Microfinance guru Muhammad Yunus faces removal from Grameen Bank

Microfinance guru Muhammad Yunus faces removal from Grameen Bank

BUS463B – Business and Organizational Management

California Baptist University

Muhammad Yunus, the “father of microfinance,” founded the Grameen Bank of Bangladesh in 1983 on the principle that credit is a basic human right (Ramesh, 2007). He is known as the “banker to the poor.” Professor Yunus is a world-renowned entrepreneur, economist, and a leader in the fight to end global poverty. He is quoted as saying, “When we want to help the poor, we usually offer them charity. Most often we use charity to avoid recognizing the problem and finding the solution for it. Charity becomes a way to shrug off our responsibility. But charity is no solution to poverty. Charity only perpetuates poverty by taking the initiative away from the poor. Charity allows us to go ahead with our own lives without worrying about the lives of the poor. Charity appeases our consciences (Yunus, 2003).” This quote demonstrates how passionate he feels about addressing the issue of global poverty. Professor Yunus is a transformational leader who has had a positive influence on the landscape of modern economics. His vision and revolutionary approach to help alleviate poverty has inspired a global microcredit crusade reaching out to millions of poor people worldwide. His work in helping the poor and reducing poverty has resulted in him being only one of six people in the history of the world to receive the Nobel Peace Prize, Presidential Medal of Freedom and Congressional Gold Medal. His micro-lending model has been copied in developing countries around the world. He has published his work on microfinance and social business in several books to include, “Banker to the Poor,” “Creating a World Without Poverty,” and “Building Social Business (grameen.org, 2020).”

As a transformational leader and the managing director of Grameen Bank, Muhammad Yunus possessed both organizational power and personal power. His power combined with his valuable leadership characteristics have helped make him a very effective leader. As a result, he has been very successful in his mission to help the poor and fight global poverty. The first type of power that Professor Yunus possesses is legitimate power. He used this power to appeal to the Bangladesh government after facing plenty of opposition from commercial banks in his attempt to get the support needed for his microlending concept to the poor. Yunus kept appealing to the government to allow his bank to convert into a special bank under separate monetary policy. Finally, all of the hard work paid off and the bank for the poor was born (Yunus, 2007). The next type of power that he possesses is expert power. Professor Yunus earned his Ph.D. in economics from Vanderbilt University. He went on to teach economics at the University of Chittagong in his home country of Bangladesh. Professor Yunus became an expert and the “father of microfinance,” through firsthand experience. His personal characteristics of selflessness, humility, and compassion led him to visit with poor people from nearby local villages. His goal was to study their poverty so that he could understand it more clearly. This experience allowed him to discover that offering people small loans for self-employment helped them generate income through skills that the borrowers already possessed. It was through these frequent trips to nearby villages that Professor Yunus gives credit to discovering the fundamentals that were essential to establishing Grameen Bank (Yunus, 2003). Another type of power that he possesses is referent power. One could make the case that Professor Yunus’s entire body of work exemplifies this type of power. His work to help the poor has earned him world renowned recognition.

Despite his prominence, in 2011 Muhammed Yunus was faced with the issue of being ousted from his position as the managing director of the bank that he founded (Burke, 2011). If there is a character weakness for Muhammad Yunus it is his pride. Critics see him as a person who does not tolerate criticism of his management style. This may have been what led to his demise and fall from being in charge at Grameen Bank. Up until 2007, Professor Yunus mostly stayed clear of politics, but in that year, he decided to form his own political party to fight corruption, which is a widespread problem in Bangladesh. He was denounced by his critics, even his biggest supporters have described this move as a huge miscalculation. The small support base that he had quickly evaporated. He soon realized for himself the move into politics was a bad idea. His mission to form a political party was aborted, but it was too late, the damage had already been done. Prime Minister Sheikh Hasina has never forgiven him. She saw Professor Yunus’s move as an attempt to remove her from politics (Lawson, 2011). Supporters of Yunus say this is what led to the campaign to remove him from his position at Grameen Bank in early 2011. They believe this because the movement was mounted mainly by politicians. Bangladesh’s finance minister said Yunus should step down following alleged irregularities in operations. The prime minister accused him of treating Grameen as his own personal property and claimed the group was “sucking blood from the poor.” These attacks came at a time when microlending as a whole was facing increased political hostility (Burke, 2011). Government officials believed they needed to redefine the bank’s role and bring it under close regulation (Quadir, 2011). The central bank declared Professor Yunus past the age of retirement and ordered for his removal. They argued that in Bangladesh, the mandatory age of retirement for a public sector employee is sixty years old, at the time Yunus was already seventy (Pereira, 2011).

Responses to the influence attempts by the Bangladesh government and its campaign to remove Muhammad Yunus from his position as the managing director at Grameen Bank was met with resistance both internally and externally. Yunus ultimately denied any financial irregularities in operations with the bank and there was never any proof of there being any. Grameen’s board, which is mainly made up of borrowers, allows him to stay on as long as he is able to perform his duties. The bank released a statement stating they were taking legal advice and examining all the legal aspects of this issue. They added that they have duly complied with all applicable laws. It has also complied with the law in respect of appointment of the managing director. Grameen Bank said Yunus was staying on and it had not violated any rules (Quadir, 2011). They suggest that because Grameen Bank was founded under a special ordinance, only the board can remove him, not the central bank. Sam Harris, the director of the Microcredit Summit Campaign, believes the government of Bangladesh is overstepping its bounds because Yunus is perceived as a political threat (Pereira, 2011). Supporters of Yunus fear politicians want to bring Grameen under government control. They believe another motive to remove him may be the electoral advantages in controlling the bank itself, in which the government has a 10 percent stake, and the resources and popularity that may come along with it. An international campaign made up of high-powered supporters of Grameen Bank have come to the defense of Professor Yunus. They include the likes of Mary Robinson, the former United Nations high commissioner for human rights and one-time president of Ireland. She publicly condemned the campaign and attacks made against Yunus. Others include, James Wolfensohn, former World Bank president, Yeardley Smith, the French-born American actor, and Liam Black, a UK-based social entrepreneur. In a statement Black said, “It is vital that Grameen Bank remains an independent financial resource for the poor of rural Bangladesh. The bullying and insulting of Yunus as a ‘blood sucker’ and the pathetic attempts by the government to remove him on grounds of his age must stop (Burke, 2011).”

The consequences of the organizational politics that the Bangladesh government created within Grameen Bank ultimately ended with Professor Yunus deciding to comply with the request of the government and the central bank. He decided to relinquish his position as managing director at Grameen Bank to prevent becoming a negative, undue distraction to the bank and its work. The dismissal of Professor Yunus has sparked criticism from some of the country’s foreign donors, particularly in the United States (bbc.com, 2011). Yunus stated that when it was all said and done his only concern is that the bank continues to be totally committed to the mission for and with the poor (Burke, 2011).

Moving forward, since stepping down as the managing director for Grameen Bank, Professor Yunus’s legacy in the fight to help the poor and end global poverty has continued. Throughout the years Professor Yunus had a vision of growing Grameen from a bank into several enterprises, each created with the specific intention of reinvesting any and all profits back into benefiting the poor. In 2011, Yunus Social Business was created to focus on growing and financing social businesses worldwide. The organization takes on poverty from the ground up with tax-deductible donations and corporate innovation from the likes of companies such as Danone, Veolia, McCain, MAN and Tata (yunussb.com, 2020). In 2008, Professor Yunus decided to establish a microfinance bank in the United States, this led to the birth of Grameen America. Today, he is on the board of directors and serves as co-chair. The organization has grown tremendously since its beginning. Grameen America went from having 4 branches in 2 U.S. cities in 2010 to having 21 branches in 14 U.S. cities in 2018. He also serves on the Board of Grameen Research, which provides research, training and support in the field of microfinance (grameen.org, 2020). His continued efforts and the ability to motivate others to support his cause in the fight against global poverty demonstrates that Muhammad Yunus is a transformational leader who is committed to the cause of helping the poor, not matter what position he holds.