The board of the Grameen Bank is meeting today in Dhaka to decide the future of its founder, Muhammad Yunus. Revered as one of the founders of microfinance, Yunus won a Nobel Prize in 2006 for his work in bringing credit to the world’s poor, beginning in his home country of Bangladesh. He is now caught in a political maelstrom and could be pushed out of the organization that he founded. Bangladeshi Prime Minister Sheikh Hasina Wajed is openly hostile to him, but her government controls only 25% of the board votes. The Financial Times’ Amy Kazmin sums up the controversy here. I spoke with the Grameen office in Dhaka today, and they tell me that it may be some time before the board makes a decision.
There’s another cloud of uncertainty over the Indian microfinance industry. In response to a storm of criticism in the politically volatile state of Andhra Pradesh, the Indian government formed a commission to consider how to curb what critics said were excessive lending rates and strong-arm tactics. The Reserve Bank of India has recommended changes to the microfinance industry that could radically alter its shape in India, capping interest rates at 24% and profit margins at about 10%. In India, where the for-profit microfinance model has boomed, those are huge changes — if they are implemented. The changes could take effect as early as April 1; or maybe not.
Yunus has been outspoken in his criticism of the for-profit microfinance model. But his institution and India’s for-profit microlenders have one thing in common — both are equally vulnerable to the whims of politics.
