Grameen Bank on Joy’s letter

Sajeeb Wajed Joy, son of Prime Minister Sheikh Hasina, has riddled Grameen Bank with allegations of tax evasion, fraud and illegal activities under its founder Muhammad Yunus, prompting the microlender to issue a firm rebuttal.
In a statement yesterday, the “Bank for the Poor” disputed Joy’s letter, published in a section of the press and said the “news contains a number of inaccurate facts and appears to be misconceived”.
Joy, who lives in the US, has written and signed an open letter full of rants against the Nobel-winning organisation. In the letter initially circulated by email, Joy has identified himself as an adviser to the prime minister.
“Last year Norwegian Television uncovered documents revealing massive financial improprieties at Grameen Bank under Muhammad Yunus. Approximately $100 million in donor funds to Grameen Bank were transferred out of Grameen Bank to a private corporation, Grameen Kalyan set up by Yunus,” Joy said.
“The government of Norway raised this as a major concern and as a compromise $30 million was returned. The remaining approximately $70 million was never returned. All correspondence in this regard was from Yunus himself,” he said.
“Just as international lobbying and media is being used in this recent incident, no doubt Yunus lobbied the Norwegian government as well. However, their explanation left millions of dollars unaccounted for.”
Joy said this became a major issue in Bangladesh and the government was forced to form an independent committee to investigate. “Yunus personally gave a press statement (no questions were allowed) where he announced that he undertook these transfers to avoid taxes, which constitutes tax evasion.”
“However, this makes no sense since Grameen was at the time a non-profit and paid no taxes. What is clear is that this transfer is completely illegal and constitutes a criminal offence of ‘conversion’ under Bangladesh law.”
“Further investigation uncovered other fraud, improprieties and illegal activity at Grameen Bank under Yunus.”
Joy said, between 1998 and 2002 all microloan borrowers were forced to pay an additional amount labelled “forced savings” which they were supposed to be paid back. “However, this money was never returned to the borrowers, who are among the poorest of society! This is fraud and theft.”
He alleged that donor funds were used to invest in a variety of private-for-profit ventures, all without approval from either the donors or the government, which owns 25 percent of Grameen Bank.
“In several cases, the equity in these private ventures was held not by Grameen Bank, but by Yunus and his family members personally. This is completely illegal and constitutes embezzlement,” Joy claimed.
He said loans were made by Grameen Bank to some of these corporations, which is completely illegal since Grameen Bank is not a regular bank. “It is lending donor funds and is only allowed to loan to microcredit borrowers.”
Joy also claimed Grameen charges up to 30 percent interest rate on loans and up to an additional 10 percent in “forced savings” to the poorest sections of society. “Their collection methods are draconian and collection officers who fail to collect payment have the uncollected amounts deducted from their pay.”
“There are many documented cases which constitute abuse and the criminal offence of ‘molestation’ under Bangladesh law,” Joy wrote in the letter.
He claimed the government, not Yunus, founded Grameen Bank. “Contrary to the popular perception, Yunus did not found Grameen Bank. The government of Bangladesh did. Initially the government owned 65 percent of Grameen Bank, which was whittled down over the years by Yunus. The government still owns 25 percent of Grameen Bank and retains the right to veto management appointees.”
Joy said there is little evidence that showed a link between microcredit and reduction of poor people. “Despite the hype, there is no evidence that microcredit has in fact reduced the rolls of the poor in Bangladesh. Grameen Bank has been in the microcredit business for 30 years, yet Bangladesh remains one of the poorest countries in the world.”
“Furthermore, the private sector investments made using Grameen Bank money have become quite profitable. Grameen Phone is by far the largest telecommunications operator in Bangladesh with a subscriber base of 28 million, annual revenue of over $1 billion and profits of several hundred million dollars per year. Grameen Bank owns 35 percent equity in Grameen Phone, so why do they have to charge such high interest rates to the poor?”
Joy also said the government had tried to retain the respect of Yunus. “Given his stature as a Nobel Prize winner, the government of Bangladesh requested that Yunus step down quietly from the post of managing director of Grameen Bank. He refused and has engaged in an international lobbying campaign accusing our government and in particular, Prime Minister Sheikh Hasina of engaging in political retribution.”
“Nothing could be further from the truth. Yunus has no political stature in Bangladesh. During the brief military regime from 2007-08, under a state of emergency with all political activity banned and most political leaders behind bars, even with the help of the military he was unable to put together a political party and garner any public support. Politically he is a non-entity in Bangladesh and no threat to any political leader,” Joy said.
Grameen Bank responded to each issue in Joy’s letter. It referred to one of his allegations that “approximately $100 million in donor funds were transferred out of Grameen Bank to a private corporation, Grameen Kalyan set up by Yunus”. The microlender insisted that Grameen Kalyan is not a private corporation set up by Prof Yunus.
“Grameen Kalyan was created by the board of directors of Grameen Bank [Board Decision 42.8, dated April 25, 1996] for the benefit of Grameen borrowers and employees [90 percent of whom come from low income families],” Grameen said.
“Empowered by a board decision and executing an agreement between Grameen Bank and Grameen Kalyan, an endowment to the extent of around Tk 3,917 million was created by simultaneous notional ‘transfer’ of fund. Grameen Kalyan was never given the control and possession of the funds,” the microlender said.
Grameen said Joy’s claim that the government was “forced” to create an “independent investigation committee” was highly misleading, as the government appointed a “review committee” to look into the operations of Grameen and its associated companies.
According to Grameen, Joy’s claim about tax exemption does not take into account the tax exemption practice prevailing at that time. “There are perfectly legal ways to minimise tax liabilities. They do not constitute ‘evasion’,” it said.
The claim that “Grameen was, at the time, non-profit and paid no taxes” is simply not true, the microfinance institution insisted. “Grameen Bank was never a non-profit organisation. Following the expiry of Grameen Bank’s tax-exempt status on December 31, 1996, it did not receive notice of tax-exempt status until 2000, when the government retroactively issued tax-exempt status to Grameen Bank from 1997 onwards,” it said.
Grameen brushed aside Joy’s claim that from 1998 to 2002, “forced savings” were taken in members’ names and not returned to them.
“From the beginning of Grameen Bank’s operation, members have been required to maintain a savings account containing five percent of their loan disbursement amount in order to provide for their emergency needs,” Grameen said.
“This money is credited to the borrowers’ savings account, which is an interest bearing account and Grameen Bank has been giving 8.5 percent interest for the savings. The borrowers are enjoying the benefit of their savings at their convenience and are allowed to withdraw the entire savings without leaving any balance in their accounts. There is no question of not returning the money to the account holders,” Grameen added.
According to Grameen, the allegation of using donors’ funds for private ventures without approval from either the donors or the Grameen Bank is completely false and baseless. “There had never been any single incident of using Grameen Bank fund for private venture with or without approval of the Grameen Bank,” it said.
Grameen also refuted a claim that it had charged a high interest rate. “Grameen Bank charges the lowest interest rate in Bangladesh for microcredit,” the microfinance organisation said.
Joy’s letter, according to ‘Friends of Grameen’, has exposed the very dynamics behind the attacks on Yunus and Grameen Bank.
On March 15, a full bench of Supreme Court will hear an appeal filed by the Nobel laureate against a High Court verdict that upheld a central bank order removing Keep on reading

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