leadership - dr. muhammod yunus

[Leadership – Dr. Muhammad Yunus] April 21, 2014

Executive Summary:

Professor Dr. Muhammad Yunus is a Bangladeshi banker and economist. He is the

developer and founder of the concept of microcredit, the extension of small loans to

entrepreneurs too poor to qualify for traditional bank loans. Yunus is also the

founder of Grameen Bank. In 2006, they were jointly awarded the Nobel Peace

Prize, "for their efforts to create economic and social development from below.”

The Grameen Bank (in Bengali, Grameen means rural) which Dr. Yunus has built

over the last 22 years is today the largest rural bank in Bangladesh. It has over 2

million borrowers and works in 35000 villages in a country of 68000 villages. 94%

of its borrowers are women. The bank is based on simple, sensible rules,

meticulous organization, imagination and peer pressure among borrowers. The

break that Grameen Bank offers is a collateral-free loan, sometimes equivalent to

just a few U.S. dollars and rarely more than $100. In rural areas, it makes things

happen. 98% of its loans are honored. Thus he has turned into reality a philosophy

that the poorest of the poor are the most deserving in the land and that given the

opportunity they can lift themselves out of the mire of poverty. His ideas combine

capitalism with social responsibility.

Micro-credit concept is now being practiced in 58 countries. In the US, it is a

success even with the Shifting poor of Chicago's toughest districts. The United

States alone has over 500 Grameen spin-offs. Bill Clinton said in his election

campaign that Yunus deserved a Nobel Peace Prize and cited the Experiment of

Dr. Yunus as a model for rebuilding the inner cities of America. Pilot projects are

starting in Britain. The methods are adapted to suit local conditions, but the

principle of empowering individuals with their own capital is the same.

1 Mohaimin Ul Jobair Leadership - Assignment


Definition of Leadership:

1. The individuals who are the leaders in an organization, regarded collectively.

2. The activity of leading a group of people or an organization or the ability to do this.

Leadership involves establishing a clear vision, sharing that vision with others so

that they will follow willingly, providing the information, knowledge and methods to

realize that vision, and coordinating and balancing the conflicting interests of all

members and stakeholders.

A leader steps up in times of crisis, and is able to think and act creatively in difficult

situations. Unlike management, leadership cannot be taught, although it may be

learned and enhanced through coaching or mentoring. Someone with great

leadership skills today is Bill Gates who, despite early failures, with continued

passion and innovation has driven Microsoft and the software industry to success.

The act of inspiring subordinates to perform and engage in achieving a goal.

Types of Leadership:

Autocratic leadership

Bureaucratic leadership

Charismatic leadership

Democratic leadership or participative leadership

Laissez-faire leadership.

People-oriented leadership or relations-oriented leadership

Servant leadership

Task-oriented leadership

Transactional leadership

Transformational leadership



Seven Principles of Social Business: Grameen Bank:

1. Business objective will be to overcome poverty, or one or more problems

(such as education, health, technology access, and environment) which

threaten people and society; not profit maximization

2. Financial and economic sustainability

3. Investors get back their investment amount only. No dividend is given

beyond investment money

4. When investment amount is paid back, company profit stays with the

company for expansion and improvement

5. Environmentally conscious

6. Workforce gets market wage with better working conditions

7. ...do it with joy

A successful Leader & Critical Analyze:

Dr. Prof. Muhammad Yunus – The Founder of Grameen Bank one most successful

entrepreneur and leader of Bangladesh and well known for his micro lending

process & implementation in the real world.

Professor Muhammad Yunus established the Grameen Bank in Bangladesh in

1983, fueled by the belief that credit is a fundamental human right. His objective



was to help poor people escape from poverty by providing loans on terms suitable

to them and by teaching them a few sound financial principles so they could help

themselves.

From Dr. Yunus' personal loan of small amounts of money to destitute basket

weavers in Bangladesh in the mid-70s, the Grameen Bank has advanced to the

forefront of a burgeoning world movement toward eradicating poverty through micro

lending. Replicas of the Grameen Bank model operate in more than 100 countries

worldwide.

Born in 1940 in the seaport city of Chittagong, Professor Yunus studied at Dhaka

University in Bangladesh, and then received a Fulbright scholarship to study

economics at Vanderbilt University. He received his Ph.D. in economics from

Vanderbilt in 1969 and the following year became an assistant professor of

economics at Middle Tennessee State University. Returning to Bangladesh, Yunus

headed the economics department at Chittagong University.

From 1993 to 1995, Professor Yunus was a member of the International Advisory

Group for the Fourth World Conference on Women, a post to which he was

appointed by the UN secretary general. He has served on the Global Commission

of Women's Health, the Advisory Council for Sustainable Economic Development

and the UN Expert Group on Women and Finance.

Professor Yunus is the recipient of numerous international awards for his ideas and

endeavors, including the Mohamed Shabdeen Award for Science (1993), Sri

Lanka; Humanitarian Award (1993), CARE, USA; World Food Prize (1994), World

Food Prize Foundation, USA; independence Day Award (1987), Bangladesh's

highest award; King Hussein Humanitarian Leadership Award (2000), King Hussien

Foundation, Jordan; Volvo Environment Prize (2003), Volvo Environment Prize

Foundation, Sweden; Nikkei Asia Prize for Regional Growth (2004), Nihon Keizai

Shimbun, Japan; Franklin D. Roosevelt Freedom Award (2006), Roosevelt Institute

of The Netherlands; and the Seoul Peace Prize (2006), Seoul Peace Prize Cultural



Foundation, Seoul, Korea. He is a member of the board of the United Nations

Foundation.

Achievement of Dr. Muhammod Yunus:

The most respected achievement that Dr.Professor Muhammad Yunus, was

awarded the Nobel Prize for Peace in 2006.

Scholarships / fellowships:

1. Awarded Fulbright Fellowship to study in the U.S.A. for 1965-66.

2. Awarded Vanderbilt University research and teaching fellowships during

1966-69.

3. Awarded Eisenhour Exchange Fellowship for 1984.

4. Senior Fellow, The Institute of Mediterranean Studies,Universita della

Svizzera Italiana, Lugano, Switzerland (2000 - Present).

Professional Experiences:

1962-65 : Lecturer of Economics, Chittagong College, Bangladesh1969-72 : Assistant Professor of Economics, MTSU, Tennessee, USA

1972(July-Sept)

:Deputy Chief, General Economics Division, Planning Commission, Government of Bangladesh.

1972 - 75 :Associate Professor of Economics and Head of the Department of Economics, Chittagong University, Bangladesh

1975 - 1989 :Professor of Economics, Chittagong University and Director, Rural Economics Program, Chittagong, Bangladesh

1976 - 1983 : Project Director, Grameen Bank Project, Bangladesh1983 - 2011 : Managing Director, Grameen Bank, Bangladesh1996(April-June)

:Cabinet Minister (Advisor) in the Caretaker Government of Bangladesh.



Membership of Committees and Commissions (National):

1981 :Member, National Committee on Population Policy set up by the President of Bangladesh.

1982 :Member, Land Reform Committee, set up by Chief Martial Law Administrator, headed by the Minister of Agriculture.

1987-88 : Member, Education Commission, Government of Bangladesh.

1989-90 :Appointed as the Chairman of the Socio-economic Committee of the National Disaster Prevention Council set up by the President of Bangladesh.

1989 :Member of the Task Force for reviewing the operation of the Nationalized Commercial Banks, Bangladesh.

1991 :Appointed as the Convener of the Task Force on Self-Reliance set up by the Planning Advisor.

2001 :Member of the National ICT Task Force Committee, Ministry of Planning, Bangladesh.

A Short History of Grameen Bank created by Dr. Yunus:

Grameen Bank (GB) has reversed conventional banking practice by removing the

need for collateral and created a banking system based on mutual trust,

accountability, participation and creativity. The origin of Grameen Bank can be

traced back to 1976 when Professor Muhammad Yunus, Head of the Rural

Economics Program at the University of Chittagong, launched an action research

project to examine the possibility of designing a credit delivery system to provide

banking services targeted at the rural poor. The Grameen Bank Project Grameen

means "rural" or "village" in Bangla language came into operation with the following

objectives:

extend banking facilities to poor men and women;

eliminate the exploitation of the poor by money lenders;

create opportunities for self-employment for the vast multitude of

unemployed people in rural Bangladesh;

bring the disadvantaged, mostly the women from the poorest households,

within the fold of an organizational format which they can understand and

manage by themselves;



reverse the age-old vicious circle of "low income, low saving & low

investment", into virtuous circle of "low income, injection of credit,

investment, more income, more savings, more investment, more income".

As of October, 2011, it has 8.349 million borrowers, 97 percent of whom are

women. With 2,565 branches, GB provides services in 81,379 villages, covering

more than 97 percent of the total villages in Bangladesh.

Grameen Bank's positive impact on its poor and formerly poor borrowers has been

documented in many independent studies carried out by external agencies

including the World Bank, the International Food Research Policy Institute (IFPRI)

and the Bangladesh Institute of Development Studies (BIDS).

The action research demonstrated its strength in Jobra (a village adjacent to

Chittagong University) and some of the neighboring villages during 1976-1979.

With the sponsorship of the central bank of the country and support of the

nationalized commercial banks, the project was extended to Tangail district (a

district north of Dhaka, the capital city of Bangladesh) in 1979. With the success in

Tangail, the project was extended to several other districts in the country. In

October 1983, the Grameen Bank Project was transformed into an independent

bank by government legislation. Today Grameen Bank is owned by the rural poor

whom it serves. Borrowers of the Bank own 90% of its shares, while the remaining

10% is owned by the government.

Micro Credit Delivery System of Grameen Bank by Dr. Yunus:

Grameen Bank Credit Delivery means taking credit to the very poor in their villages

by means of the essential elements of the Grameen credit delivery system.

Grameen Bank credit delivery system has the following features:

There is an exclusive focus on the poorest of the poor.

Borrowers are organized into small homogeneous groups.

Special loan conditionality’s which are particularly suitable for the poor.



Simultaneous undertaking of a social development agenda addressing basic

needs of the clientele.

Design and development of organization and management systems capable

of delivering program resources to targeted clientele.

Expansion of loan portfolio to meet diverse development needs of the poor.

October 13, 2006 was the happiest day for Bangladesh. It was a great moment for

the whole nation. Announcement came on that day that Grameen Bank and I

received the Nobel Peace Prize, 2006. It was a sudden explosion of pride and joy

for every Bangladeshi. All Bangladeshi's felt as if each of them received the Nobel

Peace Prize. We were happy that the world has given recognition through this

prize, that poverty is a threat to peace. Grameen Bank, and the concept and

methodology of micro-credit that it has elaborated through its 30 years of work,

have contributed to enhancing the chances of peace by reducing poverty.

Bangladesh is happy that it could contribute to the world a concept and an

institution which can help bring peace to the world.

Owned by the Poor

It is owned by the poor borrowers of the bank who are mostly women. It works

exclusively for them. Borrowers of Grameen Bank at present own 95 percent of the

total equity of the bank. Remaining 5 per cent is owned by the government.

No Collateral, No Legal Instrument, No Group-Guarantee or Joint Liability

Grameen Bank does not require any collateral against its micro-loans. Since the

bank does not wish to take any borrower to the court of law in case of non-

repayment, it does not require the borrowers to sign any legal instrument. Although

each borrower must belong to a five-member group, the group is not required to

give any guarantee for a loan to its member. Repayment responsibility solely rests

on the individual borrower, while the group and the center oversee that everyone

behaves in a responsible way and none gets into repayment problem. There is no



form of joint liability, i.e. group members are not responsible to pay on behalf of a

defaulting member.

97 per cent Women

Total number of borrowers is 8.35 million, 96 per cent of them are women.

Branches

Grameen Bank has 2,565 branches. It works in 81,379 villages. Total staff is

22,124

Over Tk. 684 billion disbursed

Total amount of loan disbursed by Grameen Bank, since inception, is Tk. 684.13

billion (US $ 11.35 billion). Out of this, Tk. 610.81 billion (US $ 10.11 billion) has

been repaid. Current amount of outstanding loans stands at TK 73.32 billion (US $

968.31 million). During the past 12 months (from November’10 to October'11)

Grameen Bank disbursed Tk. 107.30 billion (US $ 1480.53 million). Monthly

average loan disbursement over the past 12 month was Tk. 8.94 billion (US $

123.38 million). Projected disbursement for year 2011 is Tk. 110.00 billion (US$

1557.63 million), i.e. monthly disbursement of Tk. 9.17 billion (US $ 129.80 million).

End of the year outstanding loan is projected to be at Tk. 78.00 billion (US $ 1105

million).

Recovery Rate Over 97 per cent

Loan recovery rate is 96.67 per cent.

100 per cent Loans Financed From Bank’s Deposits

Grameen Bank finances 100 per cent of its outstanding loan from its deposits. Over

56 per cent of its deposits come from bank’s own borrowers. Deposits amount to



145 per cent of the outstanding loans. If we combine both deposits and own

resources it becomes 160 per cent of loans outstanding.

Borrower-Deposits Keep Growing

Besides building financial strength of the poor women by encouraging them to build

up significant amount of personal savings, borrower deposit is also a very important

element in Grameen Bank. Forty-two per cent of the branches have borrower

deposits equal to 75 per cent or more of outstanding loans of the branches.

One-fifth of the branches have more borrower-deposits than the amount of loans

outstanding. In some branches borrower-deposits are as high as 50 per cent above

the outstanding loans. In eight zones, out of forty, borrower deposits are equal or

more than the outstanding loans in zones.

No Donor Money, No Loans

In 1995, Bank decided not to receive any more donor funds. Since then, it has not

requested any fresh funds from donors. Last installment of donor fund, which was

in the pipeline, was received in 1998. GB does not see any need to take any donor

money or even take loans from local or external sources in future. GB's growing

amount of deposits will be more than enough to run and expand its credit program

and repay its existing loans.

Earns Profit

Ever since Grameen Bank came into being, it has made profit every year except in

1983, 1991, and 1992. It has published its audited balance-sheet every year,

audited by two internationally reputed audit firms of the country.

Status of Dr. Muhammod Yunus Corporate Position:



Revenue and Expenditure

Total revenue generated by Grameen Bank in 2012 was Tk. 17.74 billion

(US $ 252.05 million).

Total expenditure was Tk. 16.98 billion (US $ 241.29 million).

Interest payment on deposits of Tk. 9.23 billion (US $ 131.09 million) was

the largest component of expenditure (54 per cent).

Expenditure on salary, allowances, and pension benefits amounted to TK.

4.64 billion (US $ 65.92 million), which was the second largest component of

the total expenditure (27 per cent).

Grameen Bank made a profit of Tk. 757.24 million (US $ 10.76 million) in

2012.

30% Dividend for 2012

Grameen Bank has declared 30% cash dividend for the year 2010. This is

the highest cash dividend declared by any bank in Bangladesh in

2010.Highest record of dividend declared by Grameen Bank was in 2006.

It was 100%.The bank has also created a Dividend Equalization Fund to

ensure distribution of dividends without much fluctuation in successive year’s

.Receiving of dividends each year greatly inspires our shareholders, 97% of

whom are our borrowers.

Low Interest Rates

Government of Bangladesh has fixed interest rate for government-run microcredit

programs at 11 per cent at flat rate. It amounts to about 22 per cent at declining

basis. Grameen Bank's interest rate is lower than government rate.

There are four interest rates for loans from Grameen Bank: 20% for income

generating loans, 8% for housing loans, 5% for student loans, and 0% (interest-

free) loans for Struggling Members (beggars). All interests are simple interest,



calculated on declining balance method. This means, if a borrower takes an

income-generating loan of say, Tk. 1,000, and pays back the entire amount within a

year in weekly installments, she'll pay a total amount of Tk. 1,100, i.e. Tk. 1,000 as

principal, plus Tk. 100 as interest for the year, equivalent to 10% flat rate.

Deposit Rates

Grameen Bank offers very attractive rates for deposits. Minimum interest offered is

8.5 per cent. Maximum rate is 12 per cent.

Beggars as Members

Begging is the last resort for survival for a poor person, unless he/she turns into

crime or other forms of illegal activities. Among the beggars there are disabled,

blind, and retarded people, as well as old people with ill health. Grameen Bank has

taken up a special program in 2002, called Struggling Members Program

exclusively for the beggars. Over 111,296 beggars have joined the program. Total

amount disbursed stands today at Tk. 162.60 million. Of this amount of Tk. 130.89

million (80% of the amount disbursed) has already been paid off.

19,678 beggars have left begging and are making a living as door-to-door sales

persons. Among them 10,185 beggars have joined Grameen Bank groups as main-

stream borrowers.

Beggar’s members have voluntarily opened their personal savings accounts.

Cumulative deposit in these savings accounts amounts to BDT 22.41 million;

present balance stands at BDT 8.08 million.

Basic features of the program are:

1. Existing rules of Grameen Bank do not apply to beggar members; they make

up their own rules.

2. All loans are interest-free. Loans can be for very long term, to make

repayment installments very small. For example, for a loan to buy a quilt or a



mosquito-net, or an umbrella, many borrowers are paying Tk. 2.00 (3.4 cents

US) per week.

3. Beggar members are covered under life insurance and loan insurance

programs without paying any cost.

4. Groups and centers are encouraged to become patrons of the beggar

members.

5. Each member receives an identity badge with Grameen Bank logo. She can

display this as she goes about her daily life, to let everybody know that she

is a Grameen Bank member and this national institution stands behind her.

6. Members are not required to give up begging, but are encouraged to take up

an additional income-generating activity like selling popular consumer items

door to door, or at the place of begging.

Objective of the program is to provide financial services to the beggars to help them

find a dignified livelihood send their children to school and graduate into becoming

regular Grameen Bank members. We wish to make sure that no one in the

Grameen Bank villages has to beg for survival.

Housing for the Poor

This program was awarded Aga Khan International Award for Architecture in 1989.

Maximum amount given for housing loan is Tk. 25,000 (US $ 354) to be repaid over

a period of 5 years in weekly installments. Interest rate is 8 per cent. 690,737

houses have been constructed with the housing loans averaging Tk. 13,059 (US $

181.50). A total amount of Tk. 9.02 billion (US $ 211.21 million) has been disbursed

for housing loans. During the past 12 months (from Nov.'10 to October’11) 4,482

houses have been built with housing loans amounting to Tk. 52.43 million (US $

0.69 million).

Micro-enterprise Loans

Many borrowers are moving ahead in businesses faster than others for many

favorable reasons, such as, proximity to the market, presence of experienced male



members in the family, etc. Grameen Bank provides larger loans, called micro-

enterprise loans, for these fast moving members. There is no restriction on the loan

size. So far 3,590923 members took micro-enterprise loans. A total of Tk. 105.96

billion (US$ 1540.58 million) has been disbursed under this category of loans.

Average loan size is Tk. 29,507 (US $ 389.69), maximum loan taken so far is Tk.

1.6 million (US $ 23,209). This was used in purchasing a truck which is operated by

the husband of the borrower. Power-tiller, irrigation pump, transport vehicle, and

river-craft for transportation and fishing are popular items for micro-enterprise

loans.

Scholarships

Scholarships are given, every year, to the high performing children of Grameen

borrowers, with priority on girl children, to encourage them to stay ahead to their

classes. Up to October'11, scholarships amounting to Tk. 205.03 million (US$ 3.00

million) have been awarded to 1, 33031 children. During 2011, US$ 592,849 will be

awarded to about 24,611 children, at various levels of school and college

education.

Education Loans

Students who succeed in reaching the tertiary level of education are given higher

education loans, covering tuition, maintenance, and other school expenses. By

October’11, 49,588 students received higher education loans, of them 46,885

students are studying at various universities; 577 are studying in medical schools,

894 are studying to become engineers, 1232 are studying in other professional

institutions.

Growth of Grameen Bank & Foundation:

Grameen Bank does not own any share of the following companies in the Grameen

network. Nor has it given any loan or received any loan from any of these

companies. They are all independent companies, registered under Companies Act



of Bangladesh, with obligation to pay all taxes and duties, just like any other

company in the country.

1. Grameen Phone Ltd. (Telenor Bangladesh)

2. Grameen Telecom

3. Grameen Communications

4. Grameen Cybernet Ltd. ( Frist ISP of Bangladesh)

5. Grameen Solutions Ltd.

6. Grameen Information Highways Ltd.

7. Grameen Bitek Ltd.

8. Grameen Krishi Foundation

9. Grameen Motsho (Fisheries) Foundation

10. Grameen Uddog (Enterprise)

11. Grameen Shamogree (Products)

12. Grameen Knitwear Ltd.

13. Grameen Shikkha (Education)

14. Grameen Capital Management Ltd.

15. Grameen Byabosa Bikash (Business Promotion )

16. Grameen Trust

17. Grameen Health Care Trust

18. Grameen Health Care Service Ltd.

19. Grameen Danone Food Ltd.

20. Grameen Veolia Water Ltd.

21. Grameen Shakti.

22. Grameen IT Park Ltd.

23. Grameen Star Education Ltd.

24. Grameen Employment Services Ltd.

25. Grameen Fabrics and Fashion Ltd.

26. Grameen Distribution Ltd.

27. Grameen Shamogree Purbanchal Ltd.

28. Grameen Shamogree Uttaranchal Ltd.

29. BASF Grameen Ltd.



As per Grameen Bank reputation build up they create new companies to serve

better, to do put responsibility towards to society, to create more employment, to

give chance survive & show the talent though workforce. By these ways Grameen

Bank does their social responsibility & makes wealth in real world. Establish

themselves one of top listed companies in Bangladesh.

Rapid growth of Grameen Bank:

The successes of the Grameen Bank of Bangladesh have led to rapid growth in

funding for microfinance. For the time frame 1983-97, subsidy per person-year of

membership in Grameen was about $20, and subsidy per dollar-year borrowed was

about $0.22. By measure of consumer surplus for Grameen users, the evidence in

the literature suggests that surplus probably exceeds subsidy. Grameen—if not

necessarily other micro lenders—was probably a worthwhile social investment.

By the following graph we are able see the rapid growth of Grameen Bank since

the project starts. From 1976 to 2000 there growing level are increasing every year.



From Grameen I to Grameen II

The problems faced by Grameen Bank in the late 1990s led to its senior staff

piloting a number of experiments with new products and new ways of managing

service provision. By early 2001 these had been consolidated and Professor Yunus

announced the launch of ‘Grameen II’ – the replacement of the Bank’s earlier

products by a new range on different terms. The components of Grameen II were

designed so that (i) they should meet client demand, and (ii) they should be

profitable for the Bank. Between March 2001 and August 2002 all Grameen’s 1,200

branches were shifted from Grameen I to Grameen II products and systems.

Accounts of this process and the practice and outcomes of Grameen II are

provided by Rutherford et al. (2006) and Dowla et al. (2006).

The main elements of Grameen II are:

1. A major focus on savings from members and the public. This includes

voluntary savings, term deposits and the Grameen Pension Scheme (GPS)

– a long-term savings program.

2. The provision of flexible ‘basic loans’ to members (rather than the

standardized Grameen I 12-month loans). These are for variable amounts,

can be repaid over three to 36 months, have negotiable repayment

schedules and interest rates are determined by loan type (size, length, grace

period, etc.).

3. The abandonment of joint liability (and the idea of social collateral).

4. A poverty-focused ‘struggling members’ program, that provides small,

subsidized loans to beggars and encourages them to join Grameen Bank

centers.



Grameen Bank Tower, Mirpur 2, Dhaka, Bangladesh.

The results have been staggering. The Bank has not only been able to stabilize

itself but has, in effect, re-launched itself and its trajectory. While it took Grameen

25 years to reach a client base of 2.5 million, it took only three years, from 2001, to

recruit the next 2.5 million clients (Rutherford et al., 2006). Over the period 2002 to

2005 the Bank tripled the deposits it held (US$478 million) and doubled its portfolio

of outstanding loans. The Bank’s loans portfolio became smaller than its savings

portfolio. It built up a large fund for bad loan provision and profits rose from 60

million Taka in 2002 to 442 million Taka (US$7 million) in 2005. This growth meant

that physical expansion became essential and the Bank opened 500 new branches,

so that it had more than 1,700 branches, by late 2005.

While the Bank still proclaims its mission of poverty reduction, my personal

observations lead me to believe that its clientele is less economically deprived than

was the case in the 1980s and 1990s. This is partly because clients have done well

(perhaps through Grameen membership), and partly because of the product

redesign and the drive for expansion and profitability. Many of its clients would be

classed as non-poor or moderately poor by Bangladesh’s official poverty line. A



much smaller proportion is extremely poor (the targets for Grameen I over 1975 to

2000). The ‘struggling members program’ is targeted at the extreme poor, but by

December 2005 it had only 56,000 clients, against more than 25 million extremely

poor people in the country. Average loan size for these members was only $6 and

their average savings were $1. While many poor and extremely poor people may

benefit indirectly from Grameen II (through employment, increased demand for

products, greater availability of local level charity) the struggling members program

appears to be either failing or tokenistic.

Features of Grameen Bank II

Grameen Fund

Grameen Kalyan

Loans Paid Off At Death

Life Insurance

Deposits

Pension Fund for Borrowers

Loan Loss Reserve

Retirement Benefits Paid Out

Telephone for Ladies

Getting Elected in Local Bodies

Computerized MIS and Accounting System

Policy For Opening New Branches

Crossing the Poverty-Line

'Stars' for Achievements



Analysis of the Criticism of the Grameen Bank:

Initially, it’s important to point out that the economy perspective, which should be

applied in a comparative way. Additionally, the ethnography would have to follow

the women over a three to five year or even seven year period to get a full

perspective on the effect that micro lending. Finally, it may be that the Grameen

Bank has an organizational culture or structures that need to be changed, so the

article may not represent a systemic critique of micro lending as a means for

positive social change.

At Fixes, our focus is typically on implementing new or underutilized ideas to help

those in needs. But sometimes it’s just as important to protect institutions that are

already working well. Which is today about the Grameen Bank, the Bangladeshi

organization that won the 2006 Nobel Peace Prize, along with its founder Dr. Prof.

Muhammad Yunus, for its work extending microloans to some of the world’s

poorest, and has been crucial in global efforts to lift millions of people out of

poverty.

Both the bank and Yunus, have come under attack by the government of

Bangladesh and its prime minister, Sheikh Hasina Wazed. It has taken 35 years of

painstaking effort to build Grameen into a world-class institution that serves millions

of poor people. That progress could be lost if the country’s leaders fail to appreciate

what makes the Grameen Bank works.

Anyone who cares about international development, microfinance or social

entrepreneurship should pay attention. The Grameen Bank is not just the largest

micro lender in the world, with 8.4 million borrowers (most of them women villagers)

who received more than $1 billion in loans last year; it is the flagship enterprise in

an industry that, in 2009, served 128 million of the world’s poorest families. It is also

a leading example and inspiration for millions of citizen-led organizations that have

been established in recent decades to address social problems that governments

have failed to solve.



Yunus, the founder of the bank, is an entrepreneurial figure cut from the same cloth

as Steve Jobs, the founder of Apple. He has devoted himself since the 1970s to

demonstrating, institutionalizing and spreading microfinance. Recently, the

government issued orders that Yunus is to be removed from his post as managing

director of the bank. Yunus has taken the case to Bangladesh’s Supreme Court.

Legally, the government owns 25 percent of Grameen and has the right to appoint

a quarter of its board members, including its chairperson. In practical terms,

however, the government has little justification to intercede in the bank’s

operations. Today, of the Grameen Bank’s paid-up share capital, only 3.5 percent

comes from the Bangladeshi government. It is the bank’s borrowers who are its

majority owners. They control 75 percent of the board seats and they have supplied

96.5 percent of the paid up share capital. And it’s the savings of villagers — about

$1.5 billion — that now finances the bank’s activities and growth.

Nevertheless, the government is proceeding to remove Yunus against the

objections of its majority owners and will probably succeed. The stated reason is

hollow: Yunus, who is 70, is over the mandatory retirement age in government

banks.

An Entrepreneur became threat for local Government:

What’s the real reason behind the government’s attacks on Yunus? The most likely

explanation is that Yunus is being punished for criticizing the government and

making a bid to start a political party in 2007.

This is a threat to be taken seriously — not because the bank will collapse without

Yunus. The Grameen Bank is a strong, well-managed institution with 25,000

employees. It could probably withstand his departure. Indeed, given Yunus’s age,

it’s critical to pave the way for a successor. But if he is replaced in a manner that

diminishes confidence, the bank could face problems.

When an organization has a founder who is intimately associated with it the

leadership transition needs to be handled with great care. This is particularly



important because the Grameen Bank depends on unusually high levels of

motivation among its staff and high levels of trust among its borrowers. A forced

removal of Yunus that is seen as illegitimate, politically-motivated, or vindictive

could alienate thousands of employees and trigger a run on savings or loan

defaults.

Even the perception that it has come under the influence of the governing party, the

Awami League the present Government, could cause damage. Bangladesh has a

long history of banks and cooperatives being used as political instruments. The

state-owned banks have regularly extended loans to elite borrowers (who default at

high rates) as a form of patronage. Unlike Grameen Bank, which is financially self-

sufficient, the state banks are perpetually in need of cash infusions from the

government.

Here’s an example of what could happen: The Prime Minister has made it clear that

she believes the interest rates are too high. Her concerns for the poor may be well-

intentioned. But historically, subsidized loans have been seen as goodies — and

have gone to the most powerful, not to those they were intended for: the poor.

Grameen’s rates are, in fact, considered low among micro lenders, whose

administrative costs are far higher than that of traditional banks. However, if a

politically-minded managing director decided to cut the interest rate, it could

jeopardize the bank’s solvency.

Similarly, if the government installed a bureaucratic manager who failed to

appreciate the bank’s entrepreneurial culture, it could suck the life out of the bank.

Managing a bank that actually works with poor women in village’s means, above

all, recruiting people who care about the poor and training them in creative ways.

Before Grameen Bank workers get hired, for example, they spend close to a year

demonstrating their interest in serving the poor. They have to do things like write

detailed case studies about the lives of village women to show that they genuinely

care about, and understand, their clients. Managing this workforce is nothing like

managing a run-of-the-mill bank.



In an institution like this, the management needs to be perceived as honest,

responsive and open. If corruption, politicization or bureaucratic torpor began to

infect it, the disease would be irreversible.

The government has tried to maintain the appearance that its attacks are merely

about following the law. That is hard to believe. Over the past few months, officials

have sought to damage Yunus’s reputation, claiming without evidence that he has

enriched himself at the expense of the poor, intentionally harmed borrowers, and

engaged in fraud. The prime minister has called micro lenders loan sharks “sucking

the blood of the poor.” Her son circulated a letter which contained a litany of

unfounded accusations against Yunus — the most outrageous being that the

government created the Grameen Bank, not Yunus.

It’s not as if Bangladesh is lacking real problems that require government attention.

There can be no sense in destabilizing the leading institution in an industry that

provides financing to more than half of the households in the country. In fact, the

field of micro-finance needs solid, innovative leadership today more than ever.

There remain questions about its effectiveness in alleviating poverty. It’s crucial for

lenders to make honest appraisals of their impact and experiment with other

services to determine how it can be made to work better.

Implementation & Evaluate Strategies:

In Bangladesh, there is also a potentially serious problem of villagers taking loans

from multiple lenders and getting overly indebted. For these and other reasons, it is

unwise for the government to try to tarnish or marginalize Yunus, whose

experience, global recognition and inventiveness are valuable assets for the whole

field.

On March 15, the Bangladeshi Supreme Court postponed ruling on Yunus’s case

for two weeks. Hopefully, common sense will win the day and a solution will be

reached so that this vital institution — and the millions of villagers who depend

upon it for their livelihoods — are not jeopardized. Given that Yunus understands



Grameen’s culture better than anyone, he should have a key say in any leadership

change.

Picture: Muhammad Yunus, center, outside the high court building in Dhaka,

Bangladesh, on March 6,2010 where he contested the government’s decision to

remove him from his post in Grameen Bank.

As we’ve noted in several previous Fixes columns, the involvement of governments

in anti-poverty programs is often essential. Wise governments should view

microfinance programs not as adversaries, but as partners in furthering public goals

organizations that need to be regulated, but not controlled. Not all do. So it’s

important for leaders of micro-finance organizations to take steps to safeguard their

independence well before political attacks come. Foreign governments and multi-

lateral institutions have invested hundreds of millions of dollars in the Grameen

Bank and other large microfinance organizations in Bangladesh, and elsewhere,

with the goal of alleviating poverty. They also need to remember that it’s not

enough to finance development organizations. They need to protect them, too.



The future of the Dr. Muhammod Yunus’s Grameen Bank:

The Grameen Bank looks as though it has a secure future as an MFI in Bangladesh

and should remain a major player in the microfinance market, alongside other big

players, such as ASA and BRAC. It also seems set to remain a global icon,

although there is real confusion about the message that the Bank and Professor

Yunus project.

Internationally, it is still perceived as a micro lending institution, focused on

extremely poor women, despite the fact that it has adopted a market-based,

‘financial systems’ approach since 2001.

The confusion could be a cause for concern, but my personal analysis is more

positive. Within Bangladesh, Grameen now plays an important role as a substantial

MFI that meets client needs and helps to promote competition within the financial

markets. Its viability is essential for this internal role, but also very important for its

external role. Had the Grameen Bank collapsed, then optimism about the feasibility

of poverty reduction and international development would have been dented. While

the international message associated with the Bank – microenterprise credit for

extremely poor women lifts them out of poverty – is now inaccurate, the broader

thrust of this message – of hard working poor people using their personal agency to

overcome the problems they face – is highly appropriate for the public’s and

politicians of rich countries. It helps the citizens of the rich world to understand that

poor people are active agents in the processes of development and not passive

recipients of food aid and humanitarian relief, as the media (in the USA, Europe,

Japan and the Middle East) usually stereotype them. The Grameen Bank today is a

very different organization from what it was 20 years ago, but it still serves as an

inspiration for those trying to help poor and low- income people in their own efforts

to improve their lives.



Conclusion:

Microcredit is not the cure for everything, but it is a force that can bring about

economic, personal, social, and political change. Poverty builds giant walls around

people. Grameen does not intend to give people a few nice days within these walls.

Grameen wants to give the people the strength to tear down the walls – and

ultimately establish an existence above the poverty level. Muhammad Yunus is a

man who works for change, an optimist who is genuinely convinced of change for

the good. If society would strongly promote self-reliance, poverty would not stand a

chance. We must simply make use of human potential. Every person is endowed

by nature to support herself or himself. Promoting this potential is the task not only

of government but of business. Greed is not the only driver of free enterprise;

Social benefit can replace greed as a powerful motor. The business world does not

have to be a battlefield of bloodthirsty capitalists. Good people can feel called upon

to steer the world sustainably in the right direction.



References:

Gameen Bank & Grameen Foundation web site - www.grameen-info.org

Yunus Centre - http://www.muhammadyunus.org

Moral Heroes – Muhammad Yunus , Bangladesh, 20th Century, Asia,

Economic, Male - http://moralheroes.org/muhammad-yunus

Market Mix at Economical Sector - http://www.mixmarket.org/mfi/grameen-

bank

Hulme,.D and Arun, T.G. (forthcoming 2009) Microfinance: A Reader,

London, Routledge.

Fuglesang, A. and Chandler, D. (1986). Participation as Process: What Can

We Learn from the Grameen Bank, Bangladesh. Oslo, Norway: Norwegian

Ministry of Development Corporation.

Rutherford, S. with Maniruzzaman, Sinha, S.K. and Acnabin & Co. (2006),

‘GRAMEEN II - The First Five Years: 2001-2006’, Grameen II Briefing Notes

for MicroSave. Online resource available at: http://www.microsave.org

Dowla, A. and Barua, D. (2006). The Poor Always Pay Back – The Grameen

II Story. West Hartford, CT: Kumarian Press.

Yunus, M. (1999). Banker to the Poor: Micro lending and the Battle against

Poverty. New York: Public Affairs.

The Daily New York Times (Online Version)

http://www.nytimes.com/imagepages/2011/03/22/opinion/22fixesEimg.html


http://www.nytimes.com/imagepages/2011/03/22/opinion/22fixesEimg.html

http://www.microsave.org/

http://www.mixmarket.org/mfi/grameen-bank

http://www.mixmarket.org/mfi/grameen-bank

http://moralheroes.org/muhammad-yunus

http://www.muhammadyunus.org/

http://www.grameen-info.org/

leadership - dr. muhammod yunus

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