Government of Bangladesh to Investigate Grameen Bank

The government of Bangladesh will probe Grameen Bank about the possible misappropriation of aid funds, the Wall Street Journal reports.

The decision comes nearly a month after a documentary film premiered on Norwegian state television that raised questions about where Norwegian aid funds awarded to Grameen during the 1990s had gone. Grameen quickly labeled the allegations a "total fabrication and baseless," while the Norwegian Ministry for Environment and International Development, in a report on its transactions with Grameen, absolved the organization of any wrongdoing.

In a news release in December, environment minister Erik Solheim said, "According to the report, there is no indication that Norwegian funds have been used for unintended purposes, or that Grameen Bank has engaged in corrupt practices or embezzled funds."

Despite the apparent vindication of Grameen, the government of Bangladesh has created a committee to review the bank's financial transactions and dealings with sister organizations and will issue a report on its findings in three months. Although it is an independent body, the committee will consult with other government agencies, including the Micro Credit Regulatory Authority, a body set up to regulate the microfinance industry in Bangladesh.

In November, the authority issued a circular asking microfinance providers in the country to cap their interest rates at 27 percent, which would mean a cap of 13.5 percent on the flat rates they offer to borrowers. According to M. Mosharrof Hossain, chairman of the Credit and Development Forum, an industry body in Bangladesh, the current situation in his country isn't conducive to microfinance. "The Grameen Bank investigations show that the government is just targeting microfinance institutions unnecessarily," said Hossain. "We ourselves borrow from commercial banks which charge us 12.5 percent to 13 percent flat rates. How can we function at a rate of 13.5 percent?"

Arlene Chang. "Bangladesh to Probe Microfinance Provider." Wall Street Journal 01/13/2011.