Little Loans Earn Banker
By: Sharmila Devi, Foreign CorrespondentThe National
Women who started businesses with loans from Grameen America sell their wares at the bank’s open house and spring fair held recently outside the Carnesecca Arena at St John’s University in New York. Robert Stolarik for The National
Little loans earn banker a whole lot of credit
Women who started businesses with loans from Grameen America sell their wares at the bank’s open house and spring fair held recently outside the Carnesecca Arena at St John’s University in New York. Robert Stolarik for The National
NEW YORK // The items for sale at the Grameen Bank borrowers’ market colourfully illustrated the ethnic origins of the women who have received loans from the microcredit organisation. Indian bangles, chicken biryani and embroidered cloths were for sale on tables laid out under the spring sunshine in the New York borough of Queens.
Browsers chatted to the women entrepreneurs who started out in business thanks to Grameen, which, along with its founder Muhammad Yunus, won the Nobel Peace Prize in 2006 for pioneering microcredit in Bangladesh in the 1970s.
Since Grameen started lending in the United States last year, mainstream bankers have become the target of populist fury as the public blames corporate greed for a precipitous plunge into recession and economic turmoil.
Mr Yunus must be the only banker in the world to receive standing ovations from adoring crowds. When he strolled around the market two Saturdays ago, women, many dressed in sparkling saris, rushed to his side to have their photographs taken with him.
The financial crisis was a “great opportunity†to redesign a system that was more equitable and fair to the poor across the world, he said at a presentation at the fair hosted by St John’s University. He urged an end to predatory lending, such as payday loans that carry interest rates of up to 500 per cent.
“We’re not a ‘third world’ bank but a good bank coming to America,†he said.
Grameen has lent about US$1.5 million (Dh5.5m) to more than 600 people in Queens. Although the bank targets women after its experience showed they were more prudent borrowers and savers, US equality laws mean it must be open to all.
But Grameen America mostly adheres to the model developed more than 30 years ago in Bangladesh. In the United States, it gives loans ranging between $500 and $3,000 to start businesses ranging from catering to carpet-cleaning. Borrowers form groups of about five people. If one person misses a weekly repayment or defaults, the whole group advances more slowly.
Oscar and Martha Valencia moved to New York eight years ago from Cali in Colombia. He works in construction and she was a housewife looking after their three children. They borrowed $500 from Grameen to set up a small business selling jewellery, perfume and Colombian food that Mrs Valencia prepares at home. They pay back $60 a month, including $2 in interest and $2 in savings.
“We are so grateful to Grameen for helping us,†Mrs Valencia said. “We didn’t even try the mainstream American banks because they just aren’t interested in people like us who don’t have the right documents or records.â€
Hina Begum, who moved to Queens from Bangladesh 15 years ago, borrowed $2,000 from Grameen to set up a business selling jewellery and Asian food. “They have helped me very much,†she said in halting English. “Even people with jobs don’t have much money here.â€
Ms Begum and four of her compatriots later performed a Bengali song for Mr Yunus with plaintive lyrics about the difficulty of life and how faith can help. Other Grameen borrowers sang songs from Mexico and God Bless America.
Mr Yunus’s views on economics and banking have been much in demand while analysts debate the future of the western model. A day before the Queens fair, he attended a Georgetown Global Forum where he spoke about the need for a more inclusive system before an audience including Bill Clinton, a former US president.
“The existing systems are exclusive clubs for privileged people,†he said. “When the financial crisis has passed, we cannot return to the same normalcy we came from.â€
Grameen has an almost 100 per cent loan repayment rate, eight million borrowers and has made profits in all but three of its 25 years. It operates in more than 100 countries. In the Middle East, Grameen-Jameel has brokered more than $44 million through the Guarantee Fund for microfinance institutions in Egypt, Jordan, Syria and Tunisia.
Microfinance in the United States got a boost recently when Barack Obama, the president, announced at a summit in Trinidad and Tobago the creation of a $100m fund to help small borrowers.
“While the region has a wealth of microfinance institutions, these lenders are now confronting a serious shortage of private finance from both international and local sources,†the White House said in a statement.
Mr Yunus said the global financial downturn had had little effect on Grameen. But he acknowledged that its model would have to develop in the US, where higher living costs and tighter regulation make it much more expensive to start a business than in Bangladesh.
“We would like to expand the size of the loans. That is why we are applying for a credit union licence so we can take deposits and our money problems can be resolved,†he said. “We cannot depend on small donations.â€
sdevi@thenational.ae
Link: http://www.thenational.ae/article/20090426/FOREIGN/704259850/1014/NEWS
