1. What is meant by Collective Investment Schemes?

A Collective investment scheme is any scheme or arrangement, which satisfies the conditions, referred to in sub-section (2) of section 11AA of the SEBI Act. Any scheme or arrangement made or offered by any company under which the contributions, or payments made by the investors, are pooled and utilised with a view to receive profits, income, produce or property, and is managed on behalf of the investors is a CIS. Investors do not have day to day control over the management and operation of such scheme or arrangement.

2. Which are the schemes not treated as CIS? The following do not constitute a collective investment scheme: i. any scheme or arrangement made or offered by a co-operative society or a society being a society registered or deemed to be registered under any law relating to cooperative societies for the time being in force in any State; any scheme or arrangement under which deposits are accepted by non-banking financial companies any scheme or arrangement being a contract of insurance to which the Insurance Act, applies; any scheme or arrangement providing for any Scheme, Pension Scheme or the Insurance Scheme framed under the Employees Provident Fund and Miscellaneous Provisions Act, 1952 any scheme or arrangement under which deposits are accepted under section 58A of the Companies Act, 1956 (1 of 1956); any scheme or arrangement under which deposits are accepted by a company declared as a Nidhi or a mutual benefit society under section 620A of the Companies Act, 1956 (1 of 1956); any scheme or arrangement falling within the meaning of Chit business as defined in clause (d) of section 2of the Chit Fund Act, 1982 (40 of 1982); any scheme or arrangement under which contributions made are in the nature of subscription to a mutual fund; 3. What is a Collective Investment Management Company? A Collective Investment Management Company is a company incorporated under the provisions of the Companies Act, 1956 and registered with SEBI under the SEBI (Collective Investment Schemes) Regulations, 1999, whose object is to organise, operate and manage a Collective Investment Scheme. 4. What is an existing Collective Investment Scheme? Entities, which were operating a collective investment scheme at the time of commencement of CIS Regulations i.e. (October 15, 1999), are deemed to be an existing collective investment scheme. 5. Can an existing Collective Investment Scheme raise further funds?

ii. iii. iv.

v. vi.

vii. viii.

An existing Collective Investment Scheme cannot launch any new scheme or raise money from the investors even under the existing scheme, unless a certificate of registration is granted to it by SEBI. In other words, after notification of regulations an existing collective investment scheme, even after obtaining provisional registration as well as after obtaining credit rating cannot mobilise funds from the public unless a certificate of registration is granted to it. 6. Under what circumstances a company registered as a Collective Investment Management Company can raise funds from the public? A registered Collective Investment Management Company is eligible to raise funds from the public by launching schemes. Such schemes have to be compulsorily credit rated as well as appraised by an appraising agency. The schemes also have to be approved by the Trustee and contain disclosures, as provided in the Regulations, which would enable the investors to make informed decision. A copy of the offer document of the scheme has to be filed with SEBI and if no modifications are suggested by SEBI within 21 days from the date of filing then the Collective Investment Management Company is entitled to issue the offer document to the public for raising funds from them.

7. Will the unit certificates be listed on Stock Exchanges? Yes, they have to be compulsorily listed on the Stock Exchanges as mentioned in the Offer document. 8. Are the investors entitled to receive information about the schemes where they have invested and at what interval? The investor are entitled to receive a copy of the Balance Sheet, Profit and Loss account and a copy of the summary of the yearly appraisal report from CIMC within two months from the closure of the financial year. Further, the scheme wise annual report or an abridged form thereof has published in a national daily as soon as possible but not later than two calendar months from the date of finalisation of accounts. Also, scheme wise un-audited quarterly financial results have to be published in a national daily by CIMC within one month from the close of each quarter.

9. Does filing of offer document of a scheme by a CIMC with SEBI mean that investment in that scheme is safe and sound? It is to be distinctly understood that submission of offer document to SEBI should not in any way be deemed or construed that the same has been cleared or approved by SEBI. SEBI does not take any responsibility either for the financial soundness of any scheme for which the offer document has been filed or for the correctness of the statements made or opinions expressed in the offer document. It is the responsibility of the Collective Investment Management Company to ensure

that the disclosures made in the offer document are generally adequate and are in conformity with the Regulations.

10. Under what circumstances can an existing Collective Investment Scheme be wound up? An existing collective investment scheme which failed to make an application for registration, or was not desirous of obtaining provisional registration, or has not been granted provisional registration, or having obtained provisional registration fails to comply with the provisions as laid down in the Regulations, was / is required to wind up the existing scheme. 11. What is the procedure for winding up of an existing Collective Investment Scheme? First of all an existing collective investment scheme has to send an information memorandum to the investors who have subscribed to the schemes, detailing the state of affairs of the scheme, the amount repayable to each investor and the manner in which such amount is determined. The said information memorandum has to be dated and signed by all the Directors of the scheme. The information memorandum has to explicitly state that investors desirous of continuing with the scheme will have to give a positive consent, within one month from the date of the information memorandum, to continue with the scheme. If, positive consent to continue with the scheme is received from only 25% or less of the total number of existing investors, the scheme shall be wound up and payment be made to the investors within three months of the date of the information memorandum.

12. What are the redressal mechanisms available to an investor in Collective Investment Schemes who invested before the date of notification of the Regulations (i.e. before October 15, 1999)? Investors may note that many of the existing collective investment schemes had collected funds from the public prior to coming into force of the regulatory jurisdiction of SEBI and any action by SEBI against defaulting entities does not necessarily ensure the refund of money invested by the investors in such entities. 13. Is there some institution, which guarantees repayment of money now? As a regulatory body SEBI can not guarantee or undertake the repayment of money to the investors. 14. Whom to approach for Grievance Redressal ? Investors should approach CIS in this regard. If investors do not get satisfactory response thereto, they may write to SEBI. Further, investors can approach district consumer redressal forums in case entities fail to honour their commitments or for any deficiency in service. For bouncing of cheques, investors can move the courts

under section 138 of the Negotiable Instruments Act as the right to file criminal complaint exclusively vests with the beneficiary of the cheque. Investors should further note that wherever they do not have a right to the land or to the produce arising out of the land such investment may be a deposit and where a company fails to repay the deposits, it attracts the provisions of section 58A of the Indian Companies Act, 1956. It is clarified that SEBI has no jurisdiction over such deposits.

15. What are the mechanisms available to an investor to know about the registration status of various entities either existing or new? On grant of registration as a collective investment management company, SEBI shall issue a Press Release giving the name and address of the entities which have been granted registration. Further, the same shall be posted on the SEBI website: www.sebi.gov.in 16. What are the penal provisions if a registered collective investment management company violates certain provisions of the Regulations? If, a registered collective investment management company violates certain provisions of the regulations, then action in terms of suspension/ cancellation of certificate may be initiated against the entity. Further, SEBI may, in the interests of the securities market and the ' investors, initiate criminal prosecution under Section 24 of the SEBI Act, apart from passing of directions such as a. requiring the person concerned not to collect any money from investor or to launch any scheme; b. prohibiting the person concerned from disposing of any of the properties of the scheme acquired in violation of the Regulations; c. requiring the person concerned to dispose off the assets of the scheme in a manner as may be specified in the directions; d. requiring the person concerned to refund any money or the assets to the concerned investors along with the requisite interest or otherwise, collected under the scheme; e. prohibiting the person concerned from operating in the capital market or from accessing the capital market for a specified period At the time of commencement of CIS Regulations i.e. (October 15, 1999), entities operating a collective investment scheme are deemed to be an existing collective investment scheme. SEBI does not ensure the refund of money invested in defaulting entities registered before October 15, 1999. By any means the undermentioned do not constitute a CIS where any scheme or arrangement

Made or offered by a co-operative society or a society being a society registered or

deemed to be registered under any law relating to co-operative societies for the time being in force in any State BeinUnder which deposits are accepted by non-banking financial companies.g a contract of insurance to which the Insurance Act, applies. Providing for any Scheme, Pension Scheme or the Insurance Scheme framed under the Employees Provident Fund and Miscellaneous Provisions Act, 1952. Under which deposits are accepted under section 58A of the Companies Act, 1956 (1 of 1956). Under which deposits are accepted by a company declared as a Nidhi or a mutual benefit society under section 620A of the Companies Act, 1956 (1 of 1956). Falling within the meaning of Chit business as defined in clause (d) of section 2of the Chit Fund Act, 1982 (40 of 1982). Under which contributions made are in the nature of subscription to a mutual fund.

Registered with SEBI under the SEBI (Collective Investment Schemes) Regulations, 1999 and incorporated under the provisions of the Companies Act, 1956 whose object is to organise, operate and manage a Collective Investment Scheme forms a Collective Investment Management Company. These companies can raise funds from the public by launching schemes which has to be credit rated and appraised by appraising agencies. It also has to be approved by the Trustee and contain disclosures according to the Regulations to enable investors to make informed decision. The offer document to the public is issued after 21 days of filing document to SEBI and in return no modifications are suggested by SEBI. The CIS cannot do such. SEBI is not responsible either for the financial soundness of any scheme for which the offer document has been filed or for the correctness of the statements made or opinions expressed in the offer document. CIMC has to ensure the disclosures. FAQs on Collective Investment Schemes

What is the procedure for winding up of an existing Collective Investment Scheme? Is there some institution, which guarantees repayment of money now? Whom to approach for Grievance Redressal ? What are the mechanisms available to an investor to know about the registration status of various entities either existing or new? What are the penal provisions if a registered collective investment management company violates certain provisions of the Regulations?

What is the procedure for winding up of an existing Collective Investment Scheme? Existing CIS has to send an information memorandum to the investors who have subscribed to the schemes, detailing the state of affairs of the scheme, the amount repayable to each investor and the manner in which such amount is determined.

This information memorandum has to be signed with date by all the Directors of the scheme. The information memorandum has to state that investors desirous of continuing with the scheme will have to give a positive consent, within 30 days from the date of the information memorandum, to continue with the scheme. If positive consent is not received from more than 25% of total existing investors, the scheme will wound up and payment made within three months to investors from the date of the information memorandum. Is there some institution, which guarantees repayment of money now? No. SEBI do not guarantee or undertake repayment to the investors. Whom to approach for Grievance Redressal ? To CIS. If not satisfied then they may write to SEBI. Investors can also approach district consumer redressal forums in case entities fail to honour their commitments or for any deficiency in service. If the cheques are bounced, investors can move the courts under section 138 of the Negotiable Instruments Act as the right to file criminal complaint exclusively vests with the beneficiary of the cheque. Investors should further note that wherever they do not have a right to the land or to the produce arising out of the land such investment may be a deposit and where a company fails to repay the deposits, it attracts the provisions of section 58A of the Indian Companies Act, 1956. SEBI has no jurisdiction over such deposits. What are the mechanisms available to an investor to know about the registration status of various entities either existing or new? On grant of registration as a collective investment management company, SEBI shall issue a Press Release giving the name and address of the entities which have been granted registration. Further, the same shall be posted on the SEBI website: www.sebi.gov.in. What are the penal provisions if a registered collective investment management company violates certain provisions of the Regulations? Action in terms of suspension/ cancellation of certificate may be initiated against the entity. Moreover, SEBI may, in the interests of the securities market and the investors, initiate criminal prosecution under Section 24 of the SEBI Act, apart from passing of directions such as

Requiring the person concerned not to collect any money from investor or to launch any scheme; Prohibiting the person concerned from disposing of any of the properties of the scheme acquired in violation of the Regulations; Requiring the person concerned to dispose off the assets of the scheme in a manner as may be specified in the directions; Requiring the person concerned to refund any money or the assets to the concerned investors along with the requisite interest or otherwise, collected under the scheme;

Prohibiting the person concerned from operating in the capital market or from accessing the capital market for a specified period

India East | West | North | South | Northeast Tags: West Bengal chit fund scam | Ponzi schemes | Sebi | Saradha Realty India | Sudipta Sen | Debjani Mukherjee India Today / India / North / Story

Govt seriously considering strengthening of laws to regulate collective investment schemes, says Sebi chief
PTI New Delhi, May 1, 2013 | UPDATED 16:04 IST Tweet Amid lakhs of investors believed to have been defrauded by Ponzi schemes in West Bengal, Sebi Chairman U K Sinha on Wednesday said the regulator is working hard to ensure that small investors' savings are not put to risk. "Within the powers given to us, Sebi is working extremely hard to ensure that savings of small investors are not put to risk," Sinha said. He, however, said that the Securities and Exchange Board of India (Sebi) has some legal limitations and he would not be able to comment on specific issues concerning specific companies as there have been some court and quasi-judicial orders as well in certain cases. "I'll however like to assure you all that we are alive to the task given to us within our mandate," he added. He was replying to queries about an alleged fraud by Kolkata-based Saradha group through its investment schemes. Sinha was speaking at a public seminar here of Asia Pacific Region Committee of IOSCO, a global body of securities regulators from across the world of which Sebi is also a member. The government is seriously considering strengthening of laws to regulate all kind of collective investment schemes (CIS), Sinha said. Sebi has already passed an order against Saradha Realty India to close all its collective schemes and refund the money collected from investors within three months.

The capital market regulator has also barred Saradha Realty India and its Managing Director Sudipta Sen from the securities markets till the time it winds up all its CIS and refunds the entire money to investors.

SEBI Order in the Art Fund Case

Earlier this week, SEBI passed an order against Osians-Connoisseurs of Art Private Limited holding that the Osian Art Fund falls within the purview of the SEBI Act and the SEBI (Collective Investment Scheme) Regulations, 1999 (the CIS Regulations). Since the art fund had raised investments without registering with SEBI, it was ordered to wind up its scheme and refund monies collected by it and also prohibited from accessing the capital markets.

The Osian Art Fund was set up as a private trust with a trustee, and managed by an investment management company. It had raised monies from investors whose monies were pooled to acquire and manage art works (that were the underlying assets). A few years ago, SEBI began investigation into the affairs of the art fund and specifically on whether it violates the SEBI Act and the CIS Regulations. Osian made several submissions and arguments, including on the interpretation of the law on the issue, following which SEBI passed its order.

SEBI was required to rule on 4 specific issues, which are dealt with separately. First, although the definition of a collective investment scheme in section 11AA(2) of the SEBI Act refers to a scheme or arrangement offered by any company, it cannot be read to mean that only funds set up as companies fall within the purview of the legal regime. On the other hand, the substantive provisions in section 12(1B) of the SEBI Act and Reg. 3 of the CIS Regulations provide that no person shall carry out a collective investment scheme without registration with SEBI. Adopting this approach, only a company structure can be used to set up a collect investment scheme, and that no other type of structure (including trust) is a permissible one.

Second, although the CIS Regulations were promulgated in the late 1990s following the Dave Committee Report to deal with fraudulent schemes involving plantation/agro companies, they are not limited to that asset class. SEBI found that the Act and the CIS Regulations apply to any asset class. What is important is the nature of the scheme and not the asset class.

Third, while SEBI seemed to accept the legal interpretation that the Act and the CIS Regulations apply only to a public offering of securities by a collective investment scheme, on the facts of

the Osian case it was found that the units of the art fund were marketed extensively. Relying upon the forceful precedent of the Supreme Court in the Sahara case, SEBI found that the Osian fund was available to more than 50 offerees (the limit stipulated for a public offering in section 67(3) of the Companies Act, 1956). The fact that only sophisticated investors could subscribe to units which had a minimum subscription amount and minimum investment lots would not detract from the fact that this is a public offering.

Finally, SEBI found that the units of the art fund were securities as that expression carries a wide connotation under the SEBI Act and the Securities Contracts (Regulation) Act, 1956.

Overall, SEBI order is convincing on all counts, and is supported by principles of interpretation and jurisprudence with reference to securities regulation. The interpretation indicates the fairly wide scope of the CIS Regulations, which serves as a caution to entities that are establishing collective investment schemes (especially those that wish to stay outside the purview of registration with SEBI) and also a source of some comfort to the investors in such schemes.

Collective Investment Scheme (CIS)

A Collective Investment Scheme (CIS), as its name suggests, is an investment scheme wherein several individuals come together to pool their money for investing in a particular asset(s) and for sharing the returns arising from that investment as per the agreement reached between them prior to pooling in the money. The term has broader connotations and includes even mutual funds. For instance, in UK, the unit trust scheme is a collective investment scheme. However, in India, as in US, the definition of CIS excludes mutual funds or unit trust schemes etc and is given a strict definition in Section 11AA of the SEBI Act, 1992. CISs are regulated by the securities market regulator SEBI - under SEBI (Collective Investment Scheme) Regulations, 1999.

According to Section 11AA of the SEBI Act, CIS is any scheme or arrangement, which satisfies the following conditions: i. ii. the contributions, or payments made by the investors, by whatever name called, are pooled and utilized solely for the purposes of the scheme or arrangement; the contributions or payments are made to such scheme or arrangement by the investors with a view to receive profits, income, produce or property, whether movable or immovable, from such scheme or arrangement; the property, contribution or investment forming part of scheme or arrangement, whether identifiable or not, is managed on behalf of the investors; the investors do not have day to day control over the management and operation of the scheme or arrangement.

iii. iv.

Through the SEBI ordinance dated 18th July 2013, any pooling of funds under any scheme or arrangement, which is not registered with SEBI, involving a corpus amount of one hundred crore rupees or more shall be deemed to be a collective investment scheme.

However, as per the SEBI Act, the following activities have been exempted from the CIS Regulations. Any scheme or arrangement: i. ii. iii. iv. v. vi. vii. viii. made or offered by a co-operative society under which deposits are accepted by non-banking financial companies being a contract of insurance providing for any scheme, Pension Scheme or the Insurance Scheme framed under the Employees Provident Fund under which deposits are accepted under section 58A of the Companies Act, 1956 under which deposits are accepted by a company declared as a Nidhi or a mutual benefit society falling within the meaning of Chit business as defined in clause (d) of section 2 of the Chit Fund Act, 1982(40 of 1982); under which contributions made are in the nature of subscription to a mutual fund;

A registered Collective Investment Management Company is eligible to raise funds from the public for a particular Scheme and in turn issues them what are called units (which are essentially shares of that Scheme given in proportion to the contribution made by the investor). These units, by law, have to be compulsorily listed on the stock exchange platform.

The FAQs on CIS may be seen at http://www.sebi.gov.in/faq/cis_faq.html Even though SEBI had received complaints against over 660 entities, only one entity is formally registered as a CIS with SEBI; however no scheme has been known to be launched by this entity till date. In view of the same, SEBI has taken initiatives (Ordinance of 2013) to prune the definition of CIS accordingly. The SEBI website reflects the status of the CIS cases. Such status includes name of accused (directors/ promoters), court case no., court name, date of filing of court case for these entities. This information is available at the link: http://www.sebi.gov.in/sebiweb/home/document_detail.jsp?link=http://www.sebi.gov.in/cms/seb i_data/docfiles/21678_t.html In addition to this, the court judgment details (along with a copy of the final court orders) are also available on the SEBI website. This information is available at the link: http://www.sebi.gov.in/cms/sebi_data/attachdocs/1315992946034.pdf

History of CIS in India In 1990s there were various instances of collection of money by numerous agro-based and plantation companies, which eventually failed to provide any return on the investments (despite promising around 18-30% returns) including the repayment of principal amount. In this context, the Government of India, vide its press release dated November 18, 1997, decided that an appropriate regulatory framework for regulating entities which issue instruments like agro bonds, plantation bonds etc., will be put in place. The government decided that the schemes through which such instruments are issued would be treated as "Collective Investment Schemes" (CIS) coming under the provisions of the SEBI Act.

Accordingly, SEBI vide its press release dated November 26, 1997 and December 18, 1997, prohibited collective investment schemes from sponsoring any new scheme till the CIS regulations are notified. The press releases further stated that instruments such as agro bonds, plantation bonds would be treated as CIS coming under the SEBI Act, 1992. All the companies having such activities were required to file information with SEBI. Moreover, general public was also informed that no person can sponsor or cause to be sponsored any new collective investment scheme and thereafter raise further funds.

Meanwhile, a committee was formed under Dr. S.A. Dave to examine and finalize the draft regulations for CISs. The committee submitted its report on 5th April 1999.

Subsequently, the notification of SEBI (Collective Investment Schemes) Regulations 1999 was issued on October 15, 1999. As per the CIS regulations, any person who has been operating a Collective Investment Scheme at the time of commencement of the CIS Regulations was required to make an application to SEBI for the grant of registration under the provisions of the Regulation, within a period of two months from the date of the notification. In case, such an application is rejected, the entity was required to wind up its existing schemes in the manner as specified in the Regulations. No entity was / is allowed to run a CIS scheme without obtaining the Certificate of Registration from SEBI.

In 2013, in the backdrop of Sahara / Sharada scams, SEBI modified the definition of CIS to include any scheme / arrangment floated by any person (instead of a company as was defined earlier); and any such scheme with corpus of more than Rs. 100 Crore shall also be deemed to be a CIS by SEBI.

There should be a single regulator for all collective investment schemes: SEBI chief
CNN-IBN | Updated May 01, 2013 at 12:33pm IST

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New Delhi: With lakhs of investors believed to have been defrauded by Ponzi schemes in West Bengal, Securities and Exchange Board of India (SEBI) chairman UK Sinha on Wednesday said there should be a single regulator for all collective investment schemes, including chit funds. "Within the powers given to us, SEBI is working extremely hard to ensure that savings of small investors are not put to risk," he added. Sinha, however, said the SEBI has some legal limitations and he would not be able to comment on specific issues concerning specific companies as there have been some court and quasijudicial orders as well in certain cases. "I'll however like to assure you all that we are alive to the task given to us within our mandate," he said. He was replying to queries about an alleged fraud by Kolkata-based Saradha group through its investment schemes. Sinha was speaking at a public seminar in Delhi of Asia Pacific Region Committee of IOSCO, a global body of securities regulators from across the world of which SEBI is also a member. The government is seriously considering strengthening of laws to regulate all kind of collective investment schemes (CIS), Sinha said.

UK Sinha also said there was a need to strengthen the SEBI Act. He added the SEBI was working hard to save small investors. SEBI has already passed an order against Saradha Realty India to close all its collective schemes and refund the money collected from investors within three months. The capital market regulator has also barred Saradha Realty India and its Managing Director Sudipta Sen from the securities markets till the time it winds up all its CIS and refunds the entire money to investors. When asked about regulating collective investment schemes, Sinha said there should be a single regulator in this regard. "But the type of instances that have come to our notice...there is a case for strengthening. Our position is that ideally there should be one single regulator for entire collective investment scheme and all the schemes such as nidhi funds or schemes like chit funds," Sinha said. Collective investment scheme as a subject for monitoring came under the Sebi ambit after amendment to the act, however there are several exemptions for schemes such as chit funds, nidhi funds, co-operatives, NBFCS. The SEBI chief said they were exempted with a very on the idea was that those would be reporting at small level and there would be local level authorities who would be taking care of them. "Let there be one single regulator. This regulator will have a very serious task at hand," Sinha said. Meanwhile, in the interim the capital market regulator has suggested certain amendments to certain sections of the SEBI Act. "For example whenever we impose penalties for some people

those penalty, we find it extremely difficult to collect because the collection mechanism under SEBI Act is vastly different and inferior from the mechanism, for example, given under I-T Act of CCI Act," he added. Sinha emphasised that his belief was that the government is seriously considering his suggestions. "We should wait for the whole process to get completed," he said. Regarding Financial Sector Legislative Reforms Commission's (FSLRC) recommendation of having a single regulator Sinha said that it was given after a lot of consideration. "So let the debate continue. The government has to finally take a call on that and not Sebi," he noted. (With additional information from PTI)

http://www.sebi.gov.in/acts/cisreg.html http://www.m-cril.com/BackEnd/ModulesFiles/Publication/M-CRIL-Microfinance-Review2012-MFIs-in-a-Regulated-Environment.pdf http://www.centre-for-microfinance.org/wp-content/uploads/attachments/csy/3127/SeptemberNL.pdf http://businesstoday.intoday.in/story/budget-2012-13-microfinance-bill/1/21950.html http://www.nab.com.au/wps/wcm/connect/060f8b8048e8ce5181299b0f27cc1e3e/microfinancehousehold-economy.pdf?MOD=AJPERES&CACHEID=060f8b8048e8ce5181299b0f27cc1e3e http://thediplomat.com/pacific-money/2013/03/13/empowering-women-through-microfinancein-india/ http://www.muhammadyunus.org/

The Inspiring Story of Muhammad Yunus, the Father of Micro-Finance

As a team member at Operation HOPE, which is a national partner of the To Catch a Dollar campaign, I had an opportunity to attend a special screening of the film To Catch A Dollar: Muhammad Yunus Banks on America. I really didnt know what to expect from the film. I had only heard that Grameen America was a micro-lender that was looking to expand in Queens, NY. What I saw was both inspirational and motivational. Many of us need someone to believe in what we are trying to do and to help us get started. Individuals are often just looking for a helping hand, rather than a handout. When we are falling, we may also need a hand to prop us up and support us. Mr. Muhammad Yunus is that helping and supporting hand. His faith and trust in helping to serve a population that is so often overlooked and dismissed, serves as a reminder that there are still those individuals who look to put the needs of others in front of their individual need of lining their pockets. I want to encourage everyone to attend the March 31st special theatrical event screening of the

film followed by an exclusive panel discussion featuring: Nobel Peace Prize Winner, Muhammed Yunus, Father of Modern Microfinance with Special Guest, Financial Powerhouse, Suze Orman, Author of the new book: The Money Class: Learn to Create your New American Dream.

Learn in Economy, Poverty and Microfinance

March 2, 2011 at 4:00 AM

Muhammad Yunus, Father of Microfinance, Ousted From Grameen Bank Muhammad Yunus, Grameen Bank Founder and Father of Microfinance, Ousted by Bangladeshi Government

This is troubling. In the latestand boldestmove in the campaign against Muhammad Yunus, the Bangladeshi government has issued an order removing him from his Nobel prize-winning Grameen Bank. The government is using a special regulatory law created just for Grameen, which, it says, includes the power to fire Yunus as managing director of the pioneering microlending organization he founded in 1983. The official reasoning for the order is that Yunus, at 70, is too old for the post, citing a provision of the law that sets a mandatory retirement age of 60. Yunus accepted the formal title of

managing director in 2000. The Grameen Bank, however, says Yunus is staying put. The backstory here is what many are calling a vendetta by Prime Minister Sheikh Hasina who has accused microlending of "sucking blood from the poor." We posted on this earlier with plenty of links to responses if you want to catch yourself up. But the quick version is that Yunus made a powerful enemy of Hasina when he announced he might start a political party shortly after a 2007 military coup. At the time, Grameen was still in the spotlight from the 2006 Nobel Prize. Yunus never did start the party, but the announcement was taken as direct threat to Hasina and other powers that be. Yunus is arguably Bangladesh's most famous man and sitting at the helm of an organization with more than 8 million loyal borrowers, they worried he could shake up Bangladeshi politics as he shook up microfinance. Tensions were always present between Hasina and Yunus after that. But recently, in the wake of a Norwegian documentary that painted Grameen in a poor light, Hasina's government seized the opportunity and brought corruption and defamation cases against Yunus. Those actions obviously failed, so we'll see what comes of this "mandatory retirement" approach. The official stance of the Grameen Bank puts the matter on legal grounds:
Grameen Bank is taking legal advice. It is also examining all the legal aspects of this issue. Grameen Bank has been duly complying with all applicable laws. It has also complied with the law in respect of appointment of the Managing Director. According to the Bank's Legal Advisors, the founder of Grameen Bank, Nobel Laureate Professor Muhammad Yunus, is accordingly continuing in his office.

The real danger with all of this stretches far beyond Grameen. In the process of eliminating an erstwhile political rival, Hasina is sidelining, and potentially permanently handicapping, the key spokesman for microfinance. All of this comes at a fragile time for the industry. India has taken actions to protect borrowers from predatory microlenders raising serious questions about the effectiveness of microfinance as a tool for fighting poverty. Those are claims Yunus refutes by drawing a distinction between different types of lending and lenders. That's a debate that should be had, and is happening, but this move by the Bangladeshi government isn't helping sort out the best way to combat poverty.

News World news Bangladesh

Microfinance guru Muhammad Yunus faces

removal from Grameen Bank

Pressure on Nobel prizewinner to quit bank board but supporters say campaign is politically motivated by Bangladesh government

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inShare0 Email Jason Burke in Delhi The Guardian, Monday 21 February 2011 15.45 GMT

Muhammad Yunus, 70, who founded Grameen Bank to give micro loans to poor people in Bangladesh, is facing calls to relinquish his position as managing director. Photograph: Boris Horvat/AFP/Getty Images

Muhammad Yunus, the Nobel prizewinning economist and so-called father of microfinance, faces being ousted from the bank that he founded to help poor people in Bangladesh and across the developing world. Yunus, the managing director of the Grameen Bank, which has lent small sums to millions of deprived people to help them start or run their own businesses as a first step out of poverty since being created in 1983, has been caught in a bitter political battle in his homeland of Bangladesh. The campaign to remove Yunus, mounted mainly by politicians, is to intensify this week ahead of a key board meeting next Monday, which his supporters believe will involve an attempt to force the 70-year-old to quit as managing director. Last week, Bangladesh's finance minister said Yunus should stand down following alleged

irregularities in operations. Abul Maal Abdul Muhith called Yunus a "man of high standing and respect" but "now old". The minister, who is 77, said: "We need to redefine the bank's role and bring it under closer regulation." Supporters of Yunus fear politicians want to bring Grameen under government control. Yunus did not respond directly to the minister's comments but told reporters: "Any transition [would] essentially require a friendly environment and support from the inside and outside stakeholders of the bank to ensure that we continue to be totally committed to our mission for and with the poor." Other government comments have been less polite. In December, the prime minister, Sheikh Hasina, accused Yunus of treating Grameen as his personal property and claimed the group was "sucking blood from the poor". Supporters have branded the claim as grotesque, especially as Yunus has won a Nobel prize for his work on reducing poverty. He has appeared in a Dhaka court to face charges that one of his social business ventures resulted in the sale of contaminated yoghurt. He has also had to answer claims made in a Norwegian television documentary last year that Grameen transferred funds from Norway's aid agency in the 1990s from one legal entity to another for tax purposes. The Norwegian government said an inquiry had found no evidence of wrongdoing. The attacks on Yunus come at a time when microlending once hailed as a model that would change the lives of hundreds of millions in the developing roads faces increasing political hostility. In India, politicians have accused bankers of profiteering from the poor and, in some places, banned further lending or recovery of debts. In the southern Indian state of Andhra Pradesh, aggressive selling by scores of unregulated microfinance firms has pushed huge numbers of already desperately poor farmers deeply into debt. Some analysts have spoken of the industry as south Asia's equivalent of American's subprime loans, with equal potential to cause financial havoc. Friends and admirers of Yunus believe politicians have been looking for an opportunity to oust him since the economist tried to establish a political party several years ago to fight corruption, an endemic problem in Bangladesh. Another motive may be the electoral advantages in controlling the bank itself, in which the government has a 10% stake, and the resources and popularity it might bring.

The bank helps about 8m of Bangladesh's poorest families and, through social business partnerships with global brands such as Adidas and Danone, has secured employment for more than 30,000 people. An international campaign to defend Yunus has been launched. The high-powered Friends of Grameen, chaired by Mary Robinson, the former United Nations high commissioner for human rights and one-time president of Ireland, condemned "the campaign of misinformation" against Yunus in a statement last week. It said the "increasingly aggressive attacks" on Yunus were "politically orchestrated". Other members include James Wolfensohn, the former World Bank president, Yeardley Smith, the French-born American actor, and Liam Black, a UK-based social entrepreneur. "It is vital that Grameen Bank remains an independent financial resource for the poor of rural Bangladesh," Black said. "The bullying and insulting of Yunus as a 'blood sucker' and the pathetic attempts by the government to remove him on grounds of his age must stop."

How Grameen Bank was formed

The idea of microfinance came to Muhammad Yunus when, as a young economics professor during a famine in Bangladesh in the late 1970s, he came across rural women skilled in local handicrafts who owed so much to local moneylenders that they earned only pennies each day from hours of labour. Yunus created a bank that would lend small sums to such clients, filling the gap that traditional banks had left and cutting out local loan sharks. The model of small sums lent mainly to women, often organised into mutually supporting groups, was extremely successful, with very few loans left un-repaid and a wide range of social benefits. The bank rapidly had millions of clients. The model of Grameen Bank Grameen means rural or grassroots in the Bengali language has been exported over much of the developing world. In recent years however newcomers to the business have made significant profits from microfinance. Some have been accused of exploiting the poor through aggressive selling techniques, high interest rates and aggressive collection of loan repayments http://www.microsave.net/files/pdf/AP_MFI_Crisis_Report_MicroSave_CMF_Ghiyazuddin_Gu pta.pdf