Grameen’s #1 and #2 Divorce

February 2, 2010

This blogger does not aspire to be the microfinance industry’s gossip columnist. Still, one recent development seems at least as worthy of reporting as a Presidential Medal of Freedom or a knighting: Dipal Barua, who had worked for Muhammad Yunus for 34 years, was forced in December to resign from his posts as Deputy Managing Director of the Grameen Bank and Managing Director of Grameen Shakti, the solar power unit. The split was acrimonious. The event received almost no coverage in English.

Probably like you, I know less about Barua than I should. He was born in the same village as the Grameen Bank, and assisted Yunus from the earliest days in building the now-famous credit model. He was instrumental in Grameen’s internal revolution a decade ago, called Grameen II, and coauthored a book about it with Asif Dowla. I suspect that much of Grameen’s success owes to the partnership between Yunus and Barua. Yunus was the philosopher, pitchman, and indefatigable visionary. Barua was more the mechanic, experimenter, and hands-on manager. His loss creates, or at least points to, challenges for the Grameen Bank going forward.

Apparently one source of contention was Barua’s receipt of the first Zayed Future Energy Prize one year ago, which earned him $1.5 million (well more than Yunus’s half of a Nobel Prize). I don’t know if Yunus kept his prize money; Barua apparently did keep his. [Update: Yunus invested his money in social ventures. HT Alex Counts.] Some inside the Bank saw this as improper, arguing that Barua did not deserve the money since he was not the true founder of Grameen Shakti. And there are other accusations of impropriety, which the Bank may feel would be inappropriate to state publicly.

I don’t doubt that founder’s syndrome was another factor:

I once worked for an organization with a somewhat Messianic founding leader and remember well a firing of a long-time employee. A wise coworker cautioned that the incident was like a divorce. Two people with an old and complicated relationship had split. It was hard for us, outsiders to the relationship, to fully understand the rupture. So we should be slow to judge.

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1. Tim Ogden Says:
   February 2nd, 2010 at 10:54 am

   The Harvard Business School case on Grameen Phone hints at similar “Founder’s Syndrome” tensions.

   It would be interesting to compare governance structures at various microfinance institutions that have similarly iconic founders (e.g. Compartamos, SKS), how those structures have evolved and the role, if any, of external capital in the evolution of governance at the institutions.

   I think this is more than gossip and directly relates to your coverage of microfinance as institution building. If MFIs mirror the dysfunctional institutions of their environments rather than model better institutional practices (and I’m not placing Grameen in one camp or the other; I don’t know nearly enough to do so), then the institution building lens is not compelling.

2. RJS Says:
   February 2nd, 2010 at 10:55 am

   I like the the Wikipedia widget. And thank for a new term to use for describing one particular type of organizational dynamics.

3. David Roodman Says:
   February 2nd, 2010 at 11:52 am

   Interesting point, Tim. I think founder’s syndrome occurs in all countries, in for-profits and non-profits, in all lines of business. So to turn it into critique of microfinance, one would have to argue that microfinance is particularly prone to it. It may be. Centuries of history show that credit systems for the masses have an inherent capacity to grow fast and large. Dramatic success can easily go to the head of the founder, eroding the psychological boundary between him/herself and the organization.

   Still, I don’t see this argument as very strong. Vikram Akula has stepped aside at SKS. Years ago, I can’t resist mentioning, he quit in frustration from the employ of the same founder I wrote about, so maybe he learned something from that. My sense is that BRAC too is facing the succession challenge more wisely. So superficially anyway, the incidence of founder’s syndrome appears similar in microfinance and out.

4. Tim Ogden Says:
   February 3rd, 2010 at 5:42 pm

   David,

   I agree that its unlikely Founder’s Syndrome is somehow tied to microfinance. But that wasn’t really my point. My point was about governance in general (of which Founder’s Syndrome is just one of many dysfunctions).

   So,

   1) Completely based on anecdote, I believe the prevalence of poor governance in the social sector is higher than in the for-profit sector. This is, in my opinion, for no other reason than people tend to be more trusting of those in the social sector and therefore do not put the effort into controls that go into firms where investors worry that officers may be in it just for the money.

   2) The prevalence of poor governance in the developing countries where MFIs operate is higher than in developed countries (kicking off cause and effect arguments ad nauseum).

   3) Therefore, there is reason to suspect that governance in MFIs is more likely to be poor (though it of course matters if it is poor in relation to the levels of the countries in question, not in absolute terms).

   4) If governance in MFIs is poor or no better than other institutions in the countries, then the benefits from institution building are suspect.

   Lots of conjecture there with absolutely no evidence whatsoever.

5. David Roodman Says:
   February 3rd, 2010 at 5:50 pm

   Ah. Well, it seems to me the question is what changes has support for microfinance caused? The institutional fabric of Bangladesh’s financial sector is richer because of microfinance. Yes, that is threatened by succession issues at all of the Bangladeshi Big 3, but I doubt the threat is mortal. Meanwhile, I suspect there were founder issues and lots of other governance problems in the history of our own financial giants. Oh, actually there are right now! NGOs may have systematically worse governance, but one distinctive thing about microfinance is how it spawns for-profit institutions, sometimes by transforming non-profits into for-profits. So it may have better governance than most “aid sectors.”

6. kastriot belegu Says:
   February 4th, 2010 at 12:33 pm

   In my point of view there is not a connection between Grameen Bank and Grameen Shakhti. What i would like to add related to my experience of staying for 2 month and more in Grameen Bank, is just wrong way of making PR from International Department of Grameen Bank.
   I did not see any comments from the literature or part of measurement the impact of microcredit related to the fact how visitors and students from different countries who used to go for internship in Grameen Bank, instead of getting the right information how Grameen Bank is working, they are totally disinformed. That is because a foreigner in Bangladesh as a visitor in operation area of Grameen, normally is accompanied by a staff (translator or interpreter) hired from Grameen Bank. How the foreigner is going find the real feedback from a borrower of Grameen Bank or other Microfinance institution operating in Bangladesh, when he does not speak the local language and the translater or interpreter is hired from MFI even though the payment is going to be done from the visitor!

   Ps. I am open for the comment as i used to be one of the foreigner for internship and training program and normally exposure visit in Grameen Bank and BRAC

7. Ryan Calkins Says:
   February 12th, 2010 at 10:34 am

   Tim’s not the only one concerned about the quality of governance in the microfinance sector. Recall that in both the 2008 and 2009 Banana Skins reports, Management Quality was one of the top five risks cited by those surveyed (number 1 in 2008, before the financial crisis hit). Here’s a write-up from MicroCapital: http://www.microcapital.org/microfinanec-paper-wrap-up-microfinance-banana-skins-2009-confronting-crisis-and-change-by-david-lascelles-and-sam-mendelson/

8. Terry Hier Says:
   February 15th, 2010 at 10:35 pm

   Yikes! I just found out that the couple that founded Kiva actually did divorce (although I doubt that Founder’s Syndrome was the primary, or even a, cause.) I guess it speaks to how everyone should be mindful of professionalism in all relationships when starting this type of endeavor.

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