An Update on Grameen Bank

Alex Counts is president, CEO and founder of Grameen Foundation, and author of several books, including Small Loans, Big Dreams: How Nobel Prize Winner Muhammad Yunus and Microfinance are Changing the World.

The ongoing saga of the confrontation between the Bangladesh government and its allies in the local media on the one hand, and Professor Yunus, the Grameen Bank and its 8.3 million borrower-owners on the other, has taken some surprising turns in the last 10 days.  On April 20, representatives of Grameen Bank’s employee association held a well-attended press conference, covered by The Daily Star and other print and electronic media, where they presented the signatures of 20,103 colleagues who urged the government to either allow Prof. Yunus to remain as Managing Director or, failing that, to appoint him as Chairman of the Bank’s Board of Directors.  This follows a similar effort by the borrower-owners of Grameen Bank, 3.7 million of whom signed hastily circulated petitions several weeks ago demanding that Prof. Yunus be allowed to remain as the bank’s chief executive.

Professor Muhammad Yunus listens to some of Grameen Bank's borrower-owners at a local Center meeting.

More recently, the so-called “Review Committee” appointed by the government to probe into the affairs of Grameen Bank and its sister organizations submitted its report – spanning more than 100 pages, according to some sources – to the Minister of Finance.  While the report has not been officially released, portions of it have been leaked to government-aligned media outlets.

Soon after receiving the report, the Finance Minister commented on it to the press.  His two principal messages, as covered by the AFP wire service, were that there was no improper diversion of Norwegian aid funds in the 1990s, as had been reported in the media, and that Grameen not only did not charge “excessive” interest rates, but that it in fact charges the lowest rate of interest among microfinance organizations in the country.

Neither of these “findings” were surprising to anyone who has been following this story closely and without bias, but it was noteworthy nonetheless that a government-sponsored commission publicly affirmed these facts.  However, this did not stop hostile elements in the Bangladeshi media from seizing on the submission of the report to make new unfounded allegations against Professor Yunus. This has prompted Grameen Bank to issue a detailed “Response to the Various Issues Raised in the Review Committee Report as Reported in the Press“.

With the government-appointed committee finding that two often-repeated criticisms of Grameen Bank had no merit, hopes are rising that around the time of an upcoming Supreme Court ruling (expected May 5), Bangladesh’s judiciary or perhaps the leadership of the ruling party will put forward some kind of plan that will respond to the desires of Grameen Bank’s employees, clients and nine elected Board members to ensure the continued involvement of Prof. Yunus.  That would be welcome news and enable everyone to briefly celebrate and then get back to the work at hand – reducing the grinding poverty that remains the daily reality for millions of families in Bangladesh and around the world.

Those interested in this issue might also want to listen to a special donor update that Alex conducted by conference call on March 23, 2011. In it, you’ll hear a brief summary by Alex of the situation, as well as an enlightening question-and-answer session where Alex gives his views on the causes of the government’s actions, possible scenarios going forward, what this means for the microfinance sector as a whole, and how changes at Grameen Bank could affect Grameen Foundation.

Attending Grameen Foundation’s Spring 2011 Gala

Smita Satiani is a guest blogger who attended Grameen Foundation’s Spring 2011 Gala on April 5, 2011. She currently works for the Clinton Foundation’s Economic Opportunity Initiative in Harlem, New York.

Grameen Foundation’s Spring 2011 Gala was held at 583 Park Avenue in New York City, and I was grateful to have the experience of attending such an inspirational and eye-opening event. The evening kicked off with a moving video message from Nobel Peace Laureate and Grameen Bank founder Muhammad Yunus, who electrified the room and opened the door to a night of ideas, knowledge sharing, and stories of success from around the globe.

After being treated to live entertainment from Ballet D’Afrique Djoniba, guests enjoyed messages from Paul Maritz, CEO of VMware and Chairman of Grameen Foundation’s Board of Directors, and Grameen Foundation President and CEO Alex Counts, both of whom illustrated their strong passion for microfinance and providing opportunities for individuals to escape poverty across the world. The Foundation also honored shoe designer Christian Louboutin for his “Peace of Shoe,” a limited-edition creation designed to benefit microfinance. (Grameen Foundation is a charity of choice for Christian Louboutin and received substantial funding through this promotion.) And Margaret Sirovatka, Vice President for J.P. Morgan’s Global Trade Advisory, gave a riveting personal account about her experiences as a volunteer in Tunisia for Grameen Foundation’s Bankers without Borders® program.

Paul Maritz, CEO of VMware and Chairman of Grameen Foundation's Board of Directors, talked to guests about the power of the "double bottom line" for microfinance institutions, and how Grameen Foundation's Progress out of Poverty Index enables them to measure how well they are meeting their social goals

The final remarks of the evening were from Dolores Torres, President and CEO of CARD Bank, located in the Philippines. Initially formed as a replica of Grameen Bank, CARD is now the largest microfinance institution in the country. I have long believed in the work of the Grameen Foundation, but there is truly no better proof of the power of microfinance than to hear a woman like Ms. Torres speak about her successes in providing access to capital to millions of women and families in the Philippines alone.

Will the Government of Bangladesh Ruin Grameen Bank?

Barbara Weber, who worked at Grameen Foundation from 2002 to 2006, was a Rotary International Ambassadorial Scholar in Bangladesh and is now working on her Ph.D. in depth psychology.

Bangladesh went from being dubbed the world’s basket case in 1973 by former U.S. Secretary of State Henry Kissinger to becoming a beacon of development innovation that the rest of the world has since sought to emulate, thanks in large measure to its pioneering in microfinance. This renown is fast turning to infamy, however, as political vendetta cannibalizes the very source of the nation’s well-deserved pride.

The country’s acclaim reached a crescendo in 2006, when the Nobel Peace Prize was awarded to Grameen Bank and its founder, Professor Muhammad Yunus, for creating a system that has enabled the poor to pull themselves up by their boot straps. It has done this so effectively that its microfinance model has been studied exhaustively and replicated around the world.

What ensued next seems to have won Yunus the ire of the current prime minister, Sheikh Hasina. In 2007, the newly ordained Nobel laureate made a fleeting and ill-fated foray into politics in a vacuum that was created when a military-backed interim government began jailing operatives of the country’s top political parties. Sheikh Hasina herself was temporarily in exile and charged with masterminding crime.

Prof. Yunus and most of the Board directors who represent the borrower-owners of Grameen Bank tour the streets of Oslo the day before receiving the Nobel Peace Prize in 2006.

Some saw this as a potential turning point for a country that had topped Transparency International’s list of the most corrupt governments in the world. Bangladesh was number-one on that list for five consecutive years. But when national elections were held in 2008, Sheikh Hasina – who had held the post of prime minister from 1996 to 2001 – again took office. Now, she and her party in power seem intent on systematically dismantling Grameen Bank.

In apparent collusion with the current government, the country’s highest court recently upheld the ouster of Grameen Bank’s founder as managing director. The Supreme Court will have one more opportunity to review the case in a ruling that is due on May 2. In the meantime, Prof. Yunus remains managing director of the Bank while the world watches attentively and awaits Bangladesh’s next move.

MOTECH: Making Nurses’ Lives a Little Easier

Jessica Osborn is the Business Development Manager for Grameen Foundation’s MOTECH initiative.

MOTECH (Mobile Technology for Community Health) is an initiative of Grameen Foundation, Ghana Health Service and Columbia University that uses mobile phone-based technology to improve the quality of pre- and post-natal care for Ghanaian women and their families. MOTECH has developed an information service called Mobile Midwife, which delivers time-specific voice or text messages to pregnant mothers and their partners and families, both before and after birth.  We have also built a simple Java-based application that enables nurses in rural Ghanaian health facilities to automate much of their record keeping and reporting, which used to take 4-6 days per month of their time. This application also makes it easier for nurses to identify patients who have missed certain care.

We recently sat down with some of the nurses who use our app. Here is what they told us.

A nurse describing how the app has helped with paperwork said, “It’s been good because it helps us with our reports. Sometimes our tallying gives us incorrect data. With the phones, we know the data that we get at the end of the month is correct. We used to have to pick lots of forms in different places and take them elsewhere, but now it’s much easier.”

Our Mobile Midwife service requires “pregnant parents” to provide a due date and their location when they register for the service.  The service then sends messages to parents when appointments are due – or overdue – to remind them to visit the health clinic for check-ups.  One nurse told us, “With MOTECH, we can contact our clients easily because we get messages listing our defaulters. Some of them also come to access services because MOTECH sends them messages telling them to come.”

Another nurse really appreciated the reinforcement that Mobile Midwife messages provided for his own outreach efforts: “When we see our clients for a child-welfare clinic, we gather them in a big group to educate them, but we don’t have time to do that 1-on-1. Often these meetings are big and noisy so not everyone picks up what you’ve said. That’s why MOTECH is good – it provides 1-on-1 information to them, along with personalized reminder messages.”

We really appreciate the cooperation we have received from the nurses of the Ghana Health Service in developing, testing and deploying MOTECH. The nurses provide critical healthcare services to remote communities, which is a challenging task. We’re happy to have the opportunity to make their work on behalf of Ghanaians a little easier.  Of course, all this is made possible through the generous contributions of supporters like you – we couldn’t create, implement and expand poverty-fighting initiatives like this without you.

No Single Solution When It Comes to Research

Alex Counts is President, CEO and founder of Grameen Foundation.

In addition to our commitment to excellence in social-performance management by microfinance institutions, exemplified by our championing of the Progress out of Poverty Index™, Grameen Foundation has long been committed to promoting a fuller understanding of research into the effectiveness of microfinance as a poverty-reduction strategy. We have published two reports, one by Professor Kathleen Odell of Dominican University in 2010 and an earlier one by Nathanael Goldberg (who is now with Innovations for Poverty Action), that attempted to summarize in simple terms what the evidence could tell us. (Though Grameen Foundation commissioned both reports, we exerted no editorial control over what either Odell or Goldberg wrote.) Both reports were well-received by practitioners, researchers, investors and policymakers alike.  David Roodman, a leading blogger in the microfinance industry, wrote that Prof. Odell did “a fantastic job” with her report, adding, “I applaud the Grameen Foundation for giving her such autonomy. The report reviews a good set of relevant studies. With concision and clarity, yet without jargon, it explains the pros and cons of various research methods, and the limitations of them all. And it draws balanced judgments. It is a model of public communication about social science research.”

"Measuring the Impact of Microfinance: Taking Another Look" is the latest report published by Grameen Foundation that examines the studies of the effectiveness of microfinance as a tool to alleviate poverty.

One of the most confusing and contentious issues covered in both reports is the controversy regarding the well-known Pitt/Khandker studies on the impact of three major microfinance institutions in Bangladesh, including Grameen Bank. In general, their research found many positive, statistically significant impacts on clients when measured against  comparison groups. Despite being one of the few microfinance impact-assessment research studies that has undergone a rigorous peer-review process prior to its publication in an academic journal (the Journal of Political Economy), it has been criticized as being flawed and unreplicable by other researchers using the same data. These criticisms have been leveled by NYU Professor Jonathan Morduch (a respected researcher) and Roodman (microfinance’s most widely read and respected blogger). Though I lack a deep understanding of econometrics (on which the Pitt/Khandker study relies), I have probed into this debate, as Odell and Goldberg did in their papers. Interestingly, I was alerted last year that an article that was supposed to conclusively prove that the Pitt/Khandker study was wrong was itself rejected from a peer-reviewed journal. It may still be published, though.

Most recently, Professor Pitt has published a detailed response to the criticisms of his original research with Khandker. He claims that Morduch and Roodman made errors of their own in their analysis of his data, and when those errors are corrected, the original findings stand up. The paper’s abstract states, “This response to Roodman and Mordoch seeks to correct the substantial damage that their claims have caused to the reputation of microfinance as a means of alleviating poverty by providing a detailed explanation of why their replication of Pitt and Khandker (1998) is incorrect. Using the dataset constructed by Pitt and Khandker, as well as the data set Roodman and Morduch constructed themselves, the Pitt and Khandker results standup extremely well, indeed are strengthened … after correcting for Morduch and Roodman errors.” Roodman has just published a preliminary response on his blog.

What are the main takeaways at this point?  First, in the world of social-science research, things are not always as they appear. Individual studies should be taken with a grain of salt, as all have their strengths and limitations. More than ever, I think the safest course is to reflect on more than two decades of research using experimental, quasi-experimental and non-experimental designs, as well as personal observations (for those of us who have spent time with microfinance clients) and qualitative research, such as that found in Portfolios of the Poor, a terrific book co-authored by Professor Morduch, and my book, Small Loans, Big Dreams.  Objective efforts to demystify research findings, such as the Odell and Goldberg reports and another solid treatment by Freedom From Hunger President Chris Dunford, should be reviewed by microfinance practitioners, investors and volunteers.

Finally, there is no “gold standard” in research, but rather a growing body of evidence that microfinance is an incomplete but improving strategy to address global poverty – one that can be made more effective by refining it based on available research, as well as by having regular feedback loops involving social-performance data that Grameen Foundation will continue to ensure becomes a part of our industry’s DNA.

Serving the Poorest in Indonesia

Jason Hahn is the Business Development Manager for ICT Innovation at the Grameen Foundation in Seattle.

UPDATE: 04/06/2011 We just released a case study on using Grameen Foundation’s Progress out of Poverty Index™ (PPI™) with PT Ruma to help them ensure they reach their goal of working with the poor and poorest.

In addition to Grameen Foundation’s activities in Ghana and Uganda that – with the support of our donors – fight poverty through the power of the mobile phone, we are also very proud of the innovative work we do in Indonesia, in conjunction with our local partner, the social business PT Ruma. Working with Ruma, our AppLab Indonesia initiative has built a network of 6,400 predominately poor village-based entrepreneurs who sell mobile airtime and other telecommunications products to their neighbors (and boy, do they sell – as of February they had reached more than 560,000 customers) and increase their income while doing so.

Of the entrepreneurs who remain in the program more than four months, about half double their income.  Increasing income is a significant goal as AppLab Indonesia and Ruma have worked together to use Grameen Foundation’s Progress out of Poverty Index to recruit the poor and poorest as entrepreneurs. More than 60% of the entrepreneurs working with Ruma are poor (living on less than $2.50/day), while 10% are the poorest of the poor (living on less than $1.25/day).

In a prior post, my colleague Heather Thorne emphasized the importance of partnerships to success in ICT4D projects.  We’re very grateful for the generous financial and technical support provided by Qualcomm’s Wireless Reach™ initiative, without which it would have been very difficult to accomplish this work.

In early April we will be breaking new ground with a series of mobile applications that will provide the poor, who may own a very simple mobile phone, with access to information they didn’t have before.  Sorry to be purposefully vague but we need to keep some surprises for the unveiling!  Watch this space for more information.