The Grameen Bank Story

Posted on March 14, 2011


By: Aarti Jitender

Long portrayed as the solution towards eradicating poverty, the microfinance system and the Grameen Bank, in particular, have now come under additional attacks for profiting from and adding to the plight of the poor.

The Micro Debt, a documentary which made its UK premier on Friday as part of the Centre for Investigative Journalism’s Investigative week, highlighted the darker corners of the world of microfinance. It casts a critical eye on the benefits the Grameen Bank claims to have brought to the developing world.

Filmmaker Tom Heinemann said he decided to explore and investigate the credit system when he found there was barely any criticism and only glowing accounts of the lending practices. Something just didn’t seem right, he said.

The film focuses on how some poor loan takers in Bangladesh, Mexico and India were driven into a debt-trap after they joined the micro-credit system because they had to take out more loans to repay the initial loans. Additionally, they faced intense social pressure from other members of their groups and threats from loan officers if they were defaulting on their payments.

Accounts of coercive and abusive collection tactics taken by loan officers have been fairly well documented in India. The southern state of Andra Pradesh, which has the highest number of micro lending businesses in India, recorded a large number of suicides by borrowers who were unable to pay their debts. The issue got so intense and politicized that the government told borrowers to halt their repayments and cracked down on private microfinance lenders, banning many of their activities. The banks, which were supporting these micro-lenders, also stopped lending to them in the fear that they may not recover nearly $4bn in loans.

The most controversial part of the film was its suggestions that Grameen Bank founder and 2006 Nobel Peace Laureate Muhammad Yunus and his associates diverted over $100 million of donor money to another private Grameen company, Grameen Kalyan in 1996. According to Heinemann, who attributed his findings to archival documents from Norwegian aid agency NORAD, the money was diverted in order to avoid tax payments.

Grameen Bank

The bank, however, denied these charges and the Norwegian government exonerated Yunus and Grameen after investigations.

Grameen Foundation’s President and CEO Alex Counts dismissed the accusations and said the documentary is based on ‘fabrication and distortions.’ Counts says he regrets such irresponsible journalism because it has consequences. According to him the documentary has given political critics of Yunus in Bangladesh, such as Prime Minister Sheikh Hasina, an opening. The central bank of Bangladesh also recently ousted Yunus from his leadership role at Grameen claiming he had violated the country’s retirement laws in 1999 by staying on as Grameen’s managing director long past the mandatory retirement age of 60. Yunus is currently 70years, but his supporters say the dismissal is politically motivated and they point out that there were three government officials on Grameen’s board that unanimously reappointed him.
While the film focused more on narrating the stories of some of the borrowers facing adverse conditions, it lacked concrete statistics to support its arguments that a large number of microfinance borrowers were facing problems. The Micro Debt, however, does raise the debate about some of the negative effects of microfinance, which even if not prevalent across the system, have been largely ignored until now.

Posted in: Film