Coming to America: The Grameen Bank Comes to Queens

Sept. 30, 2007 — -- Muhammad Yunus has come a long way since he first began giving money to poor people in his homeland of Bangladesh 31 years ago.

"I started giving them money out of my own pocket. The first loan I gave was to 42 people, a total of $27," he told ABC News. "And that got them so excited that I thought I should continue with this."

Since then, his revolutionary micro credit organization called the Grameen Bank (which means "village bank" in Bangladesh) has loaned money to 7½ million people and earned Yunus the Nobel Peace Prize.

It's an impressive track record. But now, Yunus is preparing to tackle what may his biggest challenge yet. He is bringing the concept of the Grameen Bank to America.

"We are locating it in Queens, New York City, where we see lots of immigrants living there -- and they are the ones, the most enterprising ones," Yunus told "This Week" during an interview at the Clinton Global Initiative. "And we thought, maybe, this is one area where we can test out all those ideas that we have. ... Then we can expand it in many other areas -- both within New York City and any other city anywhere in the U.S."

A Modest Office in Queens

Yunus chose a working class neighborhood in Queens to launch Grameen America. . His colleague and right-hand man, Shah Newaz, who was a student of the Nobel Prize winner 30 years ago, has moved his family to New York from Bangladesh to run the project under the direct supervision of Yunus.

The Grameen office, where the door is always open in the Bangladeshi tradition, is a modest room down a flight of stairs under a doctor's office. Every day, Newaz walks along Jackson Avenue, going into one storefront after another, asking shop owners if they know groups of women who might want to borrow money.

Looking for a Few Good Women

Newaz is looking for women because it was loaning money to poor women that made the Grameen Bank a success in Bangladesh. Today, it has a repayment rate of nearly 99 percent, and 97 percent of Grameen's borrowers are women.

According to Yunus, "When a women first time joins Grameen Bank, she's really scared. She doesn't know what happened to her, whether she's successful. She wants to take the smallest possible amount. She takes about $30, $35. ... Once she can pay back the loan, she becomes very confident. Self-esteem comes to her. She can do more.

"Money going to the family through women got so much more benefits to the family than the same amounts of money going to the family through men," Yunus continued. "Women took good care of the children. Women had a longer vision. They wanted to get away from all the problems of poverty; she has got to save a little money more cautiously. She used the money much more carefully than men used the money."

Grameen America's goal is to provide an effective, sustainable and measurable response to poverty in America, with a focus on women and immigrants.

A Grameen America PowerPoint presentation contains some startling statistics: Nearly 36 million people in America live at or below the poverty line; more than 20 million of those living at or below the poverty line are women; female householder families represent the largest concentration of the poor; and roughly one in four poor persons is an immigrant or a member of an immigrant's family.

No Credit, No Problem

The Grameen approach is exactly opposite most banks' approaches in the United States. If you don't have credit, most banks won't loan you money. For Grameen, if you don't have credit, you could be the perfect customer.

Today, Jackson Avenue is dotted with pawn shops and check-cashing storefronts that promise quick cash and easy money. That, according to Yunus, is exactly the kind of neighborhood that needs the Grameen Bank.

"I see pawn shops and it gives me a very bad feeling that here is the most sophisticated banking in the world, in this country ... but some people cannot find the money, so they have to give their valuables to take some little money out of that," said Yunus.

"And you see the cash checking," he added. "It's also ridiculous thing for me. It's very humiliating that I have a check, even a government check, I cannot get it cashed. So I have to go to cash checking, and I have to spend a lot of money ... and this is my hard-earned money. But I cannot take it to the bank and get the cash. ... And then payday loans -- this is another big business. That means a failure of the system."

'You Need a Dollar to Catch a Dollar'

"Credit should be accepted as a human right," Yunus told ABC News. There are other human rights, which are the right to work, right to shelter, right to food and all that. ... But the financial system is such [that] nobody will give the money. If you don't have a dollar in your hand, you can't catch a dollar. You need a dollar to catch a dollar."

The concept behind the Grameen bank is simple: Charge affordable interest, encourage small, regular repayments, and provide ongoing support to every borrower. But there's another key ingredient -- the so called "secret sauce." Clients are organized into borrowing groups of five persons, and individual business loans are made to group members who are supported by the group. During regular group meetings, the members use peer pressure to encourage the other borrowers to repay their loans.

The bank itself is a profit-making business owned by the shareholders, who are the borrowers. So any profit goes back into making loans.

Can It Succeed in America?

Yunus believes that Grameen America will provide a crucial service to help serve America's poor. And how does he respond to critics who say it can't work here?

"I have been hearing all my life: 'It can't be done,' he said. "I do not guarantee that it will be done, but no harm trying and keep trying. If I failed first, I try the second time. If I failed [the] second time, I try the third time. So this would be something, locally, to feel proud that, 'Yes, we did something which is now applicable not only for New York City, [but also] any city in the USA, any neighborhood in the USA, any small town in the USA."