Well here we are in December and not all is well in the Micro-finance world, especially in East Asia. Lots of Internet chatter about the negative happenings in India and the SKS IPO. Now comes a charge from a Norwegian documentary that Dr. Yunus moved $100+millions from the Grameen Bank to another organization called Grameen Kalyan 12 years ago.
Where did the $100+millions go? Why was it done? and did he really steal that amount of money for his own use? I'm not qualified to opine on the 3rd question. However, I would like to add my 2 cents to the first two questions.
The Grameen Bank had received donor funds to support housing loans. Someone or several people in the organization was/were worried that the money once used would not be fully reused for the same purpose. To assure an on-going regard for the original purpose of the funds, a second organization called Grameen Kalyan was formed. The funds where transferred out of the Grameen Bank and into the new Grameen Kalyan. Grameen Kalyan would then make a non-interest loan to the Grameen Bank for the same amount. This would obligate the Grameen Bank to pay back the funds and the funds would be preserved for housing loans. Furthermore, if the money had been received in the form of a donation, it would be reported in the equity section of the balance sheet and subject to the free use or allocation by the board and management. Moved to Grameen Kalyan, the Grameen Bank's equity would have been reduced, but the funds' purpose would have been maintained.
In the industry, we would call Grameen Kalyan a level 2 lender. Usually cooperatives and MFIs overseas apply to private banks or government development banks for big loan (2nd tier or level) which would then be used to lend to their individual borrowers (1st tier or level.) This is a frequent transaction for institutions needing funds. In the case of the Grameen Bank, it already had the funds. WHO ADVISED the Grameen Board to take such action? Apparently it was their CPAs or Chartered Accountants who devised the strategy. Did they have weak management or no faith in the management that the funds could not be used correctly without having to go through such an elaborate scheme? Was it really safer? It might have been politically necessary to keep transparency in transactions and on the books. However, tier 1 borrowers can also default on loans granted by tier 2 insitutions.
Assuming the best intentions, it appears that the move was a good political move to maintain integrity within the Grameen Bank. It was probably to guard against embezzlements, co-mingling of funds, and incorrect usage of funds within the organization by board members and management. If Grameen Kalyan was completely controlled by Dr. Yunus and honest board members, they could assure integrity of the funds.
In the end, you can find a full explanation from Grameen as to what happened - this should be the end of the controversy. Find the explanation at: http://bit.ly/gJA9sd
And what about impact of crisis? Is it has a great decreased of competitiveness?
Posted by: pot lights | January 12, 2012 at 02:32 AM
I would like to add my 2 cents to the first two questions.
Posted by: http://the-term-papers.com/ | April 21, 2012 at 12:24 PM
subject to the free use or allocation by the board and management.
Posted by: Tour India | April 27, 2012 at 03:49 AM
Banking system very depends on policy of countries, so here we can expect devaluation according to foreign funds.
Posted by: research papers | April 28, 2012 at 03:35 PM