imperfect | world | 2010

Archive for December, 2010

Dec 10,2010

Translated by Mr Google from

Norad’s fresh account of the Norwegian aid money for the Grameen Bank differs in several respects from the words of the secret stamped documents that have been in Norad’s archives since 1998. Norad looked away from 109 million at the time, according to the Norwegian Embassy in Bangladesh, was tapped from Grameen Bank.

5. May 1998 sent the Norwegian Embassy in Dhaka in Bangladesh, a note to Norad stamped “confidential”.

Here it was pointed out that “one of the closest people to Professor Muhammad Yunus” has contacted the embassy and “proposed a compromise”.

Compromise on Aid

The reason was the Norwegian requirement that 608 million kroner, which had been transferred from Grameen Bank to a newly created company (Grameen Kalyan), in its entirety must be returned to the Grameen Bank, which along with Yunus received the Nobel Peace Prize in 2006.

Of the total amount of 608 million kroner was, according to the Norwegian Embassy roughly 279 million provided by Norway.

The compromise was, according to the aforementioned letter from the embassy on that 120 million given in aid from Norway as a “final solution” returned to the Grameen Bank, “against the remaining funds allocated to the Grameen Bank on loans and revolving funds remain in the Grameen Kalyan ownership “.

Statement by documentary

On 7 December, a week after Burn Punk showed the documentary “Caught in Micro Debt”, came Norad with an account of what happenedwith the Norwegian funds.

Here is the conclusion that 170 million was returned to the bank from Grameen Kalyan after negotiations between Norad and the Grameen Bank, and that it was never entered into any compromise:

“With this, Norad and the Embassy’s requirements met. When the embassy in a letter dated 05/26/1998 coined the term “compromise”, it was linked to the Grameen Bank’s invitation to negotiate a compromise.Embassy and Norad had met all their demands for negotiations. “


This stands in contrast to the secret stamped documents Brennpunkt found in Norad’s archives. It says that the Embassy and Norad wanted the following Norwegian kroner assistance should be returned to the Grameen Bank:

  • 120 million awarded to Grameen Bank’s so-called revolving funds (mainly funds for mortgages) during Phase IV (1993-97).
  • NOK 64.8 million awarded to Grameen Bank to the revolving fund under Phase III (1989-92).
  • NOK 94.25 million given to the Grameen Bank to the mortgage for flood victims as additional appropriations (1987-92).

Overall, this is 279 million Norwegian kroner assistance, the Embassy of Norad’s support demanded that Yunus and his men would return to the Grameen Bank.

So this is 109 million more than the 170 million who Norad in his report wrote that was returned from Grameen Kalyan Grameen Bank.

Norad report 2010: Embassy / Norad in 1998:
Phase IV: 106 million 120 million
Phase III: 64 million 64.8 million NOK
Additional Appropriation: NOK 0 94.25 million NOK *)
*) According to the embassy was “the largest component” of this amount to the mortgage. The exact amount will not provide the documents, but said the embassy was “reasonable to consider these funds as a natural resident of the revolving fund and not as temporarily Grameen Bank can give to another institution for a new application.”

Discrepancies in the amount of assistance

There are two circumstances in which the discrepancy is not explained by Norad.

Firstly, the embassy wrote in 1998 that the support given to the revolving funds in the contracts under Phase IV was 120 million. Norad report writing, however, that the amount that was reversed during Phase IV was 106 million. Norad not explain the difference of 14 million.

Second, Norad away from the aid of 94.25 million crowns provided as additional appropriations. The largest component of this was the mortgage for flood victims who Embassy / Norad then in the secret documents that had demanded be returned from Grameen Kalyan Grameen Bank.

“Satisfactory solution”

Despite the fact that Norwegian aid authorities at the time believed that all these Norwegian amounts were unlawfully tapped from Grameen Bank, they went in for a compromise. In the aforementioned letter from the embassy to Norad 5 May 1998 justified this by saying that Norway is not the law in hand expect more:

“After the embassy’s view compromise proposal represents a satisfactory solution in relation to what might be applicable legal and contractual.”

Others were also involved

It is also worth noting that Norad’s statement does not take up the aid money from other countries and institutions that were transferred from the Grameen Bank Grameen Kalyan.

Grameen Bank was under the Phase III funding from the Assistance Consortium, consisting of NORAD, SIDA, IFAD, CIDA, GTZ, KfW and the Ford Foundation. Together, these institutions contributed with 420.4 million to the revolving funds in the period 1989-92.


In 1998, the contact Norad, SIDA, the Swedish aid authorities to notify them of the transactions from the Grameen Bank Grameen Kalyan. Focus has been told that from SIDA, the Swedish contribution during Phase III was the entire 190 million.

SIDA, however, chose not to pursue the matter, because they did not want to destroy the “credibility of the Grameen family,” as it says in a letter from the Swedish Embassy in Bangladesh, dated 17 March, as the Focal Point has received from SIDA:

“No one wants two make a big thing out of this as It Might angry the creditability of the Grameen family and pray That Would detrimental two the whole Cause.”

Based on the secret documents Brennpunkt found in Norad’s archives, there are many factors that the public still have not received an explanation or full access to:

  • 608 million NOK was not that donors were informed transferred to Grameen Kalyan, who 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 from Grameen Kalyan Grameen Telecom / Grameenphone when the embassy raised the alarm. Whether and how much money has gone from Grameen Kalyan for other purposes, is not known.
  • Embassy / Norad agreed to a compromise of 170 million, which meant that not all of the Norwegian funds Embassy / Norad ever felt was unjustly transferred, was returned to the Grameen Bank.
  • We have no evidence to show that Grameen Kalyan has returned rest of the aid funds provided by other countries / institutions to Grameen Bank’s claim. Swedish aid agencies (SIDA) would not join in the Norway’s demand for repatriation of funds because they would not damage the Grameen Bank’s good name and reputation.
  • Embassy / Norad reacted strongly to the time that the money was transferred in part to save tax. Grameen Bank still using tax argument when they are currently defending the transaction.
  • All documents in the case was classified. Norad has not explained why this was necessary.
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.