The banker and the beggars
Mar. 12th, 2011 08:59 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
nairiporterMuhammad Yunus, the chairman of the famous Grameen bank in Bangladesh and guru of micro crediting has been fired. His firing is emblematic in that it raises a more fundamental question about the legitimacy of the practice of micro crediting overall.
He is an interesting person - for some he is a well-doer who helps the poor, for others his micro crediting system only increases inequality in the world. He has been known as "the banker of the poor", and in 2006 he was awarded a Nobel Peace Prize.
For a long time Yunus, who is an economist, used to be CEO of the Grameen bank, which is specialised with giving micro credits. But last week the 70 year old banker was fired with the excuse that his re-election in 2000 had not been coordinated with the Central Bank of Bangladesh, and besides he has passed the age of 60 years. The decision belongs to the Central Bank which can influence the dealings of Grameen because it owns 25% of its shares. A few days later the Supreme Court rejected his appeal as groundless. The decision has angered a lot of people working in the bank and they are planning to consult with lawyers and not give up so easily.
Some regard Yunus a national hero, and they are concerned that his firing would undermine the image of the country. Even the US ambassador in Dhaka recommended that the government should approach Yunus with the due respect and said that he was "deeply concerned" with his firing.
The attack on Yunus definitely looks to be politically motivated. It comes after months of government pressure for him to resign. The feud between the banker and the prime-minister Sheikh Hasina started 4 years ago and became a struggle for power between the government and the Grameen bank. The trouble for the famous economist began in 2007 when he founded a new party and said that it would be a real and effective alternative to the status quo. This put Hasina against him, she was at the time under home arrest under orders from the interim government. On the 2009 elections Hasina returned to power and she immediately began her campaign against Yunus. Recently she accused him of behaving "as if the bank is his own property" and she said Grameen is "sucking out the blood of the poor".
Last month 50 people, famous for their social and charitable activities, including the former Irish president Mary Robinson, wrote an open letter in which they called the smearing of Yunus "a politically orchestrated campaign". In December last year there was an investigation against him on charges of misappropriation of humanitarian aid, which had been sent by the Norwegian government in the 90's. And though the Norwegians completely freed him of any guilt, the damage was already done and the stain on his name remained.
For 30 years the inventor of micro financing and his bank Grameen has been serving more than 8 million people in Bangladesh (most of them women) and giving small credits to the poor. This is a practice which has spread across the whole Third World. Usually it is people who the other banks would ignore and strike off from their list of clients that are using this option. The money Grameen gives out is enough for starting a small business which could allow the poor to make ends meet, like growing vegetables or buying a cow.
The stated purpose of Yunus is to uproot poverty on a global scale. He is led by his idea that misery is due to an flaw in the system, not due to the laziness of the poor, and he believes that even those living on 1 dollar a day are capable of starting a business through which they could serve the credit. The idea appeared to him as he was witnessing the extreme poverty in Bangladesh.
The interest is much higher than that of most traditional banks - it starts from 15% and could reach 40% and even 100%. But, unlike other banks, Grameen can give small amounts even to street beggars.
The firing of Yunus has re-ignited the debate "for" or "against" micro crediting again. The government in Dhaka is skillfully using the recent discontent with the low results from micro financing to additionally smear the banker. In The Time magazine, the famous Bangladeshi economist prof. Anu Muhammad calls the micro crediting model "a death-trap for the poor", which "reproduces poverty" instead of reducing it. Similar criticism can be heard for the micro financing institutions in Latin America, Africa and Asia.
The supporters of micro crediting are citing a report which says that the system has helped 10 million people in Bangladesh in the 1990-2008 period, and many families have increased their income above 1.25 dollars per day. But according to another statistic for the period 2006-2007, only 7% of those who used micro credits have brought their income above the poverty line, and 90% have remained at the same level.
The critics believe that the concept of micro financing has been discredited, citing the extremely high interest rates. More than half of those who took such credits are also taking credits from another bank in order to pay off the first one, and this way they are stuck in a vicious circle. Besides, it could take 10-20 years until the credit is finally paid off in full. The installments are usually required from week-1 after taking the credit, and this doesn't allow enough time for the client to develop whatever business they are starting. Many villagers complain of a too rude attitude from the debt collectors, including physical violence in some cases. In the Indian state Andhra Pradesh even several suicides were registered of people who were stuck in debt. Until 2010 about 250 financial institutions in the state had given out credits worth 1.65 billion dollars, but only a small part of that amount had been paid off. In India this sector, which amounts to 7 billion dollars, has provided micro crediting for 30 million households, and the average amount of the credit is 250 dollars. In an editorial in The Financial Times, it is stated that micro financing by itself may not drag people out of poverty, but it "helps cope with illness or other temporary shocks".
As he was leaving Grameen, Muhammad Yunus said that he is just hoping his successor could guarantee the future of the bank. But he expressed concern that the government will now try to put a marionette in charge. The position of the rulers is that the institution is solid enough to handle the rule of another chairman. But still, economists are following these events with great concern, because what is happening in Grameen could reflect on the stability of the micro financing industry worldwide.
Cross-posted to![[livejournal.com profile]](https://www.dreamwidth.org/img/external/lj-community.gif)
talk_politics .
He is an interesting person - for some he is a well-doer who helps the poor, for others his micro crediting system only increases inequality in the world. He has been known as "the banker of the poor", and in 2006 he was awarded a Nobel Peace Prize.
For a long time Yunus, who is an economist, used to be CEO of the Grameen bank, which is specialised with giving micro credits. But last week the 70 year old banker was fired with the excuse that his re-election in 2000 had not been coordinated with the Central Bank of Bangladesh, and besides he has passed the age of 60 years. The decision belongs to the Central Bank which can influence the dealings of Grameen because it owns 25% of its shares. A few days later the Supreme Court rejected his appeal as groundless. The decision has angered a lot of people working in the bank and they are planning to consult with lawyers and not give up so easily.
Some regard Yunus a national hero, and they are concerned that his firing would undermine the image of the country. Even the US ambassador in Dhaka recommended that the government should approach Yunus with the due respect and said that he was "deeply concerned" with his firing.
The attack on Yunus definitely looks to be politically motivated. It comes after months of government pressure for him to resign. The feud between the banker and the prime-minister Sheikh Hasina started 4 years ago and became a struggle for power between the government and the Grameen bank. The trouble for the famous economist began in 2007 when he founded a new party and said that it would be a real and effective alternative to the status quo. This put Hasina against him, she was at the time under home arrest under orders from the interim government. On the 2009 elections Hasina returned to power and she immediately began her campaign against Yunus. Recently she accused him of behaving "as if the bank is his own property" and she said Grameen is "sucking out the blood of the poor".
Last month 50 people, famous for their social and charitable activities, including the former Irish president Mary Robinson, wrote an open letter in which they called the smearing of Yunus "a politically orchestrated campaign". In December last year there was an investigation against him on charges of misappropriation of humanitarian aid, which had been sent by the Norwegian government in the 90's. And though the Norwegians completely freed him of any guilt, the damage was already done and the stain on his name remained.
For 30 years the inventor of micro financing and his bank Grameen has been serving more than 8 million people in Bangladesh (most of them women) and giving small credits to the poor. This is a practice which has spread across the whole Third World. Usually it is people who the other banks would ignore and strike off from their list of clients that are using this option. The money Grameen gives out is enough for starting a small business which could allow the poor to make ends meet, like growing vegetables or buying a cow.
The stated purpose of Yunus is to uproot poverty on a global scale. He is led by his idea that misery is due to an flaw in the system, not due to the laziness of the poor, and he believes that even those living on 1 dollar a day are capable of starting a business through which they could serve the credit. The idea appeared to him as he was witnessing the extreme poverty in Bangladesh.
The interest is much higher than that of most traditional banks - it starts from 15% and could reach 40% and even 100%. But, unlike other banks, Grameen can give small amounts even to street beggars.
The firing of Yunus has re-ignited the debate "for" or "against" micro crediting again. The government in Dhaka is skillfully using the recent discontent with the low results from micro financing to additionally smear the banker. In The Time magazine, the famous Bangladeshi economist prof. Anu Muhammad calls the micro crediting model "a death-trap for the poor", which "reproduces poverty" instead of reducing it. Similar criticism can be heard for the micro financing institutions in Latin America, Africa and Asia.
The supporters of micro crediting are citing a report which says that the system has helped 10 million people in Bangladesh in the 1990-2008 period, and many families have increased their income above 1.25 dollars per day. But according to another statistic for the period 2006-2007, only 7% of those who used micro credits have brought their income above the poverty line, and 90% have remained at the same level.
The critics believe that the concept of micro financing has been discredited, citing the extremely high interest rates. More than half of those who took such credits are also taking credits from another bank in order to pay off the first one, and this way they are stuck in a vicious circle. Besides, it could take 10-20 years until the credit is finally paid off in full. The installments are usually required from week-1 after taking the credit, and this doesn't allow enough time for the client to develop whatever business they are starting. Many villagers complain of a too rude attitude from the debt collectors, including physical violence in some cases. In the Indian state Andhra Pradesh even several suicides were registered of people who were stuck in debt. Until 2010 about 250 financial institutions in the state had given out credits worth 1.65 billion dollars, but only a small part of that amount had been paid off. In India this sector, which amounts to 7 billion dollars, has provided micro crediting for 30 million households, and the average amount of the credit is 250 dollars. In an editorial in The Financial Times, it is stated that micro financing by itself may not drag people out of poverty, but it "helps cope with illness or other temporary shocks".
As he was leaving Grameen, Muhammad Yunus said that he is just hoping his successor could guarantee the future of the bank. But he expressed concern that the government will now try to put a marionette in charge. The position of the rulers is that the institution is solid enough to handle the rule of another chairman. But still, economists are following these events with great concern, because what is happening in Grameen could reflect on the stability of the micro financing industry worldwide.
Cross-posted to
talk_politics .
