From the archive, originally posted by: [ spectre ]
Grameen America is a microfinance company whose mission is to help
alleviate poverty through entrepreneurship by providing loans, savings
programs, credit establishment, and other financial services to the
working poor, especially women, in the United States. Grameen America
is built upon the success of the Grameen Bank in Bangladesh. Founded
by Professor Muhammad Yunus, the Grameen Bank is the most widely
recognized microfinance company in the world. The success earned both
Professor Yunus and the Grameen Bank the Nobel Peace Prize in 2006.
Grameen America has been created so that people with limited or no
access to credit can use entrepreneurship and self-employment, proven
means in the United Sates, for increasing wealth and escaping poverty.
The poor are frequently prevented from pursuing entrepreneurship
opportunities because mainstream banks will not make loans to people
who lack minimum credit scores and collateral. These “unbanked”
individuals typically have limited experience in understanding
financial institutions, getting loans, building savings and managing
credit. While conventional banks turn away these borrowers, the
success of high-interest rate predatory lenders (often charging over
300-400% APR) such as payday loan corporations, pawnshops, and check
cashers has shown that the unbanked constitute a highly valuable
customer base. Grameen America provides an alternative for these
borrowers. Grameen America provides banking for the unbanked.
Accessible Microfinance is Necessary in America
The need for accessible microfinance in America is great. Despite
being the world’s richest country, around 28 million people in the US
are unbanked and nearly 45 million have only limited access to
financial institutions. The problem is exacerbated by the US credit
rating system which excludes all those who lack collateral, education,
references or a banking history. The US financial system excludes the
poor, especially recent immigrants, because they do not have credit
ratings and cannot obtain them because they cannot meet some or all of
the credit rating requirements.
According to US Census figures, some 36 million people lived in
poverty in the United States in 2005. Among these poor persons, 8.7
million were first-generation immigrants and their family members. At
a macro level, 20.4 million of the nation’s 36 million poor are women
and 13 million of these women are in what the US Census Bureau has
accepted as “deep poverty”. Of that number, 9.8 million are single
mothers who are by far the poorest group with 38 percent living below
the poverty line. This compares to 11 percent of all Americans who
live below the poverty threshold.
Poverty in New York
* The NY State poverty level is 13.8% or approximately 1.7 million
* In New York City 650,000 people live below the poverty line.
* Women are particularly vulnerable to poverty, especially single
– Single working mothers numbered approximately 312,600
in 2000, making up 10.35% of total households in NYC.
– A family headed by a single mother is 600% more likely
to live below the poverty line than a family with a mother and a
Grameen America will serve its clients, especially women by:
* Providing them with small loans so that they can start or build
small or home businesses, with terms that are an attractive
alternative to predatory lenders.
* Creating a culture of savings and individual responsibility in
* Establishing and improving client credit ratings so that clients
can better participate in the mainstream American economy.
* Educating clients about getting loans, building savings and
managing credit as well as mainstream financial institutions as a
built-in part of the Grameen America lending program.
Queens Pilot Program
Grameen America is beginning operations with a pilot program in New
York City. The first branch office has opened in the Jackson Heights
neighborhood of Queens, and additional branches will be opened in New
York during the next few years. Grameen America is likely to undertake
a second pilot program elsewhere in the US and then begin a national
rollout of its operations.
Grameen America is attracting grants, private contributions, loans and
equity investments to support its initial development. Over time,
Grameen America has been designed to become a national business that
is self-sustaining and does not rely on grants or contributions for
Grameen America is supervised by the most senior Grameen executives,
including Professor Yunus and Prof. H.I. Latifee, the head of Grameen
Trust. Local implementation of Grameen America’s microfinance business
is being led by an experienced Grameen manager from Bangladesh, to
ensure that Grameen practices are closely followed. Vidar Jorgensen,
an American businessman who has been the principal proponent of
Grameen America, serves as President.
HOW TO BORROW
Grameen America provides small loans, known as “microloans”, and other
financial services to people with very low incomes, especially women,
who are looking to start or grow their small businesses. Grameen
America was established because most banking services in the U.S. fail
the 28 million people who do not have a bank account, positive credit
rating, or collateral. Grameen America delivers credit at reasonable
interest rates as a direct alternative to moneylenders, payday
institutions and pawnshops. These lenders usually loan money at
excessively high interest rates, making it extremely difficult for
entrepreneurs to turn their ideas into profitable businesses.
Now open in Queens, Grameen America is the first U.S. branch of the
microcredit organization, Grameen Bank, established 30 years ago by
Nobel Peace Prize winner Prof. Muhammad Yunus. With over 7.5 million
borrowers, 97% of which are women, the Grameen Bank now stands at the
forefront of microcredit.
Who qualifies for a loan?
Our loans are for people with very low incomes, primarily women, who
have great business ideas but have difficulty accessing credit at
You don’t need:
* current bank account
* credit history
You do need to:
* Be in need
* Create or join a 5 member Group of like-minded individuals of
the same economic status
* Be a permanent resident of the community
* Live close to your Group members
* Be the only member of your household applying for membership in
the same Group (close relatives such as mother, sister or in-law are
How are the loans used?
All our loans are used for income generating businesses. We provide
loans for activities as varied as the imagination of our borrowers:
* A new sewing machine for a tailoring business
* Children’s toys for a day care program
* Silk fabric for a clothing business
* Hair and beauty products for a beauty salon
* Supplies to make wallets and purses
What is Unique about Grameen America?
To provide support and to help our borrowers succeed in making timely
repayments, all Grameen borrowers join a Group of 5 like-minded
people. Their Center Manager meets them once a week at a time and
place that is convenient for them. This is where they share
information, get financial training and learn about opportunities in
their community. Members feel a sense of solidarity with other Group
members and comfort in the personal relationship they develop with the
Grameen America staff.
To ensure every borrower fully understands the Grameen America
program, newly-formed Groups learn about the Grameen method of loan
disbursement and savings from their Center Manager during a training
With membership focused on low-income women, borrowers can be sure
that Grameen America will always work to help those with greatest
All borrowers begin with a Credit Establishment Loan (also called
Basic Loan) of up to $3,000. Through consistent repayment, borrowers
can develop a credit history and the opportunity to “graduate” from
Grameen America to become eligible borrowers at many other financial
institutions. After successful repayment of their initial loans,
borrowers may use the Basic Loan to borrow from Grameen America again
and again with higher loan amounts each time, so that the borrowers
may meet all of their credit needs.
People struggling to make ends meet often don’t have enough savings
when there is an emergency. Grameen America helps our clients build
assets for the future. To make sure our clients have financial
security and stability, all borrowers open a Personal Savings Account
with 5% of their loan. At weekly repayment meetings, borrowers deposit
a small, fixed amount into their account. Over time, they build a
strong savings cushion and are prepared to face life’s ups and downs.
THE GRAMEEN LENDING MODEL
Grameen America uses the Grameen group lending and savings model that
has been developed and refined over thirty years by the Grameen Bank.
The basis of the system is a peer group model in which borrowers
encourage, support and learn from each other.
The group model requires prospective borrowers to form or join 5
member “Groups”. Groups are then organized into Centers with up to 8
Groups to a Center. Center meetings take place on a weekly basis and
are facilitated by Center Managers who are employed by Grameen. The
Group meetings and Grameen’s lending standards promote successful
repayment and also provide a valuable forum for best-practice sharing
and training on financial issues such as credit scores, savings and
related needs like health and insurance.
The Grameen model also incorporates required savings into all loan
relationships so that borrowers build financial resources for the
future. Savings are required in several ways and savings are promoted
throughout the borrower relationship because Grameen believes that
savings are an essential ingredient to the future financial stability
of its borrowers.
The Grameen model targets women because Grameen’s experience around
the world has shown that women are more comfortable with the group
lending model, are more likely to repay their loans, and are more
likely to direct their earnings to providing better clothing, housing,
nutrition, health care and education to their families.
How does Grameen America help its customers escape poverty?
Grameen America’s core business is providing small loans to its
customers so that they can begin or expand income generating
activities. There is no limit on the kinds of income generating
activities that can be financed with these loans. For example, a
customer might obtain a Grameen America loan to fund the purchase of a
food vendor cart, the operation of a home day care business, operation
of a cleaning service, or buy a sewing machine for a tailoring
Grameen America provides a variety of related services to improve the
borrowers’ chance of self-sufficiency by:
– Helping borrowers develop and improve credit history and
credit score, enabling them to qualify for mainstream credit sources.
Grameen America has a direct relationship with Experian and will be
providing customer repayment data that will help the customer earn an
acceptable credit score.
– Promoting savings by our customers. These savings can become
a key resource for customers as they grow their businesses or need
funds for their families.
– Providing financial education, training and credit
counseling to its customers as an integral part of the loan
relationship. These services are provided on a constant and
What are the amounts and terms for Grameen America’s loans?
Grameen America’s loans can be as small as $500 and as large as $3,000
initially. Typically, the customer begins with a very small loan and
then qualifies for larger and larger loans as each loan is repaid.
The increasing loan amounts help to finance the growth of the
customer’s business activities over time.
Phased disbursement minimizes default exposure while creating the
proper incentive structure for customers to reach ever higher levels
of loan disbursement.
Loans are usually made for a term of one year or six months. These
loans have an interest rate of 15%, which is far below the interest
rates charged by check cashers, pay day lenders and other predatory
lenders. There are no loan fees. The loans are typically repaid in
What is the Grameen America group process for loans?
Grameen America requires prospective borrowers (who are also savers)
to form or join 5 member “groups” of borrowers that meet regularly.
These groups are organized into “centers”, with up to 10 groups to a
center, and there are weekly meetings of each center. The group and
center model encourages and reinforces loan repayments and savings by
participants and this model also serves as a cost effective tool for
recruitment, screening, training and motivation of additional
The meetings become a valuable source of peer and Grameen training
about financial issues like credit scores, savings, and related needs
like health and insurance. While members are individually responsible
for their own loans, they are expected to voluntarily provide
assistance to their peers where needed, developing a social network of
voluntary mutual support. [Top]
Doesn’t recent experience in the U.S. demonstrate that group models
for lending don’t work?
While there are a number of microfinance organizations in the United
States that have been inspired by Grameen Bank’s success, none of
these organizations has combined the rigorous application of the
Grameen model with management by Grameen Bank executives and large
scale implementation. Grameen America will be the first microfinance
organization in the United States to combine all of these elements.
What is Grameen America’s approach to encouraging savings by its
Customers of Grameen America must demonstrate a pattern of limited
savings as part of their qualification for loans. In addition,
savings are required during the life of each client’s loan
relationship with Grameen America: More specifically, the company
imposes (i) obligatory savings during the client’s initial “group
training” period, (ii) obligatory savings equal to 5% of the loan
amount at the time the loan is disbursed, and (iii) obligatory weekly
savings based on the size of the client’s loan.
Who are Grameen America’s customers?
Grameen America’s customers are poor individuals who usually are below
the poverty line, are frequently unbanked and do not have access to
mainstream credit. They are predominantly women, though the company
also serves men. As Grameen America builds its business, it will focus
particularly on recent immigrants to the United States.
Where does Grameen America operate?
Grameen America has begun operations with a pilot program in Queens,
New York. The company plans to institute a second pilot program and
then begin implementing Grameen America programs gradually across the
United States. Among the areas currently under study are Arkansas,
Louisiana, Nebraska, Florida and California.
How is Grameen America funded?
Grameen America is obtaining grants, donations, loans and equity
investments from individuals and institutions. Tax deductible
contributions may be made to Grameen America, Inc.
How does Grameen America make money?
Grameen America’s principal source of revenue will be the interest
paid by borrowers on their loans. Interest income will provide both
the revenue to support the management of the business and along with
loan repayments will provide capital for additional loans. Grants,
donations and loans from individuals and institutions also will
support the growth of Grameen America: Equity investments in the
company will provide an additional source of capital. In addition,
Grameen America will be developing partner and affiliate relationships
with companies that are interested in serving Grameen America’s
customers. In time, Grameen America will establish itself as a bank or
credit union with the ability to accept savings and banking deposits.
The assets acquired through these deposits will provide additional
capital for loans to customers and thereby facilitate the generation
of additional interest income.
What is the poverty threshold in the United States?
Grameen America uses the U.S. Census Bureau’s figures and methodology
for determining poverty. The U.S. Census Bureau bases poverty on
income, number of people in family, age and other variables. To learn
more about how the U.S. Census Bureau calculates poverty, please visit
the following : http://www.census.gov/hhes/www/poverty/threshld/thresh07.html
POVERTY IN THE U.S.
Despite the status of the United States as one of the wealthiest
countries in the world, a significant fraction of the population lives
below the poverty line. According to the U.S. Census figures, some 36
million people lived in poverty in the United States in 2005.1
Consistent with many other countries, poverty strikes women especially
hard in the U.S.: 20.4 million of the nation’s 36 million poor are
women and 13 million of these women are in what the U.S. Census Bureau
has accepted as “deep poverty”. Of that number, 9.8 million are single
mothers who are by far the poorest group with 38 percent living below
the poverty line. This compares to the 11 percent of all Americans who
live below the poverty threshold.
Immigrants constitute a significant fraction of the poor population in
America. According to U.S. Census figures, 8.7 million of the 36
million persons living in poverty in 2005 in were first generation
immigrants and their family members. This means that roughly one in
four people living in poverty is an immigrant or member of an
To most effectively address the poverty problem in the U.S., and
consistent with the Grameen organization’s historic focus, Grameen
America has a particular focus on serving women, including immigrant
women. To learn more about poverty in the U.S., please visit:
Accessible Microfinance is Necessary in America
On top of the poverty problem in many U.S. communities, the need for
accessible microfinance in America is great. It is estimated that 28
million people in the U.S. are unbanked and nearly 45 million have
only limited access to financial institutions. The problem is
exacerbated by the U.S. credit rating system which excludes all those
who lack collateral, education, references or a banking history. The
U.S. financial system excludes the poor, especially recent immigrants,
because they do not have credit ratings and cannot obtain them because
they cannot meet some or all of the credit rating requirements.
The traditional process of establishing credit with these
organizations is largely based on four fundamental pillars: 1) A
person’s income level, 2) The level of education attained, 3) The
guarantee of a person with established credit (co-signer) and 4) Track
record of everyday life needs such as bank accounts, rent and utility
payments. While a fully functional model, one that reaches many levels
of society including college students, the credit report approach
unfortunately excludes the most of the poor who cannot meet the
The income of many low-income people is sometimes undeclared,
providing no substantiation to a level which will meet credit
underwriting requirements. A high school education is usually the
highest level of education achieved, and for new immigrants, their
level of education (although significant at times) is rarely
accredited at the same level as a locally educated citizen. Their
circle of friends and family is usually in the same predicament,
leaving very little opportunity for finding guarantors or co-
applicants who can enhance the credit application. Finally, because
money is so scarce, it is common for these same individuals to find
rooms for rent, or living quarters with multiple individuals and these
arrangements do not provide them with a paper trail of rent or utility
payments. Together, these conditions usually make it impossible for
the typical poor person in America to obtain a credit score and access
to mainstream credit in the United States.
email : i…@grameenamerica.com
Grameen Bank began with a simple but revolutionary concept: loan poor
people money on terms that are suitable to them, teach them sound
financial principles, and they will achieve financial self-
Grameen Bank was born on a day in 1976 when Professor Muhammad Yunus,
then the Head of the Rural Economics Program at the University of
Chittagong, loaned $27 from his own pocket to 42 people in the tiny
Bangladeshi village of Jobra. These women only needed enough credit to
purchase the raw materials for their trades. The borrowers repaid his
small loans promptly and inspired Yunus to establish the Grameen Bank
Project, which then spread among villages and districts across
Bangladesh with the help of his devoted students.
In October 1983, the Grameen Bank Project was transformed into an
independent bank by government legislation. Professor Yunus founded
the bank on a belief that credit is a basic human right, and that
borrowers are not simply borrowing from a bank, but are committed to a
philosophy built upon four core principles: discipline, unity,
courage, and hard work. Today, Grameen Bank is owned by the borrowers
of the bank and remains devoted to providing the poorest of Bangladesh
with microcredit loans that spark initiative and enterprise and
empower the poor to lift themselves out of poverty.
As of 2008, Grameen Bank has disbursed more than 6.75 billion dollars
to over 7.5 million borrowers, 97% of whom are women. The bank is
represented in 2,499 branches and offers service in over 81,000
villages throughout rural Bangladesh. As a testament to the strength
of the Grameen model, Grameen replication projects now number 141
programs in 38 countries. The vision of Grameen has created an
effective and sustainable response to world poverty, and the bank’s
success has advanced the concept of microcredit around the globe.
In 2006, Professor Muhammad Yunus and Grameen Bank were jointly
awarded the Nobel Peace Prize “for their efforts to create economic
and social development from below”. He is widely regarded as the
pioneer of the microcredit industry and continues to challenge
conventional thinking, identify new ways to empower unbanked
entrepreneurs, and explore new possibilities in microcredit around the
RE: posetd by [ annilkhan ]