Friday, December 3, 2010

Muhammad Yunus, Banker of the Poor Exposed for Fund Diversion: The Documentary Trail

In a secret memo from 1998 beats the Norwegian Embassy in Bangladesh alarm: Peace Prize winner Yunus has quietly tapped the Grameen Bank -- the poor bank -- for 608 million aid dollars, and moved the money into a company that Norwegians have never heard of.

Burn-point documentary "Caught in the micro-debt" shows a completely different side than the microcredit Muhammad Yunus and his bank Prize-winning Grameen Bank portrays in public.

608 million dollar on aid balance - Focal Point - NRK

In the spring of 1998 was a very stormy period in the relationship between peace prize winner Muhammad Yunus and Grameen Bank on the one hand, and the Norwegian authorities on the other. The relationship has until now been unknown to the public and hidden in the confidential documents in NORAD archive.

But in Burn-point documentary "Caught in the micro-debt" now revealed how the 608 million kroner issued by Norway, Sweden and other countries with a stroke of the pen was transferred from the Grameen Bank to a newly established company with a completely different purpose than to provide poor women micro loans.

The transaction's purpose was, according to saute Laureate among other things that Grameen Bank would not have to pay taxes and to raise funds for the clean-profit corporations.

While NORAD tried to push the Nobel Peace Prize winner Yunus to reverse the transaction, selected Swedish aid authorities to sit still as a mouse to prevent the Grameen Bank's reputation was soiled.


Here is the detailed history of the conflict, based on a folder of secret stamped documents that Focal Point has been given access to the NORAD archive.

5. November 1997:

NOK 32.2 million transferred from Norad to the Grameen Bank, as the final figure, according to a series of agreements between the two parties.

This gives Norway a total of 400 million allocated to the "bank for the poor" in the period 1986-1997. Norway is one of the largest bistandsyterne the Grameen Bank and Muhammad Yunus, both of which ten years later in 2006 will be awarded the Nobel Peace Prize.

Later in the month discovers Officer Einar Landmark at the Norwegian Embassy in Dhaka, Bangladesh by chance a footnote to the accounts of Grameen Bank's annual report for 1996.

In the footnote it says that it made a deal to transfer hundreds of millions of aid compared with the Grameen Bank Grameen Kalyan, a company embassy never heard about.

The substantial amount involved in the transaction includes NORAD and other donor support to the Grameen Bank over many years.

3. December 1997:

The Norwegian Embassy in Dhaka called Muhammad Yunus to a meeting where the Prize winner will be asked to explain the transactions and the reasons for it.

Ambassador Hans Fredrik Lehne writes later in a confidential memo to Norad Director that peace award winner explanations and rationale for the transaction is not "clarifying and compelling." The ambassador pointed out the following:

"Yunus said that the main purpose of the transaction was to reduce tax abilities, and to secure funds for the members (...ed. REF note) of the Grameen Bank."

15. December 1997:

Embassy in Dhaka sends a letter to the Grameen Bank in which they ask for more ufyllende information and explanations. Again embassy a brief response "in a manner that was neither clarification or particularly trustworthy."

8. January 1998:

A letter signed Peace Prize winner Yunus, with various attachments, sent to the embassy in Dhaka. The letter reveals the scope and background to the transaction that the embassy by chance discovered:

A total of NOK 608 million assistance has been transferred from the Grameen Bank Grameen Kalyan, a company embassy never heard about. The money is taken from the so-called revolving funds of the Grameen Bank. These are funds that are created by development funds from Norad and other donors to provide mortgages and other types of micro loans to poor people in Bangladesh.

The agreement between Grameen Bank and Grameen Kalyan -- both companies led by Nobel Peace prize winner Muhammad Yunus -- was signed on 7 May 1997 and came into force with effect from 31 December 1996. On the same date as the transfer occurred, the same amount granted as a loan back from Grameen Kalyan Grameen Bank -- the bank for the poor.

10. February 1998:

Embassy in Dhaka, by Ambassador Hans Fredrik Lehne, turn the alarm about Grameen Kalyan case in a confidential memo to Norad's then director Tove Strand Gerhandsen. The paper summarized the transaction as follows by the ambassador and officer Einar Landmark:

"It has thus been made a bookkeeping transaction where the Grameen Bank has donated funds made available from donors and then to borrow them again. Ownership of the funds has thus shifted from the Grameen Bank Grameen Kalyan, Grameen Bank and .... debts to the Grameen Kalyan"..... .

In the secret memo makes it explicit that the Norwegian assistance has disappeared from the Grameen Bank is about 300 million.

The Norwegian branch represents almost half of the total on 608 million. Other donors who have been affected by the transaction, nobody knew about are SIDA, Ford Foundation, IFAD, CIDA, Kfw and GTZ.

But not enough. Embassy finds out that the purpose of Grameen Kalyan, among other things is to make loans and invest in companies both inside and outside the Grameen family. Through the agreement, Grameen Kalyan received income from interest payable by the Grameen Bank, and had the opportunity to demand repayment of the loan.

Drain money from the Grameen Bank has already come multinationals to good, turn Lehne and Landmark stuck in his note to the Strand Gerhardsen:

"Grameen Kalyan (have) been able to pull funds out of the Grameen Bank and using them for purposes other than they have been allocated by donors, and for other purposes than the Grameen Bank has an opportunity to provide these loans. Grameen Kalyan has already granted BDT 300 million (approximately NOK 50 million) from these funds (...) to partially finance the project to the cellular Grameen Telecom/ GrameenPhone."


50 million words had already gone to the GrameenPhone case officer at the embassy when the transaction is discovered in a footnote in the 1997. The same year, GrameenPhone was launched with great fanfare on the National Day of Bangladesh on 26 March.

The company, owned by Norwegian Telenor and Yunus, Grameen Telecom Company, has since been a tremendous success and the money machine for Telenor.

According to the Norwegian telecom giant Telenor, GrammenPhone has given a dividend of NOK 855 million over the past eight years.

In the note other than the public to Norad director, the Norwegian Embassy in Dhaka is clear in its ruling:

"Through the agreement with Grameen Kalyan, Grameen Bank transferred outline, and the ownership of these funds for Grameen Kalyan, and the revolving fund for mortgage ceased to exist. This is not acceptable."

Ambassador Lehne and Officer Landmark is not impressed or convinced by the arguments Muhammad Yunus provides for the establishment of the agreement between Grameen Bank and Grameen Kalyan.


In the letter dated 8 January 1998 Yunus writes in part that the Grameen Bank in 1998 no longer enjoy tax exemption, and that the bank would have paid 40% tax on profits if not agreement with Grameen Kalyan had been signed in 1997.

The tax argument commented as follows in the secret note to NORAD Director:

“At the time, support was granted a wild one from the Norwegian side hardly have accepted organisational structures to prevent the ordinary taxation of possible future economic gains.”

The embassy also writes that Yunus leaves "a confusing impression of the Grameen Bank's management's view of itself." The reason is as follows:

"Grameen Bank's management says it that it is possible that they will not exercise sufficient financial discipline to demand loans granted by the Grameen Bank (to the poor, ed REF note) to be repaid.

Consequently, they have found it expedient to give up the funds, and borrow them again, so that Grameen Kalyan that they borrow from, which is controlled by themselves, can exert the necessary force on themselves as leaders of Grameen Bank to be responsible in handling of loans. The argument may leave a question about repayment of loans of Grameen Bank is about to develop into a problem for management. When the need for the agreement is justified in terms of repayments of loans from Grameen Bank, can also be tempted to ask: Takes place in the re-organisation as an easy, almost selvbedragersk diversion to create the illusion of them even though it has been done about a big problem that requires a very different labor-intensive approach?"

Finally, concludes the note from the embassy in Dhaka to Norad Director Strand Gerhardsen that Norway should demand that the agreement between Grameen Bank and Grameen Kalyan void, that the amounts in the hundreds of millions returned to the Grameen Bank and that a revolving fund for mortgage restored.

3. March 1998:

Legal department in Norad write a memo -- stamped except public -- about the Grameen Kalyan case. Head of Section Sverre Melsom expresses his disbelief over the embassy has narrated in his note to Norad Director:

"Like the embassy, we are very surprised that no submission in advance for Norad (and any other donors) and also without the following information has been such significant change (...). It is outrageous that Norad even have to read to such changes by Century Studies in the audited financial statements that were first received long after the changes had taken place."

Section leader writes that the Legal Section supports the embassy's conclusions and claims to the Grameen Bank:

"However, one must not forget that the agreements regarding the assistance is between Norway and Bangladesh, so we consider it very important that the Ministry and the Finance, Economic Relations Division, will be apprised of and involved in the case at an early stage, and that collect their comments on the changes in management and organisational structure that Grameen Bank seems to have unilaterally implemented."

16. March 1998:

In line with the recommendation from the Legal Department held a meeting between the Norwegian Embassy in Dhaka and representatives from the Ministry of Finance in Bangladesh. In the confidential minutes from the meeting concludes Embassy with the following:

"After the presentation of the case of the embassy and in-depth discussion it was agreed that the agreement between Grameen Bank and Grameen Kalyan was in breach of the agreements between Bangladesh and Norway for support to the Grameen Bank."

Meanwhile, the embassy also warned the Swedish aid agencies (SIDA) on Grameen Kalyan case and asked Sweden to be with the requirement that all money should be returned from Grameen Kalyan Grameen Bank.

17. March 1998:

In a fax from Franck Rasmussen at the Swedish Embassy in Dhaka makes it explicit that Swedish aid agencies (SIDA) has supported a total of Grameen Bank with 210 million SEK during the period 1989 to 1993. Of these, 190 million earmarked for the revolving funds, and consequently transferred from the Grameen Bank Grameen Kalyan with Norad money and other international support.

Rasmussen writes, however, that SIDA is not going to support Norad's claim that the money be returned because it could damage the reputation of the Grameen Bank and the good thing:

"No one wants two make a big thing of this as It might angry the creditability of the Grameen family and pray that would detrimental to the whole cause."

18. March 1998:

The Norwegian Embassy in Dhaka writes a confidential letter to the Ministry of Finance in Bangladesh, where they maintain the criticism of the agreement between Grameen Bank and Grameen Kalyan.

Ambassador Hans Fredrik Lehne concludes by asking the authorities take the necessary steps for the return of the 608 million crowns were transferred to Grameen Kalyan.

1. April 1998:

A new meeting will be held in Dhaka between the embassy and Yunus and other leaders of Grameen Bank. The meeting is being held on the initiative of the Grameen Bank, which a week earlier learned about the embassy's letter to the Ministry of Finance in Bangladesh.

Nobel Laureate Yunus disagrees that Grameen Kalyan case represents a breach of the agreement between Norway and Bangladesh, while the embassy maintains its view.

According to the confidential meeting minutes, however, the embassy stressed "the long-term and good cooperation between the Embassy/NORAD and the Grameen Bank, and maintained that the matter should be resolved as soon as possible so that it would not be known and used to damage the Grameen Bank":

"It was underscored by the embassy site that consideration for confidential treatment had also been underlined in a meeting with Secretary, ERD (in Bangladesh, ed. REF note)."


Muhammad Yunus is now so worried about Grameen Kalyan case that same day he sends a personal letter to NORAD director begins as follows:

Muhammad Yunus wrote letters to the NORAD director and asked for help. In the letter, Yunus writes that there is confusion between Norad/the Norwegian Embassy in Dhaka and the Grameen Bank, and that he hopes Strand Gerhardsen can meet him when he is going to Oslo later this month.

Otherwise, Yunus most concerned that the Embassy has informed the authorities of Bangladesh on the matter, and that this can create major problems for the Grameen Bank if the case is known:


"This allegation goodwill Create Object a lot of misunderstanding within the Government of Bangladesh. If the people, within and outside government, WHO are not Supportive of Grameen, get hold of this letter We'll face the real problem in Bangladesh."


The letter ends with Yunus apologize for taking up these issues with NORAD director, but that he no longer has other ways out.

Norad and held tight. The letter from Yunus to Strand Gerhardsen, and virtually all other documents in the case that Focal Point has found in Norad's archives, is stamped "made public."

29. April 1998:

A note from the Acting Director of Norad, Kjell Storlokken, referring from the meeting with Muhammad Yunus, who is on a visit to Oslo.

NORAD maintains still that there is a breach of the agreement between Norway and Bangladesh, and that money must be returned from Grameen Kalayan Grameen Bank.

Yunus, who, according to the note is accompanied by Arne Fjortoft in the World View and Helge Dietrichson, Telenor will not respond to the request "above board."

Instead orients Peace Prize winner and his entourage of "their plans/ ideas related to the opportunities for continuing and further developing the technology as the mobile technologies introduced in Bangladesh."

5. May 1998:

A few days after Yunus was in Oslo and the situation was totally stuck, something has happened. In an urgent letter from the Norwegian Embassy in Dhaka to Norad -- even excluding the public -- write ambassador Lehne that one of Muhammad Yunus's close associates have contacted the embassy with a proposal for compromise:

"He has asked whether it can be accepted as a final solution that the funds that Norway put into the revolving fund for mortgages under the two agreements of 1993 and 1994 (...) be traced back to the Grameen Bank, against the remaining funds allocated to the Grameen Bank for further loans and revolving funds remain in the Grameen Kalyan own."


The Ambassador requested authorization to accept the compromise and justify it that it is not legally possible to claim that all Norad money of 300 million will be reversed:

26. May 1998:

Embassy in Dhaka writes letters to the Nobel Peace Prize winner Yunus where the embassy confirming that they accept the compromise proposal. It is that 170 million is returned from Grameen Kalyan Grameen Bank.

The remaining approximately 130 million kroner of Norway's total support to the Grameen Bank of 400 million, which also demanded that Norway should be returned shall be in accordance with the current compromise of Grameen Kalyan.

Embassy concludes his letter to Yunus as follows: "The Embassy looks forward to continued good cooperation in future."

In 1999 NORAD created a team together with Grameen Bank to evaluate the total Norwegian aid to the bank for many years. In the evaluation report (the Grameen Bank 20: Impact and Future Challenges) is not a word about Grameen Kalyan case and the conflict between the Norwegian aid authorities and Nobel Peace Prize winner Yunus.

Autumn 2010:

Neither SIDA nor other donors has since Brennpunkt knowledge demanded the return of aid funds that were transferred from the Grameen Bank Grameen Kalyan.

Of the 608 million NOK to the Norwegian Embassy in Dhaka by chance discovered that had been drained from Grameen Bank, was in other words, only 170 million returned to the Grameen Bank, after pressure from Norway.

The remaining NOK 438 million remained in Grameen Kalyan, the company that the Norwegians had not even heard of. Three-quarters of the amount, which really was given as assistance to the revolving fund of the Grameen Bank for lending to the poor, has thus remained in Grameen Kalyan, a company that has a completely different purpose.

No responsible within the Ministry of Foreign Affairs or Norad -- neither those who worked on it the time or management today -- have been willing to comment Brennpunkt.

22. August 2010:

Grameen Bank has been detailed questions from the Focal Point of the transaction which, according to Norwegian and Bangladeshi authorities were in violation of the assistance agreement between Norway and Bangladesh. Grameen Bank responds cards in the form of two points in an e-mail dated 22 August this year.

Grameen Bank established Grameen Kalyan to engage in welfare activities of the bank employees and borrowers, subject to approval by the Board of Directors. However, in agreement with the Norwegian Embassy in Dhaka has become the means back to the Grameen Bank.

Grameen Bank never transferred the money to the Grameen Kalyan to avoid paying tax. The Bank has since its establishment in 1983 been exempt from the requirement to pay tax.


  1. Scary reading.
    Thanks for sharing.
    Where is this now leading?
    Lesson learn or another trash into the dustbin?

  2. Report on Norwegian assistance to Grameen Bank:

    Norad submitted its report today (7 December)on Norwegian support to Grameen Bank in Bangladesh in the 1980s and 1990s.

    Minister of the Environment and International Development Erik Solheim requested Norad to prepare the report after the Norwegian television series “Brennpunkt” raised the question of where the Norwegian aid money had gone.

    Norad’s report shows that Grameen Bank transferred a total of NOK 608.5 million to its sister company Grameen Kalyan in 1996. Norway’s share of this amount is estimated to be approximately NOK 170 million. The Norwegian Embassy in Dhaka reacted immediately when it discovered the transfer in 1997. In the embassy’s view, the transfer was not in accordance with the agreement. The matter was raised with Grameen Bank. Following negotiations, it was agreed in May 1998 that NOK 170 million was to be transferred back from Grameen Kalyan to Grameen Bank.

    “According to the report, there is no indication that Norwegian funds have been used for unintended purposes, or that Grameen Bank has engaged in corrupt practices or embezzled funds. The matter was concluded when the agreement concerning reimbursement of the funds was entered into in May 1998 under the government in office at the time,” said Mr Solheim.

    The report will be made available in English at as soon as possible.

    Press contact: Christian Grotnes Halvorsen, mobile tel.: +47 48 153 748

    Source: Norwegian Ministry of Foreign Affairs official website.

  3. good to find he was cleared of all charges and that the evidence was unfounded.

    We need more people like Yunus in this world.

    I thought you might be interested to know that Muhammad Yunus is featured as Hero of the Week over at

    Here is a link to his page:

    1. "good to find he was cleared of all charges and that the evidence was unfolded"
      are you blind? did you read the article? he has not been cleared by anyone and there are lots of unanswered questions.
      i understand burson-marsteller need to work for their money, but please.. we're not stupid.