Microfinance Pioneer Yunus Cleared in Aid Probe
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Dhaka, Bangladesh, December, 08 2010 - Microfinance pioneer Grameen Bank on Wednesday welcomed a report by Norway that cleared its founder Muhammad Yunus of misusing aid money, removing a cloud that had hovered over the Nobel Peace Prize winner.
Last week, a Norwegian documentary alleged that 96 million dollars had been diverted from Grameen Bank, which provides small loans to the poor, to other parts of Grameen group, which was founded by Yunus.
The claims were based on series of letters dating from 1996 to 1998 -- a decade before Yunus and Grameen were awarded the Nobel Prize in 2006 -- showing a conflict between the Norwegians and Grameen over the aid transfer.
After a review, Norway's minister of international development Erik Solheim said in a statement Tuesday that there was "no indication that Norwegian funds have been used for unintended purposes, or that Grameen Bank has engaged in corrupt practices or embezzled funds."
Grameen maintained the transfer of aid to Grameen Kalyan, another part of the group, was legitimate and done to minimise tax on the money.
"We are very happy that actual proof (of Grameen's innocence) has come to light and we hope this will end all debate about Grameen," Grameen spokesman Mohammad Shahjhan told AFP.
Yunus and microfinance have come under fierce attack from Bangladeshi Prime Minister Sheikh Hasina, who called Sunday for a full investigation of a sector she said "does not lift people from poverty."
"Is there any other business that forces people to pay 30 to 40 percent interest on loans?" Hasina asked, describing Grameen's transfer of Norwegian and other European aid money in 1996 to avoid tax as a financial "trick".
"The Bangladeshi people have been used as a guinea pig," by microfinance groups, she said, adding that such groups had raised millions of dollars of aid by cynically "showcasing" the poor but had failed to improve people's lives.
Bangladesh Central Bank spokesman Mohammad Asaduzzaman said that as of Wednesday morning, they had not received any instructions from the government to launch an investigation into Grameen.
Microfinance, which sees small loans disbursed to people outside of the mainstream banking system, was initially seen as a means to lift millions of people out of poverty when it began in the 1970s.
Its initial success has sparkled an unregulated, multi-billion-dollar commercial industry, however, which has been criticised for charging exorbitant interest rates and uses aggressive means to recover debts.
Hasina, who also accused Yunus of turning Grameen Bank into his own private fiefdom, fell out with Bangladesh's "banker to the poor" in 2007 when he set up his own short-lived political party.
The attacks on Grameen come at a time when the microfinance industry is already under fire both in Bangladesh, which has capped micro-lending interest rates following criticism of excessive profits, and neighbouring India.
Last month, India's Andhra Pradesh state, the hub of Indian small loan activity, cracked down on microfinanciers following accusations that high interest rates and aggressive debt collectors had led to more than 30 suicides.