POVERTY: Grameen Bank and Professor Yunus

 01 Dec 2010,
The reputation of a Nobel peace laureate, credited with helping to defeat global poverty through micro credit, hung in the balance Wednesday night after allegations that he had diverted £40 million (US$62.4 million) from a bank set up to help the poor.
Muhammad Yunus, internationally feted as banker to the world’s poor, now faces an investigation by the Norwegian government, which donated funds to him, according to The (London) Times.
It marks a further blow to the reputation of micro finance, once hailed as the most effective way to help the most needy out of poverty.
The model of extending small loans to help to stimulate entrepreneurial activity was pioneered by Yunus in Bangladesh. It won him the Nobel Peace Prize in 2006.
But letters obtained by a Norwegian filmmaker suggest that Oslo’s embassy in Dhaka was furious to discover that cash donated to his micro finance vehicle, Grameen Bank, for housing loans was diverted to another company without its knowledge or permission. The arrangement, which Yunus claimed was made for tax reasons, was not mentioned in Grameen Bank’s annual report.
When his actions were challenged in formal correspondence, Yunus wrote to the head of an aid agency, Norad, asking for its help.
“This allegation will create a lot of misunderstanding within the government of Bangladesh. If the people, within and outside government, who are not supportive of Grameen get hold of this letter, we’ll face real problem[s] in Bangladesh,” he wrote.
Yunus was ordered to return the money but while about £17.6 million was repaid, the rest of the funds were used for other social causes including victims of cyclones, according to the Norwegian government.
The chain of events -- which took place between 1996 and 1998 -- came to light this week after the letters were aired as part of a documentary on micro finance that was shown on Norwegian television.
Although it said that there was no suggestion of tax fraud, a minister in the current Oslo administration said that it was “totally unacceptable” that aid was used for purposes other than what was intended. A report into the matter has now been ordered by the International Development Minister after questions in the Norwegian parliament.
A statement released by Grameen Bank said that the claims were false and that a full explanation would be provided at the “earliest convenient time.”
The Norwegian Nobel Institute stood by Yunus Wednesday night, admitting that it was aware of “isolated incidents” relating to Grameen Bank when it awarded him the Peace Prize, but it does not plan to raise any further questions.
http://www.myfoxdetroit.com/dpps/news/nobel-peace-prize-winners-reputation-under-threat-dpgonc-20101201-bb_10895183