There are certain realities which are left unnoticed or suppressed while praising Gramin Bank and its founder Prof. Muhammad Yunus on receipt of this year’s Nobel Prize for Peace.
An overview to the activities of Islami Bank Bangladesh Ltd, the fifth largest bank in Bangladesh which was established in 1983 would be useful at this point. This is the full fledged interest-free commercial bank in the entire South Asia functioning fully on Islamic Shariah principles. The Bank’s authorised capital is 100 million dollar. They have around 200 branches and over 5000 employees.
The incredible services provided by Prof. Yunu’s Gramin Bank are also provided by Islami bank. Islami Bank has already given millions of Bangladesh Taka (almost equal to Indian Rupees) to very poor people under their Rural Development Scheme (RDS). These amounts were disbursed under 340 different schemes aimed at eradicating poverty and creating self employment for the poor people. Assistance under RDS is restricted to the marginalised people whose annual income is below $300 and those who own less than half acre agriculture land. Further, huge numbers of similar type of small loans are given to the poor section of the
society by Islami Bank Foundation functioning under Islami Bank.
We can find a lot of similarities in the functioning of both Gramin Bank and Islami Bank. As in the case of Gramin Bank, Islami Bank also organises groups of five people. The remaining process and functioning of both banks are the same. The most acclaimed “collateral-free financing” Gramin Bank is available with Islami Bank.
As per the report of some study groups, both the banks follow similar policies in deployment of funds, prioritising and identifying beneficiaries. Similarly, diversion of funds for non-productive purposes is 9% in Gramin Bank it is 11% in Islami Bank. Bad debt is below 10% in both the Banks.
Islami Bank has helped 86,000 poor people spread out in 2,200 villages in Bangladesh. The amount of assistance was in the range of 3000-15000 Tk. So far Islami Bank has spent Tk 90 crores in this area alone.
However, both Banks are functioning on conceptually different grounds. While Gramin Bank charges 16-20% interest on loan, Islami Bank works entirely interest-free. There are some modernists who are claiming that Prof. Yunus’s rate is below the Bangladesh Govt’s interest of 22%.
Islam’s strict ban on paying and receiving of interest is not a problem for Prof. Yunus. He appears to be western in outlook and encourages his bank’s beneficiaries for adopting family planning. Yunus raised funds by interest based borrowings from money market, financial institutions, central banks, international agencies, etc. Further, he accepts deposits from the members of his bank on the same basis.
There are people who smell imperialistic agenda behind awarding Nobel Prize to Yunus and his Gramin Bank. As some writers claim, could Yunus eradicate poverty from his country (Mathrubhumi weekly November 12, 2006)? It is true that Bangladesh has been little upgraded from her earlier status of one of the poorest countries. More than 60% of the population still lives below Poverty Line. Further, it is said to know that 85% of Bangladesh’s villages have no electricity. Can an interest-based economy totally eradicate poverty? This is the most vital question today.
While awarding the Nobel Prize the Swedish Academy stated, “Permanent peace is possible only when people jointly cross the barriers of poverty.” If so, rich people would have been living in peace. Is it so in Europe and America?
The glory of Yunus is that he targeted only the poor people. But Islami Bank helped others also along with the poor, fully Islamically. No doubt, there are a lot of things we can learn from Yunus. But, the way should be equally good as the goal.
[The writer K.K. ALI, is C.E.O Alternative Investments and Credits Ltd.]