finance capital. So, the mainstream policy-makers have come to recognize the merit of this method. The method devised by him has proved effective to all concerned ranging from the UN poverty-crusaders to the Citibank, from the promoters of technology-not-friendly-to-environment to the finance capital investors. These ground realities made it necessary for a wide range actors to construct a mythical image of Dr Yunus and in doing so there was an avalanche of awards, honors, etc., for him, an unending supply of chairs in the boards of ‘independent’ and ‘not for profit’ foundations floated and supported by multinational corporations (MNC). Reports with illusory images of his warm friendship with kings and queens and presidents and first ladies were circulated giving the impression of a fairy tale of friendship between a prince and a ‘pauper-son’. The target for these image-bombardments was the psycho-world of the common people. The corporate controlled pundits, media and opinion-makers have ‘illuminated’ the psycho-world of common people with illusions and high pitched propaganda to drain people of their reasoning, the power of questioning and the capacity of digging out truth. Sometimes the power-owners appear successful, at least for the time being. Relying on his magnified image Dr. Yunus has successfully become a broker in the world of international finance capital, in the marketing of technology and in the mainstream political economy. (It should be mentioned that brokering, lobbying, etc. are recognized and dignified professions in the western world.) Muhammad Yunus has been and is being awarded repeatedly for efficiently acting as a broker on behalf of big corporations of the west and as a chain reaction one award has attracted another.

No award is politics-,economics-,philosophy-, and ideology-neutral. While discussing an award it is worthwhile to take stock of the organizations or persons behind it, to whom it is awarded, and the reasons behind not awarding it to some other person than the one who has been tipped for it. Joseph Stalin was nominated for the Nobel Peace Prize but was not awarded it. Jean Paul Sartre, and in the near past, Arundhati Roy, the defiant voice, refused the Nobel Prize and Sahiyata Academy Award of India respectively. All these facts demand an analysis. Dr. Yunus was awarded the World Food Prize, known as the Alternative Nobel Prize, in 1994 and the prize is patronized by 74 organizations including the ‘famous’ US agri-business company Monsanto, Cargill and other US large soyabean and farm products exporting companies, the Agriculture Research Service of the US government, a number of financing companies and the ‘famous’ Coca-Cola. Yunus took initiative to float a joint venture company to market harmful agricultural technologies (genetically engineered seeds, Roundup herbicide, ‘transgenic’ or ‘genetically modified’ plant species) of Monsanto, a company despised in the west, in Bangladesh after being bestowed with the Alternative Nobel prize. Even US $150,000 was accepted by him to set up Grameen Monsanto Center for Environment-Friendly Technologies. This ‘pious’ act of brokering was initiated during the second micro credit summit. Monsanto in its zeal to send ‘poverty’ to a museum approached Dr. Yunus, would be curator of ‘poverty museum’, and he did not hesitate to collaborate. An adventure indeed! But he was later compelled to make a retreat with ‘dignity’ following a flurry of criticisms from different parts of the world by the environmentalists. However, the former university teacher offered no explanation to the members of the public, not even to his constituency — the poor in Bangladesh. Probably highly innovative minds need not engage in ‘petty’ acts like offering public apology for making profit at the expense of the environment and food security of the country. Nor do the poor have the opportunity to map the minds that win friendship of MNCs and kings and queens. But a number of personalities and organizations should be acclaimed for compelling the Nobel-man retreat and they include Vandana Shiva, the philosopher and environment activist; late AZM Obaidullah, a famous Bangali poet; and Nayakrishi Andolon, a movement for ecology-friendly agriculture in Bangladesh. The now-futile venture of the microcredit evangelist is a stark example of harming the agriculture of his motherland, endangering food security, creating dependency, and all these mighty tasks were planned to be initiated by offering ‘free’ technology through microcredit, the ‘panacea’ for the poor. The myth of ‘telephone ladies’ has been created with the same tact. These ‘simple’ acts tell the intimate tales of the friendship between the poor’s banker and the mighty rulers, and help to explain reasons why the corporate owned media and the pundits, who are ideologically linked, are untiringly singing the same mantra, propaganda and gospel to build up the cult of the banker for the humble. An in-depth enquiry will show that many of the individuals and organizations engaged in this campaign are connected to each other through business and financial concerns. The link here is, also, finance and business. Just as the World Food Prize was related to the marketing of Monsanto-technology among the farmers of Bangladesh, the One World Broadcasting Trust Media Award (1988) and the World Technology Network Award (2003) from Britain, the Telecinco Award (2004) from Spain, connected to marketing of mobile phone, the Economist Innovation Award (2004) and the Leadership in Social Entrepreneurship Award (2004) from the US and many other awards were meant to expand corporate business interest. The German telephone giant Deutsh Telecom and the US software giant Microsoft are the patrons of the Petersberg Prize which was awarded to the Grameen Bank in 2004.

Dr. Yunus has received the Seoul Peace Prize from Korea a few days after he had been awarded the Nobel Peace Prize. Before he left for Seoul and after his return from there he did not forget to advice the caretaker government, mainly responsible to organize national election during its 90 days tenure, to take a quick decision on opening the Korean Export Processing Zone (EPZ) in Bangladesh.

It seems that formal functioning of the Korean EPZ is the top priority of the friend of the poor as MNCs have unrestrained liberty to plunder the natural resources of the country under the guise of foreign investment, as corruption, kick backs and absence of transparency is the norm in these deals, and as many people in this country about half-a dozen poor villagers shed their lives to safeguard the rights of people on the Fulbari coal mine in the northern Bangladesh; as the people of the country do not know the consequences of the agreements with companies like Asia Energy, which was awarded with the Fulbari coal mine on terms highly unfavorable to Bangladesh. It is interesting to note that though there are awards for those who can help the MNCs to maximize profit, there is none for advocacy work to create pressure and realize compensation for the irreparable loss of natural resources due to MNC operation. For example, there has been no award for anyone protesting against the damage done to gas and to bio-diversity by MNCs in the Magurchhara and the Tengratila gas fields, in north-eastern Bangladesh, which blew out due to their callous handling of the well-digging work. There has been no prize for advocacy work to safeguard people’s rights and environment in the Fulbari coal mine and its surrounding areas, there is no patron to support lobbying work in Washington D.C. in favor of the female workers in the garments factories who need safer working condition so that no worker has to be killed in fire accidents in the factories.

It is known to all that huge amounts of fund necessary for education and research in the universities in the west are often provided through grants, assistance, investments, etc. by many Foundations and Endowments set up by MNCs. Such donations obviously influence the activities of these universities. These financial supports influence, directly and indirectly, the ideology of the faculties, the boards of directors, the boards of regents, etc.; the decision-making process; curricula; and areas and subjects of research in the universities. The MNCs efficiently manipulate these bodies and process to advance their own interest. Awarding honorary degrees is an old tactic to build up someone’s image or to polish someone’s palm. There are precedents of awarding honorary degrees to despised and despotic rulers from different countries. Compared to those instances awarding Dr. Yunus scores of honorary degrees and awards seems to be ‘small, innocent’ act. However, there is a need to remain awake to the ramifications of such awards and honors instead of naively looking at them the as the ‘recognition of a person’s extraordinary contribution’.

Muhammad Yunus was selected as one of the ”25 most influential businessmen in the world in the last 25 years.” Wharton School of Business made this selection in 2004 for a documentary made for the Public Broadcasting System (PBS), US. The rich and powerful tycoons in the list included Bill Gates, George Soros, Oprah Winfrey, Jeff Bezos, Richard Branson, Warren Buffertt, Michael Dell, Alan Greenspan, Lee Lacocca, Charles Schwab, Frederick Smith, and Sam Walton. The image of Dr. Yunus that has been built up gradually as a friend of the poor is, apparently, not in accordance with these rich people. Then, there comes the big question: what is the below-the-surface reason for his inclusion in this group of moneyed people? Is it a mere whim of a leading business school? But an analysis of the politico-economic factors brings forth a different answer: the efficient performance of Dr. Yunus as a new pathfinder for the investment of capital, as a broker and salesman of technology is the actual reason for his getting selected by the corporate circle as one of the 25 most influential businessperson in the last quarter century. The capacity of the Grameen Bank in this area is what has prompted the corporate circle to make its decision correctly.

A few more examples will help to show the close deals between Muhammad Yunus and the corporate world. He is a member of the advisory body of the Stockholm Challenge, the global network of the entrepreneurs of information and communication technology. The other members of the board include the senior vice-president of the chief research and science office of the San Microsystems, one of the leading computer companies; the president and CEO of Ericson; a member of the European parliament; a leading entrepreneur of Russia, Western Europe and the US. This list is enough for anyone to understand that safeguarding corporate interest, instead of pushing back poverty to a history museum is the main objective of this corporate network.

Dr. Yunus is co-president and a member of the advisory board of PlaNet Finance (PF), a French organization for financing microcredit programs. Sanofi-Aventis, a multinational pharmaceutical company, is one of the financing patrons of PF. Should anyone believe that Sanofi-Aventis and other multinationals are so eager to eliminate poverty from the face of the earth? One may pray that their eagerness should not be like that of Monsanto. If they are a bit less enthusiastic about poverty elimination that would a favor to the poor.

Dr. Yunus, as a member, adorns the advisory board of the Holcim Foundation, ‘independent of business interest’ established and run by one of the biggest cement and construction material producers in this poverty-ridden world. The Swiss company’s revenue in 2000 was US $ 8.2 billion. A look at the activities of the Rockfeller and Ford Foundations that have been criticized and condemned by many will help understand the reasons behind establishing such foundations and the type of activities they often carry out.

Apart from the close connections and deals with the MNCs Dr. Yunus has an organizational structure to turn microcredit into a vehicle for the investment of capital and marketing of technology producedby the MNCs. The Grameen Bank acts as a brand name or a franchise. Microcredit programs, broadly designed after the Grameen model are now being run in more than 100 countries, in continents east and west, in the north and the south. While Bill Clinton initiated it in the US state of Arkansas, the Reserve Bank of India, ‘inspired’ with the neo-liberal ideology, has liberalized their rules so that the program can be introduced among the starving tea farm workers in north-eastern India and among the poor in south India. It is a single string tying all: finance capital, the idle-capital seeking interest.

The Grameen Foundation USA (GFUSA) was established in 1997 to propagate and to expand the activities of interest seeking finance capital among the poor. Dr. Yunus is one of the founder-members and board members of this Foundation, a strategic partner of the GB. This Foundation has now spread out its credit net over 7 million breathing souls in 22 countries through 52 networks. This Foundation invests finance capital among the poor through its marketing of telephone, and through its window of microcredit which is financed by the capital market and commercial banks. It is closely connected with the Citibank, one of the largest financing organizations in the world. Along with Dr. Yunus, some former or present executives of Kane Property Company, GuideStar, Citibank, Microsoft, Citigroup, Calvert Funds and similar other large corporations and financing organizations are on the board of this Foundation. One can guess the power and brokering capacity of this Foundation from the fact that it is closely connected with the Clinton Global Initiative from the days of its inception. Former US president Clinton recommended Yunus for the Nobel award in 2005 for the second time though this move of Clinton went beyond all norms. Because Clinton was not empowered to make such a recommendation as Amartya Sen had been. While this act of recommendation was under way the GFUSA and Citibank joined hands as partner of the Clinton Initiative to jointly invest US $ 50 million and, if possible, $ 300 million, as microcredit. This Foundation has a special role in mobilizing capital, expanding GB-model micro credit all over the world, building up image of microcredit and its guru, and making public relations work. There is a similar type of power brokering house of Dr. Yunus in Australia to mobilize international power.

Undoubtedly, Dr. Yunus has become a blue-eyed boy of the corporate world for his excellent performance and innovations in the field of investment and marketing of finance capital and technology among the poor through microcredit. The third world is not a risk-free area for investment. The defaulting industrialists in Bangladesh are a stark example of this. There are other relevant questions that need to be addressed before an investment is made. The risk of socio-political upheavals in the country in question, the carrying capacity of the economy, the market size, etc. demand serious attention. Dr. Yunus has a ‘magic wand’ that creates an ensured market, an ensured return, an almost full return of the capital, an instant return, and all these he has done with his ‘panacea’ — microcredit. This is what makes him dear to the corporate world and the corporate world is paying him back with laurels, awards, honors, etc. and facilitating his job by building up a larger-than-life image of the salesman. Thus, the underfed, undernourished multitude is fed with the fairy tales of friendship between the ‘banker to the poor’ and the spellbound kings, queens, presidents and first ladies. The Nobel Peace Prize to Dr. Yunus has reaffirmed this fact only.

P.S.: Patrick Bond (Director, Centre for Civil Society (South Africa) and author of Looting Africa: The Economics of Exploitation) repored in the South African daily The Mercury (Oct. 25, 2006): ‘So why then did Norway’s Nobel committee give Yunus the award? Colleagues in Oslo point out to me that he was strongly supported by friends in the Norwegian elite, including a former top finance ministry bureaucrat and leading officials of the national phone company, Telenor, which owns 62% of lucrative GrameenPhone, a company in control of 60% of Bangladesh’s cellphone market.

———
Note:
1. Websites: Grameen Bank, GFUSA, World Food Prize, Clinton Initiatives, Holcim Foundation, PlaNet Finance, Monsanto, GAIA Foundation, Stockholm Challange, Nobel Prize, natural-law
2. British agriculturalist Mark Griffiths’ letter to Dr. Muhammad Yunus, (June 29, 1998)
3. Vandana Shiva’s E-mail to Dr. Muhammad Yunus, (July 4, 1998)
4. Briefings of Rural Advancement Foundation International (RAFI), Canada and USA
5. BBC report on termination of Grameen-Monsanto deal. July 27, 1998
6. ‘Gene firm tightens grip on food chain’ by Louise Jury. The Independent (UK), 16.8.98
7. ‘Unmasking the microcredit success lie’ by Patrick Bond. The Mercury (SA), 25.10.06

—————————————————————-
Omar Tarek Chowdhury (tarekomar at agnionline dot com) translates pro-people political literature and contributes to alternative periodicals and newspapers.

Bruce December 16, 2006 at 4:20 am

I think Mr Yunus took the credit for a system which already existed in a less formal form.

My wife is from India and she says her mother and the local ladies would all contribute in times of plenty to a village fund, called ‘susu hand’ (no idea what that means). This pot of money would then be available either as loan or perhaps charity in times of distress. Some old village customs in India, such as Panchayat, are thousands of years old folk wisdom.

Sameer January 8, 2007 at 11:36 pm

Mr. Tucker,

Your lack of individual research, and the plucking of certain, and often peripheral, phrases from particular articles, makes reading your article extremely frustrating for anyone with slightest understanding of microfinance.

I suggest you do your own research, and read more on the subject. I suggest to you, “the Poor Always Pay Back,” and “More Pathways out of Poverty.” There are also wonderful scholarly articles published by various institutions, which have highlighted the impact and effectiveness of microfinance.

I was, once, also a naysayer, much like yourself. But, I took the courageous leap of informing myself further.

Also, as one obvious correction to make. Grameen “Foundation” (as you so effectively characterized), is not a spin off of Grameen Bank. Further, it has no organizational ties to Grameen Bank, whatsoever. They are financially independent organizations with almost entirely different goals. In fact, Grameen Foundation, which accepted teh $1.5 million dollar grant from the Gates Foundation, is a 501 3 c, or also known as a US government recognized non profit organization, founded by a group of friends who observed the success of Grameen Bank, first hand, and decided to do something on their own.

Again, I encourage you to read and educate yourself more on the issue. I’m happy to point you in the direction of some wonderful literature, but as someone who’s been to the field and observed microfinance, as a once curious researcher, I cannot recommend anything to make the case stronger than seeing microfinance for yourself.

Good luck.

shakib ahsan May 20, 2007 at 9:30 pm

the article gives away that the author never went to bangladesh or met a single grameen borrower and yet wrote a scathing article putting down an enterprise 36 years old bringing meaningful changes in the lives of those that he or the likes of native academicians like Omar Tariq could careless about. Yes pawn shops exists in inner cities or the idea of commonwealth existed for thousands of years, does that make Grameen bank a scam ? definitely not. Democracy existed in rome, but they never allowed women to vote, does that mean the democratic principles on which our country was based is a flawed idea? Baseless argument. To say that Grameen bank must have been cooking thier annual reports by not brining it out for audit is using the Bushite psychology of assuming that not finding WMD is only a proof of how clever Saddam Hussain was in hiding his nukes. The obviously plain truth is that Grameen is nothing new neither is it trying to be, Grameen has just provided a technique to uplift a large segment of the population from below poverty line to a step above. It does not claim to do any more tricks than moses claimed before the Pharoah.

suren September 24, 2007 at 7:00 pm

Couple things
1) Do you research
2) Remember Mr Yunus lives in Bangladesh, not in United States. Given the conditions this is an alternative which seems to work.
3) Gates and Soros did their research before giving their money.
4) you wont get a noble price for criticizing others work. you need to do your own good deed.

rathi September 24, 2007 at 7:03 pm

and yeah

being anti dowry is a good thing (if you had done your research you would know that).

Vincent van Gogh October 7, 2007 at 11:40 am

What’s your take on the following blogspot:

http://www.e-bangladesh.org/2007/10/06/grameen-bank-allowed-expansion/

Would highly appreciate comments on it. The current government in Bangladesh is headed by a former World Bank employee who has excellent relationship with two of Bangladesh’s largest NGOs-BRAC and Grameen Bank. I don’t know how you define NGOs but I think these NGOs are heavily funded by donors ranging from Queens of Europe to MNCs and global monetary institutes.

Yunus has extended full backing to this regime as he despises the two major political parties in Bangladesh and has grieviously hurt Bangladesh’s democratic cause abroad through his Clinton and other high level connections in the US and Europe. He is a shrewd silent operator.

In future, Bangladesh may see the rise of a Grameen Bank-World Bank-BRAC chimera taking shape to dictate its economic guideline.

Personally, I feel microcredit is a tool for enslavement of the poor so that they can never surmount (may just cross but never break the barrier) way above the poverty line with self dignity and self respect. Had microcredit really been successful why would it then need expansion and slashing down the government stake to 15%. Grameen’s Telenor project is already a highly lucrative government-blessed business. Why does it need extra favors from an unelected administration which should have held elections in 90 days. Holding a free, fair and impartial election is the only task given to them by the constitution. Embrace for more favors to Grameen and look-alikes as long as this army-backed government runs the show!

Purba Negoro March 21, 2008 at 12:57 pm

Highly unconvincing argument.
The argument centres on the paragraph:
The best that Professor Yunus could do .. push for a freer market through radical privatization and free trade…privatization in health care. …no excuse for serious analysts of the Grameen experience to pretend as if money alone is going to save the country.”

Your own argument contradicts and nullifies itself. You argue for Mises-esque free market economics – yet state money alone cannot solve th problem.

So what, pray tell, omni-benevolent albeit personification of the atypically greedy Jew Mises may profer on poverty elimination?

Alas- nay but wet-dreams and fanatsies of the Institute’s corporate financiers masturbating frantically at the hope of sinking their greedy claws into yet sovereign nation’s resources, removing true choice from society, destroying real democracy for plutocracy and enslaving its’ population.

Very transparent and highly unconvincing.
Pray tell, what are the figures on the Mises’ Institute’s own pverty elimination schematae?

Inquisitor March 21, 2008 at 9:13 pm

We should make a petting cage for the trolls.

Bari April 10, 2008 at 6:25 pm

Before I start writing I must mention that most of the “Scholastics” on this board here are some hows trying to undermine Dr. Yunus’s achievement in microfinance. So many of intellectuals here never been to the poverty driven battle field. It’s so easy for you to scratch each other’s remarkable achievement but there is still somebody out there who did help millions of poor people in Bangladesh and transform their lives remarkably. We can talk about all day.. even years and years on theoretical implementation of micro credit. At the end of the Dr. Yunus moved away from his comfort zone and did extraordinary for millions of poor people of Bangladesh even though it’s small amount of money.

It’s looks like this blog is full of anti Dr.Yunus campaign. You know what all you ignorant intellectuals ….. it is so easy for you to rubbish the idea of Dr. Yunus … Actually Bangladesh is really lucky to have a visionary man like Dr. Yunus

Purba Negoro April 18, 2008 at 12:48 pm

Inquisitor- you emotively attack me but avoid rebutting my argument.

Thus, one may presume- my argument to the superior and you and your Jewish Mises’ anarcho-capitalist onanists as you lack sufficient wit and indeed proof to counter the pro-Yunus argument.

Perhaps it is, but petty sour grapes, that a Muslim has yet again, upstaged a Jew?

Inquisitor April 18, 2008 at 4:59 pm

Look, you anti-semitic worm, I couldn’t give a damn whether my comments address your “points” or not. I don’t waste time on religious cultists, no matter how big the cult, whether it worships “Allah” or some other imaginary creature, like the flying spaghetti monster. So don’t feel offended, and go back to worshipping your pathetic little fictional god.

Purba Negoro April 29, 2008 at 4:06 pm

Alas, the emotively immature and volatile resort to base character assassination and slurs when intellectually outclassed.

Anti-Semitism? I’ll wear that one with pride, thank-you.
Perhaps you’d forgotten your history that the Jew is the historical enemy of all Christians due to their continual practice of predatory usuary.

The point remains- the rabidly anarcho-capitalist Mises Institute draws yet another balnk.
Albeit this time- poverty reduction.

Ho Hum- tough luck Austrian School dogmatists, Fabians, Keynesians and other such highly academic masturbators remain woefully inadequate and poorly argued/reasoned at best.
Pray tell, how much money does the Mises Insitute donate to charities in Christian and Muslim lands?

or does Laissez faire thumb its nose at humanity?

Inquisitor April 29, 2008 at 5:30 pm

Alas, the attempt to mask one’s bigotry in flowery prose, only to say nothing of much worth at all.

As for Muslim charities, the sooner cults like Islam die, the better for us all.

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