Microcredit Thriving in America

Mar 31, 2014 by

Grameen America logoMuhammad Yunus won the 2006 Nobel Peace Prize for his seminal work in founding the microfinance pioneer Grameen Bank in Bangladesh. Grameen Bank’s core principle is that loans are better than charity to interrupt poverty. Grameen offers credit to classes of people formerly underserved: the poor, women, illiterate, and unemployed people. Mr. Yunus and Grameen believe loans offer people the opportunity to take initiatives in business or agriculture, which provide earnings and enable them to pay off the debt.

As of October 2007 over seven million Bangladeshis had borrowed from Grameen Bank, 97% of them women. The bank had nearly 25,000 employees in 2,500 branches serving over 80,000 villages.

And it turns out that what’s good for impoverished Bangladeshis is good for impoverished Americans as well.

Grameen America

Forty-six million Americans, including 20% of American children, live in poverty, defined as a family of four living on $23,500 per year or less. Full-time work at the federal minimum wage of $7.25 per hour translates to $15,000 annually. Like Bangladesh, America is fertile ground for microcredit.

Grameen America has lending offices in Boston, New York, Union City NJ, Charlotte, Indianapolis, Omaha, Austin, Los Angeles, San Jose, and San Francisco. In New York, Grameen America’s most active lender to date, 50,000 loans totaling $103 million have been made. In total, Grameen America’s made about 65,000 loans to 22,000 women in 397 communities.

The Grameen America Model

Grameen America works on a group lending concept. Here’s how its website describes Grameen’s model:

  1. A woman with a dream for a better life finds four people she trusts to form a Grameen Group.
  2. Groups participate in a week of financial training to learn about loans, savings, and credit building. At the end of the week, each woman opens a savings account.
  3. Each woman receives a $1,500 microloan to build a small business in her community.
  4. Every week groups meet with Grameen America staff in a member’s home to make loan and savings payments, continue their education, and build peer networks.
  5. With the tools in hand, women can build their businesses.

Grameen America’s Credit Score Impact

It’s tough to succeed in America without a good credit score. The typical Grameen America loan applicant—with poor or no credit—would be unwelcome, for any business, in many banks. But after six months in a lending group, the average Grameen America member’s credit score is 670.

In addition, members participate in fifty annual training sessions, develop a peer network, and begin saving money, often for the first time in their lives.

Numbers are one thing, but listen to these short videos focusing on a couple of Grameen America borrowers.

What Do You Think?

Are you surprised there’s a need for microcredit in the world’s wealthiest nation? What do you think of Grameen’s lending model?

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