Key Highlights:
- On Sunday, May 26, Grameen Bank authorities had accused Muhammad Yunus and his associates of financial irregularities and corruption
- The ‘Grameen Bank Ordinance 1983’ stipulates that the bank’s lending services are reserved exclusively for landless poor borrowers
- In 1996, Yunus made another company, Grameen Samogree, the managing agent of PCL, allegedly transferring PCL’s profits to his two companies
On Sunday, May 26, Grameen Bank authorities had accused Muhammad Yunus and his associates of financial irregularities and corruption, submitting evidence and documents to the Anti-Corruption Commission (ACC). In response, the Yunus Center issued a rejoinder on May 30, denying the allegations raised by Grameen Bank.
Regarding the loan to Packages Corporation Limited (PCL), Grameen Bank disclosed that in the 1990s, during Dr. Yunus’s tenure as managing director, a loan of approximately 9.5 crore Bangladeshi Taka was granted to PCL, a Chittagong-based business owned by Dr. Yunus and his family, without adhering to the bank’s rules and regulations. Yunus, along with his father Dula Mia Saudagar, and his two brothers Abdus Salam and Muhammad Ibrahim, own the company.
You can also read: Grameen Bank Chairman Enacts Legal Seizure of Seven Entities
Moreover, significant details have surfaced in the report issued by the high-powered review committee established by the Bank and Financial Institutions Department of the Ministry of Finance. The exhaustive audit spanning 40 years from 1983 to 2023, conducted by a reputable auditing firm endorsed by Bangladesh Bank, also reveals extensive corruption involving Dr. Yunus.
How a Loan to Yunus’s Family Business Broke Trust?
In the agreement between Grameen Bank and Packages Corporation, owned by Yunus’s family, it stated the owners would not receive financial benefits like dividends, rent, or use of assets from Grameen Bank – everything would be given for free. After signing and transferring Packages’ plant and property to Grameen Bank, Packages was no longer under owners’ control with no further financial transactions with them.
Packages received a loan after the Grameen deal, not from Grameen Bank, but from SVCF (Social Business Venture Capital Fund) formed with donor funding to promote social businesses. However, immediately after the agreement (on 19-11-1991), Dr. Yunus illegally approved a loan of 11,50,000 from Grameen Bank to pay Packages’ debts to Janata Bank.
They claim this loan was from SVCF, which is actually Grameen Bank’s fund consisting of foreign aid and loans only allowed for lending to rural poor per the Grameen Bank Act. Yunus did not have legal right to lend to his own printing press. By waiving interest and principal on the loan, he benefited his private company while causing huge financial loss to Grameen Bank, breaking trust of employees and borrowers.
A look at Other Complaints Raised by Grameen Bank
Yunus and his family reaped significant financial benefits by directing work orders for Grameen Bank’s printing materials to their family-owned company, Packages Corporation Limited (PCL). They did so by supplying low-quality products at exorbitant prices, which was both illegal and unethical.
The ‘Grameen Bank Ordinance 1983’ stipulates that the bank’s lending services are reserved exclusively for landless poor borrowers. However, Yunus violated this law by extending a loan to his family-owned Packages Corporation Limited (PCL). When PCL defaulted on the loan, Yunus exploited his position to waive a substantial portion of the debt, thereby financially benefiting himself and his family, while causing significant financial harm to Grameen Bank.
Moreover, without informing the Board of Directors, Mr. Yunus, in his capacity as Managing Director of Grameen Bank, entered into a ‘Managing Agent’ agreement with Packages Corporation Limited, which was detrimental to Grameen Bank’s interests. He also assigned numerous Grameen Bank officers and employees to work for PCL and used Grameen Bank’s office facilities free of charge to support PCL’s operations, all for the benefit of his family-owned business.
What did Yunus Centre Say Against the Charges?
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The PCL agreement was valid for 25 years, during which Grameen Bank gave a total loan of Tk 9.66 crore to PCL. No financial gain was received by Professor Yunus and his family, the owners, from the agreement. The objective was to reduce Grameen Bank’s cost of printing materials, ensure quality printing, and timely delivery.
The owners handed over the printing plant to Grameen Bank without thinking about financial benefit. Yunus did not break any law. PCL received the loan from the SVCF (Social Venture Capital Fund) created with donors’ help. Grameen Bank’s pricing committee fixed prices lower than the market price.
There was no connection between the Yunus family and PCL’s financial operations, and the owner remained loan-free. Out of the Tk 9.66 crore loan, the unpaid amount being waived is Tk 7,22,000. Allegations of “abusing power to waive significant amounts to benefit the Yunus family” are baseless.
After several rounds of deliberation in board meetings, an agreement was reached by the Grameen Bank authority. It was the busiest period of Grameen Bank’s expansion, with branches increasing from 500 to 1000 in a short time, making timely delivery of printing materials monumental.
Proofs That Yunus Rigged the Rules to Benefit His Companies
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The Yunus Center is accused of hiding the fact that the contract between Grameen Bank and Packages Corporation Ltd (PCL) was signed for only 15 years, from 1990 to 2005. However, even after the contract expired in 2005, PCL continued to receive all printing works from Grameen Bank until 2020 when Professor Yunus was Managing Director.
In 1996, Yunus made another company, Grameen Samogree, the managing agent of PCL, allegedly transferring PCL’s profits to his two companies. It is claimed Yunus overcharged Grameen Bank for printing, fixing prices 30 to 40% higher than market rates.
For example, in 2008 Grameen paid TK 772 per loan-approval book printed by PCL, while in 2021 the same book cost only TK 6.05 from another printer, a reduction of BDT 1.67 per unit after 13 years. Grameen prints around 20 to 25 lakh such books annually.
More allegations include Yunus making unethical and illegal changes at Grameen to benefit PCL financially. In 1995, he reconstituted purchasing and price-fixing committees through memos 52/1995 and 53/1995 respectively, allegedly to influence procurement favoring PCL.
As per the contract’s Clause 16, if Grameen invested money in PCL it would be considered a loan. It is alleged Yunus waived the interest and principal on PCL’s debt illegally. The debt was TK 96.75 lakh principal and TK47.88 lakh interest (TK144.63 lakh total), with 16% interest till 1996 and 12% from 1997. In 2005, the interest was reduced to 5%, leaving only TK 7.22 lakh due, waiving TK 137.41 lakh.
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The saga surrounding Muhammad Yunus and the allegations against him by Grameen Bank authorities have unveiled a tangled web of financial intricacies and ethical breaches. While Yunus and his associates vehemently deny any wrongdoing, the evidence presented casts a shadow over his legacy as a pioneer of microfinance and social entrepreneurship.
As the dust settles on this controversy, it serves as a stark reminder of the fragility of trust and the importance of transparency and accountability in even the most revered institutions and individuals. The repercussions of these revelations will undoubtedly reverberate through the corridors of finance and social enterprise for years to come, underscoring the need for vigilance and integrity in the pursuit of noble causes.