An Asian bank for low-income women is out to teach Wall Street a lesson.

Rana Foroohar

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.

Certainly, Grameen plays a much needed role in filling the void. Vast swaths of the developing world have almost no access to credit, but even in mature markets like the U.S., there is a large group of "unbanked" people. In the U.S., the Federal Deposit Insurance Corporation says that nearly 8 percent of the population has no access to credit, and 18 percent has very little. Lending to the small businesspeople who create the majority of jobs remains extremely tight. Yet there has been no financial crisis in microlending-the sector is gaining popularity in dozens of nations around the world, including a surprising number of rich ones (Grameen and other microlenders are active in several European nations, too). "Grameen America has 3,500 borrowers, which is much more than we expected to have at this point, and if the trend continues, we'll be a self-sustaining business by 2013," says Grameen American CEO Stephen Vogel. He adds that the bank currently operates on grants and long-term loans from other financial institutions, like Wells Fargo or Capital One, which see supporting Grameen borrowers as a way of building a community of more affluent people who'll eventually need services higher up the food chain.

Most of those who make it up that ladder via Grameen America will be women (many of them single mothers) and their families. While the bank doesn't market specifically to women, Vogel says that they simply make up nearly 100 percent of those willing to attend meetings and fulfill savings obligations. They'll also make up the majority of people moving up the socioeconomic ladder, in the U.S. and abroad.

Finance Secretary John Swinney has had "useful and constructive" talks with a Nobel Prize-winning anti-poverty campaigner.

Mr Swinney met leading economist Muhammad Yunus to discuss his bid to set up Britain's first Grameen Bank in Scotland.

Professor Yunus pioneered the banks in his native Bangladesh in order to provide small low-cost loans to aspiring entrepreneurs who are too poor to qualify for traditional credit.

Copyright © 2010 The Press Association. All rights reserved.

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Finance secretary John Swinney will hold talks with a Nobel Prize-winning anti-poverty campaigner about setting up Britain's first Grameen Bank in Scotland.

Leading economist Muhammad Yunus pioneered the banks in his native Bangladesh, which offer small low-cost loans to aspiring entrepreneurs who are too poor to qualify for traditional credit.

He will discuss the possibility of setting up the first UK branch in Glasgow during talks in the city with Mr Swinney.

Copyright © 2010 The Press Association. All rights reserved.

http://www.google.com/hostednews/ukpress/article/ALeqM5jpbdmR_tMULM2sytsy6u417LySWw

Business Rx: The books of summer

By Special to Capital Business

Monday, June 28, 2010

Even busy entrepreneurs and business leaders need some downtime to recharge. While you're relaxing on the beach or poolside this summer, check out some of the books that the faculty and leaders at the University of Maryland's Robert H. Smith School of Business prescribe as must-reads. Here's 10, along with comments from the Smith School:

1. "Drive: The Surprising Truth About What Motivates Us" by Daniel H. Pink (2009) Pink is a Washington-based author.

"Most of us believe that the best way to motivate ourselves and others is with external rewards like money -- the carrot-and-stick approach. According to Pink, the secret to high performance and satisfaction -- at work, at school, and at home -- is the deeply human need to direct our own lives, to learn and create new things, and to do better by ourselves and our world." -- G. "Anand" Anandalingam, dean, Robert H. Smith School of Business

2. "This Time is Different: Eight Centuries of Financial Folly," by Carmen M. Reinhart and Kenneth S. Rogoff (2009) Reinhart is a professor of economics at the University of Maryland.

"The authors have amassed an incredible data set on banking crises going back to the 1800s. They use this data to provide what is arguably the most insightful and well-documented analysis of the recent subprime mortgage crisis and ensuing Great Recession. A chapter on the 'Aftermath of Financial Crises' argues convincingly that recessions following financial crises are deeper and longer-lasting than average, providing guidance as to expectations this time around." -- Curt Grimm, dean's professor of supply chain and strategy

3. "Building Social Business: The New Kind of Capitalism That Serves Humanity's Most Pressing Needs," by Muhammad Yunus (2010 ) Yunus, 2006 Nobel Peace Prize winner, founded Grameen Bank, a pioneer microfinance institution.

"This book goes beyond issues of microfinance to describe and discuss the nature of 'social enterprises.' " -- Brian L. Nelson, Tyser teaching fellow of logistics, business and public policy

4. "Crisis Economics: A Crash Course in the Future of Finance," by Nouriel Roubini and Stephen Mihm (2010)"

"In 2008 when others saw a liquidity crisis, [Roubini] saw the truth of the matter -- a credit crisis. The book reads very easily and draws one in to this remarkable story that traces and explains step by step the elements of the crisis." -- John A. Haslem, professor emeritus of finance

5. "Profession and Purpose: A Resource Guide for MBA Careers in Sustainability," by Katie Kross (2009)

"'Profession and Purpose' is an excellent guide to those job seekers looking to understand the broad umbrella of a career in 'sustainability.' " -- Melissa Carrier, executive director of the Center for Social Value Creation

6. "Financial Shenanigans: How to Detect Accounting Gimmicks & Fraud in Financial Reports," third edition, by Howard M. Schilit and Jeremy Perler (2010) Schilit recently started the Financial Shenanigans Detection Group. Perler is co-director of accounting research at RiskMetrics Group, which has an office in Rockville.

"In addition to providing fascinating 'financial autopsies' of Enron, WorldCom and other recent accounting frauds, this edition shatters the myth that cash flow statements cannot be manipulated. One need not be an accounting expert to enjoy the stories presented or to learn to uncover foul financial play." -- Martin Loeb, department chair and professor of accounting and information assurance

7. "Rules of Thumb: 52 Truths for Winning at Business without Losing Your Self," by Alan M. Webber (2009)

"His illustrative style of writing allows you to quickly grasps the rules, apply context and be on your way toward more professional and personal success. You will enjoy the 'ah-ha' moments of the book as much as his wit." -- Carrier

8. "Half the Sky: Turning Oppression Into Opportunity for Women Worldwide," By Nicholas D. Kristof & Sheryl WuDunn (2009)

"A direct implication of this book is that, as a society, we will never reach our potential until the human rights and the talent of half the world's population is realized. Note that this book will challenge its readers and is not for the faint of heart; it is a cleareyed view of lives of groups of women around the world, and the view isn't pretty. The stories, though, are inspiring and give cause for hope and possibility." -- Rachelle Sampson, assistant professor of logistics, business and public policy.

9. "Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System -- and Themselves," by Andrew Ross Sorkin (2009)

"This book gives a very detailed play-by-play of the financial crisis from both the Wall Street and inside Washington perspectives. It shows how the Treasury Department team worked around the clock to deal with countless unexpected issues. It is a great example of crisis management and also gives a lot of insight into the inner workings of Wall Street." -- Asher Epstein, managing director of the Dingman Center for Entrepreneurship

10. "Wellbeing: The Five Essential Elements," by Tom Rath and Jim Harter (2010)Rath lives in Washington and leads Gallup's workplace consulting business.

"This book uses extensive research and examples based on Gallup's work in over 150 countries to provide the reader with a view of what contributes to an individual's well-being. Not only do the authors discuss these important areas, but they introduce the reader to Gallup's new Wellbeing Finder, which is an online assessment they can use to track and improve their well-being." -- Joyce E.A. Russell, director of executive coaching and leadership development programs and Ralph J. Tyser distinguished teaching fellow

Looking for some advice on a new business, or need held fixing an existing one? Capital Business and the experts at the University of Maryland's Dingman Center for Entrepreneurship at the Robert H. Smith School of Business are ready to assist. Contact us as  This e-mail address is being protected from spambots. You need JavaScript enabled to view it .