imperfect | world | 2010

Archive for the ‘investors’ Category

Breaking news - Yunus sacked

Mar 2,2011

Gloating is not a dignified thing to do. Today, and in this particular case,  I make an exception. Tom Heinemann’s documentary “Caught in Micro Debt” set off a chain events which resulted in a thorough evaluation of the operations of Grameen. And today the man who has headed it for decades has been sacked.  For decades Yunus has been the darling of neoliberals with his market solution to poverty. His grinning face is everywhere. For decades his zillions of fawning supporters have twisted the truth and failed to see the limited creature that microcredit is. I hope today that grin has been wiped off his face. For sure he is fighting back and he has powerful friends both at home and abroad. But this is a day to savour. I shall say no more. I am privilleged to have been part of the documentary. So thanks Tom.  And I thank my team in Bangladesh for this great result.

Dec 8,2010


It seems that 608 million (the documented 540 million aid NOK from NORAD and
other donors) were transferred WITHOUT INFORMING THE DONORS to Grameen Kalyan,
which had a completely different purpose than the Grameen Bank (among
other things, to create joint ventures, invest in other companies,
invest capital in shares, etc).

- 50 million had already been transferred to Grameen Telecom /
Grameenphone when the embassy raised the alarm.

- Embassy / NORAD originally demanded that all the Norwegian funds
would be returned and asked for a total amount of around 275

- Embassy / Norad agreed to a compromise of 170 million, which meant
that not all of the Norwegian funds Embassy / Norad at the time
believed was transferred was returned to the Grameen

- There is no evidence to show that Grameen Kalyan has returned rest of
the aid funds provided by other countries / institutions, as they
claim. Swedish aid agencies (SIDA) has provided evidence to us which
shows that Sweden gave 190 million Swedish kronor, which was
transferred from the Grameen Bank Grameen Kalyan. But they concluded
that they would not join in the Norway’s demand for repatriation of
funds because they did not want to damage the Grameen Bank’s good name and



Here is what Norway is saying. The Ministry of Foreign Affairs have however spectacularly failed to coordinate their story with Grameen’s response. There is a very definite disconnection between the two accounts.

The Norwegian Foreign Ministry states that their Embassy in Bangladesh “reacted immediately” and

“Following negotiations, it was agreed in May 1998 that NOK 170 million was to be transferred back from Grameen Kalyan to Grameen Bank.”

They also state that

“Norad’s report shows that Grameen Bank transferred a total of NOK 608.5 million to its sister company Grameen Kalyan in 1996″

IT IS CLEAR THAT A TRANSFER WAS MADE WITHOUT ANYONE BEING INFORMED. We also know from a letter dated May 27, 1998 that The Nowegian Embassy in Dhaka wrote a letter  to  Yunus where the embassy confirmed that they will accept the compromise proposal. It is that 170 million is returned from Grameen Kalyan to Grameen Bank. The remaining approximately 130 million kroner ( UPDATE ABOUT 105 MILLION) of Norway’s total support to the Grameen Bank could  in accordance with the compromise remain in Grameen Kalyan.

Total Norad money is not 170. It is 300 million. (UPDATE CIRCA NOK 275 MILLION NOT 300 ).  And what happened to the NOK 438.5 million? Quite clearly they insisted on the money going back but they didn’t manage to persuade Yunus to return all of it.

Grameen Bank’s response says:

“Afterwards not only Norad’s money, but the 100% of all donor’s money to the extent of Taka 3,474 million 501 thousand was “transferred back”, from Grameen Kalyan to Grameen Bank, although money was always in the Grameen Bank’s account.”

Very different stories there. 100 percent is not the same as the compromised NOK 170 million. And we know further that part of the money went to the profit making outfits Grameen Telecom/Grameen Phone from the embassy letter dated 10 February 1998 where it is stated:

“…..Grameen Kalyan has been able to pull funds out of the Grameen Bank and using them for purposes
other than they have been allocated by donors, and for other purposes than the Grameen Bank has the opportunity to provide loans. Grameen Kalyan has already granted BDT 300 million (approximately NOK 50
million) from these funds (SAF funds) to partially finance the project to the cellular Grameen Telecom / GrameenPhone.”

Are we surprised? Norway is the country which did not even set up an independent evaluation of the huge money that they gave to Grameen. Even after the transfers were detected, there was no evaluation of any sort after 1999. The attitude is one of condescension and aloofness - “lets just give these brown folk of Bangladesh the money and let them do what they want. We will have done our bit by throwing money at poor people. And that is all that counts.” That seems to be the vibe that is coming over like a bad smell.

Dec 7,2010

The transaction was NOT NEUTRAL as Grameen have portrayed it but
rather very significant.  We  have to consider the following important issues:

Grameen Bank shareholders had a hugely reduced stake suddenly WITHOUT
COMPENSATION. Indeed MORE THAN THAT they were burdened with debt by a
massive amount.


The Embassy were very concerned about the lack of safeguards:

“There is nothing in Grameen Kalyan statutes or the agreement between
the Grameen Bank and Grameen Kalyan, ensuring a certain level of the
funds in the future are available for the Grameen Bank or the members
of the Grameen Bank for home loan. The Grameen Bank’s letter dated
01/08/1998 stated however that the money be lent back to the Grameen
Bank will be used for the same purpose as when the assets were in a
rolling fund. However, Grameen Kalyan may require repayment of the
loan, and there is nothing in the agreement that such refunds should
be temporary. There is also no provision in the agreement that ensures
that the Grameen Bank are entitled to be reimbursed funds from Grameen
Kalyan under the original loan amount, if and when the Grameen Bank
has a need for this. This would, even though the provision was
included, it might be impossible to meet if Grameen Kalyan funds
invest long term, as it is intended for multiple purposes of
paragraphs.” ( Document date 10 Feb 1998. Royal Norwegian Embassy Dhaka)


In a letter dated 08.01.1998, Grameen Bank states that is working to
incorporate the date for the repayment of the loan into the contract
with Grameen Kalyan. So first the equity is transferred. Then loaned
back. Then interest paid on it and then it is paid back? And surely
that constitutes a double whammy?


A reason given was and is that the deal could reduce Grameen’s tax
liability. But according to an Norwegian embassy official, Yunus first
emphasized this rationale, then deemphasized it months later. And the
Bank disowned the rationale in a letter to Tom Heinemann in  August

Whatever the tax implications, this is a significant matter. NORAD’s
aid remit is to create economic development or  economic surpluses, if
you like, which can be taxed so that the state can use it for social
welfare etc. The agreement with Kalyan was a tool to regulate away ALL
THE SUPRLUS in the accounts of Grameen Bank.


The transaction which took place without any consultation basically
meant that management of the Grameen Bank has considered the funds had
been released from the conditions of the donors, and could be freely
managed by the Board.

This is moving money around as if it is in your own pockets.


Grameen’s response to the Ambassador’s concern amounted to what the
ambassador termed “untrustworthy.” Grameen Bank wrote to the
ambassador saying that by transferring the money Grameen would be
|”more responsible in handling it” ( page 2 of response to
Ambassador). And as the officials at the time speculated - were
the board members even informed of the details surrounding the
transaction? And if the Grameen Board included three government
representatives, as the Grameen Bank response says it did,  is it not
curious that the ERD originally indicated they found a breach of
agreement? They demanded that the money be returned to its original
status ( a grant and not a loan). Were the government representatives
on the board kept in the dark?

This is what David Roodman writes:

This Bank, entrusted with the serious responsibility of using foreign
funds to help the poor, would not entrust itself with the basic
function of a bank: holding money safely.  Or—more likely—the Bank was
and is lying.

This is moving money around as if it is in your own pockets.


It is worth bearing in mind that the report was not an independent
study. We know from Arne Disch, the Chairman of the 1999 report, that
there was concern about the composition of the team.

Norway never followed up with any further reports despite donating
such large sums of money. There seems to have been no responsibility
towards the Norwegian tax payer or indeed the poor people they were
claiming to help.


It is fully understood that poor people need financial services. Who
doesn’t? The documentary program only shows that such credit programs do not
necessarily solve poverty. They are not a panacea as some people want you
to believe.

In fact for many people it can push them in to further poverty. Giving
someone some money does not automatically mean they become successful
entrepreneurs. A lot of this money is not used productively. But most
importantly Tom Heinemann’s program shows that poor people also need consumer
rights. Rights to avoid becoming over-indebted. Rights of legal redress.
Rights against harrassment. And what the financial scandal shows is
their rights at the institutional level were infringed. The
microcredit market needs diligent regulation.

Nov 30,2010

Documentary: “Caught in Microdebt” by Tom Heinemann

Tonight a documentary will be aired on NRK Television where investigative documentary maker and journalist, Tom Heinemann,  reveals some dubious goings on in the financial empire that is Grameen. It again involves Professor Yunus duping the Norwegians ( this time the Norwegian government ) into giving him and his outfit money.

Sensational documents are being released by NRK show that the Norwegian Embassy in Dhaka was very seriously concerned by funds which were given to Grameen and which were then suddenly and without any notice transferred to Grameen Kaylan (you can find them here). There follows an exchange of letters where Yunus tries to justify his actions.   Professor Yunus  engages in the most specious reasoning to hoodwink the Norwegian ambassador. Clearly it had little or no impact and Yunus then turns to the head of the Norwegian aid organisation, NORAD, practically begging for a cover-up and for assistance.

The ambassador argued that the money was given to Grameen because of its nature and its ownership structure. If the money is transferred to another entity and then loaned back to it, as Yunus suggested was happening,  there would be a loss of equity for Grameen itself apart from the fact that the entire move was an ultra-vires one. Incredibly Yunus tries to argue that the financial discipline of Grameen would be improved if its equity was moved to Grameen Kaylan.

That aid funds should be used for purposes which are agreed upon is surely a principal which is in the interests of everyone to keep. How else are you going to assure donors to give? Only the staggering arrogance of someone like Yunus could contemplate such a flagrant dismissal of the agreement.

More than that - funds went missing apparently, Heinemann argues. Questions need answering. And Norwegians need to ask how long they are going to keep supporting this banker who is not even accountable to his own creditors.

The documentary also looks at the effectiveness of Grameen, and unsurprisingly concludes that it has had little impact on poverty. There are interviews with academics and experts from Bangladesh and elsewhere. In one segment Heinemann visits the home of the celebrated original grameen loan-taker - Sufiya Begum of Jobra Village. Celebrated in grameen folklore that is. He finds some very uncomfortable stories. She died in poverty and her daughters were beggars.

More about “Caught in micro-debt” here

And the full program in Norwegian ( international version coming in January) is HERE.

Here is Tom Heinemann’s blog post with a nice post by Milford Bateman - one of the development specialists featured in the film.

Dec 8,2009

The former military dictator has an interesting take on his role in the establishment of Grameen Bank.  He writes in today’s Daily Star:

Grameen Bank Ordinance was promulgated by me to establish Grameen Bank on September 4, 1983 when I had had barely completed my first year in office. One should understand how busy I was during those days.


My government allocated resources for Grameen Bank for its expansion program to cover the entire country at very generous terms, mostly, if I remember correctly, with aid funds from Sweden, Norway and Canada.


I did this deliberately so that Grameen Bank could provide loans to the poor at a rate that was affordable to the poor at 9-10%. I was assured by Grameen Bank that interest rate would be lowered to the desired level, when the expansion program ended in 1992. But over the years the interest rate went up from 13% in 1983 to 20% after I left office

Ershad is basically saying he was far seeing enough to realise what a good thing Grameen was and would be and thus he facilitated the way for Grameen through his unique “Grameen ordnance.”  He also deftly manages to remove himself from the widely criticised interest rates charged by Grameen!

Another take on this history would be that Grameen did not want to register as a bank or a cooperative. Yunus was able to do his usual politicking to milk the situation. Ershad, as a new military dictator, was keen on promoting a more humane image of his regime. And Yunus needed Ershad’s help to set his enterprise up as a parastatal agency overseen by a board made up of himself, state officials and a larger group of Bank clients. Yunus and Ershad needed to scratch each other’s backs and they did.

Aug 8,2009

What is not just irksome but downright unethical is to give an article a big headline like “The Modern Face of Slavery” and then follow it up with some initial text bristling with buzz words like bonded labour AND THEN fizzle out into nothing. No information. No references. Just a couple of interviews on this most incredible of issues.

So, with all that in mind, this is HOW NOT TO WRITE an article about modern slavery.

Jul 30,2009

Professor Chowdhury reminds us of a key aspect of the garment industry: outside forces.

The garment industry is the only area where Bangladesh could claim considerable success. Today garment export is the main source of foreign exchange earnings for the country after remittances. Its success was not necessarily influenced by government policy but essentially by outside forces. This industry had its origin in the 1970s when the investors of other South East Asian nations ventured to set up garment factories in Bangladesh to work around the export quotas imposed on their native countries by the United States. Later, Bangladeshi entrepreneurs rushed to establish their own companies, some with little or no experience. After a period of adjustments, the industry began to stabilize and started to grow, and has eventually earned the world’s respect.

Thus, the stabilization and growth of the garment industry in Bangladesh was achieved largely with the help and intervention of foreign investors who supplied expert technical support for its quality control and had an effective marketing plan. Additionally, the country enjoyed a favorable quota system from the United States for quite a while. But this situation is now changing as other least developing countries gain trade advantage for their manufactured garments from the United States.

More bad press for Telenor

May 30,2008

Notions that Scandos have progressive and enlightened labour policies are continuing to take a battering. Following on from my earlier post where I described Tom Heinemann’s documentary about working conditions for Bangladeshi workers doing contract work for Telenor and Grameen, there seems to be more bad news for the parent company:

Telenor’s Labour Scandal Deepens

Two more workers’ deaths linked to Telenor

May 15,2008

Yunus and Telenor

Jon Fredrik Baksaas of Telenor in a grinning competition with Mohammed Yunus.

A minority of regular readers of this blog will be fed up with my …er…concern about Professor Yunus in past posts. ( Just search Yunus in the search box..!!) If you are one such reader, then I request you to close your browser or surf to the Disney site because the story below is as nasty as it gets:

A Danish documentary will tonight reveal “miserable working conditions and environmental violations at companies in Bangladesh that act as suppliers to GrameenPhone ….co-owned by Norwegian telecoms firm Telenor and firms founded by Nobel Peace Prize winner Muhammad Yunus.”

Tom Heinemann

The documentary was made by made by Danish journalist Tom Heinemann and is to be aired on Norwegian Broadcasting (NRK) tonight.

The documentary shows:

* Employees working with hazardous chemicals and heavy metals virtually without protection.
* that workers were as young as 13 years, a clear violation of child labour laws. The firms were caught allowing polluted wastewater to spill into nearby rice fields.
* the death of a worker killed when he fell into an unsecured pool of acid.

The report in this Norwegian publication says :

Telenor officials claim they were shaken by the documentary’s findings, and admit they failed to adequately monitor the operations of GrameenPhone’s suppliers

See a trailer of the film here.

Tom Heinemann is an established journalist with a formidable track-record. In 2005/6 he made a documentary about the harsh working conditions of Indian workers producing for the Scandinavian market. The film is called “A Killer Bargain.” Heinemann’s primary concern is to reveal the stark realities of globalisation  in the developing world.

You will find more about Telenor in the comments section of this post of mine on Professor Yunus.

Feb 25,2008

Here is a delicately written Economist article which pulls the rug from under nobel laureate Yunus’ feet. You remember the Danone thing where the good Professor, always a man for stunts,  invited the great Zinedine Zidane to Bangladesh? The article deals with the business model inherent in that set up and compares it to other approaches,  namely a book by Paul Polak.  And the article sticks the boot in….but oh ever so subtly.  Some excerpts:

In his new book, Mr Yunus describes how Grameen and Danone agreed on a joint venture to sell nutritious food to the poor. It is a wholesome tale of French businessmen finding meaning in their lives, and Bangladeshi children enjoying something better than rice gruel to eat. But Mr Yunus also smothers the story in molasses, making claims about the originality and profundity of the enterprise that are simply too rich to take.

And the absurdity of Yunus’ hyperbole is collapsed like a house of cards:

However tasty and nutritious the yogurt they eat, the poor will not consume their way out of poverty. To escape, they must find a way to make more money. This simple truth is repeated by Paul Polak, the founder of International Development Enterprises (IDE), in “Out of Poverty”, his wise and engaging new book.

Jan 31,2008

Rub your hands all those of you with apartments in Gulshan…here is another giant moving into Bangladesh and driving up your property prices. Forbes reports that Vodafone is “looking at a number of options including the acquisition of any of the six mobile phone companies now operating in the country…We are excited by the growth possibilities in Bangladesh.” Oh yes….so are a lot of property owning NRBs!

Great I say if it helps reduces call charges. I don’t know what the situation is now, but even as recently as 2004 Bangladesh had the highest ( ie most expensive) call rates anywhere in South Asia and there were consumer protests about this including a demonstration if i remember rightly. The impact of liberalisation was overwhelmingly adverse for the consumer. The sequential release of licenses helped the first guys to make super profits and monopolise the entire sector. However things are changing. The regulator (BTRC) has recently been praised for price capping and other measures but derided (by Joe Bloggs at least) for proscribing VoIP.

Someone now needs to tell Steve Jobs that as the market for BMWs is now limited in the country ( chuckle, chuckle) “in the face of the government’s anti-corruption drive” - not a single damn sale last year - there must be a lot of cash floating about. And the iPhone is nowhere near as conspicuous as the 5 series. Potential owners can even hide it in their lungis?


Go East, my son

Jan 19,2008

The sweet scent of moolah is bringing the great and the good ( or the rich and the bad if you prefer) to New York city for a conference entitled “Updated Investment Opportunities in Bangladesh.” The Asia Society is holding a panel discussion called “Bangladesh: Untapped Opportunities.” Here is the exciting blurb:

The Word Bank calls it the Bangladesh Paradox. The Bangladesh economy has steadily accelerated in recent years, with growth reaching 7% in 2006. The country scores particularly well on socio-economic indicators. Global banks and multilateral institutions present a highly optimistic outlook: Citi, Goldman Sachs, JPMorgan and Merrill Lynch have identified Bangladesh as a key investment opportunity. This impressive growth occurs in a climate of political restructuring. A caretaker government is implementing reforms toward privatizing many state-owned enterprises. The Dhaka Stock Exchange Index is at a 10-year high, up 66 percent this year, making it Asia’s top performer after China. And the stock market is expected to double in size in 2008.

Discover why market-oriented reforms, strong socio-economic indicators and highly favorable demographics are poised to render Bangladesh one of the world’s most exciting investment opportunities.

Venture Capital in Bangladesh

Jan 17,2008

Buoyed by the inclusion of Bangladesh in J P Morgan’s “Frontier Five” group of countries and also Goldman Sach’s “Next Eleven” group, Asian Tiger Capital Partners have launched themselves in Bangladesh complete with a bengal tiger as logo. Their blurb goes like this

Asian Tiger Capital Partners is one of the first financial institutions in Bangladesh focusing on private equity and venture capital. Asian Tiger Capital Partners invests in leading companies and works with management to grow and improve them and thereby create shareholder value.

I read more of their interim web site and find that they want to invest in companies with a strong domestic and foreign presence and also create joint ventures in sectors such as outsourcing. There are not many indicators what these companies are. I would have also thought there is an assurance problem here…and am quite surprised to learn that the World Bank ranks Bangladesh higher than India in terms of “Investor Protection.” The political analysis of Bangladesh is a little …em…glossy but this site is certainly one to watch though.

Sep 11,2007

That has to be the quote of the week by Foreign Adviser Iftikhar Ahmed Chowdhury. Apparently the Russians are going to help develop nuclear energy in Bangladesh. “All countries do not like to extend nuclear cooperation. Russia has the appropriate technology for it.”  Yes tell that to the Ukrainians, Mr Chowdhury, and they might remind you about a nuclear plant called Chernobyl. But yes, unquestionably, energy policy and energy development should be top priority for any administration and especially so after Kansat last year.