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Micro-Finance's Ascent in America
Manhattan, the nation's financial capital, might not be the first place that comes to mind when you think of micro-financing, the development tool used widely the since 1970s in places like India and Kenya where a lack of access to credit institutions mean the poor are often unable to invest in small enterprises.
Yet in 2010, Grameen Bank, founded by Muhammed Yunus, the Bangladeshi economist and microcredit pioneer, opened its first branch in Manhattan. Within three months, it lent $350,000 in microcredit loans (most under $1,500) to small business owners unable to secure loans otherwise.
Manhattan resident Mariana Sanchez used her Grameen Bank loan to keep her food cart stocked with fruit. Her interest rate was 15 percent on a declining basis, and each week she repaid a portion of the principal and interest while also making a required deposit into a savings account.
Grameen Bank is part of a growing sector of micro-financing institutions now operating in America, where some estimate as many as 66 million Americans either do not have a bank or rely on "payday lenders" for credit.
In Michigan, the Detroit Micro-Enterprise Fund is lending money to urban business owners, $10,000 for startups and $35,000 for businesses at least two years old. ACCION Texas, a microcredit institution based in San Antonio, reports (source) a 92 percent repayment rate, and has expanded to Louisiana, Mississippi, Alabama, Arkansas, Tennessee and Missouri.
An estimated 20 million micro-enterprises exist in America, but only two percent of customers who would benefit from this service currently have access. Micro-financing in America may seem surprising now, but it is likely to become common as services to this needy demographic expand.