This is guest post by Prosper member ChrisFS
Just as credit seems to have tightened for many Americans, The Financial Times reports that microcredit pioneer Grameen Bank has opened their first US office in New York city.
According to FT, Grameen banks lent $50,000 to groups of immigrant women in Queens in the last month. The bank, founded by Nobel Prize winner Mohammad Yunus, is using New York to see if it’s formula for lifting people out of poverty in Bangladesh and elsewhere in the 3rd world will work in the developed world.
During the next 5 years, Grameen plans to offer $176 million in loans. “If it makes an impact in the USA, then the whole world will come around… because you have gone to the toughest fort first, and if you can conquer that. then the rest of it gets easier” said Mr.Yunus.
While this turn of events is fascinating, Prosper lenders need not worry about competition from the Grameen bank, as they target a very different segment. Grameen Bank looks to lend to people who have traditionally not had access to the regular banking system such as savings or checking accounts and have non existent credit records. They instead rely on pawnshops, check cashing centers and payday lenders that can charge 400% or more interest.
It is estimated by the FDIC that 28 million people in the US fall into this category.
Grameen banks loans were made to 35 women in Queens towards building hairdressing and manicure businesses. Loans start at $1,500 and rise to $6,000 as as borrowers display their ability to repay. Loans will be at about 16 per cent interest.
I plan to watch the Grameen US bank with great interest to see how they negotiate the financial and legal obstacles that have faced Prosper and other new types of lenders.
