Could Microfinance Work in America?

Look out, Eddie Murphy. Coming to America has new meaning. What micro-credit pioneer Muhammad Yunus started in Bangladesh in the 1970s as a way to help the country’s poor lift themselves out of poverty – and has spread to become a worldwide phenomenon since – is slowly creeping into the mainstream here in America. But can micro-lending, providing small, low interest loans to people living in poverty really have a place in the United States where, according to this New York Times article, many banks consider lending under $50,000, especially to poor people, a risk not worth the taking?

Yunus says yes.

A quick look at history tells us he may be right. In President Obama’s hometown of Chicago in 1985, far from the depths of the Third World, Yunus and a group of financiers began lending to the poor. They charged no interest, had no lawyers, and did away with loopholes. As you can imagine, they were met with skepticism from the banking elites. Funny thing is, the loans worked. The new business owners paid back their loans in record numbers the same as the women of Bangladesh. At the time, Yunus dreamed of a nationwide network of micro-credit programs across the U.S. – his efforts even caught the eye of the Clinton Administration, but nothing of that magnitude ever transpired.

A model that had been grown from poverty-stricken areas of Bangladesh inspired the poor of Chicago, mostly women, and gave them the means to build new livelihoods.  That was in the 80s, but who’s to say it can’t work today? Huffington Post’s Jonathan Daniel Harris recently raised the issue in his article on To Catch a Dollar, the documentary of two American women who benefited from micro-loans from Yunus’ Grameen America.

Watch the trailer:

You rarely see a story on micro-lending these days without a mention of Yunus, but he’s not the only one making waves in small loans to the poor this side of the ocean. Lending powerhouse Kiva, which operates in 53 countries, is widening its giving in the U.S. as more and more Americans are faced with a tightening of their belts.

The loans Kiva and Grameen America procure for the poor are unique – there’s a heavy emphasis on innovation, passion, and social entrepreneurship. The fact they they’re funneled through non-profit organizations at the community level doesn’t hurt either. Micro-credit success stories already abound in the United States, but the story has yet to be written on whether the massive good it has done overseas can be replicated here.

Photo Credit: World Economic Forum