New York — Manhattan, the site of Grameen America’s fourth and newest office, seems a stark contrast to the cluster of villages in Bangladesh where rural economics professor Mohammed Yunus began giving out small loans to poor women entrepreneurs in 1976. But Yunus and his staff say that Grameen’s lending model has worked so well in their three New York locations and their Omaha, Nebraska center that they are currently fundraising to open branches in San Francisco, Washington and five other cities across the United States.
Grameen, “village” in Bangladeshi, has become the most prominent brand name in the flourishing world of microcredit — the practice of granting small-scale loans to help impoverished people start or expand their own businesses. Yunus, whom many refer to as the “father of microcredit,” received the Nobel Peace Prize and the U.S. Presidential Medal of Freedom, among dozens of other awards, for his organization’s efforts to alleviate poverty in developing countries. But when Grameen opened its first office in the New York borough of Queens in early 2008, its entrance into the U.S. market was nonetheless considered a bold move.
At the Manhattan branch’s opening ceremony on May 17, Yunus explained why Grameen’s work is needed at the center of the global business world: “New York City is the world capital of banking. In these skyscrapers that New York built, they control world finance. What I pointed out is that they do the banking with the world but they don’t do the banking with their neighbors. We are here to show that there is nothing wrong with doing banking with neighbors.”
By “neighbors,” Yunus meant the roughly 825,000 adults in New York City who lack access to regular banking services such as checking and savings accounts, credit cards and loans. Thirteen percent of households in Manhattan alone are “unbanked,” many of these in the neighborhoods of Harlem and Washington Heights, according to a Citywide Financial Services study published in February.
The study, commissioned by the city’s Department of Consumer Affairs, found that New Yorkers who do not have bank accounts relied instead on “high-cost fringe financial services” such as check cashers and pay-day loan services, a trend that Grameen America staff and clients also emphasized.
Manhattan-based hairdresser and Grameen borrower Lissette said that when she started her own salon service two years ago, she went to a “loan shark” because she needed money for basic supplies. But the interest on her loans averaged at least $50 per month, and she ended up losing her house as collateral on her debts.
“But Grameen is a lot better,” Lissette said in an interview broadcast on the organization’s website. “I took a loan for $1,500. I pay it weekly. It’s so much nicer because I am paying the loan, and the interest is less. And it let us be able to pay it back. Look, six months later I’m done paying it. I think I’ve seen them helping a lot of us make it out there,” she concluded.
Lissette and her fellow Grameen America borrowers are as diverse as the city itself is: they are hairdressers from Manhattan, soul food vendors from Brooklyn, jewelry makers in Queens. But they share one quality that Yunus has said all poor people have in common: they pay back. For the 2,500 loans that have been disbursed in the U.S. since 2008, there has been an average repayment rate of 98 percent, unaffected by the economic recession. They’ve also been required to open up savings accounts and have deposited a total of $350,000 so far.
Katherine Rosenberg, GA’s director of evaluation and education, said that the Grameen group-lending model helps encourage repayment: women in groups of five take out loans and pay them back together, and if one group member misses payments, the rest miss out on larger loans. In this way, the peers support one another and keep each other responsible.
Rosenberg said that the U.S. program has tried to stick as closely as possible to the Bangladeshi example, while adapting to the needs of their clients here. “Other than the fact that we’re not a bank, we’re running the exact same model,” she stated, also noting that the $1,500 loans they give to New York borrowers are much higher than those offered in Bangladesh, to account for differences in the cost of living.
She explained that the organization imports Bangladeshi managers who have spent 25 years or more working on Grameen projects. Loan officers — the people who meet with clients on a daily basis — are typically members of the community in which they serve, and they receive months of training in the Grameen model before they start handing out and collecting checks.
The nonprofit also relies on student interns from local colleges and universities. Andrew Cabasso, a second-year Fordham Law School student whose interests range from microcredit to video game law, spent last summer as a legal intern at Grameen America, helping them plan their current expansions by researching state banking laws and restrictions on interest rates.
Cabasso said he first discovered microcredit as a freshman business student, when he read Yunus’s book “Banker to the Poor” and it changed his life. He was inspired in part because the Grameen Bank seemed like a more practical model than any of the philanthropic organizations he had been exposed to. “Microfinance is not charity,” he emphasized.
“People say that for-profits are all brains and no heart, and nonprofits are all heart and no brains. Well, Grameen America is both heart and brains,” Cabasso added.
Ananya Roy, a University of California at Berkeley professor who teaches a course on global poverty and published a book this year called “Poverty Capital: Microfinance and the Making of Development,” said she had been skeptical about microcredit’s ability to help the most marginalized groups until she visited the Grameen Bank and other microcredit project sites in Bangladesh, and saw firsthand the way their loans helped to create “an infrastructure of social and human development.”
Roy said that it’s “too early to tell” whether Grameen America will end up pulling Americans out of poverty the way she thinks the model has in other countries. The program “is so new that I think it’s difficult to reach any sort of conclusion.”
She said the U.S. was an “obvious place to start” in the developed world for Grameen, given the concerns about poverty and inequality here, as well as the prevalence of predatory lending institutions. “There’s also a powerful symbolism to it, especially in New York,” Roy concluded.