Microcredit Pioneer’s Troubles

One of the founding leaders of one of the most promising nonprofit innovations—microcredit—in years, is experiencing some difficulties, as reported by the New York Times.

An excerpt.

“DHAKA, Bangladesh — Any other year Muhammad Yunus, the Nobel Peace Prize laureate and a pioneer of microcredit, would be in Davos, Switzerland, this week. For years he has been celebrated at global gatherings like the World Economic Forum there for helping move millions of impoverished women toward a better life through tiny but transformational loans.

“Instead, he was in court again on Thursday, facing accusations, considered frivolous by most accounts, that one of his nonprofit companies adulterated vitamin-fortified yogurt. On Jan. 18, he was summoned to a rural courtroom to face charges of defamation lodged by a local politician.

“Microcredit, the idea that Mr. Yunus popularized as a path out of penury for those long excluded from the banking system, has increasingly come under scrutiny. Scholars have cast doubt on its effectiveness in fighting poverty, and politicians and other critics accuse microfinanciers, many of whom, unlike Mr. Yunus, profit from the loans, of getting rich off the poor.

“Now, the government of Bangladesh has ordered a wide-ranging inquiry into the microfinance institution he founded 34 years ago, Grameen Bank, after a Norwegian documentary accused him of mishandling donors’ money. Norway’s government has said no money was misused. Still, Mr. Yunus’s troubles will deepen what has become a global crisis in microfinance that threatens to undermine the very concept — small loans to poor people without collateral — on which his reputation rests.

“Long accustomed to adulation at home and abroad, suddenly, at 70, Mr. Yunus, Bangladesh’s best-known citizen, finds himself very much on the defensive. In an interview at his office here, Mr. Yunus seemed stunned and deeply stung.

“There is some kind of misinformation,” he said, his voice trailing off. “I shouldn’t say more.”

“A pause.

“Every word I say will be held against me,” he said finally.

“On one level, his troubles seem to be largely political. Mr. Yunus, who leads a spartan life, has for decades floated well above the muck of Bangladeshi politics. Then in 2007, while a caretaker government backed by the military ruled Bangladesh, he waded in, egged on by supporters who argued that his leadership was needed in a time of crisis.

“He declared in an interview that Bangladeshi politics were riddled with corruption. He floated a short-lived political party. Bangladesh’s political class did not take kindly to being lectured by the Nobel laureate. The steely leader of one of the main political parties, Sheikh Hasina Wazed, took umbrage, analysts say.”