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Micro-Lending Program Started in Developing World now Carrying Thousands of Poor People in the U.S.

"Group disciple is our collateral," says Grameen America's CEO of Operations. "They know that their payments affect the lives and businesses of their friends.”

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Peer pressure keeps the default rate at about one percent. If all the group members make regular payments, each one becomes eligible for a second loan 15 percent larger than the first. And if all the groups at a particular center pay on time, the second loan can be 20 percent larger. A default in a group caps loan increases at 10 percent.

"Group disciple is our collateral," said Newaz. "These people are very poor and need continuous credit support. Plus, they know that their payments affect the lives and businesses of their friends.”

Grameen America has helped form a social network of similarly situated women, who not only benefit from it, but also add value to it in many ways. Carmen Landy, 46, a member of Delfina’s group, raises two teenagers alone, sells ice-cream in the summers and sweet, fried churro snacks in the winters, from a food cart she wheels around different neighborhoods in Queens.

A few days ago, Grameen sanctioned Landy’s third loan of $2,520, a nearly 30 percent jump from her previous loan, thanks to her repayment record. She will pay $105 every week for the next six months, but said she is not worried because business has improved significantly.

Landy likened her center members to business partners who routinely help her and trade business tips.

“Many times Delfina calls me and tells me that there are a lot of people in so-and-so park, or an event at such-and-such school,” said Landy. “I go there for more sales. We help each other out. Many times, we set up our carts next to each other."

Group members assist each other financially too, in their own small ways. On three occasions in the past year, Delfina couldn't make her weekly payments. To bail her out, each center member contributed $2, a debt she repaid gradually.

Now that her business has improved, Delfina has applied for a third loan of $3,500, with which she hopes to buy a big food stall.

Delfina’s group members also draw emotional support from each other, said Thelma Suarez, a Grameen America executive familiar with their stories. She said she has watch them become a bunch of friends, who meet often, share each other’s problems and enjoy moments of fun.

“We cook together, and we sometimes have small parties too,” said Landy with a sheepish smile. "We meet and drink coffee," many voices at the meeting chimed in, prompting a burst of laughter.

 
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