ACCT19083 - Grameen Bank: Ethical Challenges and Political Impact

This assignment provides a detailed analysis of Grameen Bank, focusing on its social responsibility, ethical dilemmas, and governance challenges within the context of Bangladesh's political landscape. It explores the bank's microcredit system, founded by Nobel laureate Mohammad Yunus, and its impact on poverty alleviation. The study delves into the ethical issues surrounding interest rates and political pressures faced by the bank, including allegations of financial impropriety and government interference. It further examines the structure of Bangladesh's governance system and its implications for Grameen Bank, highlighting the tensions between the bank's mission and the country's political dynamics. The case study concludes by discussing the importance of good corporate governance in fostering market confidence and promoting long-term investment, while also noting the challenges faced by Grameen Bank in maintaining its ethical standards and operational independence.

Running head: CORPORATE GOVERNANCE & ETHICS
Question and Answer
Name of the student:
Name of the university:
Author note

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Part A Question 1:
The term social responsibility of a business denotes the ethical behaviour and
consideration of the institution and the stakeholders and contribution to the society and its
economic and environmental issues (Cheng, Ioannou & Serafeim, 2014). A Social
Responsible Business is for-profit business venture and has two objectives: first, to gain
financial profits and second, to improve the base of the society by creating optimist changes
to the community. The most important aspect of this kind of business is that it makes an
attempt to improve various vicinities of the society including the cultural, economical and
environmental sides. There is similarity in between the Social Responsible Business and
Corporate Social Responsibility as intention of both the ventures is to make certain positive
changes in the society by widening the community-based involvement (Tai & Chuang, 2014).
However, the main aim of the Social Responsible Business is to create market space by
forming partnership with local community or with non-governmental organisations.
One of the most suitable examples of Social Responsible Business is Grameen bank
that has been originated in Bangladesh and founded by the Nobel laureate Mohammed Yunus
(Schrempf-Stirling, Palazzo, & Phillips, 2016). The bank has played an important role in the
micro credit system of Bangladesh and helped to recover the turbulent financial crisis.
According to Mohammed Yunus, every company is required to be measured on the basis of
triple bottom line (financial, social and environmental). Grameen bank has provided money
to the poor villagers so that they can start new business and transform their livelihood and can
avoid the curse of poverty ("Grameen Bank | Bank for the Poor", 2018). Therefore, it can be
observed that the objective of Grameen bank is similar to the Social Responsible Business as
the bank wants to expand their business by changing the lives of the poor villagers and
abolish the curse of poverty (Hopkins, 2016).

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Part A Question 2
The term Grameen Bank has derived its origin from the concept of village and works as a
community development bank in Bangladesh. It provides micro credits to the poor villagers
of Bangladesh and encourages the people to start up new businesses so that they can avoid
the curse of poverty (Roodman, & Morduch, 2014).
The bank was founded by Mohammad Yunus in 1976. Considering the objective of
the bank, it can be stated that it is a good example of Social Responsible Business. The bank
has made an involvement with the local community, provided loan to the poor to set up their
business, motivates them to reduce the curse of poverty and expand their business by backing
up the financial structure of Bangladesh. The bank has launched the idea of micro credit
system to the poor people for the first time in Bangladesh and won World Habitat Award for
its low cost housing program. The bank has taken many initiatives to gear up the commerce
and agriculture of Bangladesh and help the poor villagers to earn money and pay off the debt.
The bank believed that the endless potentiality of the people can promote financial
independence and to cherish the fact, it provides small loan to them. This helps the bank to
earn profit by improving the social, cultural and economical standard of Bangladesh (Crane,
& Matten, 2016).
Part A Question 3
Ethics is a part of philosophy that resolves a dispute in between the good and bad on
the base of morality (Tasnim, 2014). Ethics can be divided into three parts such as meta-
ethics that deals with the theoretical approach to moral proposition; normative ethics that
deals with moral course of action and applied ethics that deals with the situation-base actions.

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However, certain situations can be cropped up where problem arises between possible moral
imperatives and probability of situational conflicts can be raised. Literally, ethical dilemma
points out the situation where there are more than one ethical solution and it becomes tough
to choose any one of the existing options. Considering the nature of ethical dilemma, it can be
stated that it forms a part of situational ethics.
Ethical dilemma can be cropped up at any time. The principle of this dilemma can
better be understood by way of certain examples. Suppose, in a runaway, a train is running
and all of a sudden a man come in between the lines. There are two options available for the
driver, either to save the man by stopping the train or let the man be killed. Therefore, an
ethical dilemma cropped up in this situation. If the driver wants to save the man, he has to
stop the train immediately and there is a possibility that the train can be derailed by such
sudden break and that may cause life threat to many passengers. This is a hypothetical
instance of situational conflict.
Topic A Question 4
Mohammad Yunus is not only the founder of Grameen Bank, but he is considered as
the father of micro finance too. The financial concept of Grameen Bank has been praised by
many countries and Economists (Novitaningrum, & Amboningtyas, 2017). He is able to
change the concept of human potentiality by improving their standard and provided small
loan to them. However, the bank is facing certain ethical dilemma now regarding the interest
rate riddle (Islam, Sathye & Hu, 2015). The Prime Minister of Bangladesh has commented
that the loan concept of the bank is sucking the blood of thee poor villagers. The aid funding
system of the bank has been challenged for the first time in a documentary telecasted by the
Norwegian television where it was alleged that the rate of interest of the bank is being used in
different purpose and that does not support the poverty alleviation of professor Mohammad

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Yunus. A political pressure has been made on professor and it was suggested to affiliate the
bank under government control. Further, the life changing plans of the bank has able to make
revolutionary changes in the village lifestyle and become an apple of discord in the political
sector in Bangladesh. Many politicians imposed charges against Prof. Yunus regarding high
interest rate of the bank and his financial proprietorship over the bank. The ethical dilemma
in this case is to choose the right option between terminations of Professor Yunus from the
Managing Director of the bank as he is old enough for the post or let the bank being operated
by him with certain financial consideration.
Part B Question 1
Bangladesh has democratic republic governance system and framework of the country
is based on Parliamentary system. The government of Bangladesh has three branches such as
executive, legislative and judiciary and the nature of legislature is unicameral. The executive
branch is headed by Prime Minister and the Supreme Court holds the apex position in
Bangladesh from the aspect of judiciary. Like the entire democratic republic system,
President is considered as the Head of state in Bangladesh. He appoints the Prime Minister
and the Chief Justice of Supreme Court of the country. Prime minister takes all the important
decisions regarding the administrative matters of the Country and Supreme Court takes final
judicial decision regarding a case (Tasnim, 2014). However, the governance system of
Bangladesh symbolises an underdeveloped polity. The political perspective of Bangladesh is
governed by the money giants and goons and most of the politicians have no strong political
base. Considering the low grade political system, Bangladesh holds the first position
regarding the worst governance in the world for five years consecutively. The endemic
corruption has swallowed up the entire society of Bangladesh. Further, the unchangeable
nature of the political rulers becomes a threat to the democratic system and makes the

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common people as passive voter. Much independence has not been given to the judiciary and
administrative interference is a common matter in case of judicial decisions. The condition of
the human rights is also unsatisfactory and politicization of public democracy creates adverse
impacts on overall performance.
Grameen bank has changed the thought regarding the standard of the poor
villagers and brought a revolution by the concept of micro credit system. Nobel laureate Prof.
Mohammad Yunus is the founder of the bank and he has started the concept of micro credit
loan to the poor villagers, women and illiterate people so that they can start their own
business and can avoid the curse of poverty. Micro credit is a small loan service provider and
supports the poor people to change their livelihood by upgrading their boot strap (Gallenstein,
2017). The micro credit system has able to replicate around the world and able to achieve
huge success regarding its objective. However, Prof. Yunus was victimised by the
underdeveloped political governance system of Bangladesh in the year 2007 when it was
alleged by the government of Bangladesh that the financial proprietorship of the bank is
based on autocracy and does not follow the banking rules of the country. The Prime Minister
of Bangladesh, Sheikh Hasina had considered the bank as a blood sucker of the poor
villagers. A political pressure has been created on Professor to resign from the post of
Managing Director of the bank and it has been stated by many politicians that he has
completed the age criteria for the post of Managing Director (60) and therefore, he should
resigned from his post. The political tyranny over the Grameen bank left the whole world in
shock and many countries had raised their voice against the unethical termination of Prof.
Yunus from the bank founded by him. One of the most corrupted governments of the world
has ill-treated Mohammad Yunus and forced him to resign from his post. According to the
Bangladesh government, the bank should come under the control of government so that they
can make possible changes in the financial terminologies and take the credit of the bank’s

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international fame. According to the report made by the government-sponsored review,
changes will be made regarding the composition of the bank’s governance structure.
Miscarriage of justice has been observed by the hostile takeover of the bank which is known
as one of the prime microfinance institution. The main strength of the bank is the poor
villagers who owned 96.5% of the capital structure and also the shareholders of the bank.
Human dignity is the main pillar of Grameen bank and the hostile takeover of the same has
assisted to accept its demise and goes against the best interest of Bangladesh (Cai et al.,
2015). It has further been observed that the bank has provided much support and respect to
the women and abolish the male dominated system of Bangladesh. Among 12 Board of
Directors of the bank, 9 are women. The economic contribution of the women has been
improved and active participation of women has made a huge social change in Bangladesh.
However, the change in the composition of the bank by present government has denied the
efforts of Prof. Yunus and the women on a large basis and it will create negative impact on
the society.
Part B Question 2
The objective of good corporate governance is to create market confidence and
commercial integrity so that a positive environment can be established for the access of
equity capital regarding long term investment (Novitaningrum, & Amboningtyas, 2017). The
equity capital is important for the future growth of the companies and it makes a balance
between the leveraging. Therefore, good corporate governance is helpful to back the financial
stability of a country. The principle of good corporate governance is also motivating the
people to take active participation in the corporate wealth creation. It is important to make an
effective framework for the corporate governance for promoting transparent market

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segmentation and concentrating on the consistency between different authorities. Further, the
rights of the shareholders are also identified by this system.
However, in this case, it has been observed that the political governance system of
Bangladesh is creating an adverse situation regarding the business resources. The Bangladesh
government is corrupted one where the rights and interest of the common people are being
denied. The money giants are the main decision maker in this country and there is no place
for ethics and morality under this governance system. It has been observed that the excessive
interference of the executives on the other two branches of the parliamentary system has
made the whole system corrupted. The international investors are less interested to invest
their capital in this country because of this turmoil political spats and autocratic mentality of
the government. The parochial mentality of the government is come to the lights in the case
of Grameen bank (Islam, Sathye, & Hu, 2015). The unethical takeover of the bank by the
government had remained the whole world silent and the negative response of the local
government has welcomed the miscarriage of justice. The Bangladesh government should
make an ideal commercial environment for the business and should motivate the investors for
long term investment. The equity capital is necessary to generate more job security as well as
job opportunity to the citizen of Bangladesh. Concurrently, the changes in the composition of
the bank had denied the rights and interest of the existing shareholders, which is against the
moral objective of good corporate governance. Therefore, the government of Bangladesh is
required to change their political mentality and should accept the importance of equity capital
by creating positive business environment to attract the national and international investors to
gear up the business market and to back the financial condition of the state as well.
A good corporate governance has certain essentials that have to be maintained at all
circumstances. According to the essentials, the framework of the corporate governance
should be based on the fair market policy and should protect the rights and interest of the

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shareholders. It has been observed that the objectives of Grameen Bank, at the time of its
incorporation were quite similar to this framework and the founder of the bank had taken
many useful steps to improve the standard of the poor villagers and the women. The rights of
the shareholders were secured and after the huge success in the field of micro credit system,
the bank had get many international investors and support. Prof. Yunus had taken all the
important decisions by consulting with the Board of Directors of the bank (Bank, 2017).
However, negative implication of the bank has started when political pressures have been
created on the founder and Managing Director of the bank with an intention to terminate him
from the post and grab the power and fame of the bank by the government. Agitations have
been made by many political leaders against him and the government has forced him to
resign. The changes made by the government regarding the internal composition of the bank
have mortified the rights and interest of the existing shareholders. Therefore, it is suggested
not to deny the basic needs of the fair market policy and the initiatives of the bank and the
government should be based on good corporate governance.

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