Bangladesh’s ‘village banker’ faces toughest challenge yet: Running his country

It would be called the Citizen’s Power party. The villagers of Bangladesh would make up his main power base. “I can’t stay away from politics any longer," he told reporters in 2007. “I am determined."

Yunus’s declaration from the airport in Dhaka stunned friends and associates, including several who wanted him to enter politics. When they pressed him on his plans, he appeared to have put little thought into the nuts-and-bolts of founding a party.

Within a few months, Yunus abandoned the idea.

Now the 84-year-old is in charge of Bangladesh, a country of 170 million, after student protests rocked the country and forced the abrupt resignation of former Prime Minister Sheikh Hasina. As Yunus makes the transition from development expert to statesman, any stumbles could spell trouble ahead for the strife-torn country.

Friends and associates of Yunus say the microcredit pioneer is a principled man obsessed with eradicating poverty from the world but has sometimes demonstrated a deep naiveté about politics.

“He’s devoted his life to helping the poor," said Mahfuz Anam, editor and publisher of the Bangladesh newspaper the Daily Star and a longtime friend. “And he’s totally unused to the world of politics and also politics in Bangladesh, which is filled with pitfalls, quicksand."

Political experts say he will face competing demands from students who want constitutional changes to repair Bangladesh’s democracy following Hasina’s autocratic rule, while political parties will be pushing for quick elections after being shut out of power.

Under the constitution, new elections are required within 90 days after the dissolution of parliament.

Some worry about a military takeover if Yunus cannot bring back law and order on the streets and run a functioning government. The Nobel laureate came to power after the army pulled its support from Hasina and accepted a proposal from protesters to put Yunus in charge.

Yunus has acknowledged the perils ahead and has said he would be guided by the protest movement. Hundreds of people have died since student demonstrations began in July over access to government jobs, before spiraling into a broader uprising against Hasina.

“I’m not saying I can run a government. I’m saying that I have some experience of running some organizations," he said on Sunday. “I’ll bring that as much as I can."

The moment you start making decisions, he added, “some people will like your decisions, some people will not."

Banking the village

Yunus grew up in the port city of Chittagong, now called Chattogram, on the southeastern coast of Bangladesh. The third of nine children, he was active in the Boy Scouts and traveled to international jamborees as a teenager to far-flung places including Japan, the U.S. and Europe.

He received a Fulbright scholarship to study at Vanderbilt University, where he earned a Ph.D. in economics in 1971 and also taught economics at Middle Tennessee State University.

During Bangladesh’s war of independence against Pakistan in 1971, Yunus lobbied for the U.S. government to officially recognize the new country and helped run a newsletter for the Bangladeshi diaspora. He returned to Bangladesh in 1972, eager to participate in building the new country led by freedom fighter Sheikh Mujibur Rahman, Hasina’s father, first taking on a role in the government’s planning commission before returning to his hometown university to teach economics.

The country quickly took a dark turn. Rahman was assassinated in 1975 in a military coup that killed most of Hasina’s family.

The country was also one of the poorest in the world—infamously described as a “basket case" by Henry Kissinger—and ravaged by conflict, famine and natural disasters. While strolling around a nearby village, Yunus said he noticed that many people running small businesses were forced to borrow money from loan sharks at usurious rates because they couldn’t get traditional bank loans.

“I was shocked to discover a woman in the village, borrowing less than a dollar from the moneylender, on the condition that he would have exclusive right to buy all she produces at the price he decides," Yunus said in a 2006 speech. “This, to me, was a way of recruiting slave labor."

He began lending them small amounts from his own pockets, and in 1983 he founded Grameen Bank, or Village Bank in the Bangla language. He spent the next two decades crisscrossing the globe, selling the idea of microcredit to governments all over the world. Over 100 developing countries have since launched microcredit services. Hasina once lauded his work, calling microcredit “a critical next step" in eradicating poverty.

He steadily gained international renown. In 2006, he won the Nobel Peace Prize along with Grameen Bank for “efforts to create economic and social development from below."

Yunus’s aborted foray into politics the following year, his friends and critics say, marked the beginning of his troubles in Bangladesh. “Newcomers in politics are dangerous elements," Hasina said at the time.

Rubana Huq, chairwoman of a garment-making conglomerate, said that Yunus told her late husband about his plans to form a political party. Huq’s husband, who was once a student of Yunus’s, advised him to abandon the idea because he lacked the institutional backing to run a functional party.

“You have to have that backing, that strength, the root-level support," Huq said. “Prof. Yunus is a great guy, but he’s an academic. He’s not a political person."

Yunus said he was disappointed to find that the people interested in joining his party “were the same people we were trying to get out of government."

Prison looms

Despite his lack of success, Hasina, who returned to power in 2009, saw in Yunus a potential political rival. The government began targeting him through court cases and investigations. He was ousted from Grameen Bank in 2011 and accused of sabotaging a World Bank loan for a major bridge project.

Yunus embarked on fresh projects aimed at helping the poor.

In 2012, he tapped Parveen Mahmud as managing director of Grameen Telecom Trust, a flagship company for Yunus’s other brainchild: social businesses, which are companies that reinvest profits back into the business with the aim of increasing its social impact.

Mahmud, whose family has known Yunus since she was a child, said he constantly threw out new ideas and encouraged others to voice their own opinions. He was very prompt at responding to texts, answering immediately even while traveling abroad.

At one point, she told him the company should stop investing in so many ventures and focus on a few areas such as funding a nursing college.

“He gave me a free hand in that way," Mahmud said.

Fahmida Khatun, executive director of the Centre for Policy Dialogue, a think tank based in Dhaka, said she would get together with Yunus over the years and chat about their work, which had many overlaps. He provided on-the-ground perspective about which policies were most workable for papers she wrote on topics such as female empowerment.

Yunus has a “childlike simplicity," she said. “His thinking is so beyond some worldly matter."

He was baffled and hurt as the government began levying case after case against him, she said. He advised friends to cut down on visits to avoid stirring up trouble for themselves. The Hasina government had him under heavy surveillance in recent years.

For the Daily Star’s 25th anniversary party in 2016, Anam invited government ministers but didn’t specify on the invitation that Yunus would be the chief guest. When Anam called Yunus to the stage, many of the ministers got up and left abruptly.

“I ran after them and said, ‘Sir, what happened?" he recalled. The response was: “Hey, you didn’t tell me you’re bringing in this man.’"

Anam said that marked the start of a campaign against him and the newspaper, including 84 legal cases. Sixteen were for sedition. He discussed their mutual legal troubles often with Yunus, who was saddened that the public and media didn’t rise up to condemn them.

“He was totally flabbergasted. Then he was very disappointed," he said.

Earlier this year, the Nobel laureate was sentenced to six months in jail for a labor-violations case, which was overturned last week. Separately, Bangladesh’s Anti-Corruption Commission alleged that Yunus and over a dozen associates were involved in money laundering and embezzling funds from Grameen Telecom, accusations they deny. For some charges, he faced life imprisonment.

Mahmud, who was also accused, said her recent face-to-face meetings with Yunus have been as co-defendants in court. During a June hearing, the judge asked everyone except Yunus to stand in an iron cage during the court proceedings. Yunus insisted on standing in the cage with everyone else, Mahmud said.

“Psychologically you feel very humiliated," she said. “Always, he’s smiling. He never showed, you know, his stress in that way."

Yunus and the other accused have been cleared in recent days in the graft case as well.

After Yunus picked his 16 cabinet members, a roster heavy on the academic and nonprofit spheres and light on administrative experience, concerns over Yunus’s political acumen deepened among allies and critics alike.

“I was wondering who these people are, what their education is," said Abdul Awal Mintoo, vice chairman of the Bangladesh Nationalist Party, the main opposition party against Hasina’s Awami League.

On Monday, Yunus appointed a retired civil servant, Ali Imam Majumder, as a special assistant. Majumder has served in top government positions, including as cabinet secretary.

Mintoo said it is too early to tell how effective Yunus will be.

Yet it is the very lack of involvement in Bangladesh’s bitter politics and his air of simplicity that prompted students to back Yunus as the man for this moment, protest leaders said.

“We searched in my country and everyone was polluted in Sheikh Hasina’s regime," said Nusrat Tabassum, a 23-year-old political-science student and one of the six main coordinators of the protests.

“We had only one person who is nonpartisan, who has a good reputation, who has guardian vibes, not king vibes," she said. “We don’t need any more masters, any more god in my country."

Krishna Pokharel contributed to this article.

Write to Shan Li at shan.li@wsj.com