Banker to the Poor (13 page)

We invited Finance Minister Muhith to be the chief guest at our opening. But when we told the ministry staff that the ceremony would be held in a branch located in a village, they replied that the location would not be appropriate and that the festivities should take place in Dhaka so that all the top government officials could attend. I tried to explain to them that Grameen did not operate in urban areas and that it made no sense to have a ceremony in a place where we had no borrowers.

"If the ceremony were held in Dhaka, it would exclude our borrowers, those who now own 40 percent of the bank." I said. "They can't be transported to the city simply because government officials do not want to come to a village!"

We stood firm in our position. We wanted the function held in a rural setting—where we worked, surrounded by our borrowers, near their homes and their villages. We were a bank of the rural people, for the rural people, and the symbolism of where we opened would not be lost on anyone.

The Finance Ministry official responsible for the Grameen Bank warned us that the minister might not attend the ceremony if we insisted on holding it in a village. I told him that it was up to the minister to decide whether he found the time or not, but that we would go ahead with our ceremony as planned. As the deadlock continued, I called Muhith and told him about our date, the place, and the order of events. He immediately declared that he would attend and gave me the names of several friends who should also be invited. It now became clear to me that it was never the minister, but rather a ministry official, who thought the ceremony should be held in the city. When I mentioned this, Muhith said, "He is crazy. Why should the
Grameen
("Rural") Bank have its opening ceremony in the city? I cannot even imagine such an absurd thing."

When we were drafting the legal framework for the bank, I was also trying to come up with a Grameen logo. In meetings I often scribble or doodle in my notepad. Now my doodles all concerned possible logos. Three themes occupied me, all of them rural. One involved weaving, particularly weaving with cane, which I thought was a beautiful allegory for the way in which tiny pieces can be assembled into a strong whole. I tried many designs with weaving patterns, but none really worked. Another theme was the number five, since all our groups are made up of five borrowers. I tried many arrangements with five sticks, five people, five hands, five faces. The third theme was that of a village hut. It was simple in design and stood eloquently for all that is rural.

At this time, whenever I visited a Grameen village, I carefully noted all the unfinished cane work, the rice husking, the different types of work people did, their shelters, their implements and decorations, to see if I could pick up some detail that I could use in our new logo. I was attending a seminar in Bangkok when the outline of a logo hit me. Rather than paying attention to the lecture, I was working on the theme of the hut. Suddenly out popped a design. I drew several versions of it. One I liked right away. I knew I had found my logo and I even wrote down its color scheme.

As soon as I returned to Dhaka, I had the logo drawn and colored and showed it to Muzammel, Mahbub, Dipal, Nurjahan, and Daiyan. Their response was cautious. They asked many questions. What does it symbolize? What do the colors mean? I gave my own interpretation: The logo's hut stood for the rural but could also be read as an arrow shooting upward, with the red color of the arrow signifying speed. The green at the center of the hut stood for new life, and that was the goal the arrow was aiming toward.

At first my colleagues were not entirely enthusiastic. I argued that we should adopt the logo immediately and put it everywhere—on our letterhead, envelopes, pamphlets, and all other stationery—so that it would become part of the project and be inherited by the new bank. To make the logo an even more inseparable part of Grameen, I suggested we use it on the opening day at our ceremony. We would build a magnified logo out of bamboo and colored paper. It would serve as a gate through which to enter the Grameen branch.

We held the opening ceremony in a big open field in the village of Jamurki in Tangail. We invited groups of borrowers and all the staff from several branches to participate in the ceremony. They filled the field. Other guests came from Dhaka. Minister Muhith, representatives of the borrowers, and I sat on the podium. It was a wonderful day, full of bright sunshine. We began the ceremony with recitations from the holy Quran, as is customary on such occasions, and emotional speeches from the women borrowers. For all of us who had labored so long and so hard to achieve this, it was a dream come true. I looked out over all those women seated in their colorful red, green, ocher, and pink saris—a sea of saris—these hundreds of barefoot borrowers who joined our celebration. They had voted with their feet. There was no doubt about their commitment and their determination to break free from poverty. It was a beautiful spectacle, powerful in all respects.

The challenge of transforming Grameen from a pilot project operating inside a mostly hostile banking system to an independent bank for the poor thrilled me as well as my colleagues and our borrowers. We continued to encounter skepticism from Bangladeshi bankers, but from October 2, 1983, onward we could argue our side as a peer institution—and one that was financially outperforming traditional commercial banks. Most important, independence allowed us to grow. We added new branches at a breathtaking rate. I had such confidence in our training methods and in the basic soundness of our micro-lending methodology that I saw no need to go slowly at this point.

Not only did we undergo quantitative growth, but we made many improvements to our methodology in the second half of the 1980s. Until then our staff had been recruited on a temporary basis and had to continually worry about whether the project would be terminated and they would be out of a job. When Grameen became an independent bank, they were automatically named permanent staff of the new organization. This was the greatest victory for all of them. We also popularized the Sixteen Decisions, resolutions adopted at a national workshop of borrowers (see Chapter 8), integrated housing loans into our program, expanded our social development efforts, and experimented with irrigation loans and other seasonal loan programs. Though there were setbacks, such as the floods of 1987 and 1988 and a repayment crisis in the district of Tangail (our first), it was a time of growth, innovation, and confidence. But we realized that for our growth to be sustainable, we needed to resolve some governance issues that were left over from our campaign to become an independent bank. The most pressing issue was how to transform Grameen from a bank owned by the government to one owned primarily by the people who borrowed from it. We were counting on Muhith to guide us through this process.

Unfortunately for us, Finance Minister Muhith resigned in 1985 before he had a chance to keep his word about altering Grameen's corporate structure. But luckily, the permanent secretary of the Finance Ministry, Syeduzzaman, was a close friend of Muhith's and shared his enthusiasm for Grameen. Syeduzzaman was also aware of Muhith's promise to me. When I reminded him about this unfinished business, he assured me that he would stand by Muhith's decision.

He did. Very quietly, he changed the ownership structure of Grameen by granting 75 percent of the shares to the borrowers and keeping 25 percent for the government, the government-owned Sonali Bank, and the Bangladesh Krishi (Agriculture) Bank.

But there were other complications that came with our governmental status. In 1986, the composition of the board of directors was altered to bring in the majority members from the borrower shareholders. We now found ourselves in a strange situation. Grameen became a private bank run by a "government official." According to our legal framework, I was a government-appointed managing director. As such, I had to follow all the rules of a civil servant, including asking permission from the president before I could leave the country to attend any meetings. One particularly aggravating incident came in 1985, when I was not able to attend the UN women's conference in Nairobi. My request for permission to leave the country was rejected by the president, who raised the question, "Why should a man go to a UN women's conference?"

My appointment also hung from a very weak thread. The official letter of appointment said that I was "managing director until further orders." In other words, I occupied my position as long as the government was not unhappy with my work. I could wake up one morning and read in the newspaper that somebody else had been appointed as managing director of Grameen in my place. The government was not required to explain why I had been dismissed or what I was supposed to do with myself.

This organizational arrangement did not ensure stability. I kept worrying that one government or another would suddenly replace me, and plunge Grameen into a crisis. And so I consulted the lawyer who had helped us set up the bank, Dr. Kamal Hossain. We worked out a request for an amendment to the Grameen legislation by the parliament. It had to be brought to the floor of parliament through the Finance Ministry. But officials in the ministry were in no mood to get this provision amended. Why should they help to change the provision that gave them unlimited power to remove the managing director? I sent in my proposal for amendment and, as expected, the Finance Ministry paid no attention to it. I then maneuvered to place it with a higher body called the Executive Committee of the National Economic Council, a body of ministers. They recommended that my proposal be adopted. Still, the permanent secretary of the Finance Ministry paid no attention. When I raised the issue with him personally, he argued that the council was not the government and that the Ministry of Finance was not required to take instructions from the council. For me, this was an unforgettable lesson in the obtuse functioning of the government machine.

I kept knocking at any door I could find. Finally, I raised the issue with President Ershad himself. He ordered his finance secretary to put my proposal up for consideration at his next cabinet meeting. But the finance secretary sent the papers to the president with a recommendation not to amend the provision. I did not give up. I explained my case to the secretary in charge of the presidential Secretariat. This senior bureaucrat happened to have been a student in my math class while I was teaching at the University of Colorado in Boulder. When I asked for his help, he promised to do everything possible. He organized a high-level meeting on the issue, inviting the vice president, the governor of the Central Bank, the finance minister, the finance secretary, the planning minister, and myself. The president was to preside at the meeting.

I argued my case as forcefully as I could. Everyone in the room expressed support for my position except for the finance secretary, who built his case around the fear that the government would lose the ability to properly supervise the bank. Despite his warnings, the meeting approved the amendment proposal. It was finally sent to parliament and passed just before the parliament was dissolved and the Ershad government brought down by a people's uprising. Under the new provision, a managing director had to be appointed by the board of directors, not by the government. Once the board went through the legal steps and appointed me managing director of Grameen, I stopped being a government servant and became an employee of the bank. More important, the Grameen Bank was now free to choose a CEO who would serve the interests of its shareholders and not stand at the mercy of the government.

The amendment was a crucial alteration in the Grameen Bank legislation. But to further ensure the future of the Grameen Bank, there is another vital issue that still needs to be addressed. This relates to the appointment of the chairperson of the board of directors, which is currently assumed by the government. Again, in the usual government style, the appointment is valid only "until future orders," that is, the chairperson can be deposed by the government any time. This arrangement threatens the bank's stability. The role of the chairperson is crucial, particularly as nine of the thirteen members of our board of directors, representatives of the borrowers, are usually illiterate.

Through the 1980s, Grameen's aggressive expansion program saw us adding approximately one hundred new branches every year. These new branches were of very high quality as six years of experimentation in Jobra and Tangail had taught us a great deal and allowed us to refine our methodology. By 1985, we had an impressive cadre of young professionals with several years of village experience behind them who were able to guide and manage hundreds, and later thousands, of new recruits. We experienced some problems in our oldest branches in Chittagong and Tangail, where our borrowers had been subjected to many changes in policies as we went through our process of trial-and-error, but branches started during or after 1983 performed extremely well.

We originally located our nationwide headquarters in Shymoli, then something of a suburb of Dhaka, outside the city's financial district. I tried to postpone our move to the capital city—where powerful bureaucrats seem to inevitably lose touch with the rural reality—but by 1983 we had no choice. Still, I insisted that everyone make a solemn commitment to stay true to our rural grassroots origins. We decided that no one should work in the head office who had not spent several years working in one of our rural branches, a rule that we have only broken a handful of times over the past fifteen years.

As we expanded, we watched our borrowers progress through successive loan cycles. In most cases, the size of their loans increased as their businesses and their self-confidence grew. Some of the most dynamic borrowers used their profits to build new houses or repair existing homes. Every time I visited a village and saw a house built with profits from a Grameen-financed business, I felt a thrill, but I still regretted that more borrowers were not able to undertake such major investments. I began to think about how we could create a new program that would offer dependable borrowers with perfect repayment records long-term loans for house building or repairs. I imagined that this new loan program would begin as a kind of a reward to exceptional borrowers. But I was unsure about how to proceed. Then, in 1984, I noticed an advertisement by the Bangladesh Central Bank announcing a new refinancing plan for housing loans in rural areas. In response to this advertisement, the Grameen Bank applied to the Central Bank for help in introducing a housing program to its borrowers. We explained that we were constrained by the modest circumstances of our borrowers, who could not repay sums of money as large as those mentioned in the Central Bank's ad. Our borrowers could not take out 75,000-taka (about $2,000), but we did want to extend 5,000-taka ($125) housing loans to them.