Grameen Bank’s loans to US poor
Sunday, February 17, 2008
Bangladesh’s Grameen Bank has made its first loans in New York in an attempt to bring its pioneering micro-finance techniques to the tens of millions of people in the world’s richest country who have no bank account.
The bank’s entry into the US, its first in a developed market, comes after mainstream banks’ credibility has been hit by the mortgage meltdown and many people are turning to fringe financial institutions offering loans at exorbitant interest rates.
“Now is a good time because of . . . the subprime crisis and that highlights the issue that the financial system is not perfect,” Muhammad Yunus, the bank’s Nobel prize-winning founder, told the Financial Times.
Grameen has lent $50,000 (?25,500) in the past month to groups of immigrant women in Jackson Heights in New York’s borough of Queens. During the next five years, it plans to offer $176m in loans within New York city, and then expand to the rest of the US.
In Bangladesh, Grameen lends to poor women seeking to start small enterprises but who cannot borrow from banks because they do not have accounts or a high enough credit rating.
The bank, which started with $27 in loans Mr Yunus made to 42 women in Bangladesh in 1976, has now made more than $6.5bn in loans to 7m people in the country.
In the US, about 28m people have no bank accounts, while 44.7m have only limited access to financial institutions. People often did not hold bank accounts because they had had credit problems, had no access to a local branch or they distrusted the mainstream financial system, said Jonathan Morduch, a microfinance expert at New York University.
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