Word: loaning
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...working microfinance equation consists of borrowing funds cheaply and keeping loan defaults and overhead expenses sufficiently low. Microlenders overseas, including Grameen, do that by charging hefty interest rates - as high as 60% or 70%. (Yes, that's a colossal rate but one that's necessary to compensate for the risk and to attract bank funding.) But in the U.S., loans at rates much above Grameen America's standard 15% would most likely be attacked as usurious. (See 10 ways your job will change...
Grameen's approach is different, since unlike most U.S. microfinanciers, it uses the group-lending model. Costs are kept down by having borrowers vet one another, tying together their financial fates and eliminating expensive loan officers entirely. Whether that setup will eventually allow Grameen to stand on its own two legs is a huge question mark...
...even if it can, it is still important to keep in mind exactly what a $1,500 loan can do. The ultimate promise of Grameen - and of microfinance more broadly - is to use business lending as a way for people to lift themselves out of poverty...
Take, for instance, Altagracia Familia, a former schoolteacher in the Dominican Republic who now lives in New York City and sells empanadas and coconut sweets. Her vending cart used to be wooden, but then she upgraded to metal. Not by way of a loan, though. Familia slowly saved profits and bought a new cart once she had amassed $7,000. What she spent her Grameen loan on is much less flashy: ingredients and cart repairs...
Back at Ziomara Suarez's apartment, the formal loan collection ends, but the women of the Progressives - what the group has named itself - stick around. As Emily Medina leaves to deposit the cash she's collected, the borrowers continue to chat and laugh and swap stories about the ups and downs of business. Then one of them opens up a suitcase and starts selling jeans and T-shirts...