RALEIGH, N.C. — With a track record of more than seven million borrowers and $6.5 billion in disbursed funds to microbusinesses, North Carolina's credit unions and banks have certainly taken notice of Grameen America.
Grameen America is the U.S. affiliate of Grameen Bank, a microfinance institution started in Bangladesh in 1983 by Muhammad Yunus, the 2006 Nobel Peace Prize winner for social and economic development, a professor and author of Banker to the Poor and Creating a World Without Poverty.
Launched in April 2008 in Queens, N.Y., Grameen America provides loans, savings programs, credit establishment and other financial services to the working poor. Its first borrowers included a group of Dominicans and Bangladeshis. During its first month of operation, the microlending bank said it disbursed more than $350,000 in loans to more than 165 borrowers. As of November 2008, more than $1 million had circulated among 380 borrowers.
The Grameen model is based on a peer group lending system. Prospective borrowers form or join group member groups, which are then organized into centers with up to eight groups to a center. Center meetings take place on a weekly basis and are facilitated by center managers who are employed by Grameen. The group meetings and Grameen's lending standards promote successful repayment and also provide a forum for financial issues such as credit scores, savings and related needs like health and insurance, according to the bank's Web site (www.grameenamerica.com).
The loans generally range from $500 to $3,000. Loans are usually made for a term of one year or six months, have an interest rate of 15%, carry no fees and are typically repaid in weekly installments. Phased disbursement minimizes default exposure while creating the proper incentive structure for customers to reach ever higher levels of loan disbursement, according to Grameen. The bank's principal source of revenue will be the interest paid by borrowers on their loans. Grameen said it has a 99.5% repayment rate. All borrowers are required to open a savings account.
Women account for Grameen's largest customer base because the bank has discovered through its 38 affiliates worldwide that they are more comfortable with the group lending model, are more likely to repay loans, and are more likely to direct earnings to providing better clothing, housing, nutrition, health care and education to their families.
Now Grameen America is looking to expand to other states including North Carolina. On Feb. 6, Yunus and other bank officials met with State Employees' Credit Union, Self-Help Federal Credit Union, the North Carolina Bankers Association, and both the North Carolina Commissioner of Banks and the North Carolina Administrator of Credit Unions to discuss setting up an affiliate there. The $16 billion SECU is excited about the idea and has offered to provide back-office functions should Grameen plant seeds in the Tar Heel state.
"SECU is always interested in creative solutions to help North Carolina overcome a weakening economy. The cooperation of North Carolina's diverse financial community in supporting this endeavor is the key ingredient," said Jim Blaine, president/CEO of SECU. "Normally banks and credit unions are rivals in competing for a slice of the North Carolina economic pie. With Grameen America, we are all working together to increase the overall size of that economic pie."
Blaine said Yunus visited North Carolina about a year ago to tour Latino Community Credit Union, Self-Help and other financial service providers in a quest to gather information on what structural and legal framework Grameen could operate under in the U.S. While planning is still in the early stage, SECU said it would provide accounting, processing, ATM access and statement rendering services, "the things that can trip up a new organization," Blaine said.
Also at the February meeting was Joseph Smith, North Carolina commissioner of banks, who welcomed the idea of having a microlending bank in the state.
"We are excited and committed to helping them in any way we can to establish lending and deposit operations," Smith said. "It's fair to say the banking community is excited about the process and how to address the unbanked and market of low-wage people."
The North Carolina Bankers Association said Grameen is poised to tap a niche that mainstream financial service providers are still trying to capture.
"We know that there are traditional [financial] needs out there that credit unions and banks can't provide, and we think Grameen can fill that void," said Erin Scheithe, financial education director at the bankers association. "Whether financially or with people on the ground, we look forward to working with them."
Smith said the current plan is for Grameen America to obtain an installed-loan license with SECU serving as a vehicle to offer deposit services pending a full-service charter later on. Vidar Jorgensen, president of Grameen America, said North Carolina has been very receptive.
"The banking regulators, banks, credit unions, universities and related organizations have all been positive and supportive," Jorgensen said. "The next step is for the funds to be lent to be raised locally in the cities that want a Grameen America operation there."
Jorgensen said once that step is completed, the lending can begin. Any sort of banking license will take longer, but the lending can begin within a few months of the local funds being available, he added. It is anticipated that the bank could be up and running by the spring or early summer.
Certain, rural parts of North Carolina "are almost like a third-world country," Blaine pointed out. However, a provider like Grameen could create jobs and woo people back to neglected towns. Still, he is aware of the skeptics.
"There's some doubt on whether it will succeed or not because it's a group borrowing model. In rural North Carolina, there's a lot of land, a lot of vacant plant capacity. We would love to reinvigorate those areas."
–msamaad@cutimes.com

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Microbusiness Lender Planting Seeds in N.C.

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