Dr. M. Aminul Islam Akanda :
Professor Muhammad Yunus gets popularity for his innovation of microcredit model in the late 1970s. He solved the problems with physical collateral in the traditional formal credit system replacing it with social capital. His model facilitated a vast majority of small farmers and landless rural households through group-based lending. It was easily accepted by them because of lower interest rate compared to informal credit and supervisory nature towards non-farm income generating activities. Since then, He along with his Grameen Bank was much praised in Bangladesh and was welcomed by many international development agencies.
Not long back, if we look at the middle of last century, the rural poor had no other options but to take high-interest informal credit from moneylenders. The green revolution technology came out later in the early 1960s for raising productivity of cereals. As the rural economy used to suffer from a vicious cycle of capital formation, the government had to push subsidized credit for irrigation infrastructures through traditional bank credit. The collateral-based credit system used to face many problems like (i) uneven flow of credit to collateral providers or land-rich farmers, (ii) dearth of funds due to higher demand for subsidized credit, (iii) misled credit flow by social and political powers and (iv) bribing bank officials for an access to credit. Moreover, public banks used to run on give-and-forgive policy due to non-repayment of loans. Consequently, corruptions along with a gradual decline in the donors’ fund led the credit system to conceive an ill fate all over the least developed world since the early 1970s. The economists, at that time, were looking for a way to control flow of land-rich biased formal credit and to supply credit to the land-poor.
Professor Yunus met that demand in time with his microcredit model incorporating the poorest of the poor, especially women. It added compulsory savings beside credit that was one step forward to microfinance (components of which are credit, savings and insurance). Not the Grameen Bank alone, many of the NGOs in Bangladesh started to provide microcredit, recovery of which is almost cent per cent. The government also favored for proliferation of NGOs for their pooling of foreign funds in development programs at grass-roots. Moreover, the regulations on NGOs were negligible as reflected from their carelessness even to register with the NGO Affairs Bureau until the late 1990s. That was a time when many researches demonstrated so many achievements of NGOs in poverty reduction and women empowerment. Meanwhile, the fame of Professor Yunus peaked with a worldwide spread of his model. In 2006, he brought the rare honor for Bangladesh, the Nobel Prize, which is widely regarded as the most prestigious award in the world.
It is often argued that the power configuration of NGOs is not only influenced by their large share in credit market but also by many global supports. May it not be for his global networks; Professor Yunus expressed his willingness to be a political leader in 2007 to move beyond the dysfunction of major two rivalry parties. Subsequently, the Awami League recognized him as a covert political entity for his strong grass-root alliances. The government then moved forward with some earlier criticisms of Grameen Bank and NGOs like (i) high interest rate of over twenty five per cent, (ii) repayment schedule without gestation period for income generation with loan money, (iii) non-facilitating early repayment and (iv) persuasive sales like suppliers credit. Consequently, the NGOs of non-profit notion turned into profit makers without disbursing profit share to group members. Many of their activities were evidenced as a fallacy of hypothesis contrary to fact. The domestic fame of Grameen Bank was in uproar for being a pioneer and a dominant player in microcredit market.
Professor Yunus himself agreed on allegations against microcredit operators in Bangladesh. He never imagined his model to breed loan sharks that also came in his writings. Nevertheless, the ruling political leaders asserted for mismanagement of Grameen Bank and made allegations against Yunus’ own integrity even as a personal vendetta. The government did not count its liability of earlier laissez faire regulatory motions for microcredit operators. Meanwhile, his overseas fame was on rising trend as a social entrepreneur, banker, economist and civil society leader. Even after assertions of international bodies and development partners, he was removed from the Grameen Bank and its reform initiatives got gradual momentum. Lately, the Grameen Bank Act 2013 passed in the parliament, which would enable the government to exercise decisive control in policy matters of the bank. What is new is that the government has stopped speaking against Professor Yunus after 10th parliament election in 2014.
After a rise in domestic and global fame of Professor Yunus until 2006, there was an ambiguity on his domestic fame over the last six years. He was praised by the oppositions in their political languages and the government even blamed him a destroyer of Grameen Bank. However, very recent speech of the honorable Finance Minister AMA Muhith was devoted to praise Professor Yunus as a pioneer of microcredit system that contributed much for economic and social development of the country. Such a sudden change in the stands of the same Finance Minister within a year leaves a question unanswered for not any changes with Professor Yunus.
Whatever may be ups and downs in the fame cycle for an individual, a down in microcredit operations must not like be the same. No matter if anyone keep consents or not; the microcredit has been mixed with economic power-base of Bangladesh. May it be for a high expectation and sweet emotions to our Nobel laureate, we may blame him for not innovating a way to stop irregularities with microcredit operations. However, our policymakers also need to think in-depth of innovating control measures to make NGOs and microcredit providers as non-profit and welfare institutions. Rather making a tally on domestic and global fames of pioneer, it will be much rational to walk for a transparent debtor-friendly microcredit operation flexible to social and economic dynamisms.
(The writer is Associate Professor and Chairman, Department of Economics, Comilla University. He can be reached at [email protected])
