Courtesy Daniel Pimlott in New York
Bangladeshâ€™s Grameen Bank has made its first loans in New York in an attempt to bring its pioneering microfinance techniques to the tens of millions of people in the worldâ€™s richest country who have no bank account.
The bankâ€™s entry into the US, its first in a developed market, comes as mainstream banksâ€™ credibility has been hit by the mortgage meltdown and many people are turning to fringe financial institutions offering loans at exorbitant interest rates.
â€œNow is a good time because of . . . the subprime crisis and that highlights the issue that the financial system is not perfect,â€ Muhammad Yunus, the bankâ€™s Nobel Prize-winning founder, told the Financial Times.
Grameen has lent $50,000 in the past month to groups of immigrant women in Jackson Heights in New Yorkâ€™s borough of Queens. During the next five years, it plans to offer $176m in loans within New York city, and then expand to the rest of the US.
In Bangladesh, Grameen lends to poor women seeking to start small enterprises who cannot borrow from banks because they do not have accounts or a high enough credit rating. The bank, which started with $27 in loans Mr Yunus made to 42 women in Bangladesh in 1976, has now made more than $6.5bn in loans to 7m people in the country.
In the US, about 28m people have no bank accounts and 44.7m have only limited access to financial institutions. People often do not hold bank accounts because they have had credit problems, have no access to a local branch or they distrust the mainstream financial system, said Jonathan Morduch, a microfinance expert at New York University.
Some microfinance experts doubt that Grameen could make an impact in the US where credit is widely available, and businesses and tax systems are much trickier to navigate than in developing countries.
After beginning with small loans to micro-entrepreneurs, Grameen plans to expand into other businesses such as remittances and mortgages.