Small Loans, Significant Impact

After Success in Poor Nations, Grameen Bank Tries New York

NEW YORK -- "Señoras!" calls the banker, summoning her borrowers to attention at their first loan-repayment meeting.

The small-business borrowers -- day-care providers, clothing sellers, jewelry makers -- crowd into the living room where their children are napping, eating cereal and watching TV.

They are part of a nascent lending program created by Muhammad Yunus, a Bangladeshi economist who won the 2006 Nobel Peace Prize for developing the Grameen Bank, which uses micro-loans to help eradicate poverty in developing nations.

But these women are not in Bangladesh, they are in Queens. They are among the first 100 borrowers of Grameen America, which began disbursing loans in January. This is the first time Grameen has run its program in a developed country.

"I just want to live a little better, and one day own a little house or something," said Socorro Diaz, 54, a borrower who sells women's lingerie and jewelry. "I'm trying to change my life. Bit by bit."

Grameen America, which offers loans from $500 to $3,000, hopes to reach people like her, part of the large segment of poor Americans without access to credit, said Ritu Chattree, the vice president for finance and development.

They are bakers who can only buy enough eggs and milk for a day's work because they cannot afford a restaurant refrigerator to store ingredients. They are vendors who borrow money daily to rent a cart. They are hair salon owners who take out loans every time they need to buy shampoo.

They often use pawn shops, or fall prey to check-cashing stores, loan sharks, and payday lenders, which can charge interest rates of 200 or 300 percent, Chattree said.

"You think this is normal, because you grew up with it," said Yunus of such high-interest lending in a recent interview with the Financial Times. "This is an abnormal situation, because of the problem with the financial system, so we have to adjust the financial system."

His adjustment begins with this experiment in the immigrant neighborhood of Jackson Heights, Queens.

Three groups of five borrowers attend the meeting in the apartment of Jenny Guante, 40, who makes silver and gold jewelry and runs a home day care. Some are making weekly loan payments; the largest payment is $66 on a $3,000 loan. Guante, the group's chairwoman, counts the money carefully before passing it to Alethia Mendez, the Grameen staff member who serves as community banker and center director.

"I've known these people forever," said one borrower in the roomful of immigrants from the Dominican Republic. "We grew up together. We went to school together around the corner."