GB set up firms beyond mandate

Grameen Bank helped set up about 54 legally independent associated organisations beyond its specific mandate, said a government-sponsored commission on the microcredit organisation.
The four-member Grameen Bank Commission held the bank's board, the senior management, the finance ministry, Bangladesh Bank, auditors and the Office of the Registrar of Joint Stock Companies and Firms responsible for the deviation.
"Each one of those bodies should have been more observant to the unusually cavalier interpretation of the provisions of the Grameen Bank Ordinance," said the commission in a report submitted to the finance ministry last week.
Dr Muhammad Yunus, founder of the Bank and globally known as the Banker to the Poor, set up the associated organisations as part of his mission to eradicate poverty.
All the organisations are legally independent and separate companies and have no legal ties with Grameen Bank.
The report said the board did not query whether the Ordinance gives the bank the mandate to create such organisations or whether it was legal to fund the subsidiaries.
The government or the BB did not play any substantial regulatory role in the functioning of Grameen Bank since changes were made to the Grameen Bank Ordinance in 1990, the report said.
"The regulatory framework for governing the bank was weak to begin with, and has become practically non-existent since the amendments of 1990."
The commission also came down heavily on the Grameen Bank's 12-member board.
"The extremely feeble and muted role of the government-nominated chairman and directors indicates that their role has to be strengthened and the regulatory role most certainly has to be devolved to an external body."
The report said the directors of Grameen Bank, both elected and government-nominated, and the chairmen have been ineffective particularly since 1989.
"It is imperative that the government's representatives -- chairman and directors -- have to be persons who have some experience and knowledge of policy and corporate management," the report said.
The interim report said the board should only take policy decisions.
The commission will make recommendations on the future legal and organisational structure of Grameen Bank, taking into consideration the aims and objectives for which it was initially set up.
However, the commission acknowledges that many underprivileged people at the lowest end of the Bangladeshi society have been empowered and successfully brought out of the poverty trap.
It also criticised the chartered accountant firms who have been auditing Grameen Bank's books for years now.
The report said the firms did not seem to have warned against the instances of bad governance and lack of accountability which include diversion of funds, issuing guarantees, and creation of subsidiary organisations beyond mandate.
“These should have stared right at the auditors' faces demanding explanation before signing off on the accounts," said the commission.
The report said the commission has found another instance of the lax and indulgent manner in which the chartered accountancy firms acted.
The report, however, did not contain any of the firms' names.
The members of the commission could not be reached for comments.
In May last year, the government formed the four-member commission to review the activities of Grameen Bank and the 54 organisations bearing 'Grameen' names, and make recommendations on how to run the organisations.
The report of the commission led by former secretary Mamun Ur Rashid came amid allegations that the government-sponsored body was not functioning properly.
The deadline for submitting the report was extended twice due to long absence of one of its members and the resignation of another.
Initially, the commission could not function fully, as Moslehuddin Ahmed, a chartered accountant and microinsurance specialist, did not attend office until September last year due to illness, according to sources close to the commission.
But by then, the first deadline for submitting the report had elapsed.
Furthermore, MA Kamal, the then director general of National Academy for Planning and Development, stepped down as the commission's member secretary in September.
The inclusion of Barrister Ajmalul Hossain, a lawyer, in the commission raised some questions, as he had represented Bangladesh Bank in its case against Prof Yunus after the microcredit pioneer was controversially removed from the bank in 2011.