During a recent trip to Latin America, I took advantage of my presence on the continent to make a detour in New York.

You might assume that the main reason for my stop was an international conference to meet with colleagues working in this market. Far from it! There’s a particularly active group of microfinance volunteers in Manhattan. Their goal is to offer their expertise to institutions working in the banking realm. This well-organized group meets monthly over lunch to exchange ideas. They work closely with Microfinance Sans Frontiéres (MSF – Microfinance Without Borders), an association with which current or retired BNP Paribas employees (as well as others) go on missions abroad.

Even though this group is indeed very interesting, the main reason for my visit was not to have lunch with members of the group. In fact, it was to visit one of the leading microfinance institutions located on U.S. soil, Grameen America. Muhammad Yunus, the winner of the 2006 Nobel Peace Prize, is one of the founders and serves on the board of directors. The group of volunteers who made the initial contact invited me to learn about the fieldwork carried out by this MFI.

This NGO, founded in 2008, has set itself the goal of eradicating poverty in the United States. An ambitious project, but also a symbolic one in which emerging countries come to the rescue of the American “fourth world”.
It’s estimated that 37 million Americans live below the poverty line, defined as $22,000 (€17,844) per year per household. Customers of Grameen America are well below this threshold, with only $12,000 (€9,728). They also reflect the diversity of the country, as they include Latinos, African-Americans and Asians.

The scope of this initiative is still modest. The institution has only 3,000 customers and a loan portfolio of $2.3 million (€1,864,575). But it provides disadvantaged individuals with a practical opportunity to work. The average loan is $1,500 (€1,216) with an effective annual interest rate of 15%, which is extremely competitive in this industry.
Furthermore, no guarantee is required.
The managers, expatriates from Bangladesh (yes!), told me that the 5-member peer lending groups were difficult to establish at the beginning. Mistrust was rife among the targeted Americans, who thought they smelled a scam, given the low rates. Since then, word-of-mouth has had its effect and strong growth is on the horizon.

In addition to economic integration, this model aims to integrate these Americans financially. Agreements have been reached with some American banks to open accounts for them with zero fees.
In fact, most of Grameen’s customers are opening their first savings accounts, as they are required to pay a minimum of $2 per week into their accounts. A payment history is also provided to U.S. credit bureaus to demonstrate Grameen’s customers’ ability to pay when they join the traditional banking system. Lastly, they also receive financial education and advice for their businesses.

We are currently studying ways of setting up collaboration between Grameen America and BNP Paribas, along the same lines of our work with Adie in France.

Filled with enthusiasm, I then flew to Mexico where I met an MFI that is offering interest rates of 100% per year to the most disadvantaged members of the population…