(March 12, Dhaka, Sri Lanka Guardian) Since past few weeks, there had been series of reports and editorials on Grameen Bank and Nobel Prize winner Dr. Muhammed Yunus in Bangladeshi and foreign media. While a segment of the people are still willing to see Dr. Yunus as an ‘angel’, lately released news and information evidently show that, this man has been sucking blood of the poor people in the name of micro-credit. On the other hand, taking his position of having global contacts, especially with high profile people, Dr. Yunus not only continues to commit series of financial crimes at home, he even misappropriated his position when he joined the interim government in Bangladesh in 1996. Through such misappropriation, he caused financial loss to Bangladesh to the volume of a few hundred million dollars.
Much writing has appeared about Grameen Bank since it was enacted into law in 1983 following the transference of the Grameen Bank Project under Bangladesh Bank. However, whilst most writings on Grameen Bank focus on the success or failure of the institution as a vehicle for the alleviation / reduction of poverty for the poor rural people of Bangladesh, little seems to have appeared in these writings about its legal status, its modus operandi as a legal entity, and indeed the internal mechanism by which it is governed, and its relationship with its supervisory and regulatory bodies. Set out below are some of its features which would place an accurate picture of its status under the law and its relationship with its regulatory bodies.
1. Grameen Bank is a statutory public authority created by the Grameen Bank Ordinance, 1983 [Ordinance No. XLVI of 1983]:
Under Article 152 of the Bangladesh Constitution the term “Statutory public authority” means any authority, corporation or body the activities or the principal activities of which are authorised by any Act, Ordinance, Order or instrument having the force of law in Bangladesh.”
As a public statutory authority, Grameen Bank is an organ/instrument of the State, the term “the State” being defined in Article 152 of the Constitution as including “Parliament, the government and statutory public authorities”.
2. The status of Grameen Bank as a statutory public authority, i.e. an instrument/organ of state is further defined by the authority vested in the Government read together with the functions required to be carried out by the Government and Bangladesh Bank [which is also a statutory public authority] in the various provisions of the Grameen Bank Ordinance, 1983 [as amended up to 1990, the 1990 amendment being the last statutory amendment made in respect of Grameen Bank].
3. This authority and the functions extend from the creation of Grameen Bank to its winding up.
4. Grameen Bank is not an independent entity which operates outside the purview of Governmental process as a State organ.
5. Grameen Bank’s legal status is distinct from an association of persons such as a company, trust or cooperative which associations may be formed under a law but not by the law itself and which associations of persons are not statutory public authorities and therefore not State organs/instruments of State.
6. Contrary to a view incorrectly held by many, as a State organ/instrument, Grameen Bank has not been founded by any individual person, or group of persons. Its existence, continued operations and dissolution [winding up] are dependent on the State acting through the Government although Parliament may invoke its legislative authority to repeal the statute [Ordinance] under which it was created.
7. Under the statute, the Government retains the authority to determine the rural areas to which the operations of Grameen Bank shall extend. This determination by the Government would require notification in the official gazette.
8. The Government retains the authority to determine the initial paid-up share capital of the Bank which presently stands at Tk. 7 Crore 20 Lakhs of The present paid up capital was increased in 31 July, 1990 by an amendment to the Statute involving a notification in the official gazette and the official publications of the statute show that the present paid up capital is Tk 7 crore 20 lakhs [1 crore = 10 million]. The term “initial period” would mean such period from the date of the commencement of the GB Ordinance as the Government may by notification in the official gazette determine. It is apparent that the term “initial period” which features in Section 2 [g] vests the only Government with authority to determine by notification in the official gazette what the paid-up share capital shall be.
9. The Government retains the authority to direct what specific provisions of the Banking Companies Act, 1994 shall be applicable to Grameen Bank. The Government shall exercise this authority by notification in the official gazette. It is evident under this provision that the Government retains the authority to invoke or revoke provisions of the Banking Companies Act, 1991 at any time.
10. An increase in the authorized capital of the Bank requires the prior approval of the Government which means that the authority to increase the authorized capital is vested in the Government. Given that the authorized capital of Grameen Bank is stated in the statute [i.e. the GB Ordinance] to be Tk. 10 Crore, any approval by the Government shall have to be reflected/ embodied in the statute itself and not by any approval by the Government which is not incorporated in the statute. An approval by the Government without a change in the statute would mean that the Government approval has not been acted upon and may not be deemed as a valid statutory provision. The authorised capital of Grameen Bank under the statute stands at Tk 10 Crore.
11. Under the GB Ordinance it is provided that the Government shall hold 25% of the shares of Grameen Bank. It is also provided that it is only the Government which may increase the paid-up share capital of the Bank from time to time. Thus the Government retains the authority to determine the paid-up share capital. Further, unless differently embodied in the statute, the Government shall continue to hold 25% of the paid-up share capital of Grameen Bank. As the statute presently stands, having last been amended in 1990, the Government holds 25% of the paid-up shares.
12. The Government is vested with and retains the authority to appoint a Chairman of the Board of Directors. Such appointment of the Chairman would also be limited to Directors appointed by the Government itself. Even in the event of the vacancy in the office of the Chairman, the Government would have the authority to appoint any other Director to discharge the functions of the Chairman except that such Chairman shall not be the Managing Director. The Government’s authority to continue to appoint a Chairman and two other Directors is co-extensive with the Statute as it stands today.
13. Of the 12 Directors comprising the Board the Government shall have the authority to appoint 3 Directors.
14. The 3 appointed Directors shall hold office at the pleasure of the Government. This provision would mean that only the Government may remove the 3 or any of the Directors appointed by the Government.
15. The Government is vested with and retains the authority to receive the resignation of its appointed Chairman or its appointed Directors.
16. Since the Managing Director or any other Director may resign his office by writing under his hand to the Chairman who is a Government appointee, it is to the Government appointed Chairman [and not to the Board] that the resignation of a Director may be submitted. Such provision makes clear that the Government alone or through its appointed Chairman that the Government may receive and accept the resignation of a Director.
17. The Bank which may issue and sell bonds requires the prior approval of the Government to do so. The Government’s authority to approve the issue and sale of bonds and debentures at interest rates approved by the Government affirms the Republic’s control over such issue and sale of bonds and debentures.
18. The authority of the Government is further iterated by the provision that the bonds and debentures shall be guaranteed by the Government [i.e. the invocation of a sovereign guarantee] which in turn creates a loan by the Government furnished on behalf of the Bank to a Third Party or Parties.
19. The Government is vested with and retains the authority to receive returns, reports and statements from the Bank which the Bank would be required to furnish as the Government would require from time to time.
20. The Government is vested with and retains the authority to receive within three months after the end of every financial year statement of accounts audited by the auditors thereby affirming the Government’s regulatory financial authority over Grameen Bank’s financial operations provided in the Statute itself.
21. The Government is vested with and retains its authority to levy taxes on Grameen Bank.
22. Any exemption from taxes payable by Grameen Bank will be determined by the Government for the period such exemption shall be made. It is a requirement that such exemption shall be notified in the official gazette.
23. The Government and only the Government has the authority to wind up Grameen Bank. The authority to issue an Order to wind up Grameen Bank also vests in the Government. The manner in which such winding up may be effectuated also vests in the Government.
24. The Government retains the authority to make rules for holding elections of Directors.
25. The Government retains the authority to remove any difficulty in relation to the transference of the Grameen Bank project carried out under the aegis of Bangladesh Bank to the statutory public authority which Grameen bank became with the establishment of Grameen bank by the Ordinance.
And now, here are some of the irregularities that Dr. Yunus has already committed by establishing his autocracy over Grameen Bank:
Grameen Bank is authorised to lend only to the landless poor:
Grameen Bank is authorised to provide credit and other services to landless persons in the rural areas. It is not authorised to lend money to any person [or entity] other than the landless persons including Grameen Krishi Foundation, Grameen Motsho Foundation and Bigyan Gonoshikha Kendro as indeed it is not to Packages Corporation which it has done.
Packages Corporation Limited:
Grameen Bank has undertaken a Managing Agency on behalf of Packages Corporation Limited [“Packages”], a family enterprise owned by Dr. Yunus’ father, Mr. Dula Meah and his family in which Professor Yunus and his brothers, Abdus Salam and Mohammad Ibrahim are directors. Included under the terms of the Agreement, Grameen Bank and Packages Corporation would share losses on 50- 50 basis, Grameen Bank would have access to the loans taken by Packages Corporation and Grameen bank would lend money to Packages Corporation.
Brothers appointed in entities created:
In one of these entities, brother of Dr. Yunus, one Dr. Mohammad Ibrahim has been made Executive Director, whilst Professor Yunus assumes the position of Chairman. Another brother of the Nobel laureate, Mohammed Jahangir is in charge of the public relations of Grameen Bank and other enterprises of Grameen Bank Group.
It is also learnt from various sources that, Muhammed Yunus is using the huge advertisement revenue of Grameen Phone and other enterprises of Grameen Bank in buying the voice of local media. According to initial sources, the annual advertisement revenue of all the projects under Grameen Bank Group exceeds a few hundred million dollars.
Furnishing Guarantees not authorised by law:
In the Bangladesh Bank Audit Report, mention is made of guarantees having been granted by Grameen Bank favouring several of the entities created by Grameen Bank. These guarantees are not authorised by law or under GB’s own Memorandum and Articles of Association.
Formation of companies without authorisation in law:
Grameen Bank is a statutory body created by an Ordinance authorised to purchase shares of any body corporate the object of which is to provide services to landless persons in the rural areas. Grameen Bank is not authorised to sponsor, subscribe, and incorporate new companies such as it has done.
Unlawful transfer of funds to other entities formed by Grameen Bank itself:
In all cases where Grameen Bank has formed new entities, companies, for profit or not - for -profit, financial institutions without obtaining a licence from Bangladesh Bank, trusts and hybrid entities, it has transferred funds or provided guarantees against loans taken by these new entities which it is not authorised to do.
Professor Yunus’ continuance as Managing Director beyond 60 years in violation of the relevant laws:
His continuance in office as Managing Director in violation of Clause 50 (1) of the Grameen Bank Service Regulations wherein it is provided that the age limit for employees of Grameen Bank shall be 60 years. This provision read together with Bangladesh Bank’s rules regarding the appointment and reappointment of heads of Banks and non-banking financial institutions only re-affirm his unlawful continuance in office for more than 10 years.
Employment and Service Rules: whether made without authorisation:
A serious question which has been raised is that the present Service Regulations of Grameen Bank has been made without authorisation in law. Indeed, these have been gazetted, but the Rules are deficient inasmuch, contrary to law, since, as delegated legislation, they are shown [i] as have been gazetted in the name of Professor Yunus who is Managing Director of Grameen Bank; [ii]. There is no reference to the parent law from which such Rule – Making authority is derived nor any reference to the lawful person / legal entity upon whose instructions Professor Yunus has gazetted the Rules of Service;[iii] Professor Yunus is not authorised to make Service Regulations for Grameen Bank. To ascertain whether any offence under this head has been committed or not it may be prudent to check the law relating to the notification in the gazette by statutory bodies.
Usury/ Illegal interest rates:
The basic case against the interest rates charged by Grameen Bank is that these interest rates are usurious [“excessive” or “illegal”] interest rates under the various laws relating to the charging of interest rates by Money Lenders. The principal legislation among these being the Usurious loans Act, 1918, the Money Lenders Act, 1933 and the Money Lenders Act, 1940; further, the jurisprudence of higher courts in the Sub-continent on “ usury’ under the said law or similar laws and in other similar jurisdictions clearly show that the interest rates charged upon landless persons in the rural areas is not only usurious but constitutes a violation of their fundamental rights as contemplated under the equality clauses embodied in Articles, 27 and 31 of the Constitution. It cannot be a valid case to say that Grameen Bank’s rates are lower than the interest rates charged by other micro-credit agencies.
Method of recovery:
The method of recovery of loans practised by Grameen Bank is not authorised under the Grameen Bank Ordinance, 1983 [as amended to date, the last amendment having been made on 31 July, 1990] even upon rendering inapplicable certain provisions of the Public Demands Recovery Act, 1913. Further, the method of recovery practised by Grameen Bank is directly in conflict with the applicable law relating to recovery set out under the Money Lenders Act, 1940 under Section 41 [1] the effect of which violation has been defined as “molestation” of the borrower by the lender.
Grameen – Gonoshasthya Textiles Mills Limited:
Here, at the time of the formation of the company shares were allotted in the personal name of Professor Yunus, as indeed, all of the other subscribers of the company so formed, is self aggrandisement.
Non-payment of savings of borrowers:
This case is as unfortunate as it can get. Borrowers’ savings were put away into a fund to which they had no access. Borrowers departed without their savings between 1988 and 1992.
Retrenchment – unfairly and on the basis of non existent Rules – coercion:
The retrenchment of thousands [about 4000] of employees between 2000 and 2003, shown as voluntary retirement, was not in accordance with any valid rules of service, and constitutes a blatant case against the rights of employees of a statutory body [whose fundamental rights also appear to have been violated].
Loans from Banks taken by the companies created by Grameen Bank has been without authorisation in law:
The Ordinance/Statute does not provide for purported companies created by Grameen Bank to take loans from banks as these companies have done [take loans] for purposes which Grameen Bank itself cannot undertake, that is, undertake company activities other than providing credit and other services for landless persons in rural areas. In other words, can purported companies created by Grameen Bank do indirectly what Grameen bank itself cannot do, the said purported companies being born of Grameen Bank [validly or invalidly even]?
Activities: undertaking travel abroad for non-Grameen Bank purposes without authorisation from competent authorities:
It would be an issue to examine if the regulations relating to the undertaking of foreign travel by the Chief Executive of a statutory body requires the taking of permission from a competent authority and if permission was given for periods of time not consistent with pertinent rules / regulations by the competent authority for non – Grameen Bank purposes.
Grameen Kalyan:
There was transfer of funds received by Grameen Bank from NORAD without prior authorisation of the Government and other regulatory bodies. The offences arising are multiple in nature: [i] “conversion” in criminal law; [ii] avoidance of tax payment (per Grameen Bank’s Reply to Bangladesh Bank’s Audit Report); [iii] elements of fraud upon Grameen Bank itself, the NBR, the Government, the shareholders of Grameen Bank, the laws of Bangladesh and the people of Bangladesh.
In this unauthorised transaction the status of the parties, namely, [i] Grameen Bank, as recipient of a donation, was converted to become a borrower; [ii] the donor, NORAD’s role was converted to funding an activity not approved by the Government; [iii] ERD, which had permitted housing loans to be extended by Grameen Bank; [iv] the new lender, Grameen Kalyan, was caused to undertake unauthorised lending since it had no licence from Bangladesh Bank to function as a financial institution.
Grameen Telecom:
Apart from the issue of whether Grameen Bank has the legal capacity to incorporate a company which does not provide for the rural landless poor, the issue which arises is the status of the income earned by Grameen Telecom. Is Grameen Bank or Grameen Telecom entitled to hold such income in separate funds and accounts that have no nexus with the Grameen Bank’s statutory function to provide loans to landless persons in the rural areas?
There are several other issues arising from a regime created without authorisation in law. This regime functions extra statutorily, extra constitutionally and in disregard of the obligations of a statutory body, association of persons or any other valid entity created under the law. The length and breadth of this regime extends to at least the equivalent of 20 ministries of the Government.
With all such list of irregularities and nepotism prevailing inside Grameen Bank, due to autocratic administration of Dr. Muhammed Yunus, it has now become a question in the financial sector in Bangladesh, as to whether the government or the foreign donors and investors would ultimately ask Dr. Yunus to resign from the post he has been unlawfully holding for decades.
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