Muhammad Yunus: Probably Not a Fraud!


Here's a game to start off the 4-day work week: A shiny dime to the first person who finds a point in this profile of Muhammad Yunus. Tom Bethell is a fine writer (John Nye reviewed Bethell's The Noblest Triumph in 1999) and The American is a smart magazine, but the points of this piece seem to be:

1: Muhammad Yunus's Grameen Bank doesn't turn a profit and couldn't thrive the way it does without deep-pocketed charitable supporters.

2: Bethell had some trouble finding this out.


Jonathan Morduch, a professor of public policy and economics at New York University, writing in the Journal of Economic Literature, said in 1999 that "most [Grameen] programs continue to be subsidized directly through grants and indirectly through soft terms on loans from donors." The best-known microcredit programs "cover only about 70 percent of their full cost." Grameen, he wrote, "is in fact subsidized on a continuing basis."

So I guess that was what was on my mind. If you lend money at 20 percent and everyone repays, you don't need guilt-edged money from the West Coast. Microcredit is such a fashionable cause that maybe Yunus has all along been a high-class beggar himself, taking his bowl around to Bill Gates, Sergey Brin, and Larry Page, and using the proceeds to pretty up his balance sheets.

But what's the high crime? Bethell isn't suggesting that Yunus is getting rich off his high interest rates and covering it up, is he? The strongest allegation he makes is that (cue John Carpenter piano theme) the bank gets money from the U.N. Probably.

It has a United Nations feel to it, and as Jeffrey Tucker pointed out, the UN International Fund for Agricultural Development provided Grameen with its first major loan and "has consistently pumped money in ever since." When Yunus won his prize, the UN agency boasted in a press release that from 1981 to 1995 it had "provided capital to the Grameen Bank through three projects." I began to harbor dark suspicions that the Grameen Bank was a UN front, or at least may have started out that way.

The best counter-intuitive slam of Yunus is still Tucker's piece in The Free Market. It's 12 years old and it's not entirely persuasive (contrast the "Ponzi" scheme Tucker opposes with the options of your average Bangladeshi), but more so than Bethell's Inspector Clouseau investigation.