Few companies can boast a founder who’s won a Nobel Peace Prize, but New York City-based nonprofit Grameen America can do just that. Grameen America’s goal is to provide small business loans, savings programs, and financial education to women who live below the poverty line.
When a famine struck Bangladesh in 1974, esteemed economic professor Muhammad Yunus made a small $27 loan to 42 families to help them start small businesses. He believed this infusion would help improve their condition. The idea was a success. Soon, professor Yunus was inspired to implement the idea on a much larger scale. This idea reached fruition in October of 1983 when the Grameen Bank of Bangladesh was officially established. The bank’s aim was to help lift the poor of the country out of poverty by providing small business ‘microloans’ to them without requiring collateral, a credit score, a guarantor, or a bank account. The program proved successful, and over the next 25 years the bank continued to open new branches worldwide. By 2005, over $4.7 billion in loans had been made by Grameen Banks and in 2006, professor Yunus was awarded the Nobel Peace Prize for his efforts.
Expanding to the States
In 2008, when the New York-based Grameen America opened many were surprised to learn there was a need in the United States. But, according to Grameen America, currently in American 46 million people live below the poverty making less than $23,500 a year. Among this number, 34% of female led households in the United States fall below this line. For such people, opening a small business is simply not an option. This is where Grameen America stepped in.
The way the system works is actually quite simple. To start, five women living below the poverty line form a Grameen Group. The group then participates in a week long series of financial education programs where they learn the basics of small business loans, savings, and credit. At the end of the program, each of the five members opens a savings account, and each is given a ‘microloan’ of $1,500 to be used for their small business venture. These businesses can range from flower shops, to hair dressers, and everything in between. Once participants repay the loan, they may be eligible for higher loan amounts in the future as well.
During the repayment phase, a member of the Grameen America staff visits the participant once a week in their home to discuss their repayment progress and advise them on their business plan going forward. During these meetings, further advice and education is extended, and the participant can raise any questions they may have. Repayment of the loan is reported directly to Experian, which helps to build each participants credit score and credit report. According to Grameen, today over 327,000 U.S. loans have been made through the program totaling over $760 million. In recent years, Grameen America has expanded to 19 other U.S. cities.
A Brighter Future
Globally the program has been an enormous success. As of 2017, Grameen had opened 2,600 branches and provided loans to over 23 million borrowers worldwide. Perhaps the most astonishing fact of the entire experiment however is the repayment rate, which stands at an astounding 99.6%.
Along with small business lending, Grameen also engages in many more philanthropic causes worldwide. These causes range from rebuilding communities devastated by natural disasters, to advising on sustainable agriculture methods, and even in engaging with general health concerns. Today, few companies have come close to doing more to serve the public good than that the Grameen Foundation. To learn more, or donate, please visit https://www.grameenfoundation.org