Bangladesh: Norad won’t back micro-lenders
Dhaka, Jun 19 (bdnews24.com) – In a major policy shift, the Norwegian aid agency will no longer fund new microfinance institutions after nearly 15 years as a key donor to the controversial anti-poverty scheme, especially in Bangladesh.
“With an exception for South Sudan, Norad will no longer finance new MFIs (microfinance institutions),” Norway’s state TV NRK said on Tuesday.
“Norad’s focus within microfinance will be in raising competence and building institutions that can improve the microfinance industry as a whole,” a foreign ministry spokesperson was quoted as saying in the TV report.
Norad has been an important donor in different countries to microfinance institutions for more than a decade.
The announcement from Oslo comes months after a Bangladesh government-instituted panel of inquiry pointed out massive mismanagement and institutional inefficiency in Grameen Bank’s way of running the micro-lending business.
A NRK documentary in Dec 2010 hit major headlines in Bangladesh when it raised questions about a 1998 decision of the Norwegian authorities to classify correspondences with Muhammad Yunus.
The then Norwegian ambassador in Dhaka objected to Grameen’s transfer of funds to an unknown sister concern without consent of the Norad.
The ambassador also lodged a strongly-worded complaint with the Bangladesh government about the Grameen Bank’s failure to follow agreed guidelines in using the tens of millions of dollars that Norad had given the Yunus-run bank.
Yunus then took the issue to Oslo and was able to secure a deal marking these correspondences ‘confidential’.
The Dec 2010 NRK documentary by Danish journalist Tom Heinemann revealed those documents, leading to inquiries in Bangladesh into the Grameen operations and removal of the Nobel laureate as its chief executive.
Yunus put up a robust defence backed by local and international media but lost a crucial legal battle in Supreme Court to retain his job as the Grameen managing director and head of the massive Grameen empire he had ruled for years with absolute authority.
Tuesday’s TV report said Norad was also responding to the latest research on the effectiveness of micro-credit as an anti-poverty tool.
“Norad is well aware of the new research in the microfinance area, including the systematic reviews.
“Norad pays close attention to the global trends within microfinance, and this includes research on the effects of microfinance,” the TV report said.
“Norad is well aware of the discussions that go on, on the possible need for credit checks, a possible credit register, regulations of the sector on national level and new systems to ensure openness and transparency in the sector,” the foreign ministry spokesman in Oslo said.
Norad works under the umbrella of the ministry and is not allowed to give public statements on such issues.
“This shift of focus away from directly funding projects, reflects the development in the global microfinance sector, with more competition and the addition of commercial capital,” Trond Viken, the spokesman, said.
“Many of the established microfinance institutions (MFIs) are making money of their own these days, and do not need government funding to manage,” according to the Norwegian TV report broadcast on Tuesday.
“Commercial players are entering the scene as well.
“Some examples of this trend are the insurance company Storebrand and the investment company Ferd from Norway.
“The need for funding in form of development aid budgets has decreased.”
The state-run NRK in its report spoke of its failure to quiz the country’s former minister for international development who was in office when the TV station took the lid off the decade-old Grameen fund transfer controversy.
“NRK has on several occasions tried to interview former Norwegian minister of development and environment, Erik Solheim, regarding his attitude towards microfinance.
“We have especially wanted to ask him about the relationship between Nobel Peace Prize winner Mohammad Yunus and Grameen Bank on one side, and Norad on the other.
“Among other issues, NRK wanted to know why Norwegian authorities for several years did not publish that there had been controversies over the transfer of Norwegian aid money between two Yunus-controlled companies at the end of the 1990s.”