Grameen comes to the USA

February 22nd, 2007 by Dave Leave a reply »

Grameen Trust, the Bangladesh-based charitable arm of the Grameen Bank, is starting up a microfinance business in the USA called Grameen America. [I couldn’t find a web site for this yet although there is a job posting for a CEO.] Grameen Bank has been a pioneer in microfinance and recently was awarded the Nobel Peace Prize along with its founder Muhammad Yunus.

Here are some of the highlights from a business plan overview I have seen:

  • It will be a for-profit social enterprise business setup as a joint venture between Grameen Trust and a large financial institution [likely to be H&R Block] with Grameen Trust having a controlling interest. They expect positive cash flow in 4-5 years.
  • A long-term Grameen executive, Prof. H. I. Latifee [see his recent whitepaper], the managing director of Grameen Trust will head up the initial “build, operate and transfer” team to setup and then hand-off operations to a USA team. The thinking is to transfer the know-how and DNA of Grameen Bank to seed this organization.
  • The business plan references the Association for Enterprise Opportunity which estimates that there are more than 750 existing microfinance organizations/programs in the USA. Most of them are characterized as “social welfare programs” and none are financially self-sustaining [without donors] with the best running at only 70% cost recovery.
  • Their initial focus will be on recent immigrants who have an entrepreneurial spirit. Micro-business loans will start at $500 and grow from there based on a positive repayment history. The borrowers will support one another in groups although they won’t guarantee each others loans.
  • It sounds like the focus is going to be on urban areas with the first test market of New York City. They are planning to take advantage of credit cards to simplify credit access and lower transaction processing costs (for borrower and themselves).
  • They expect to later offer a number of membership benefits including networking, member discounts, visa and citizen information, credit establishment and more.
  • They are hoping to ultimately create a lot of grief for the credit services for the working poor offered in the form of payday loans, loan sharks and other unscrupulous bottom feeders who prey on the vulnerable.

I am a big fan of introducing more competition and reasonable credit choices for the working poor in the USA. Grameen America has a lot of the right thinking on this including starting with a business (=sustainable) mindset, establishing a beach head with a likely-to-succeed client segment, partnering with a deep pocketed financial services company and taking advantage of technology to enable scale and cost containment. I think that the challenges of business licensing, regulations and tax reporting will likely require more of an incubator-type structure, but this is something that can evolve over time.

What do you think?

Reference: previous post on Microfinance in the USA

Update: Here is Grameen America’s web site.

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4 comments

  1. David Stoker says:

    I cringe every time I see a payday lender and think about the incredibly high annual interest rates hidden in fees and commissions and how it preys on the financial ignorance of the poor. However, the popularity of the payday loans is evidence that there is a huge unfulfilled need. I applaud any effort by a social entrepreneur to compete with these lenders and I think it will take a large organization like Grameen America to make a sizable dent in the market share. If I were Grameen America I would expect strong efforts by the payday loan industry to make life miserable and difficult for Grameen America. I would make sure I have a good legal team.

  2. serenden says:

    I picked up Yunus’ book after discovering your site — thank you!

    I wrote a quick post about it on my blog and mentioned you… just letting you know!
    Collective Rising

  3. Anonymous says:

    i’m doing a report on Dr. Yunus and what he has done with helping the impoverished and Garmeen is amazing. simply amazing.

  4. Cnn says:

    Thanks for this great post!

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