The Birth of Microcredit

The concept of social business has its origin in microcredit, which grew out of my concern about the problems poor people faced in my country of Bangladesh.

Back in 1976, I failed to persuade the local bank manager to give loans to the poor-loans they badly needed in order to start or expand small businesses and work their way out of poverty. To overcome this obstacle, I offered myself as a guarantor and started to lend to the poor without collateral. This enabled the poor to get access to the credit they needed without being victimized by loan sharks. Eventually, Grameen Bank was created in 1983 to provide banking services targeted at the poor, especially poor women.

Today, Grameen Bank is a nationwide bank serving the poor in every single village of Bangladesh. Of its more than eight million borrowers, 97 percent are women. Early in the history of the bank, we deliberately decided to focus on lending to women-initially as a protest against the practice of conventional banks, which refused to lend money to women even if they belonged to a high-income bracket. We also saw that women in Bangladesh had the talent and skill to become income-earners. Our initial goal was to make sure we had borrowers of both genders in equal numbers. But soon we discovered, through experience, that female borrowers brought much more benefit to their families than male borrowers. Lending to women in the poor villages of Bangladesh, we realized, was a powerful way to combat poverty for the entire society.

Grameen Bank is unusual in many other ways. It is owned by the borrowers, who, in their capacity as shareholders, elect nine of the thirteen members of the board of directors. Grameen Bank lends out over $125 million a month in collateral-free loans averaging about $200. The repayment rate on loans remains very high, about 98 percent, despite the fact that Grameen Bank focuses on the poorest women and gives its loans without collateral. Conventional banks still consider our borrowers non-creditworthy.

Grameen Bank even lends money to beggars. They use the loans to enter the business of selling goods-toys, household items, foodstuffs-from door to door, along with begging door to door. Contrary to some people's expectation, beggars like the idea of supporting themselves through sales rather than relying on charity. We now have over 100,000 beggars in this program. Since this program was launched, four years back, over 18,000 have quit begging. Most of the beggars are now on their second and third loans.

Grameen Bank also encourages the children of its borrowers to go to school, offering affordable loans for them to pursue higher education. More than 52,000 students are currently pursuing their education in medical schools, engineering schools, and universities with financing from Grameen Bank.

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Why have I appeared at the Court? Why did I want to contest the order of Bangladesh Bank? Why there is so much concern about this issue at home and abroad? These questions have created confusion among some people. Please allow me to share my feelings with you to remove this confusion. I went to the Court for a specific reason. Bangladesh Bank sent letters to Grameen Bank and me, removing me from my post as Managing Director of Grameen Bank. The letter also mentioned that I held this position for the last eleven years illegally. Bangladesh Bank did this without even giving me a chance to explain my position. I feel that this letters is not lawful and through this letter, not only was I wronged, but Grameen Bank as well. Nine elected members of the Board of Directors of Grameen Bank felt the same way. That is why the nine members of the Board and I filed separate writs in the High Court. We wanted these wrongs to be corrected. Therefore, we had to seek justice through all avenues offered in the Bangladeshi judicial system. This is what we have done.

The fate of 40 million poor people connected to this

In the event that the Honourable Court stated in their final decision that the letter from Bangladesh Bank was issued without lawful authority, I could continue my work with Grameen Bank and make the transition to a capable management as smooth as possible. But, if the Court verdict went against us, the Board may be forced to take steps to implement the content of the Bangladesh Bank letter. This was the only reason for me to take this matter to the Court. I had no option but to seek justice in this matter.

It is indeed a much wider and much more significant issue to save the future of Grameen Bank and also to protect the hopes and dreams of the over 8 million borrowers. These borrowers are also the owners of 96.5% of the Bank's shares. The Bank is connected with 40 million microcredit borrowers in Bangladesh, and its impact on all these people cannot be neglected. What happens to Grameen Bank influences the future of the millions of Bangladeshis that benefit from microcredit activities, as well as the future of the institution of microcredit itself. It is actually a great concern for me, and many others, that I properly fulfil my responsibility to safeguard their future before and after leaving the post of Managing Director of Grameen Bank.

Some have said that, instead of going to the court, it would have been more honourable for me to resign from my position as suggested by the Finance Minister. I do not think so. In that case, the end result would have been the same, so far as my exit is concerned. But I would have suffered from carrying the guilt of knowingly accepting an unexpected proposal and putting the borrowers and their families' futures at risk. I could not do that.

Some people felt that I intend to cling to the position of Managing Director of Grameen Bank. But, the nation knows that this position is not my life's goal. I was, and am, conscious of the fact that the rest of my work will not be based on my holding on to this position, but rather, it would be working with the younger generation, from other platforms to address the problem of poverty at home and abroad. I want to do that without jeopardizing the interests of Grameen Bank. This is the thought which prompted me to write the letter to the Honourable Finance Minister one year ago. I suggested two options to him for a transition that could take place without creating any waves of unrest in the Bank. I did not get any response to these proposals. I was, instead, told to quit. It is, therefore, unfair to me to suggest that I am holding on to the position Managing Director unjustly or to allege that I am not co-operating in the process of transition.

Unfortunately, Bangladesh Bank is interfering in our work. Bangladesh Bank has ordered the removal Dr. Muhammad Yunus, founder of Grameen Bank who has been appointed as Managing Director of Grameen Bank by us. We filed a writ petition in the High Court for justice. It is unfortunate, but it is true that the Honorable Court has rejected the appeal without a rule.

We wanted to say that Dr. Muhammad Yunus is the Bank's founder. The Board appointed him. Authority of dismissal is always vested in the authority that gives the appointment. Bangladesh Bank cannot dismiss Dr. Muhammad Yunus without giving the Board of Grameen Bank any opportunity to decide on this issue. This has created an unprecedented episode for Bangladesh.

We again petitioned for leave to appeal at the Supreme Court against the verdict of the High Court for justice. In our decision in the Board we did not impose any restriction of age limit for Dr. Yunus while appointing him as the Managing Director. As owners of the Bank, it is for the Board to decide at what terms we appoint our Managing Director. We are deeply hurt and disappointed at the decision of the Supreme Court. However, we respect the law.

The Review Committee Report mentioned that Grameen Bank's interest rate is lower than all other microfinance organizations in the country. Also the issue of fund transfer was settled long back between the donor country and the Government of Bangladesh. We had hoped that we would get justice from the Supreme Court.

Dr. Muhammad Yunus is the founder of Grameen Bank. He has devoted his life for the Grameen Bank. No one can separate him from us. We will stand by him as long as we live. He will be with us as long as he lives.

We earnestly request the government to give us an opportunity to save Grameen Bank by appointing him as the Chairman of the Board of Grameen Bank.

Signed by,

1.Rahima Begum
2.Nasima Begum
3.Josna Begum
4.Anowara Begum
5.Mosammat Rozina Begum
6.Mossamat Julekha Begum
7.Mossamat Majida Begum
8.Shundari Begum
9.Mosammat Safia Begum

Elected Members of the Board of Grameen Bank

The Statement can be downloaded in the original Bangla here and here.