Microfinance loans – for Americans
Bangladesh’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 world’s richest country who have no bank account.
The bank’s entry into the US, its first in a developed market, comes as mainstream banks’ credibility has been hit by the mortgage meltdown and many people are turning to fringe financial institutions offering loans at exorbitant interest rates.
Grameen has lent $50,000 in the past month to groups of immigrant women in Jackson Heights in New York’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 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.
Very amusing. And to think of all the bad press Hugo Chavez got with his oil. From a previous article:
The US presents a ripe market for Grameen, Mr Yunus claims, because it has a large population that sits outside the formal banking system. As many as 28m people, earning $510bn a year, do not have any relationship with a financial institution, according to the Federal Deposit Insurance Corporation.
Those who have no bank accounts rely on fringe banking services such as cheque cashers, pawnshops and payday lenders.
Payday lenders can charge as much as 1,560 per cent for a week’s cash ad- vance against forward-dated cheques, according to the Consumer Federation of America. Payday lenders made $48bn (€33bn, £24bn) in loans last year, while pawnshops’ business has been soaring as the US heads into a slowdown.
“You have the payday loans, you have the cheque cashing companies, and they’re flourishing, and they are pretty bold, the big advertisements in the newspapers, big ads on television . . . so this shows how much [of a] gap there is in the system,” Mr Yunus said.
I can understand the argument about the greater complexity of the tax system here – although that supposes that recipients are engaging with the tax system fully. A decent proportion of those Americans without bank accounts are Americans without papers, too, I would expect. One hopes his doesn’t wind up leading to a load of poor dream-chasers simply having those hopes dashed by the cruelty of the tax system (you know, the one that now doesn’t chase rich tax-evaders/avoiders, just middle-class-and-lower tax-evaders/avoiders).