MICROCAPITAL BRIEF: Grameen Bank Ordinance Seen as Power Grab by Bangladeshi Government, Bank Refutes Claims by Prime Minister of 45% Microloan Interest Rates

The cabinet of ministers of Bangladesh has reportedly approved an amendment to the ordinance regulating Grameen Bank, a Bangladeshi microfinance institution (MFI), that allows the bank’s chairman, Mr Muzammel Huq, to nominate a pool of three candidates from which a managing director of the bank will be chosen. Dr Muhammad Yunus reportedly expressed shock at this decision and apprehension over what he sees as the government taking over undue control of the bank. The cabinet has also asked Bangladesh’s National Board of Revenue (NBR) to submit information regarding the salary received and taxes paid by Dr Yunus, the bank’s founder, who was forced to resign as managing director in 2011. At the time, some observers described the forced resignation as politically motivated.

In related news, Grameen Bank has reportedly refuted Bangladeshi Prime Minister Ms Sheikh Hasina’s claim that it charges between 30 and 45 percent interest on microloans. The Microcredit Regulatory Authority, a government-run microfinance regulatory institution, limits interest on microloans to 27 percent annually. According to Dr Yunus, the bank charges a maximum of 20 percent effective interest for standard loans, 8 percent on housing loans and 5 percent on higher education loans.

For the year 2011, Grameen Bank reported a gross loan portfolio of USD 921 million, total deposits of 1.43 billion and 8.37 million active borrowers.

By Charlotte Newman, Research Associate

About Grameen Bank
Grameen Bank is a Bangladeshi microfinance institution that provides loans to poor entrepreneurs in rural areas. It was founded in 1976 by Muhammad Yunus, who, along with Grameen Bank, won the 2006 Nobel Peace Prize for his work in developing the concept of microfinance. As of December 31, 2010, Grameen Bank reported to the US-based nonprofit Microfinance Information Exchange total assets of USD 1.7 billion, return on assets (ROA) of 0.7 percent and return on equity (ROE) of 10.7 percent. For the year 2011, Grameen Bank reported a gross loan portfolio of USD 921 million, total deposits of 1.43 billion and 8.37 million active borrowers.

Sources and Additional Resources:

Bangladesh Sangbad Bagstha: “Cabinet Okays Amendment to Grameen Bank Ordinance,” http://www1.bssnews.net/newsDetails.php?cat=0&id=269431&date=2012-08-02

The Daily Star: “Grameen Bank Refutes PM’s Remarks,” http://www.thedailystar.net/newDesign/news-details.php?nid=244355

The Daily Star: “Yunus Fears Govt’s Takover of GB,” http://www.thedailystar.net/newDesign/latest_news.php?nid=39623

MicroCapital.org story, May 8, 2012, “MICROCAPITAL BRIEF: US Secretary of State Hillary Clinton Expresses Concern over Investigation of Bangladeshi Microfinance Institution Grameen Bank,” https://www.microcapital.org/microcapital-brief-us-secretary-of-state-hillary-clinton-expresses-concern-over-investigation-of-bangladeshi-microfinance-institution-grameen-bank/

MicroCapital.org story, April 24, 2012, “MICROCAPITAL BRIEF: Bangladeshi Government to Investigate Muhammad Yunus, Social Businesses Associated with Microfinance Institution Grameen Bank,” https://www.microcapital.org/microcapital-brief-bangladeshi-government-to-investigate-muhammad-yunus-social-businesses-associated-with-microfinance-institution-grameen-bank/

MicroCapital.org story, May 17, 2011, “MICROCAPITAL BRIEF: Under Pressure Since January, Dr Muhammad Yunus, Founder of Bangladesh Microfinance Institution (MFI) Grameen Bank, Resigns as Managing Director,” https://www.microcapital.org/microcapital-brief-under-pressure-since-february-dr-muhammad-yunus-founder-of-bangladesh-microfinance-institution-mfi-grameen-bank-resigns-as-managing-director/

MicroCapital Universe Profile: Grameen Bank
http://microcapital.org/microfinanceuniverse/tiki-index.php?page=Grameen+Bank

Browse the MicroCapital Universe and add your entry to the wiki at https://www.microcapital.org/microfinanceuniverse/

Similar Posts: