MICROCAPITAL BRIEF: Bangladeshi Prime Minister Proposes Microfinance Pioneer Muhammad Yunus as Next World Bank President

Bangladeshi Prime Minister Sheikh Hasina has reportedly recommended the appointment of Dr Muhammad Yunus, founder of Grameen Bank, as the next president of the World Bank, an institution that provides loans to developing countries. The current president, Robert Zoellick of the United States, will complete his five – year term on June 30, 2012. Hasina reportedly stated that Dr Yunus is well respected for his work in microfinance and that he could spread microcredit as a poverty alleviation tool across the globe. Last year Hasina’s government forced Dr Yunus to resign from his position as managing director of Grameen Bank, claiming he was past the age of retirement and that his original appointment had not followed applicable rules.

European Union Parliament member Jean Lambert of England, to whom the recommendation was given, reportedly stated that Dr Yunus “is a candidate who has all the required qualifications, qualities, merits with international standing for an important job like World Bank president” including understanding the needs of developing countries.

Under current policy, the post of World Bank President is held by a citizen of the United States. However, there have been calls to reform this practice from many sources.

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. As of September 30, 2011, Grameen Bank reported a gross loan portfolio of USD 959 million and 8.34 million active borrowers.

About the World Bank Group
The World Bank Group consists of five institutions, all of which are owned by its member countries. The Group’s mission is to improve living standards for people in the developing world. The World Bank Group encompasses the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA); the International Centre for Settlement of Investment Disputes (ICSID) and the World Bank, which consists of the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA).

Established in 1944, the World Bank was initially comprised of two development institutions, IBRD and IDA, which provide leveraged loans to developing countries for capital programs. IBRD makes loans and grants and provides analytical and advisory services to middle-income countries and poorer countries that are deemed creditworthy, with the aim of promoting sustainable development to reduce poverty. IDA offers interest-free credits and grants to the world’s 81 poorest countries, where a majority of the people lives on less than USD 2 per day. IDA resources and technical assistance support country-led poverty reduction strategies in the following policy areas: increased productivity, better governance and accountability, an improved private investment climate and access to education and healthcare.

Established in 1956, IFC was created to support financial private sector development, mobilize private capital and provide advisory and risk mitigation services to businesses and services in emerging markets. Unlike the World Bank, which finances projects with sovereign guarantees, the IFC finances projects without sovereign guarantees, which means that the IFC is primarily active in private sector projects.

Established in 1988, MIGA’s mission is to promote foreign direct investment (FDI) in developing countries to help support economic growth, reduce poverty and improve people’s lives. It does this by providing political risk insurance (guarantees) to the private sector.

Established in 1966, ICSID facilitates the settlement of investment disputes between governments and private foreign investors through conciliation and arbitration. Its aim is to foster an atmosphere of mutual confidence between states and investors in order to promote increased flows of international investment. ICSID is an autonomous international organization. However, ICSID’s Administrative Council is chaired by the World Bank Group’s President.

Also housed in the World Bank is the Consultative Group to Assist the Poor (CGAP), an independent policy and research center guided by the aim to promote financial access for the world’s poor. The World Bank was one of the founding donors of CGAP in 1995.

Sources and Additional Resources:

The Financial Express: “PM’s Proposal on Yunus as WB Chief Positive: Lambert,” http://www.thefinancialexpress-bd.com/more.php?news_id=121140&date=2012-02-24

MicroCapital.org story, January 5, 2012, “MICROCAPITAL BRIEF: Dr Muhammad Yunus to Seek Court Review of His Removal as Managing Director of Bangladeshi Microfinance Institution Grameen Bank,” https://www.microcapital.org/microcapital-brief-dr-muhammad-yunus-to-seek-court-review-of-his-removal-as-managing-director-of-bangladeshi-microfinance-institution-grameen-bank/

MicroCapital.org story, February 13, 2012, “MICROCAPITAL BRIEF: Center for Latin American Monetary Studies (CEMLA), Multilateral Investment Fund (MIF), World Bank Launch Envia Centro America to Promote Transparency in Remittance Activity,” https://www.microcapital.org/microcapital-brief-center-for-latin-american-monetary-studies-cemla-multilateral-investment-fund-mif-world-bank-launch-envia-centro-america-to-promote-transparency-in-remittance-activity-2/

MicroCapital Universe Profile: World Bank Group

MicroCapital Universe Profile: Grameen Bank

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