Microfinance II

If all you knew of them was what I described in the preceding post, you'd think Yunus and his Grameen Bank universally beloved.

But of course, on this conflict-ridden planet, nobody is universally beloved.

Bangladesh Foreign Minister Dipu Moni spoke on December 7th of how "famous Yunus" can not be considered above the law, and a certain charge must be investigated "for the sake of the truth".

Those comments came about because a reporter asked the Foreign Minister about a documentary that aired on Norwegian television, November 30, entitled "Caught in Micro Debt." Why Norwegian television? Apparently because the Grameen bank has become a 'cause' in northern Europe. People from Norway, as well as Sweden and Germany, impressed by Yunus' work, have donated money to assist the bank in its micro-lending.

The most explosive allegations in the piece involved a transfer of funds from Grameen Bank to Grameen Kalyan, a sister organization that offers health "microinsurance".

Authorities in Norway say that they find it "totally unacceptable that aid is used for other purposes than intended no matter how praiseworthy the causes might be."

The maker of the documentary said that the transfer was a tax-evasion trick. (Whose taxes does it help evade? Norway's? Bangaldesh's? Both?) At any rate, the govt of Norway has formally dropped the matter, Yunus and Grameen have denied they did anything wrong, and the controversy over this particular transfer is only significant because it is a part of a larger whole: continued confusions over the morality, and practical significance, of lending money for interest at all.

If interest rates are inherently suspect, then lending money to the poor is even more so. If lending for interest is a natural and practical part of a system by which a country can develop and pangs of poverty can be banished -- or at the least lessened -- then what Yunus is doing is right, but one should also re-examine the laws by which people are stigmatized and punished as "sharks" for doing much the same.

A recent FT story on Grameen Bank quoted Mirza Azizul Islam, a former adviser to the finance ministry in Bangladesh, "Microcredit has played an important role in poverty alleviation in Bangladesh. My reservation is that people have gone just above the poverty line, but they have not been able to graduate much further."

Yes, for going "much further" something more than village bike repair shops, and the other microprojects that Grameen finances, would be necessary. Still, that fact hardly allows one to deprive Grameen of the credit for extending those services to those villages.