Viewed through this distorting lens ....
Saturday, 11 December 2010
An abysmal 'poverty of understanding' about the so-called transfer of funds from Grameen Bank (GB) to its sister organization, Grameen Kalyan (GK) seems to be informing the antagonists and they are ready to distort what they have not grasped. Norwegian Minister for Environment and International Development, Erik Solheim, clarified last Wednesday that the GB of Bangladesh had "neither embezzled Norad fund nor used the money for unintended purposes". Also, the Norwegian Agency for Development Cooperation (NORAD) in its letter, dated December 06, 2010, to the Bangladesh Ministry of Foreign Affairs, stated very clearly that no evidence of embezzlement of its fund given to the GB fund, was found. The issue over the transfer of fund by GB to GK was, according to the Norwegian Embassy in Dhaka, closed in a "satisfactory way" as far back as in 1998.
In this context, it is deeply saddening, and indeed embarrassing, that some highly responsible persons in Bangladesh only four or five days ago went all out in favour of certain quarters who were - and still are - out to tarnish the image of Dr. Mohammad Yunus over the issue of the 'notional transfer' of funds from GB to GK. It's a pity that the quality of 'discourse' from that height has so shockingly been lacking in decency.
In the introduction to his book 'Building Social Business', this pioneer of micro-credit who has brought so much honour to Bangladesh in his battle against poverty, says:
'The biggest flaw in our existing theory of capitalism lies in its misrepresentation of human nature .... portrayed as one-dimensional beings whose only mission is to maximize profit. ..... The essential fact about humans is that they are multidimensional beings. Their happiness comes from many sources, not just from making money .... And yet economists have built their whole theory of business on the assumption that human beings do nothing in their economic lives besides pursue selfish interests. .... No doubt humans are selfish beings, but they are selfless beings too. Both these qualities coexist in all human beings. Self-interest and the pursuit of profit explain many of our actions, but many others make no sense when viewed through this distorting lens.'
And it is through this distorting lens that the Nobel laureate's management of funds for Grameen Kalyan seems to have been deplorably viewed by some negative elements, regardless of the facts. The controversy arose following a Norwegian TV documentary which focussed on a 1996 'transfer of funds', on paper only, from GB to GK, for the purpose of benefiting the poor -- not for Dr Yunus to 'siphon off,' as so many half-baked hacks were quick to conclude.
NORAD, from which the grant had come, of course could not initially grasp the full import of the notional transfer, which is perhaps culture-specific to this part of the world. But later, the Norwegian aid agency did come to understand that the transfer was meant to help the GK fund grow, and therefore, in principle it did not really violate the terms of agreement between GK and NORAD. And the matter was amicably settled, to the satisfaction of both parties in 1998 and allowed to rest without further ado.
Besides, it should be borne in mind that all policy decisions of Grameen Bank are taken by a board, chaired by a highly respected person. Nine of the board members are elected from among the borrowers while the government is represented by three senior officials. All decisions are taken as per rules and there is no scope for any one person's whims or high-handedness getting humoured. The Grameen Bank and Grameen Kalyan are both not-for-profit organisations operating within the bounds of law, with their accounts regularly audited, and the Bangladesh Bank is fully abreast of all that transpires.
As Professor Yunus himself explained in a letter to the Norwegian embassy, dated January 8, 1998:
'For the grant that Grameen Bank received from NORAD and other donor agencies under its third extension phase, Grameen Bank and donors agreed that a 2% interest rate would be fixed on the grant and that interest would be used to create a Social Advancement Fund (SAF) for the welfare of Grameen Bank borrowers and employees. The creation of SAF was our suggestion, donors happily agreed to it.
Grameen Bank believed that if SAF was kept within Grameen Bank and managed by Grameen Bank then it would not receive the attention it deserves. The core activity of Grameen Bank, the lending programme, would always get precedence. Grameen Bank may not pay sufficient attention to create welfare-based programmes for its members and employees.
Moreover, Grameen's tax exemption period expired on December 31, 1996. .... if the government would not extend the period then the contribution to SAF as expenses would not be considered as expenditure of Grameen Bank. As a result 40% tax would have been imposed on contribution to SAF. It might compel Grameen Bank to reduce or stop charging 2.0% interest on revolving fund to contribute to SAF, which would be a violation of the agreement with donors.
Under these circumstances, the need for a new organisation emerged..... and Grameen Kalyan was created by the Grameen Bank Board..... GK is a not-for-profit company under company law. No individual owns any share in this company. The profit of this company is not divisible and can only be recycled into its operation to maximise its stated objectives of providing primarily healthcare and education services to Grameen Bank's members and employees, 90% of whom are from low income families.
Empowered by a board decision and executing an agreement between Grameen Bank and Grameen Kalyan under which an endowment to the extent of Taka 3917million 014 thousand was created by simultaneous notional "transfer" of money. Grameen Kalyan was never given the control and possession of the fund, This simultaneous transfer and Grameen Bank receiving it back in the form of a loan created an opportunity to charge interest on this loan. The interest income was ear-marked to finance SAF borrowers as agreed by the donors earlier .... it was a financial innovation to benefit the poor .... the actions taken by the board were viewed as the best use of the funds, a way to ensure Grameen Bank would remain financially accountable for the money while still ensuring that the borrowers received the most possible benefit from donors' grants. Afterwards not only NORAD's money, but the 100% of all donors' money, to the extent of Taka 3,474 million 501 thousand, was "transferred back," from Grameen Kalyan to Grameen Bank, although the money was always in the Grameen Bank's account. Only SAF money amounting to Taka 442million 512 thousand remained with Grameen Kalyan as it was created out of the interest.'
All these facts are transparent and verifiable. Disagreement between NORAD and Grameen Bank, if any, had long been ironed out 12 year ago. An earlier letter from the Norwegian Embassy, dated May 26, 1998, stated clearly: 'The Embassy highly appreciates your cooperation in solving this issue, and is pleased to have arrived at a solution which is satisfactory for Grameen Bank as well as the embassy.' It is curious, therefore, that the Norwegian TV documentary should be produced at this time, and then be doubly misrepresented by some sections of the media, and the public given to believe that Dr Yunus had actually misappropriated huge sums for himself!
In this context, it is deeply saddening, and indeed embarrassing, that some highly responsible persons in Bangladesh only four or five days ago went all out in favour of certain quarters who were - and still are - out to tarnish the image of Dr. Mohammad Yunus over the issue of the 'notional transfer' of funds from GB to GK. It's a pity that the quality of 'discourse' from that height has so shockingly been lacking in decency.
In the introduction to his book 'Building Social Business', this pioneer of micro-credit who has brought so much honour to Bangladesh in his battle against poverty, says:
'The biggest flaw in our existing theory of capitalism lies in its misrepresentation of human nature .... portrayed as one-dimensional beings whose only mission is to maximize profit. ..... The essential fact about humans is that they are multidimensional beings. Their happiness comes from many sources, not just from making money .... And yet economists have built their whole theory of business on the assumption that human beings do nothing in their economic lives besides pursue selfish interests. .... No doubt humans are selfish beings, but they are selfless beings too. Both these qualities coexist in all human beings. Self-interest and the pursuit of profit explain many of our actions, but many others make no sense when viewed through this distorting lens.'
And it is through this distorting lens that the Nobel laureate's management of funds for Grameen Kalyan seems to have been deplorably viewed by some negative elements, regardless of the facts. The controversy arose following a Norwegian TV documentary which focussed on a 1996 'transfer of funds', on paper only, from GB to GK, for the purpose of benefiting the poor -- not for Dr Yunus to 'siphon off,' as so many half-baked hacks were quick to conclude.
NORAD, from which the grant had come, of course could not initially grasp the full import of the notional transfer, which is perhaps culture-specific to this part of the world. But later, the Norwegian aid agency did come to understand that the transfer was meant to help the GK fund grow, and therefore, in principle it did not really violate the terms of agreement between GK and NORAD. And the matter was amicably settled, to the satisfaction of both parties in 1998 and allowed to rest without further ado.
Besides, it should be borne in mind that all policy decisions of Grameen Bank are taken by a board, chaired by a highly respected person. Nine of the board members are elected from among the borrowers while the government is represented by three senior officials. All decisions are taken as per rules and there is no scope for any one person's whims or high-handedness getting humoured. The Grameen Bank and Grameen Kalyan are both not-for-profit organisations operating within the bounds of law, with their accounts regularly audited, and the Bangladesh Bank is fully abreast of all that transpires.
As Professor Yunus himself explained in a letter to the Norwegian embassy, dated January 8, 1998:
'For the grant that Grameen Bank received from NORAD and other donor agencies under its third extension phase, Grameen Bank and donors agreed that a 2% interest rate would be fixed on the grant and that interest would be used to create a Social Advancement Fund (SAF) for the welfare of Grameen Bank borrowers and employees. The creation of SAF was our suggestion, donors happily agreed to it.
Grameen Bank believed that if SAF was kept within Grameen Bank and managed by Grameen Bank then it would not receive the attention it deserves. The core activity of Grameen Bank, the lending programme, would always get precedence. Grameen Bank may not pay sufficient attention to create welfare-based programmes for its members and employees.
Moreover, Grameen's tax exemption period expired on December 31, 1996. .... if the government would not extend the period then the contribution to SAF as expenses would not be considered as expenditure of Grameen Bank. As a result 40% tax would have been imposed on contribution to SAF. It might compel Grameen Bank to reduce or stop charging 2.0% interest on revolving fund to contribute to SAF, which would be a violation of the agreement with donors.
Under these circumstances, the need for a new organisation emerged..... and Grameen Kalyan was created by the Grameen Bank Board..... GK is a not-for-profit company under company law. No individual owns any share in this company. The profit of this company is not divisible and can only be recycled into its operation to maximise its stated objectives of providing primarily healthcare and education services to Grameen Bank's members and employees, 90% of whom are from low income families.
Empowered by a board decision and executing an agreement between Grameen Bank and Grameen Kalyan under which an endowment to the extent of Taka 3917million 014 thousand was created by simultaneous notional "transfer" of money. Grameen Kalyan was never given the control and possession of the fund, This simultaneous transfer and Grameen Bank receiving it back in the form of a loan created an opportunity to charge interest on this loan. The interest income was ear-marked to finance SAF borrowers as agreed by the donors earlier .... it was a financial innovation to benefit the poor .... the actions taken by the board were viewed as the best use of the funds, a way to ensure Grameen Bank would remain financially accountable for the money while still ensuring that the borrowers received the most possible benefit from donors' grants. Afterwards not only NORAD's money, but the 100% of all donors' money, to the extent of Taka 3,474 million 501 thousand, was "transferred back," from Grameen Kalyan to Grameen Bank, although the money was always in the Grameen Bank's account. Only SAF money amounting to Taka 442million 512 thousand remained with Grameen Kalyan as it was created out of the interest.'
All these facts are transparent and verifiable. Disagreement between NORAD and Grameen Bank, if any, had long been ironed out 12 year ago. An earlier letter from the Norwegian Embassy, dated May 26, 1998, stated clearly: 'The Embassy highly appreciates your cooperation in solving this issue, and is pleased to have arrived at a solution which is satisfactory for Grameen Bank as well as the embassy.' It is curious, therefore, that the Norwegian TV documentary should be produced at this time, and then be doubly misrepresented by some sections of the media, and the public given to believe that Dr Yunus had actually misappropriated huge sums for himself!