What's New in the Grameen Investigation Report

The report of the committee appointed to investigate the Grameen Bank is now public, thanks to what is obviously a friendly leak to bdnews24.com. That's the organization that launched the controversy in Bangladesh with its headline, Yunus 'siphoned Tk 7bn aid for poor'. Unfortunately, the report is in Bengali, so I can't read it. You probably can't either.bdnews24 has the report, as well as the most in-depth coverage in English, which presumably accentuates the negative. There are also helpful stories from the AFP and the Financial Times. Also see The Daily Star's summary (HT Asif Dowla).Most of the themes will be familiar to followers of this blog. The transaction that triggered the controversy was not proper. But there is no evidence of anything nefarious (as far as I can tell). Grameen's interest rates are low. According to the FT, "the committee concluded Grameen had become 'a person-oriented organisation, not a rules or system-based organisation'." Here's what's new and interesting to me. The committee apparently concludes that the empire of Grameen organizations (Grameen Telecom, Grameen Shakti, Grameen Danone...) is in some way illegal because the original ordinance that created the Grameen Bank does not permit such activities.Now, a priori, I don't see why it would be illegal for officers of the Grameen Bank, as individuals, to start other organizations which have "Grameen" in their names. In fact, if they want to get into social business activities besides banking, this is exactly what they should do, so that the Bank's assets and deposits are not subjected to risks created by other activities.Where things might get questionable is if the Grameen Bank has donated or lent to or invested in such activities; and that may be what the report is alleging. But even this is not so obviously problematic. Section 19 of the ordinance, which defines the Bank's functions, includes:

(g) the subscribing to the debentures, being debentures repayable within a period not exceeding ten years, of any body corporate concerned with economic activities in rural areas;(h) the purchasing of shares of any body corporate, the object of which is to provide services to landless persons;

My impression is that Yunus has generally avoided links between the Bank and other Grameen organizations, precisely to preserve the independence of the non-banking organizations from the Bank, and thus from the government. Grameen Telecom's stake in Grameen Phone, which is today worth more than $1 billion, was purchased mainly with a $10.6 million loan from George Soros (see page 100 of Nicholas Sullivan's You Can Hear Me Now). This arrangement deliberately bypassed the Bank.On the other hand, the improper transfer of funds from Grameen Bank to the ownership of Grameen Kalyan, which started this whole business, may be just one example of a more general pattern hitherto hidden.So what I would be looking most for in the new report is close analysis of such transactions: their details, their legality, and their intent.Also interesting is that the five-member investigative committee takes the Awami League government of 1996--2001 to task for complacent oversight of the Grameen Bank. That government, like the current one, was headed by the woman who appointed the committee. And the report implicitly refutes her charges of usurious "bloodsucking."Overall, based on limited impressions, this report seems like a thoughtful analysis, not a hatchet job. Under the right circumstances, it could help put the Bank on a stable, sustainable footing, beyond the stewardship of its founder.Update: According to The Daily Star, the report recommends that Grameen Telecom give its $1.1 billion stake in Grameen Phone to the Grameen Bank. This strikes me as wrong-headed. The interest in this wealth doesn't surprise me, but it would be a terrible precedent for private enterprise in the country if the government grabbed the shares and handed them to a company that it controls. I don't see how the Grameen ordinance gives the government authority over independent entities that also have "Grameen" in their names.