Nobel Peace Prize Winner Muhammad Yunus Is No Saint

From the desk of Filip van Laenen on Tue, 2006-12-19 23:05

This is what can happen if you give the Nobel Peace Prize to a still active businessman: he tries to use the PR around the prize ceremony to push through a transaction.

In 1997, the Norwegian company Telenor started a joint venture with Muhammad Yunus to set up GrameenPhone. The company gives women, through those famous micro-credits, the chance to buy cellular phones so they can set up small phone centres and earn some money for their living. At the same time, these small phone centres give the isolated rural communities a possibility to communicate with the rest of the world. Or two birds killed with only one stone.

The original plan was to obtain 250,000 customers in the course of the first ten years, but today GrameenPhone has 10 million customers, almost two thirds of the market share in Bangladesh. Actually, a fifth of those customers were acquired during the last quarter. The estimated value of GrameenPhone is 1.2 billion euros, with Telenor owning approximately 62% of the shares.

The agreement made in 1997 contains a phrase in which Telenor expresses the intention to sell out of the company in the long run. Today Telenor says this involved no obligation. Muhammad Yunus has another opinion, says Telenor is «greedy», and wants Telenor to give up the control over the company. Jon Fredrik Baksaas, CEO of Telenor, points out that it is remarkable that Muhammad Yunus did not make his claim until now: only recently the risk in GrameenPhone was reduced substantially.

I cannot make any judgments on the case, but there is the fact that Telenor is no charity organization and as such would have to explain a thing or two to its shareholders if it were to give away millions of euros to another company. On the other hand, this case shows that Muhammad Yunus is a smart businessman who wants to pick up profits when he gets the opportunity. That is of course no problem, and in fact, I think it is to his credit, but things become a bit different when he tries to use the ceremony of the Nobel Peace Prize to blackmail a business partner. He even wrote a rather threatening letter to Telenor lining out a press release that would have been damaging to the company.

A person who certainly does not mind voicing opinions without being properly informed is the former Norwegian Prime Minister Thorbjørn Jagland of the social-democratic Labor Party (Ap). According to him, Telenor has «the moral obligation» to sell its GrameenPhone shares. He recognizes that without Telenor perhaps there would not have been a GrameenPhone, but it seems that if a Western company just for once sets up a charity and makes a profit out of it, the company is morally obliged to renounce that profit. In other words, the investment in GrameenPhone never was an investment, but only a donation. Making profit by abusing the Third World is wrong, but making profit on investments in the Third World is wrong too. That is, if you are a Western company, because for exactly the same thing Muhammad Yunus and Grameen Bank got the Nobel Peace Prize this year.

business model

Submitted by markpetens on Wed, 2006-12-20 21:23.

Social business or not, how can Grameen actually work? It seems to me that if 94% of its owners (and thus lenders of credit) are the poor themselves, where do they get the savings from to actually hand out these credits? It wouldn't surprise me if something really fishy goes on at the bank, possibly making up credits under the auspices of the Bangladesh government, whereby other Bengals are suffering from inflationary effects these credits cause.

Give him a break

Submitted by Hasibul Haque on Wed, 2006-12-20 20:56.

Telenor should start fulfilling what it 'intended' in the original contracts and that would certainly mean eventual departure from business in Bangladesh. I as a overseas Bangladeshi feel that Telenor did a great service to the country by becoming a partner in pioneering the cell phone revolution in the country but it has now reached a point where there is a fundamental philosophical difference between Grameen and Telenor - namely social enterprise versus solely profit making. I think Telenor should acknowledge this difference and sell it shares to Grameen at the market price and gracefully depart from the picture.  Yunus'  mentioning of his desire to make Grameen telecom a social business should not be thought of as a blackmail - It was to emphasize how important Grameen telecom is to the Grameen's objective of social business.

Re: Give him a break

Submitted by Filip van Laenen on Wed, 2006-12-20 23:11.

@Hasibul Haque:

Yunus didn't just «mention his desire», he wrote a letter to Telenor stating what sort of press release he would send out if the company wouldn't do what he told it to do. That's plain old blackmail in my book.

Contract Law is Contract Law...

Submitted by Kapitein Andre on Wed, 2006-12-20 04:45.

"The agreement made in 1997 contains a phrase in which Telenor expresses the intention to sell out of the company in the long run."

If Yunus is prepared to buy out Telenor's shares in GrameenPhone, then I don't see any problems, short of Yunus causing the share prices to be devalued. Telenor is correct in stating that this phrase does not constitute an obligation, for the "long run" is not a specified duration of time.

 

The Norwegian Prime Minister is a fool to become involved in what is essentially a possible international business dispute. Quite frankly, Telenor profiting off of its investment in GrameenPhone would only encourage further Western investment in such enterprises, where philanthropy and profit can go hand in hand.

While there is perhaps a

Submitted by Jordan on Wed, 2006-12-20 01:09.

While there is perhaps a genuine double standard here, I don't think this incident alone is enough to tarnish Muhammad Yunus

I have personally been disillusioned with the Nobel Peace Prize. It seems to consistently reward failure. But this year, it supported a humanitarian who, unlike the left, truly understands poverty. We should give him the benefit of the doubt.

Muhammad Yunus is not the devil either

Submitted by Filip van Laenen on Wed, 2006-12-20 23:06.

@JordanR

In fact, I agree with you. Muhammad Yunus is actually fundamentally a capitalist, and the only thing he did was to guarantee for the loans the poor otherwise were refused by traditional banks. He has probably done much more for the poor than any of the tiers-mondists blaming the West for everything that has ever gone wrong in the Third World.