Micro USA Credit

This following is the complete article from the International Hearald Tribune. I have long been a fan of the Grameen Bank, and now it is coiming to the USA. I wonder if Bank of America can handle the competition? That was not a rhetorical question.

Muhammad Yunus of Bangladesh, a Nobel Peace Prize winner for pioneering a micro-lending model for the world's poorest to engage in business, said Thursday his formula can also help recession-racked American families escape poverty.

"This is the right time to come here," Yunus declared as he sought $2 million in seed money to establish North Carolina as another U.S. foothold for his micro-finance institution outside New York.

The year-old U.S. offshoot of the Grameen Bank that the former economics professor founded in Bangladesh three decades ago also is looking to expand into New Jersey, Nebraska, Louisiana and other U.S. states as economic turmoil closes employment doors on more people.

"It was not in our agenda to be in a crisis, but the crisis is here," Yunus said Thursday with several members of North Carolina's banking establishment flanking him. The micro-lending model means "you create your own jobs instead of waiting for other people to hire you."

North Carolina lenders see Grameen America as an economic development organization reaching out to open the way for people with entrepreneurial skills or a business idea but who are too poor even to set up a bank account.

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Grameen has seen sustained interest in a North Carolina expansion from banking leaders in the home of Bank of America Corp. and Wachovia Corp., recently acquired by San Francisco-based Wells Fargo & Co. State banking commissioner Joseph Smith has been working since at least April to lure the lending institution that won the Nobel together with Yunus in 2006.

The Grameen Bank model developed by Yunus involves lending very small amounts, mostly to women, as seed money for home businesses. A Grameen staffer meets the borrowers in groups every week, tracks progress and offers advice on managing money and startup obstacles.

The formula also relies on peer pressure instead of collateral to secure the loans. Potential borrowers must form five-member groups that approach Grameen jointly for loans. While each borrower is individually responsible for a loan of up to $2,200, group members cannot borrow again unless all are paid up.

"It's not about redividing the pie, it's about making the pie bigger," said Jim Blain, president of the State Employees' Credit Union, North Carolina's largest. Between the unemployed and the poor, "there are a lot of people sitting on the sidelines right now."

North Carolina's unemployment rate hit 8.7 percent in December — 1.5 percentage points higher than the U.S. jobless rate of 7.2 percent.

Yunus met at The Carolina Inn on the University of North Carolina campus with Blain, Smith, and representatives of the North Carolina Bankers Association and Durham-based Self-Help, a similar community development organization. All said helping Grameen start up could help stimulate the smallest of small businesses.

"I am committed to getting them set up and operating," Smith said. "I want to get them licensed as a small loan company very soon. ... It's going to happen."

Grameen opened its first U.S. affiliate in New York City 13 months ago and loaned more than $1.2 million to 440 women, all lacking assets or credit rating.

About 70 percent of the borrowers are Hispanic, and their loans launched everything from hairstyling to catering and tailoring services and more, said Stephen Vogel, chief executive officer of Grameen America Inc.

Because of strict U.S. banking laws, the New York office doesn't hold the savings deposits borrowers are required to make along with loan repayments. Instead, the money is held by Citibank, which created special, no-cost checking and ATM accounts for Grameen borrowers, Vogel added.

Grameen's model has traditionally targeted women because experience has found them to be more responsible than men and more comfortable with group responsibility. But lending is open to all in the U.S. where anti-discrimination laws are strict.

Yunus has not succeeded everywhere. He was invited to rural Arkansas by then-Gov. Bill Clinton in the mid-1980s. But the effort failed when the Arkansans proved unable to overcome individual preferences to go it alone on lending.

Still, the need and the times make Grameen a worthy experiment, said Blaine. His credit union, which does not lend to businesses, is prepared to provide the costly accounting and administrative tasks and ATM network.

"You've got a proven model that is unfamiliar to the United States. There is very low risk," he said. "It may not work, but what does it cost to try? Not much."