Americans are defaulting on their loans in record numbers. Credit cards, student loans and even mortgages. As a result, those with low credit scores or self-employment are finding it difficult, even impossible to get the credit needed to maintain their businesses. Enter Grameen America, a branch of Bangladesh-based Grameen Bank, which shared the 2006 Nobel Peace Prize with the father of microcredit, Professor Muhammad Yunus.
Grameen America is directed by CEO Steve Vogel and is serving loans in one of the poorest parts of New York City—Queens. Since opening a year ago Grameen America has lent $1.1 Million to 440 women in the borough of Queens. All are self employed and have little or nothing in terms of assets. All are also-self employed and many are immigrants. Remarkably, despite mainstream-America’s credit woes, Grameen is reporting a 99.5% loan repayment rate. These loans, averaging about $2,000 each have been issued with receipts and ledgers and without the benefit of credit checks have performed better than heavily documented mortgages and credit cards.
Grameen America holds all of its own loans, and requires weekly meetings with its borrowers. By contrast, according to an MSNBC article, in more than half of all US mortgage foreclosures, the lender and borrower had no communication in the prior twelve months.
There is a core trust between borrowers and lenders (and peer to peer between the borrowers) that the loans will be repaid. In fact, no loans can be issued until all borrowers in a group are current on their payments—which keeps the borrowers aware of each others’ payment status as well.
Grameen America plans to expand to other low-income communities in the United States. Its published goal is to build a culture of individual responsibility, savings and prudent use of credit for income-generating activities throughout the United States. Once a substantial base of about 10,000 borrowers and savers has been established, Grameen America plans to add loans for other purposes.
Jessica Ward authored this post. She is a freelance writer, microcredit enthusiast and frequent contributor to this blog.