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Nobel-winning microcredit bank comes under scrutiny

By Farid Ahmed, For CNN
STORY HIGHLIGHTS
  • Microlender faces questions over funds transfer
  • Norway, which donated the money, said the bank did nothing wrong
  • Panel has three months to finish its job

Dhaka, Bangladesh (CNN) -- Bangladesh has ordered a probe of the Grameen Bank -- founded by Nobel Laureate Professor Muhammad Yunus, the pioneer of microcredit -- following media allegations that donor's funds were inappropriately transferred.

"I've received a letter from the government to review Grameen Bank activities today," a professor of economics, A.K. Monaw-war Uddin Ahmad, who heads the five-member government probe body, told CNN Wednesday night.

The probe was initiated following the allegations raised in November last year that Norwegian aid of nearly US$100 million given to Grameen Bank was transferred to another Grameen entity almost 15 years ago.

A Norwegian TV documentary "Caught in Micro Debt" triggered the controversy and the story was quickly picked up by local and international media, although Norad, the Norwegian Aid Agency, later in December said Grameen had done nothing wrong.

Erik Solheim, the Norwegian minister for environment and international development, said in a statement that Grameen Bank had neither embezzled Norad funds nor used the money for unintended purposes.

Yunus, who is dubbed as "banker to the poor," founded Grameen Bank nearly three decades ago, pioneering the use of small loans to the poor to bail them out of poverty. He won the Nobel Peace Prize in 2006 along with his microfinance bank.

Grameen's model was replicated in different parts of the world to fight against poverty. Although Grameen was initially acclaimed globally, it was later criticized by analysts at home and abroad for high interest rates and not being effective in fighting against poverty.

Yunus has defended himself and said he did not do anything wrong. The funds were only transferred fearing that the tax-exempt status of Grameen Bank might be changed, he said amid wide criticism in December.

Bangladesh Prime Minister Sheikh Hasina, who wanted the probe initiated, accused Yunus of playing a "trick" to evade taxes and charged micro-lenders with "sucking blood from the poor in the name of poverty alleviation."

Other members of the government investigating committee, formed by the Ministry of Finance, are Bangladesh Bank Deputy Governor Nazrul Huda, Syeda Rokeya Din, former deputy comptroller and auditor general, former Bangladesh Institute of Bank Management Professor R. M. Debnath and Supreme Court attorney Mohsin Rashid.

"It's not a probe against a person," said Ahmad, who teaches at Dhaka University and the Independent University of Bangladesh.

"We'll begin the work on Thursday and review all activities of Grameen Bank and its other entities, its economic, legal and social matters," Ahmad said, adding that they were given three months to complete the task.