Govt control over Grameen Bank reduced

The government has issued an ordinance amending the Grameen Bank Act 2013, curtailing its control over Grameen Bank and extending the work area of the microcredit institution to urban areas.

The Grameen Bank Act 2013 significantly expanded the government oversight over the bank's operations, with the government appointing the chairman and not the board member.

The ordinance, which was issued on the evening of May 12 with immediate effect, has reduced the government stake in Grameen Bank to 10 percent from 25 percent and increased the shareholding of Grameen Bank's borrower-beneficiaries to 90 percent from the previous 75 percent.

The revised law has stripped the government of its power to increase the paid-up capital of the bank, cut the number of state-appointed directors to one from three and removed the authority of the government to appoint the chairman of the Grameen Bank board.

From now on, nine board members will be elected from the beneficiary shareholders of Grameen Bank, whose founder, Muhammad Yunus, is now heading the interim government.

The board will select three directors: a teacher having expertise in rural economy or women's empowerment from Chittagong University, a woman chartered accountant and one expert on women's rights.

Additionally, the Financial Institutions Division under the finance ministry will appoint one director.

The board will select a chairman of Grameen Bank from among the nine nominated directors. In the Grameen Bank Act 2023, the chairman was appointed among the government-appointed directors.

The latest revision also curtailed the scope for directors to be on the board for more than two consecutive terms and reduced the power of the chairman to form a selection board to hire the managing director of Grameen Bank.

The maximum age of the bank's managing director has been increased to 65 years from 60 years, according to the amendment, which has also allowed the Grameen Bank to expand its operation to municipalities and city corporation areas apart from rural areas.

The ordinance widens the scope for Nobel Prize-winning organisation to disburse microcredit among the poor in urban areas alongside the landless in rural areas.

Founded in 1976, the microloan pioneer has 1.06 crore member borrowers and its cumulative disbursement stood at Tk 3.31 lakh crore as of March, according to its website.

As part of rolling back many of the changes done by the previous government, the interim administration, in early October last year, reinstated a tax exemption for Grameen Bank until December 2029.

The microcredit pioneer enjoyed the tax exemption under the Grameen Bank Ordinance 1983, as its activities are primarily focused on poverty alleviation.

The benefit was renewed every five years and was last extended until December 2020. The previous government did not extend the exemption after that period.

Other microfinance institutions also enjoy a tax break on income from microcredit operations, but they have to pay tax on income from other sources, such as interest earnings from deposits.