Lending small and helping people dream big

Last Monday, something strange happened in Manhattan. A bank from one of the poor countries in the world in the Wall Street bankers’ neighborhood and said it would provide banking for the unbanked, namely small and micro businesses.

Well, the last sentence was partly built for effect. ’s Manhattan branch is not its first in the US: in fact, it is its third in as many years.

Since 2008 when it started operations in the New York City borough of Queens, Grameen America has lent more than $6 million to 2,800 borrowers, mainly women, living below the US poverty line. These borrowers, who used the money to invest in their small businesses, have, in turn, deposited savings of more than $350,000.

At the inauguration of the Manhattan branch, Nobel-laureate and founder of Grameen Bank, Mohammed Yunus said, “New York City is the world capital of banking. They do the banking for the whole world, but they don’t do banking for their neighbors, and we’re here to show there’s nothing wrong with doing banking with neighbors.”

I found myself thinking, ‘How true!’ Who would have thought Grameen would have had any takers in the capitalist heaven of the world, in the land of opportunity where businesses thrived on sheer merit (and collaterals).

But then, if you take a closer look, Grameen’s transition from Bangladesh to Brooklyn seems very logical and the timing just right. When it started in 1976 in Bangladesh, it challenged traditional banking views on who was creditworthy and who wasn’t. Yunus believed everyone is creditworthy, especially the poor of Bangladesh who were bearing the burden of highly expensive loans from moneylenders and yet surviving in some way.

Fast forward to 2008 and change locations to New York and Yunus has to defend his theory all over again. Banks in the US are very to small businesses, now more than ever before, never mind that it was the former who brought on the current credit crisis and that it is the latter who did comparably well in the recession and are, in fact, America’s best bet today.

Small businesses, the big bankers say, are risky to lend to, despite a federal subsidy and, reciprocally enough, small businesses think the government should have handed them the rescue package rather than channel it through unwilling banks. So, there is a relationship of distrust now between the two – something America could have very well done without at this juncture.

Contrast this with the community feeling which Grameen builds its business logic on. Grameen is not a charity. It doesn’t just give away money to people. It lends small amounts – the maximum first-time loan is of $1,500 – to people who want to start a business, however small, and have the necessary skills. And, peer pressure is about the only collateral that the bank takes advantage of. The system has worked beautifully in Bangladesh, now it’s Brooklyn’s small businesses’ turn. I have a good feeling about this.

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