Dr. Muhammad Yunus, a Nobel Peace Prize laureate, enjoys international acclaim for his pioneering work in the field of microfinance. However, his reputation is far more complex within his home country of Bangladesh. A master of personal branding, using a web of strategies that can only be described as deceptive, to establish an empire centered around poverty alleviation.

Yunus has exercised considerable control over funds, directing them according to his discretion and cultivating connections with some of the world’s most powerful and influential individuals. Despite presenting himself as the trailblazer in microfinance, dating back to 1974 when he partnered with the Janata Bank and the University of Chittagong to provide small loans, there is controversy surrounding this claim.

During the same time period, other organizations such as BRAC and ASA had already initiated their microfinance programs in 1972 and 1978, respectively. This contrasting narrative raises questions about Yunus’s true contributions and his portrayal as a sole pioneer in the microfinance arena. Yunus, Grameen Bank, and Grameen Telecom have been facing legal charges for over a decade for breaking rules of engagement, tax evasion, embezzling its employees’ welfare fund, and misappropriating Tk3,000 crore from various affiliate organizations. There is a clause in Grameen Telecom, a company funded by Grameen Bank, that has a legal obligation to 5% of the profit will be shared among its employees which never happened. In light of the complaint, a case was filed under Sections 4, 7, 8, 117, and 234 of the Labour Act. Yunus who enjoys almost Hollywood Celebrity status in the West, received strong support from Western liberal elites including 106 fellow Nobel Laureates.

They urged Prime Minister Sheikh Hasina to stop the judicial procedures, even though she is constitutionally barred from doing so. A concentrated media effort from international media is going on in an effort to persuade public opinion that Yunus is a victim. But while the international arena celebrated him people of Bangladesh, mostly rural ones, had been the real victims of his endless pursuit of ego and greed. A government review committee published on 25 April 2011 numerous findings of blatant disregard of rules, shady business practices and misuse of funds.

THE BIRTH OF GRAMEEN BANK

After the initial success of his pilot project in collaboration with Janata Bank and Chittagong University was a success, the institution continued its operation by securing loans from other banks. During the martial law under Major General Hussain Mohammad Ershad on 2nd October 1983, the operation became a full-fledged bank under the Grameen Bank Ordinance 1983. Ron Grzywinski and Mary Houghton, who were bankers associated with ShoreBank, a community development bank based in Chicago, played a pivotal role in assisting Yunus with the formal incorporation of the bank. This support was made possible through a grant from the Ford Foundation. According to the ordinance, Grameen Bank members owned 60% of the shares and the Bangladesh Government other 40%. But in 1986, it was manipulated with an amendment where Grameen Bank members hold 75%. However, an investigation found that as of December 2010, the real share should have been 3.29% by the government and the rest 96.71% by Grameen Bank which is a direct violation of section 7 of the ordinance.

Findings by Advocate M. Mohsen Rashid states, “The paid-up capital of the bank may be increased by the Government from time to time under the authority of Section 7 (2) of the Grameen Ordinance 1983. This explicitly means that it is only the Government which in its discretion can increase paid up Capital. The power to increase the paid up capital vests singularly with the Government and none else. Meaning thereby that without government sanction or authorization the paid up capital cannot be increased. This is in slight deviation to the provision of Section 6 (3) where the authorized capital may be increased by the bank with the approval of the government. But for the increase of paid up capital the power vests exclusively with the Government. In this particular case, the paid up capital is being increased by the Bank on a daily basis having no regard for law. The Bank’s board or its shareholders have no authority whatsoever under the Grameen Ordinance to increase paid up capital. We have not found or seen or come across any document to show or suggest that Government has increased or authorised the increase of paid up capital of the bank.”

The Board of Directors of Grameen Bank is comprised of 13 members, including the Managing Director. Within this composition, 3 members, including the Chairman, are selected by the government, while 9 members are elected from among the bank’s shareholders. Additionally, the Managing Director holds a position on the board as a nonvoting member by virtue of their role. It is noteworthy that all 9 of the directors elected by the bank’s shareholders have limited formal education. However, there are concerns regarding their active participation and understanding of complex issues during board meetings. The board typically discusses important matters such as annual reports, significant documents, and contracts with national and foreign institutions. The review of board meeting minutes indicates that the shareholder-elected directors and some government-appointed members do not actively engage in decision-making or demonstrate a thorough grasp of the complexities involved. Furthermore, while there are procedures outlined for electing shareholder directors in the ‘Grameen Bank (Election of Directors) by-laws 1987,’ there is no mention of specific criteria or qualifications for directorship, such as a “fit and proper” test.

During the height of the antidictatorship movement in 1990 on August 14th a Second amendment was passed. As per the Grameen Bank Ordinance of 1983, the Managing Director was originally appointed by the government. However, in accordance with the 1990 amendment, the responsibility for appointing the Managing Director shifted to the Board of Directors, subject to prior approval from the Bangladesh Bank. Consequently, the Chairman of the Board of Directors, on August 14, 1990, requested the approval of the Bangladesh Bank to appoint Dr. Muhammad Yunus as the Managing Director. Bangladesh Bank issued no objection to the appointment of Dr. Muhammad Yunus subject to the following conditions:

SHREWD ASCENT AS MANAGING DIRECTOR

During the height of the antidictatorship movement in 1990 on August 14th a Second amendment was passed. As per the Grameen Bank Ordinance of 1983, the Managing Director was originally appointed by the government. However, in accordance with the 1990 amendment, the responsibility for appointing the Managing Director shifted to the Board of Directors, subject to prior approval from the Bangladesh Bank. Consequently, the Chairman of the Board of Directors, on August 14, 1990, requested the approval of the Bangladesh Bank to appoint Dr. Muhammad Yunus as the Managing Director. Bangladesh Bank issued no objection to the appointment of Dr. Muhammad Yunus subject to the following conditions:

• The terms and conditions of employment of the Managing Director shall be regulated by the regulations made as per Article 14(4) of the Grameen Bank Ordinance of 1983;
• The Board of Directors shall make regulations according to Article 36 of the said Ordinance, and these will come into after publication in the government gazette;
• If the terms and conditions of the appointment of the Managing Director made by the said regulations are not similar to the present terms and conditions, fresh approval of the Bangladesh Bank must be obtained.

According to the rules of government employment, a managing director cannot cross the limit of age 60. When Yunus was 59 years old, during the 52nd meeting of the Board of Directors held on July 20, 1999, a resolution was passed indicating that Dr. Muhammad Yunus would continue to serve as the Managing Director until the board made a different decision. The minutes of this 52nd meeting of the Board of Directors hold significance. The minutes of the 52nd Board of Directors meeting are noteworthy for the following reasons:

“The Board of Directors has not specified any time limit on the appointment of Professor Muhammad Yunus as Managing Director. It is hereby decided that unless the Board of Directors take another decision, Professor Muhammad Yunus shall continue as Managing Director. To avoid future problems in the appointment of Managing Director, let necessary actions be taken to prepare regulations with the advice of Legal Advisors in the light of the Grameen Bank Ordinance “

This was a blatant disregard of the Ordinance by taking a statutory public authority as a private organization. On November 19, 2001, a Regulation concerning the appointment of the Managing Director was published in the Bangladesh Gazette. The following are notable among the terms and conditions:

• The appointment of the Managing Directors shall be contractual;
• The Board of Directors shall specify the duration of appointment of the Managing Director in the letter of appointment. However, the duration shall not exceed five years. The Board of Directors may renew the appointment after the expiry of the duration of the appointment. The terms and conditions of appointment of the Managing Director may be newly made at the time of renewal of appointment.
• There shall be no specific limit on the age of the Managing Director. The Service Rules of Grameen Bank shall not be applicable to his case.

As per the no objection letter issued by Bangladesh Bank on August 25, 1990, it was stipulated that if there were any variations in the terms and conditions of the Managing Director’s appointment in new regulations, obtaining reapproval from Bangladesh Bank was necessary. However, it appears that this requirement was not adhered to. The Regulation for the appointment of the Managing Director in 2001 states that the Board of Directors should specify the term of service in the appointment letter, and this term should not exceed five years. Additionally, it allows the Board to reappoint the incumbent to the same position after their term has expired. However, no new appointment letter has been issued since the issuance of these regulations, which dates back to 1990. This situation appears to be in violation of Article 14(4) of the Grameen Bank Ordinance. Moreover, there are concerns that the 2001 regulations governing the appointment of Managing Directors may have been enacted with questionable intentions.

It’s important to highlight that the Managing Director of Grameen Bank is considered a Public Servant in accordance with the definition provided in Section 21(12)(ii) of the Bangladesh Penal Code of 1860. Additionally, as per Article 152 of the Constitution of Bangladesh, the Managing Director holds the status of a Public Officer. Based on a thorough examination of multiple sources, records, and testimonies gathered by the Review Committee of 2011, it has been determined that Dr. Muhammad Yunus significantly breached the terms and conditions of his service as a Public Servant in the following ways:

• Frequent absence in the place of work as a full-time public officer;
• Foreign travel without the permission of proper authorities;
• Taking funds in his own name from abroad without permission;
• Failure to represent himself as a full-time Public Officer of Grameen Bank when building up various affiliated companies and institutions.

On 2011, after the central bank review committee posted its findings, Yunus was fired from Managing Director role 11 years after his appointment. The legal battle was fiercely fought by Grameen Bank in the court and media. Notable big names like US Secretary of State John Kerry and Hillary Clinton issued statements supporting Yunus notwithstanding all the laws Grameen broke and legal loopholes the Nobel winner jumped through. On 8 March 2011, the High Court confirmed Yunus’s dismissal.

THE LABYRINTH OF GRAMEEN SHELL COMPANIES

Since its inception back in 1983 Grameen Bank received donations and loans from international organizations like IFAD, NORAD, SIDA, CIDA, USAID, and Ford Foundation. According to that Ordinance, the objective of Grameen Bank is to offer credit facilities to the rural landless. Instead, Yunus started two not-for-profit companies Grameen Fund in 1994 and Grameen Kalyan in 1996 with 49.1 Crore Taka and 44.25 Crore Taka respectively. These companies were not established under the Ordinance. Using these funds as equity or loans, Dr Yunus created 34 other mostly for-profit companies registered under The Companies Act of 1994. In all the companies Yunus and senior officials from Grameen Bank served as Chairman or Director of the board while still being a fulltime employee exposing each company to a massive scale of insider trading. Yunus also started 11 other entities at home and abroad. Many of these companies were closed for business by the early 2000s and merely existed as shell corporations.

In November 2010, the Norwegian Broadcasting Corporation (NRK) broadcast a documentary titled “Fanget I Mikrogjeld” or “Caught in Microdebt” by Danish Newscaster Tom Heinemann exposing the unethical nature of these fund transfers and their possible implications. The documentary found that Yunus transferred almost 100 million Dollars of European origin from Grameen Bank to Grameen Kalyan. Norwegian Agency for Development Cooperation or NORAD’s donation of 219.6 Crores taka to Grameen Bank was also transferred to Grameen Kalyan.

Under an agreement between the Governments of Bangladesh and Norway aimed at expanding Grameen Bank’s activities, Grameen Bank received loans totaling 39.83 crore Kroner or 219.60 crore taka (at the exchange rate at the time of receipt) from NORAD between 1986 and 1997. These loans were later converted into grants. Using the grants and low-interest loans received from NORAD and other donor organizations, Grameen Bank established a fund known as the Social Advancement Fund (SAF). The purpose of SAF was to enhance the well-being of Grameen Bank members and employees. By 1996, the funds transferred to SAF amounted to taka 44.25 crore. In 1996, the SAF had a balance of taka 44.25 crore, and the Revolving Fund (comprising grants from donor agencies) held a balance of 347.18 crore. On December 31, 1996, these funds were transferred to Grameen Kalyan, a separate company registered under the Companies Act. This transfer was documented through a contract between Grameen Kalyan and Grameen Bank, finalized on May 7, 1997. In Grameen Bank’s balance sheet, this transfer was recorded as a debit from the Revolving Fund and a credit to “Borrowing from Grameen Kalyan.” Conversely, Grameen Kalyan’s accounts reflected this transfer as a credit to the Endowment Fund and a debit to “Loan and Advance – Grameen Bank.”

On 8 January 1998, giving an explanation to NORAD Yunus wrote, “If the donation is kept in Grameen Bank as a revolving fund, eventually a vast amount of tax will need to be paid for increasing tax rates.” Thus, explaining the existence of the shell companies’ role in tax evasion. While under the protest of NORAD and the Embassy of Norway Yunus returned some funds to Grameen Bank, more than 70 million dollars remained in the web of the shell companies. Except for NRK many International media like The Washington Post, New York Times, The Guardian, and The Atlantic published reports regarding this web of unethical business practices. Yunus faced a legal challenge for evading 15 Crores 39 Lakh taka worth of taxes during FY 2011-2013. After getting convicted he was ordered to pay 12 Crores taka. Excerpts from the High court decision say,

“Extra Assistant Commissioner of Taxes (having been included in the meaning of ‘Deputy Commissioner of Taxes’ by section 2(23) of the Income-tax Ordinance, 1984 and hereinafter referred to as ‘the DCT’) of Circle-127, Taxes Zone-6, Dhaka upon examination found that the assessee on several occasions made various amount of gifts to 03 (three) Trusts, which are subject to the gift tax having been imposed under the Gift Tax Act, 1990. Accordingly, the DCT issued notices under section 7(2) of the Gift Tax Act, 1990 asking the assessee to submit his returns in accordance with the provision of section 7 of the Act, 1990; in reply, the assessee submitted his returns on 05.12.2013 in accordance with the provision of section 7(1) of the Act, 1990 for the assessment years, 2011-2012, 2012-2013 and 2013- 2014, respectively, claiming exemption under section 4 (chha) and (ja) of the said Act. The DCT concerned upon examination of the record and relevant 4 provisions of law rejected the contention of assessee and thereby made 3(three) separate assessments on 26.01.2014 for the assessment years, 2011-2012, 2012-2013 and 2013-2014, respectively, computing total taxable gift amount for year 2011-2012 the assessment at Tk.61,57,69,000/- for and demanding applicable gift tax of Tk. 12,28,74,800/-; for the assessment year 2012-13 total taxable gift amount was computed at Tk.8,15,00,000/-, demanding applicable gift tax of Tk.1,60,21,000/- and for the assessment year 2013-14, the taxable gift amount was computed at Tk.7,65,00,000/-, demanding applicable gift tax of Tk. 1,50,21,000/-.”

The most serious problem of this whole operation is again the clause that funds of Grameen Bank can only be used to give credit to landless rural people. But we can see from the list of companies that most had nothing to do with that. The most successful grant from this fund was given to Grameen Telecom which is a minority shareholder of Grameenphone, the country’s largest mobile network operator.

Dr. Yunus held the position of a full-time Managing Director at Grameen Bank, which categorizes him as a public servant. However, there are instances where he has identified his profession differently in various organizations. In the Memorandum of Association and Article of Association of

• Grameen Cybernet Limited and Grameen Bebsa Vikas, he listed his profession as a businessperson.
• For Grameen Trust, he declared his profession as a professor
• In the case of Grameen Udyog, he identified himself as the Managing Director of Grameen Bank.
• Notably, for Ganoshasthya Grameen Textile Mills Limited, he provided his address as Medical College Road, Panchlaish, Chittagong, rather than his address at the Grameen Bank Complex in Dhaka.

These variations in his declared profession and address across different organizations raise questions about his official roles and affiliations.

THE MONEY TRAIN: GRAMEEN TELECOM AND GRAMEEN PHONE

The biggest money gravity in this whole web is centered on Grameen Telecom, which was started with 100% investment from Grameen Kalyan with 53.26 crores Taka. Grameen Telecom has a 34.2% share of Grameenphone, the largest mobile service provider in Bangladesh. Other 55.8% of shares are held by Norwegian multinational firm Telenor and the rest of the 10% shareholding includes the General public & other Institutions. According to Grameenphone’s financial website for 2022 published on their website, the profit after tax was more than 30,091,598,000 taka and the total equity is 49,878,558,000 Taka. This puts Grameen Telecom’s equity value in Grameenphone at 17,058,466,836 Taka. Grameen Telecom was registered under the guarantee of Grameen Bank which legally it cannot do.

Grameen Telecom’s major operation was a project named Village Phone. The idea aimed to provide modern telecommunication services to underprivileged people in Bangladesh. To become a subscriber of a Village Phone, one had to first become a member of Grameen Bank. These mobile phones had relatively expensive billing rates and were offered with loans from Grameen Bank that were not particularly favorable. Once given a phone, subscribers were encouraged to provide services to people in the surrounding area, handling both outgoing and incoming calls. The project had no general impact on the rural population. In the late 2000s mobile phones and their rates got cheaper making them accessible to rural people anyway. At present it is rare to see any person in Bangladesh, even in the remotest area of the country without a mobile phone. That begs the question what non-profit work is Grameen Telecom doing with its profits?

On 28 August 2023, consequently, a group of eighteen workers of Grameen Telecom lodged a case against Yunus, who serves as the chairman of the company. As per the company rule the workers are entitled to get 5% of the total profit. If we count the financial statement of Grameenphone which will be at least 514,566,325.8 Taka. Grameen Telecom most recently published a press release where they tried to meekly defend the non-payment to its employees that as a non-profit registration, it cannot disburse profit dividends. But we can see that funds generated from the profit was transferred directly or indirectly to at least to further 15 other companies under Yunus.

GRAMEEN TELECOM PROVIDED EQUITY OR LOAN TO:

1) Grameen Udyog
2) Grameen Solutions Limited
3) Grameen IT Park Limited
4) Grameen-Danone Food Limited
5) Grameen Distribution Limited
6) Grameen Fabrics & Fashion Limited
7) Grameenphone
8) Grameen Healthcare Services Limited
9) Grameen Telecom Trust
10) Grameen Healthcare Trust Limited

Grameen Udyog further transferred funds to Grameen Textile Mills and Grameen Shikkha, Grameen Healthcare Services Limited Grameen Viola Water Limited, and Grameen Healthcare Trust Limited to BSSF Grameen Limited. Most of these companies have almost zero footprints in their relevant industries. It is clear as day and night that the business practices introduced and still practiced by Dr. Yunus can only be described as shady. It is only logical that the government should have a forensic auditory investigation aimed at all the companies that received the original Revolving Fund. The Government Review Committee commented,

“The affiliated companies created by Grameen Bank were created outside the ambit of the law. The irregular creation of such companies has created serious problems of law. These must be immediately regularized. Financial irregularity has occurred in the act of transfer of funds to GK. While the Norwegian government may be satisfied with the resolution of the matter upon reimbursement of the funds, the Bangladesh government cannot ignore the attempt to evade taxes.”

INTEREST IMPUTATION FOR MEGA PROFIT, BURDEN FOR POOR

Grameen Bank’s initial target was to empower the landless rural poor by providing micro-credit. But credit was given at a very high-interest rate. The government review report found that loans provided by Grameen Bank carried an effective interest rate of 20%. However, when factoring in mandatory expenses such as contributions to credit insurance, compulsory savings, and contributions to the construction of center houses, the effective interest rate could rise significantly, potentially reaching 27.05%. It’s worth noting that when borrowers made installment repayments, the interest was calculated on the reduced loan balance at a rate of 20%. This interest calculation method is considered to be at a simple rate, as it does not involve adding interest to the principal.

Moreover, compared to other micro-credit lenders in Bangladesh Grameen Bank does not provide any grace period for its borrowers. During its inception time of Grameen Bank the per capita income of Bangladesh was 278 US Dollars, when Yunus was providing the Revolving Fund marked for microfinance to his other entities in the 1990s that was from 300 to 400 US Dollars. In his documentary, Tom Heinemann showed the inverse effect of Grameen Bank’s high-interest rate on people beyond the poverty line.

The Daily Asian Age published a news on 17 December 2017 that a tragic incident occurred in West Khas Kaulia village of Chouhali upazila in Sirajganj, where a 28-year-old housewife named Jarina Khatun reportedly took her own life by self-immolation. This devastating act followed her family’s inability to meet the loan installments owed to a local branch of Grameen Bank. The family was obligated to make weekly payments of Tk 750 to repay the loan that had been taken under Jarina’s name. The mounting financial strain had left Jarina deeply distressed, exacerbated by increasing pressure from Grameen Bank employees demanding repayment. Jarina set her alight after her husband left home on Saturday following an argument over the loan installment.

While Grameen Bank charged a higher interest rate with no charges, it transferred the revolving fund for microcredit with an imputed interest rate to fund its affiliated companies. The government review committee found that “Serious violation of law has occurred through the transfer of funds obtained as grants from donors by using the goodwill of Grameen Bank to the affiliated companies. It has severely damaged the interest of Grameen Bank. There is a need to balance the business profitability with the social advantages of financing affiliated companies. More transparency must be ensured in the accounting of the affiliates.”

ALLEGATIONS AGAINST YUNUS

A case was filed after the ACC investigation against the accused found ‘the truth of the allegations of embezzlement and money laundering’. Yunus was accused of ’embezzlement and money laundering’ of more than Tk 25 crore 22 lakhs from the workers. The defendant showed that a settlement deal outside of court on 9th May 2022 was documented. The case also alleged that the workers’ dues were transferred to the bank accounts of several union leaders without informing them before the dividend was distributed.

The allegations against Grameen Telecom are that five per cent of the dividend reserved for distribution among the employees has been lost through irregularities, six percent has been illegally deducted in the name of lawyer’s fees and other fees while paying the dues of the employees, two thousand 977 crores from the Grameen Telecom company. 45 crores 52 lakhs 13 thousand 643 including transfer as bank of various subsidiaries for money laundering purpose and embezzlement of 45 crores 52 lakhs 13 thousand 643 including interest allocated to workers welfare fund .

Dr. Nobel laureate economist has donated 76 crore 73 lakh 34 thousand taka to three institutions named Yunus Trust, Yunus Family Trust and Yunus Center Trust. Yunus. The Deputy Commissioner of Taxes imposed 15 crore 39 lakh 16 thousand 800 taka in the three fiscal years from 2011 to 2013.

Grameen Telecom, a company controlled by Yunus, filed its annual returns with RJSC with false statements. Grameen Telecom has stated in their annual return, that no dividend has been distributed from the company. This statement is completely false, as thousands of crores of rupees of dividends have been distributed to Grameen Kalyan from Grameen Telecom over the years. Such false statement in the annual return is a punishable offense under Section 397 of the Companies Act, 1994.

Since Grameen Telecom has transferred its dividend to Grameen Kalyan it has lost the status of a non-profit company under Section 28 of the Companies Act and the license of Grameen Telecom is voidable under Section 28. According to the law, the Registrar of Joint Stock Companies and Firms (RJSC) has the authority to cancel this license.

A CALL FOR JOINT INTERNATIONAL INVESTIGATION

The concerning revolving fund of almost 100 million US Dollars was mostly collected from government agencies like IFAD, NORAD, SIDA, CIDA, and USAID. The funding of these agencies comes from ordinary taxpayers of Norway, Sweden, Canada, and the USA. It can be strongly stated that Dr. Yunus’ Nobel reward or his social status in Western society does not make him immune to the law. On August 28, 2023, a letter addressed to Prime Minister Sheikh Hasina, signed by 108 Nobel winners was released by a Chicagobased PR firm who firmly defended Dr. Yunus and called for seizure of judicial processes against him. The next day PM in a press conference said, “I call upon those who have made this statement to send experts, lawyers and examine all the documents submitted against him (Prof Yunus) in the court to see whether there was any injustice or inconsistency. Otherwise, our country has laws, courts, labor laws, labor courts and laws will take its own course.”

“I call upon those who have made this statement to send experts, lawyers and examine all the documents submitted against him (Prof Yunus) in the court to see whether there was any injustice or inconsistency.”

–SHEIKH HASINA

It is not only the poor people of Bangladesh who were deceived by Yunus, the people whose taxes paid for the funds were too. The celebrity status of Yunus and his comprehensive PR strategy might be clouding many from knowing the true facts regarding his controversial business practices. Rather than interfering in Bangladesh’s independent judicial system not knowing the full facts the Nobel winners and global leaders should ask their own governments to help look into whether their taxpayer’s money was misappropriated or not.

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