Grameen Bank expands into rich nations

The financial world may be crashing down around him, but Muhammad Yunus' Grameen Bank continues to expand. The bank that began giving small loans to people in Bangladesh is expanding into rich nations. Three years after the Grameen Bank started in the US, they will open a new office in San Francisco, as well as a new office in Glasgow, Scotland.

From Newsweek Magazine, writer Rana Foroohar talks about giving tiny loans in the rich world.

It’s pretty safe to say that three years ago no one could have predicted that one of the few financial institutions to be opening new branches and expanding lending in America would be a Bangladeshi bank that specialized in loans to people below the poverty line (the vast majority of them women). But that’s just what has happened. Grameen America, the U.S. offshoot of the famous Asian microlending institution founded by Nobel laureate Muhammad Yunus, is now in its third year of operation in America, and even as the major banks, still battered from the financial crisis, are keeping credit tighter than ever, particularly to the small and midsize businesses that need it so desperately, Grameen is expanding. This summer, the little Bangladeshi bank—already operating in New York; Omaha; and Washington, D.C.—will move into its fourth U.S. city, San Francisco, fueled by a series of loans from institutions like Wells Fargo and Capital One that, aside from basking in the glow of good PR, have realized that they are more likely to get their money back by lending to African-American hairdressers in Queens or Latina food-cart operators in D.C. than by chucking money at middle-class whites who have bought more McMansion than they can afford.

Ironically, Yunus himself has characterized Grameen as “sub-sub-subprime.” In this case, it’s not a bad thing. Since its establishment in 1983, Grameen has given out billions to borrowers around the world, mainly women below the poverty line, and has recouped 98 percent of its loans. Admittedly, those loans are tiny—$1,500 on average in the U.S., but much less elsewhere. Interest rates are high (15 percent in the American operation), but they are much less than the poor would pay a black-market lender. According to its proponents, the Grameen model works because of peer pressure. Each borrower is required to attend a weekly meeting with other borrowers, all of whom are responsible for communal payback rates (the group can’t borrow more if individuals don’t pay back). Each borrower must also contribute to a personal savings account to help create a financial cushion while building a business.

It’s a model that is the antithesis of the big-bank system of recent years, in which the “know your customer” approach of the local savings and loans went out of fashion and the complex bundling of thousands of mortgages came in. The Grameen way recalls the Latin meaning of the word credit, which is “to believe in.” Grameen builds community at the same time it builds financial security among its members. “I think the financial crisis will be an opportunity,” said Yunus in a speech to borrowers last year, “to create an entirely new type of financial system.” At the opening of a branch in lower Manhattan this past May, Yunus pointed out that “Wall Street does banking to the world, but it doesn’t do banking for its neighbors. We are here to show there’s nothing wrong with banking with neighbors.” Indeed, they may be among the most creditworthy.

A new movie on microcredit in the US

A new documentary that chronicles the efforts of Grameen Bank expansion to the US has premiered at the Sundance Film Festival. Titled “To Catch a Dollar: Muhammad Yunus Banks on America,” the movie shows the struggle that the concept of microcredit has in catching on in the states.

Muhammad Yunus coined the concept of microcredit back in the 1970s when he loaned a few dollars to a Bangladeshi women, since then his Grammen Bank has flourished in Bangladesh with a 99 percent repayment rate. In America however, there have been problems in raising the cash for the bank and getting borrowers to attend required weekly meetings.

From the Huffington Post, blooger Emily Goligoski introduces us to the films director. The youtube of the film’s trailer is after the jump.

Before the screening introduced by producer/director/cinematographer Gayle Ferraro (whose first film Sixteen Decisions followed the story of a borrower in Bangladesh, where the bank first began operating in 1976), founder Dr. Muhammad Yunus spoke about inspiring business ingenuity in potential entrepreneurs. Along with two other Sundance film selection subjects, Harlem Children's Zone founder Geoffrey Canada (of Waiting for Superman) and environmentalist Lester Brown (Climate Refugees), the Nobel Peace Prize-winning economist said he is eager for a time when people don't have to consider taking work that's either in pursuit of profit-making or social aims only.

His bank has managed to focus on the latter while expanding, but its introduction to the United States hasn't been a seamless one. A young Grameen employee who advises groups of five borrowers in Jackson Heights -- and whose simultaneous patience and frustration are the focus of much of the film -- finds that her clients are less likely to be engaged with weekly group meetings than their Bangladeshi counterparts. Her expression of joking concern when she reads from a bank manual about livestock trading value (when the women she's working with primarily work in clothing and hair extension sale) provides calm as the bank struggles to earn $6 million to set up a legal banking structure in the States, largely through Yunus' nearly-constant speaking engagements.

Grameen Bank about to open in the U.K.

While in London to give a lecture, the Guardian had an opportunity to interview Muhammad Yunus. The "Banker To The Poor" set up Grameen Bank over 20 years ago and it became a model for microcredit lending to poor people who want to start up their own business.

Yunus is now bringing Grameen Bank to the western world, with a branch in New York and one coming soon to Glasgow. Interviewer Alison Benjamin asked Yunus about some of the challenges of setting up the branches in those two cities.

The biggest hurdle to setting up Grameen America last year, he explained, was finding a mainstream bank that would open a savings account for its borrowers. Under Grameen rules, borrowers are required to save a small weekly amount, but in the US, Grameen is a programme, not a bank. Even with Yunus's clout, it took time to persuade the branches of Citibank to open accounts for customers who wanted to deposit only $2 a week.

"These are the lessons that we need to now bring together to ask ourselves what kind of financial system we should be creating when we move out of this crisis," Yunus said.

There are now 660 Grameen borrowers in New York City, with an average loan of $2,200. More projects are planned in cities across the US, where, Yunus has said, he wants Grameen to become as "ubiquitous as fast food".

After the lecture, I ask him how the Grameen model will translate to inner-city Glasgow, where three generations of unemployment is not uncommon in some families. He readily admits it will be difficult to wean people off welfare and make them more self-reliant. "We don't know what all the problems will be," he replies.

Despite his calm, thoughtful demeanour, this champion of the poor is openly critical of welfare systems for deterring people from working. "Today, neither the welfare officer nor the welfare recipient has any incentive to move people out of welfare," he says. "If you earn a dollar it is deducted from your welfare cheque. Wrong things have been built into the system."

Yunus believes a better system would reward people for finding work by matching every dollar earned, rather then deducting it. In the US, Grameen has negotiated a welfare holiday that allows borrowers to claim welfare for three years while they build up their small business. Similar waivers may have to be looked at for the Scottish model, which is being developed with Glasgow Caledonian University and is in the process of raising £1.5m.

The full lecture that Yunus gave at the British Council is available at the Guardian, we have also linked to it at our Facebook group.

Micro Credit in the US increasing during the recession

A story in today's International Herald Tribune looks at microcredit in the US. Micro lenders in the states are seeing an increase in their lending during this depression. Many microcredit leaders hope to see some money come from the latest stimulus package that President Obama is about to sign into law.

From This Associated Press story that we found in the International Herald Tribune, we hear from a couple who used microcredit to begin a business.

When Amy Sokoloff and John Powell were trying to start their art restoration business in New York City, they needed some working capital. But banks weren't willing to take a chance on them.
...

Sokoloff and Powell ended up on the doorstep of ACCION USA, a not-for-profit group patterned after the Third World microfinance institutions best known for providing money to Moroccan farmers for breeding chickens or to Bangladeshi women for weaving supplies.

The $15,000 loan they got in 2005_ which they paid back in two years — got them the sunlit studio where their Chelsea Restoration Associates brings aged, damaged oil paintings back to life. Last fall, after the U.S. recession began to cut into their business, they went back to ACCION USA for a $25,000 loan, "a tremendous help for cash flow" with an affordable 10.9 percent interest rate, Sokoloff said.

Sokoloff and Powell are among thousands of Americans using microcredit, a financing system originated in the Third World, to help open small businesses or get through rough spots. While the dollar amounts are much bigger in the U.S. than the tiny loans in developing countries — some for less than $10 — the principle is the same: a financial stake that lets people in need better their lives.

Now, with the recession deepening, U.S.-based microlenders say they are seeing an increase in inquiries from would-be borrowers, including startup entrepreneurs seen as too risky by banks and other traditional lenders.

And the still-small U.S. microcredit sector hopes for a boost from the new administration of President Barack Obama.

Obama's secretary of state, Hillary Clinton, is a big supporter of microfinance, praising it during her confirmation hearing for its ability to "raise standards of living and transform local economies" overseas. Obama also has a personal link to the industry because his late mother, Ann Dunham, was involved in microfinance in Indonesia.

These connections gave raised hopes among microloan advocates that some money from the administration's $787 billion economic rescue package will filter into their programs. U.S. microlenders already get support from the Small Business Administration and a Treasury community development fund.

"We're hoping for more funding" from government, said Wendy K. Baumann, vice chairman of the Association for Enterprise Opportunity, an advocacy group for microfinance based in Arlington, Virginia.

Microloans have been made in developing countries for more than 30 years. Bangladeshi economist Mohammed Yunis made the first one of about $27 from his own pocket to 42 women hoping to buy bamboo to make furniture. He later formed the Grameen Bank, which is now one of the world's largest microlenders and shared the 2006 Nobel Peace Prize with the founder.

Concept for world's poor aids richest nation on earth

from CNN

NEW YORK A bank operating on a concept that has lifted thousands of people out of grinding poverty in the developing world has set its sights on helping the poverty-stricken in America.

The Grameen Bank rose from humble origins in the impoverished South Asian country of Bangladesh to win the 2006 Nobel Peace Prize. It offers small loans to let poor people start their own businesses, a concept known as microlending.

With the threat of a looming recession, the subprime mortgage meltdown and tougher standards by lenders, poor Americans deemed unworthy of credit by commercial banks now have somewhere to turn.

The bank's concept is simple. Credit is a basic human right, says founder Muhammad Yunus. Offer even a small credit and a person will work out how to best use it to break free of poverty.

Last month, Grameen Bank opened a branch in New York City's Jackson Heights, an immigrant enclave just miles from the global center of finance, Wall Street.

It hopes to expand it to other parts of the country soon.

"People will say this can work any place -- in any city in the United States -- if it worked right here in New York City," Yunus said.

It certainly helped Elizabeth Tordoya, a Bolivian immigrant, who opened a store last year but needed an additional $3,000 to add to her inventory.

Because of her weak credit score and limited English skills, she had trouble securing a traditional bank loan.

"Our customers are really people who are the unbanked in the United States," said Ritu Chattree, vice president of Grameen America. "There are about 25 million people in the U.S. with no relationship with a conventional bank. And so the only access they can get to credit are predatory loans at rates of 300 to 400 percent a year."

Judged by gross domestic product, the United States is the world's richest nation, according to World Bank figures. Its $13.1 billion in GDP -- the value of all goods and services a country produces -- is nearly three times as much as the second-richest nation, Japan.

Yet 36 million Americans live in poverty, according to U.S. census figures from 2005.

Grameen charges borrowers like Tordoya about 15 percent a year and does not require collateral. It does not make its borrowers sign a legally enforceable contract, but rather models its business on trust.

But the bank demands something else: Borrowers are required to put a part of the money in savings. And they can't simply mail in payments.

Instead, they commit to weekly group meetings, with each member helping the other meet their payment goals.

"We do the same as we do in Bangladesh," Yunus said. "Five-member groups, weekly meeting. We show support for each other, help each other to stay afloat, work on the problems that you face together."

The bank said its recovery rate is more than 96 per cent.

The loans range from $500 to $3,000. By mid-April, Grameen said it had loaned out more than $350,000 to more than 165 borrowers in New York.

Yunus' pioneering microlending concept began about three decades ago when the American-educated economist returned home.

While touring of villages on the outskirts of the university where he taught, he talked to villagers who told him that they had borrowed from money-lenders -- but found themselves unable to climb out from under a mountain of debt because of high interest rates.

Yunus realized that the sum they needed was minuscule -- sometimes less than $30. Half of Bangladesh's 133 million people live on less than $2 a day.

He lent $27 to 42 villagers out of his pocket to help them buy tools and equipment to start their own businesses. They promptly repaid him.

Emboldened, Yunus began Grameen Bank ("rural bank"). The concept caught fire. The model has been replicated in more than 60 countries.

More than $6.5 billion in microloans have been disbursed to 7 million poor people across the globe, the bank says. Ninety-seven percent of the borrowers are women.

Experience has shown that women are more likely to repay loans, the bank says. They are also likely to direct earnings toward their family's needs, rather than their own.

[Comment] Where to spend the rebate? Don't. Just give it away

from the Seattle Post Intelligencer

By D. PARVAZ
P-I COLUMNIST

If you're in a certain income bracket, you will soon receive a tax rebate from the government. Maybe you already have. It's that $600 -- more if you have kids -- that President Bush hopes will shut us up about the economy and send us running to the malls to buy more stuff. Those who live paycheck to paycheck will understandably use the dough to keep the wolves at bay for another month. But there are some, myself included, who are fortunate enough to not count on this check from Bush to make ends meet.

This money could be put to better use, so I propose that those who can afford to do so donate their rebates -- or a portion thereof -- to a nonprofit, such as a food bank or a reputable microcredit organization dealing with needs here or overseas (where some resorted to eating fried mud). Shop on your salary, and yes, donate money at other times too, but use this check to help those who are routinely overlooked.

Think of it as a subversive act of charity.

We're experiencing a food and fuel crisis possibly created by some sort of commodities/speculation game. Prices of the basics continue to rise, leaving the poor in an ever more desperate state. Rick Jump, executive director of the White Center Food Bank, says gas and food prices are driving more people to food banks -- his location saw a 20-plus percent jump in the number of people it served in April.

"The cost of gas alone is really bringing more in here. Families have to choose between putting gas in their cars to go to work and buying groceries," said Jump. How much food could $600 buy a food bank?

"I can't tell you enough about what a difference that would make. For us, a pound of food on average is 21 cents," said Jump, who shops in bulk and frequently locks in prices months in advance -- which is why donating money is more effective than donating food. The average family of four tends to use the food bank twice a month, leaving with enough food for 11 meals. That's about 75 pounds every two weeks, for about $15.75. Jump hasn't heard of a movement to donate rebate checks to nonprofits, but mentioned several churches in the West Seattle area that are encouraging members to donate 10 percent of their tax rebates.

If you're inclined to focus on other types of community outreach, there are plenty of organizations that could make lemonade out of the lemons that constitute Bush's ridiculous "economic stimulus package." Solid Ground is cleverly using the administration's name for the rebates for its own "Economic Stimulus for ALL" campaign.

The organization helps those who are struggling with poverty-related issues, offering financial support and education. The funds Solid Ground hopes to raise will be used for housing counseling. Spokesman Mike Buchman said $600 would cover the staff expertise to take three families through the default process, helping them renegotiate the terms of their loans and maybe even save their homes.

Local microcredit outfit Washington Cash (which works on the Grameen Bank model) also would do wonders with your rebate check, turning it into a loan for a small struggling business or training for those trying to get back on their feet and into the work force, says Executive Director Cheryl Sesnon.

"So, $600 would pay the tuition for someone to go through our 10-week course," said Sesnon. The course trains people on the basics of starting their own small business, such as understanding cash flow, bookkeeping, legal issues and more. Washington Cash doesn't charge for the classes, but it still has costs associated with the courses, which, by the way, are quite effective. Sesnon said that two years after completing training with Washington Cash, "Sixty-seven percent of people who were in poverty have moved out of poverty." They do so by starting their own business or using what they learned to get (better paying) jobs.

Starting Small

from Urbanite Baltimore

By: Lionel Foster

One day in November 2005, a truck driver named Jean Bonaney walked into the office of an organization called Acción USA in Miami’s Little Haiti community. Acción has offices or affiliates in eight states, and its parent organization, Acción International, operates in twenty-five countries, but the Little Haiti office has just one staff member, Joann Milord, who greets clients in the Sant La Haitian Neighborhood Center.

Bonaney wanted a loan. His wife wasn’t working, so his job driving a cement truck was the only income for his family of six. Their budget was tight. “Sometimes we couldn’t get clothes,” he remembers. At $16 per hour, his take-home pay varied with the number of shifts he was given. During a good week, after a few 3 a.m. wake-ups, he might clear $800.

Bonaney had dreams of running his own concrete outfit. He’d studied business at a local community college and with the help of the Enterprise Community Center he’d written a business plan for T.J. Concrete of Miami. The idea was to run a smaller, nimbler operation that could pour high beams, slabs, and driveways in areas that larger trucks, like the one he drove every day, couldn’t reach. When shifts at his day job were scarce, he could fill in the gaps with his own jobs.

With no savings to tap into, Bonaney needed access to credit. He had a decent job but no credit history—no mortgage, no auto loan, nothing. He’d been turned down for every credit card for which he’d applied—seven, by his reckoning. With a credit score of zero, he couldn’t even get a department store charge card.

He hoped Acción could help. The organization provides small, short-term “Credit Builder” loans designed to help people get a foot in the door. At a 17.5 percent annual interest rate, they beat many credit cards and the typical “payday lender,” which extracts triple-digit rates from borrowers who fail to repay loans by their next payday. Acción gave Bonaney a $500 loan, and, after he paid that off, a second loan for $750. As Bonaney paid the monthly $100 installments, his credit score improved. In 2007 he graduated to Acción’s small business loan program and borrowed $3,000 to cover the cost of insurance for T.J. Concrete and repairs for one of his cement pumps. After about a year working with Acción, he says his credit score reached 700, what many lenders consider the low end of the high-score range, and this January T.J. Concrete opened its first office.

Bonaney is what many people refer to as a microentrepreneur, a small business owner employing one to five people. And Acción USA is a microlender providing small loans to current and would-be entrepreneurs, who, because of problems with credit or low income, might otherwise be turned away by banks uninterested in lending such small sums.

Microcredit gained international attention in 2006, when Bangladeshi economist Muhammad Yunus won the Nobel Peace Prize for his work fighting poverty with small loans. That same year, he told Time magazine that microcredit could “halve total poverty by 2015.” Global poverty will become so uncommon, he said, that “we’ll create a poverty museum in 2030.” Yunus’ Grameen Bank has continued to have dramatic success in the developing world, and Grameen America opened its first office in Queens, New York, last fall. But there are many questions about the future of microcredit in the United States, specifically whether the Grameen model or something like it can work in this country.

Yunus got his start in 1976 when he lent a group of subsistence basket weavers $27 out of his own pocket. Within a year each had paid him back and he was borrowing money to help others. In 1983, special legislation designated Grameen as an independent bank. Since then the bank has distributed approximately $6.5 billion to more than 7 million borrowers in 81,000 Bangladeshi villages. Grameen reports a 98 percent loan recovery rate, which compares well with the recovery rate for personal loans in the United States. It took its last donation in 1998 and is now a for-profit enterprise owned predominantly by its borrower members.

Part of Grameen’s success is due to the way it has positioned itself within a country full of tight-knit villages. Ninety-four percent of Grameen’s recipients are women, many of whom have used their newfound access to credit to raise their own social status and better care for their children. Borrowers must be part of a group of typically five people. No collateral is required, but anyone thinking about defaulting on one of the weekly payments, often delivered during public meetings, has her reputation to consider. Lastly, a Grameen loan is not just about the money. Grameen is also the hub of a social movement. Borrowers are strongly encouraged to adhere to “The Sixteen Decisions,” a manifesto that, along with guidelines on basic public health measures and nutrition, includes pledges to maintain small families and spurn marriage dowries.

It’s difficult to imagine such a system succeeding in the United States. Indeed, it hasn’t. As recently as December 2006, there were 133 million outstanding microcredit loans worldwide, according to the Microcredit Summit Campaign, which tracks the industry. But the industry’s footprint in the United States is still microscopic: Less than one-tenth of one percent of those loans were in North America and Western Europe combined. In Maryland, Urbanite could find only one domestic microlender—Maryland Capital Enterprises in Salisbury—and a handful of county-run small business loan funds.

“I don’t know of anyone in the United States who’s reached scale,” says Gary Woller, a microfinance expert and president of Woller and Associates, a development consulting firm in Sandy, Utah. “Scale” is shorthand for the large volumes of microcredit borrowers that would increase returns, decrease the average cost of servicing each loan, and make microlenders less dependent on charitable donations. (In the United States, microloans can vary from as little as $100 to several thousand dollars.) In 2003, Woller and fellow researcher Mark Schreiner published a paper in the journal World Development that laid out a number of impediments to America’s microcredit industry.

For starters, while some low-income Americans are denied access to mainstream credit options such as bank loans or even credit cards, so-called predatory lenders often fill the gap. Creative lenders continue to find ways around a Maryland law that puts a 33 percent cap on the annual interest for loans of less than $2,000. There’s also the question of motivation. In countries like Bangladesh, the alternative to starting a small business might be starvation. In the United States, wage jobs are much more abundant, and even a low-paying one can, at the very least, help a person pay for necessities. Factor in welfare and unemployment benefits and it means there’s more of a cushion between America’s poor and absolute destitution.

These differences may explain the contrast between Acción’s success in Latin America and some of the challenges it faces here. Acción International made its first loans to small-scale entrepreneurs in Brazil in 1973 and saw such a large and steady return that, in 1992, it helped found Bolivia’s BancoSol, the first commercial bank in the world devoted solely to microenterprise. It came to the United States in 1991, when it began a pilot project in Brooklyn, New York. But fifteen years later, Acción USA counted only 6,049 active borrowers.

Alternatives to entrepreneurship leave organizations like Acción USA a smaller pool of potential clients than their developing world counterparts, and within this pool, lenders have to choose carefully to ensure a decent rate of return. To make it work in the United States, Acción has had to alter at least one aspect of its approach, and this change has shut out some of the most needy. Acción USA requires collateral, or, at the very least, a co-signer for each loan. Jean Bonaney leveraged the pickup trucks he used to transport cement as collateral when he applied for his small business loan. Loan officers also ask for a bank statement and home utility bill as some indication of a borrower’s cash flow. Such requirements would not be onerous for most people, but they can represent too great a hurdle for anyone without a steady source of income and a fixed address. Even Credit Builder loans require proof of income. “We look for low-to-moderate income entrepreneurs,” says Elizete Groenendaal, Acción USA’s vice president of marketing. “We need them to have some kind of credit established.”

In Acción USA’s case, as with other domestic microlenders, most of the clientele are immigrants. “A lot of people come from countries where the bank system isn’t stabilized,” says Acción USA’s Joann Milord. They may not even have a bank account. So microcredit is, for many, an introduction to mainstream U.S. financial services. And this may prove to be one of the industry’s main functions in the United States: Microcredit might not turn America’s most destitute populations into business owners, but it could help set people like Jean Bonaney and those once considered un-bankable on a clearer path to financial security.

—Lionel Foster

Lending Plan Won Prize, but Will It Work Here?

from the New York Times

By AMANDA M. FAIRBANKS

The maroon couch was big enough to take up half the living room, but by the time the 10th woman arrived it could hold no more.

The room temperature was rising from all the body heat. Chairs were brought in from the kitchen. Even the floor was called into service.

“I’d like to start the collection,” Alethia Mendez announced after the last of the 15 women had arrived on a recent Saturday morning.

Therese Prentice counted out crisp bills, divided them, tucked them in envelopes and recorded the amount in a flimsy green book. The next woman repeated the exercise, until all 15 had made their payments for the week.

Then the money was handed to Ms. Mendez, the group’s 24-year-old banker.

“This is the way it was done in Bangladesh, so we do the same thing here,” Ms. Prentice said. “It’s our ritual.”

The women are clients of Grameen Bank, the international organization that pioneered “microloans” to third-world entrepreneurs and that, along with its founder, won the Nobel Peace Prize in 2006.

But the women were not in one of the abjectly poor villages in Bangladesh where Grameen usually does business; they were in a modest two-story brick house in St. Albans, Queens.

Since the beginning of January, 11 Grameen lending groups have sprung up throughout Queens in the bank’s first venture in the United States. They have lent more than $250,000, in amounts ranging from $500 to $3,000, to more than 100 women for income-generating activity like elder care, housecleaning and flower-arranging businesses.

“Of the entire U.S. population, 40 percent is underbanked, and as a result end up using payday lenders, check cashers and other, more expensive services,” said Vidar Jorgensen, president of Grameen America. “We’re here to meet this huge need.”

If the program works well, Grameen intends to expand nationwide. But while it has flourished elsewhere, it is not clear whether Grameen’s model — which relies on peer pressure rather than collateral to make sure women repay their debts — will work here, and whether such small loans can actually help lift its borrowers out of poverty.

“In parts of the United States it may very well work, but I have real doubts about it working in places like New York City,” said David R. Jones, president and chief executive officer of the Community Service Society of New York.

His group gives cash grants averaging $3,000 to city residents in financial distress — for instance, to people who have fallen behind on their rent or who cannot pay their medical bills. But Mr. Jones said that $3,000 is generally not enough to stabilize a New York resident.

Still, Grameen’s experiment here is being closely watched. Elaine L. Edgcomb of the Aspen Institute in Washington, who co-wrote a 2005 study of more than 100 microlending programs in the United States, said that borrowers do “move out of poverty, and the business can be an important contributor to that, but it’s not always the only contributor.”

“For many families, the increase in income is sufficient to take them above the poverty line,” she said.

Grameen’s distinguishing feature is its mandatory weekly meetings at which borrowers learn money management skills from their banker and from one another and must make their payments in front of everyone else in the group. If one person defaults on a loan, Grameen will not call a lawyer or a collection agency or confiscate any assets. Instead, no one in the group will be eligible for a new loan.

“You have 30 eyeballs who are looking at you and making you accountable,” said Myriam Pericles, a 41-year-old first-generation Haitian-American, who will use her $3,000 loan to expand her computer consulting business. She was a little skeptical about the process. “Maybe all this works in Bangladesh, but this is America, where people are different — our value system gets warped, our word is not our bond.”

Nicole Brown, 30, who immigrated from Jamaica as a child, is using her $2,000 loan to start a day care business. “I didn’t have it in my head to start my own business, but if you want to be great in life, you have to have your own stuff,” she said. She added that she was drawn to Grameen through her sister, Wendy Brown, who is using her $3,000 loan to expand her apartment-cleaning business, Meticulous Cleaning Service L.L.C.

As the other group members looked on, Wendy Brown, 36, made her first payment on the $3,000 loan: $60 toward principal, $6 for interest and $2 toward a savings account. If she makes all her payments, she will retire the debt within a year and be eligible for another loan. “It’s very simple, as opposed to getting it through a normal bank and going through the red tape and getting denied,” she said.

Grameen America’s managers, who are based in Jackson Heights, say that all the women in Queens are paying back their loans on time. But adapting its model to the United States has not been easy.

While Grameen officially requires a home visit to verify that borrowers are truly poor — they must fall below the United States Census Bureau’s poverty line, currently defined as $21,027 for a four-person household with two children — some borrowers at the St. Albans meeting still had not received a visit. Grameen organizers said last week that all borrowers would receive home visits in the next few weeks.

Finding potential borrowers has been another challenge.

“Here, the women are not working in the community where they are living,” said Shah Newaz, the general manager of the Jackson Heights office, who has worked with Grameen for 26 years all over the world. It is hard to meet with the women “because they are not in their houses in the daytime, and in the evening they are very tired and preparing meals, taking care of children and getting ready for the next day.”

Grameen aims its loans at women, saying it has found them more responsible than men and more comfortable with the group model. So far, the Queens operation has lent only to women.

But the organization says it will lend to men here, and is aware that it cannot discriminate on the basis of gender. “We want a female candidate, but in the U.S. you can’t say that in advertisements,” Mr. Newaz said. “That is a problem.”

The idea behind Grameen Bank began in Bangladesh in 1976, when Muhammad Yunus, an economics professor, lent a total of $27 to a group of 42 women in Jobra, a southern village. All of the women repaid their loans. Since 1983, when Mr. Yunus formally founded Grameen, it has lent $6.8 billion to 7.4 million Bangladeshis; 97 percent of its borrowers are women.

Mr. Yunus tried to start a microlending program in the United States in 1985, when he was invited to rural southern Arkansas by Bill Clinton, who was then the governor. But the program Mr. Yunus helped start, called the Good Faith Fund, failed. The group lending model never caught on. If given the choice, “any human being on earth would want to borrow as an individual rather than as a group member. It didn’t work very well in this country,” explained Mary Houghton, founder of ShoreBank, who helped advise the Arkansas experiment.

Another microfinance organization, Acción USA, which has lent money to more than 20,000 people since 1991, also attempted the group lending model in its early days. “We found that the group methodology did not work well because there was a general lack of trust among potential borrowers and an unwillingness to guarantee another person’s loan,” said Bill Burrus, president and chief executive of Acción USA. The organization has since adopted a more traditional individual lending model in almost all cases, and its default rate has ranged from 4 to 7 percent in recent years. Grameen says its default rate in Bangladesh was less than 1 percent, though higher in times of flooding.

Grameen America is aiming to reach 21,000 borrowers within five years, the number that its organizers say would allow it to break even. To improve its chances of success, it relies upon dense social networks, the kind often found in immigrant communities, to help form its groups of borrowers. The center in St. Albans consists predominantly of Caribbean and African-American women.

Not long ago, they would wait out winter afternoons between cleaning jobs on subway platforms, unable to afford lunch or dinner.

“We’d starve until we got home,” Nicole Brown said. The sisters, who had moved back in with their mother, did not want to ask for more help from her, so they turned to Grameen.