Govt stake in Grameen Bank to be slashed to 10%, Advisory Council approves amendment

Highlights

• Amendment limits govt board seats in Grameen Bank to one
• Bank Resolution Ordinance lets BB merge weak banks, seize looters' shares, alter ownership
• Draft ordinance approved to split revenue policy from administration
• Courts can issue summons via phone and text

The Advisory Council of the interim government has approved, in principle, a proposal to amend the Grameen Bank Ordinance, aiming to reduce the government's stake in the Nobel-winning microcredit institution from 25% to 10%. 

The amendment also seeks to limit the government's control over the board by reducing its director appointments from three, including the chairman, to just one.

As a result of the proposed changes, the shareholding of Grameen Bank's beneficiaries will increase from the current 75% to 90%, according to the ordinance drafted by the Financial Institutions Division (FID) of the Ministry of Finance.

At a briefing after today's meeting of the Advisory Council, chaired by the chief adviser, Syeda Rizwana Hasan, adviser to the Ministry of Environment, Forests, and Climate Change, said that Grameen Bank operated on a value system that gave its beneficiaries a significant voice in its operations.

"But you know, the Nobel laureate chief adviser was politically targeted during the previous government's tenure, and a lot of government control was imposed," she added.

The new ordinance also proposes to expand Grameen Bank's operations to assist the destitute and landless at both the union and municipal levels.

An FID official, speaking on condition of anonymity, said that the move aims to restore the government's stake and board representation in the bank to the pre-2011 framework.

"The 1983 Ordinance required a 25% government ownership in Grameen Bank. However, successive governments failed to contribute their share of the paid-up capital, which led the government's stake to fall to about 5%-8%," the official said.

"In 2011, when Muhammad Yunus was removed as managing director, the government increased its capital contribution to regain a 25% stake in the bank," the official added.

The Grameen Bank Ordinance of 1983 states that the government owns 25% of the bank, while the borrowers own the remaining 75%. Under the proposed amendment, borrowers will own 90% of the bank's shares. 

The bank's paid-up share capital will be set at Tk300 crore. As per the draft ordinance, borrower-shareholders will gradually increase their paid-up capital to reach 90% ownership. Any dividends declared by the board will be distributed according to the proportion of paid-up share capital.

In addition to the Grameen Bank amendment, the Advisory Council also approved the draft of the Bank Resolution Ordinance. This law will enable the Bangladesh Bank to merge weak banks, recover funds by confiscating and selling shares of bank looters, and make changes to bank ownership.

The Council also approved a draft ordinance to separate revenue policy from revenue administration. The International Monetary Fund (IMF) has been advising the government to make this separation to improve revenue collection. It is also one of the conditions for the $4.7 billion loan Bangladesh received from the IMF.

The IMF believes this new structure for the National Board of Revenue (NBR) will increase revenue collection and ensure transparency. The business community has also been calling for this reform to reduce harassment by revenue officials.

According to the draft ordinance, one division will handle revenue policy, and another will manage revenue administration. These divisions will operate independently but will have provisions for coordination. 

The law also allows hiring private sector personnel on a contract basis to ensure the smooth operation of both divisions.

Furthermore, courts will now be allowed to issue summons through modern communication methods like phone calls and text messages.

The government has decided to include this provision in the Code of Civil Procedure (CPC) along with other amendments.