Microfinance has grown from its origins as a pilot project that sought to demonstrate that the world's poor could benefit from access to the financial services we take for granted. It has since become a major part of the financial sector and national poverty-reduction strategies in a growing number of countries.
The successful effort to scale up this promising social innovation has drawn support from such visionaries as Nobel Peace Prize laureate Muhammad Yunus, founder of the Grameen Bank; Sam Daley-Harris, founder of RESULTS, who organized the Microcredit Summit in 1997; Ben Gilman, the former Republican congressman from New York, who backed the idea as early as 1986; and Democratic Rep. Rush Holt from New Jersey, who has been a tireless advocate for microfinance for more than a decade.
|Microfinance helps the poor
The Grameen Foundation has worked hard to advance promising microfinance institutions and ideas globally. It has also tried to present unbiased evidence that microfinance is an effective poverty-reduction strategy while advocating how it can reduce povery more effectively.
The foundation has produced two reports along these lines, the most recent being "Measuring the Impact of Microfinance: Taking Another Look." One of the many studies it analyzes compares districts in Bangladesh that experienced fast growth in microfinance clients over a three-year period with districts that had much slower growth. The fast-growing districts saw poverty rates drop more than three times faster than the slow-growing districts.
The tendency among those who promote social change is to remain silent about the shortcomings of the organizations they depend on, but Mr. Yunus chose another course. He has publicly criticized traditional aid models, supported by development agencies and international financial institutions, for channeling funding through government bureaucracy rather than directly to those most in need. If funds do reach the ground, they too often support government priorities, such as large-scale construction projects, rather than programs that empower the poor. He has also criticized his own government for corruption and ignoring the needs of the poor.
Yet he also praises positive developments, such as his own government's strong backing of the Microcredit Summit and its establishment in 1990 of a wholesale fund for microfinance that serves as a model for the world.
Recently, the Bangladesh High Court ruled in favour of the government in its case to force Mr. Yunus into premature retirement. Mr. Yunus and nine of the 12 directors of the Grameen Bank's board -- nine women who represent the Bank's 8.3 million borrower-owners -- issued writs of protest, which were dismissed; the case will now be brought to the Supreme Court.
The High Court's ruling comes after months of attempts by the government to discredit Mr. Yunus and challenge the independence of Grameen Bank. This process has taken some unusual turns, such as when the country's 77-year-old finance minister stated publicly that the 70-year-old Yunus is "too old" to serve.
The sudden departure of the managing director would risk destabilizing Grameen Bank, an institution upon which millions of Bangladeshis depend for affordable financial services. There has been speculation that some of the nation's politicians view him as a threat, particularly in light of his brief flirtation with politics in 2007.
Certainly, the government of Bangladesh has a right to regulate and audit Grameen Bank, in accordance with local laws. But a calculated effort to weaken one of the country's most important civil society and anti-poverty partners and tarnish one of its leading citizens is, in my judgment, self-defeating and contrary to the nation's interests.
These attacks on Grameen Bank are especially unfortunate given the tremendous progress that the country has made: After years of being dismissed as a basket case, Bangladesh is achieving impressive economic growth and social progress. The government can take justifiable pride in its role in this wave of innovation and improvement. In his influential book "The End of Poverty," Prof. Jeffrey Sachs commented that Bangladesh has transformed itself from a country mired in stagnation, unable to grab the bottom rung of the "development ladder," to one that is progressively pulling itself up. Many people and institutions -- public and private -- deserve credit for this achievement, and many donor governments have rewarded this progress with critical financial support to continue development gains, including in education, food security, health, climate adaptation and governance.
Since Grameen Bank's founding in 1983 as the world's first "bank for the poor," every government in power has respected its independence from inappropriate, politically motivated interference. The hope of many around the world was that, despite months of posturing, the creative and dynamic partnership between Grameen Bank and the Bangladeshi government, which spans nearly three decades, would be renewed. However, the recent ruling to oust Prof. Yunus signals that the government is continuing to put its own priorities over those of its people.
We still hope that, somehow, this collaborative public-private partnership will resume and continue to serve as a beacon of hope -- not just to Grameen's 8.3 million borrower-owners, but also to development organizations and governments around the world that are grappling with how to make progress in reducing poverty.
(The writer is president, CEO and founder of the Grameen Foundation and the author of several books. This article appeared in the website of the Yunus Centre which is described as a one-stop resource centre for all Grameen social business related activities both globally and in Bangladesh. The Yunus Centre, chaired by Prof. Muhammad Yunus, says it helps forge lasting, productive relationships among all social business institutions around the world.)