[R-G] [BillTottenWeblog] Grass-roots banking

[Bill Totten]

While Wall Street was in meltdown, Sigrid Rausing found an alternative
model of lending thriving in Queens, New York.

by Sigrid Rausing

New Statesman (October 16 2008)


On the morning of Friday 10 October, as even the mainstream US media
were speculating about the possibility of the end of capitalism as we
know it, I went to visit Grameen Bank in Queens, New York. Founded by
Professor Muhammad Yunus, who invented microcredit in Bangladesh in
1976, Grameen is often thought of as a bank for the developing world.
But 36.5 million people in America live below the poverty line. Up to 28
million have no bank account. Many are immigrants. They rely on payday
loans or cheque cashiers, and short-term loans - some legal, some not -
with annual average interest rates reaching 300 or even 400 per cent.
They, too, need "Banking for the Unbanked", as Grameen's slogan puts it.
The Queens branch, its first in America, opened last November and made
its first loan in January.

The office is on a peaceful street in a mainly Bangladeshi area of
Jackson Heights. Ritu Chattree, vice-president of finance and
development, formerly of Insead and J P Morgan, opens the door to a
shabby, steep staircase with a torn patterned carpet. Upstairs is a
single room with six worn desks, some photos and hand-drawn maps of
Brooklyn and Queens on the walls.

All the staff are out visiting clients, apart from Shah Newaz from
Bangladesh, who runs the office. He gives me instant coffee with sweet
powdered creamer. The contrast is beguiling - the runaway success of the
bank, its Nobel Peace Prize-winning founder, the great and the good on
the leadership council; and this tatty, tiny office. The ethos of
providing financial services to the poor permeates the room. That day,
in the context of the collapse of Bear Stearns and Lehman Brothers, this
form of grass-roots banking seems not only ethical but also solidly
safe: its payback rate, so far, is over 99 per cent.

Grameen Bank started 34 years ago, in Bangladesh, when Professor Yunus
lent $27 to a group of 42 women. That was the beginning of the
microcredit movement, which has spread to most of the developing world,
not least through Grameen, whose model has been replicated in more than
a hundred countries. The core principles are simple: the poor need
credit, not aid. They need loans, given with respect and received with
dignity, within the context of supportive groups, and in close contact
with Grameen staff. Loans are given to women because evidence shows that
they put the money to better use. The sums lent are carefully
considered: the right amount is empowering; too little, or,
interestingly, too much, is thought to be damaging.

There are four aspects to the client relationship: the loan, the savings
account through the Citibank partnership, five days of financial
literacy training (important for the many clients who did not previously
have bank accounts) and a partnership with Experian, which establishes
credit ratings for Grameen clients.

Initially it was difficult to reach the target group in New York.
Leafleting proved ineffective, and Shah found it a culture shock to work
with such atomised and individualistic communities where suspicions of
Mafia connections or moneylender abuse were widespread. He speaks of
Americans with the thoughtful concern of NGO workers worldwide, who
always mirror the societies they work in. This, more than anything,
strikes me as the essence of Grameen America. Shah is not only talking
about the poor, he is talking about Americans, and the nature of
America, just as westerners in Bangladesh talk about Bangladeshis.

The culture shock may be mutual. American women may wonder why a bank
based on an explicitly woman-oriented theory of change is so lacking in
feminist language. According to its leaflets, Grameen America
anticipates its clients using their loans for purposes such as selling
beauty salon products, clothing and jewellery, bakery goods, handicrafts
and flower arrangements. There are many things that women's borrowing
groups might do, and specifically suggesting the most traditionally
female crafts strikes a surprisingly conservative note.

Grameen will open six more branches in the city over the next two years,
as well as a mix of urban and rural branches in the rest of America. It
is hoping to reach between 18,000 and 20,000 people within the next five
years.

This is a fraction of the millions of people below the poverty line in
the US, but the model is easily scaleable. Perhaps a part of that $700
billion bailout ought to have gone not to Wall Street, but to a
community bank providing small loans and a personal financial service to
the poor.

Two days after my visit, the tatty Stars and Stripes flags on Fifth
Avenue barely move in the humid heat. We are trapped by the Hispanic
Columbus Day parade, led by eight young women marching with replica
guns. Countless cops with real guns are lined up, obsessively
controlling movement across the street. Election tension is palpable.
Never before have I felt a sense of so much being at stake in this
country. I don't know if Grameen's arrival in the US is a sign of hope,
or a sign of the end of the American era. Perhaps, on reflection, it
could be both.

http://www.newstatesman.com/north-america/2008/10/grameen-bank-usa-vote


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