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Shirley Lemus, center, account manager for Grameen America receives the  payments from microloan borrowers in New York (Mariana Cristancho-Ahn)

By MARIANA CRISTANCHO-AHN
Channel: Economics

Walking through the streets of East Harlem in New York on a summer morning, Shirley Lemus recognizes some familiar faces amongst the women who are setting up their food stands and other businesses for another day’s work.

Some of these women are her clients. Lemus is a center manager for Grameen America, a microfinance nonprofit organization that specializes in providing loans to low-income women to improve or start their own businesses. Grameen (a Bengali word meaning “village” in English) was founded by Nobel Prize laureate Muhammad Yunus in 1976 in his native country of Bangladesh.

“I couldn’t believe that it would work in the U.S.,” said Lemus, 25, who moved from Guatemala to New York last year to work for Grameen.  She has had experience providing microloans to low-income women in Guatemala and Colombia. “I couldn’t believe that Grameen’s team methodology could work in a place as international and diverse as New York.”

Known as “the bank for the poor,” Grameen operates under the principle that people with low income have the ability to improve their own lives through financial empowerment without the need for welfare.   Grameen requires borrowers to form a team of five women, who live within walking distance of each other, and apply for loans individually, but to accept the responsibility of the loan repayment as a team. If one of the women doesn’t make her weekly payment, the others are responsible for it.  They also have to consistently meet on a weekly basis with representatives of Grameen.

At about 8:30 a.m. Lemus arrives to an apartment in East Harlem where a weekly meeting with borrowers takes place.  About 25 women attend the meeting.  Each woman leaves a small blue booklet on a kitchen table in the middle of the room. Inside the booklet there is the weekly payment for their loan, interest and a discretionary amount for savings.  Lemus starts collecting the money from each of the booklets and keeps track of the accounting records.  A couple of the women who serve as president and secretary of the group assist her.

“It provides us with the flow of capital that we cannot access in this country because of our immigration status,” said Margarita Martinez, 40, a Mexican immigrant who has been a Grameen client since 2009. She runs a business selling health products, jewelry and party supplies.  

Grameen launched its operations in the United States in 2008 and so far has disbursed $22 million in loans. In New York it has about 5,000 borrowers, most of them immigrants, 95% of whom are Hispanic.

“Attendance is more important than payment, if you don’t pay we have no problem, but we cannot accept your absence,” said Shah Newaz, chief executive officer of Grameen America, a native of Bangladesh who worked along Yunus in the late 1970’s.  “We found that Hispanics follow this discipline better than other communities.” 

Grameen doesn’t ask for collateral or credit scores for loan approvals. First time loans can range from $500 to $1,500, and borrowers are given six months to repay the loans.  The payment structure changes according to the amount borrowed.  For example: A $500 loan requires a weekly payment of $21 ($20 for capital plus $1 of interest); a $1,000 loan requires a weekly payment of $42 ($40 for capital plus $2 of interest); and a $1,500 loan requires a weekly payment of $63 ($60 for capital plus $3 of interest).

Besides the weekly payments of capital and interest, borrowers have to save a minimum of $2 dollar a week.

“We have been taught how to save, a habit that we don’t have as Hispanics,” said Elsa Velez, 44, who expanded her business selling clothes by catalog with a $700 loan. The loan allowed her to buy extra inventory. “I’m saving the money to start another business.”

Borrowers are required to open a savings account. In New York, Grameen has partnered with some Citibank branches to open accounts with low transaction fees.  A number of Grameen borrowers have never before had a bank account and many did not know how to use an ATM card. Some clients don’t even know how to read or write.  

Once Lemus finishes collecting the money she talks with some of the women about the status of their loans.  She gets ready for the next meeting at another apartment a couple of blocks away where another group of about 25 women are waiting for her.  As she arrives, the blue booklets with the loan payments are already piled on a table.

Follow Mariana on Twitter: @marianareports