Professor Bhagwati's article on Grameen Bank makes some useful points and rightly lauds SEWA, one of the earliest successful examples of pro-poor microfinance. We also believe that the article creates some unnecessary and false dichotomies, and contains several errors and distortions.

No one connected with Grameen Bank has denied or even questioned the Honorable Sheikh Hasina's political successes or legitimacy. Repeatedly, Professor Yunus has struck a conciliatory tone, and when asked about the Prime Minister's statements about Grameen, he has said she has the right to her opinion and to exercise her prerogatives as the lawfully elected head of government. Nor has anyone questioned the impressive accomplishments of SEWA and its more than 60,000 client-owners. Indeed, Professor Yunus and I (among many others associated with Grameen) have repeatedly praised Ela Bhatt and her team for their groundbreaking accomplishments - which look even more important in light of recent events in the Indian microfinance sector.

In fact, there are excellent relations between Indian microfinance leaders and Grameen Bank, most recently evidenced by an open letter written by more than 300 members of Sa-Dhan, the largest association of Indian MFIs (whose board Ela Bhatt chaired for many years), to make the case for the continued independence of Grameen Bank. Among the signers was the current CEO of SEWA Bank, which was founded by Ela Bhatt. Professor Bhagwati is apparently seeking to highlight divisions that do not exist.

The article also creates the impression that Grameen Bank is supported by foreign capital infusions. In fact, Grameen stopped taking foreign money of any kind in the 1990s, and today it is actually a net investor in Bangladesh. Its deposits (which total $1.4 billion) exceed its loans to clients by more than $500 million.
Grameen Bank's impact on the lives of its 8.3 million client-owners and their families has been studied intensively over the last two decades and there is a strong consensus that it has, along with other pioneering microfinance institutions in the country, contributed to the impressive economic growth and poverty reduction witnessed there. Professor Bhagwati is correct that there has been a disparity in economic growth rates between India and Bangladesh, and that forward-looking macroeconomicpolicies can play a critical role in fostering economic growth. We also agree that microfinance can be far more effective when carried out in an environment of broad economic reforms. But, absent those reforms, where else can the poor turn to improve their income earning potential? Microfinance may not be the sole solution, but it is certainly one part of the solution.

No one ever said the economic progress achieved in Bangladesh was equal to India's, or that it was solely the result of Grameen's contributions. However, Professor Jeffrey Sachs, who analyzed the progress of Bangladesh when preparing his book The End of Poverty, found that microfinance is one of the two principle reasons why the country was moving forward, economically and socially.

Finally, I would like to direct readers who are curious about the actual evidence base for microfinance as a poverty-reduction strategy to consult "Measuring the Impact of Microfinance: Taking Another Look," by Professor Kathleen Odell. Though global in scope, it covers many of the studies of the effectiveness of microfinance in Bangladesh as well as India, and is available for free download from the Grameen Foundation website. Many have found it a useful antidote to some of the unsupported claims and counter-claims about microfinance circulating in the media right now.

Alex Counts is the President of Grameen Foundation, a Washington, DC-based non-profit organization founded in 1997 and the author of "Small Loans, Big Dreams."