New Study Suggests Grameen America’s Microloan Model Works for Female Entrepreneurs
March 15, 2019
Microfinancing for low-income female entrepreneurs is having a positive impact in the U.S., according to a recent study examining the Grameen America model.
As Forbesreports, Grameen America, the U.S. version of Nobel Peace Prize winner Muhammad Yunus’ Grameen Bank, has helped most of its members improve their financial situations over the last year by providing microloans for their startups. The study, “Microfinance in the United States: Early Impacts of the Grameen America Program,” was funded by Robin Hood, a New York organization dedicated to lifting families out of poverty, and conducted by social-policy research firm MDRC.
The study looked at 1,492 women in Union City, N.J. It determined that 94 percent of Grameen America members reported their financial situation was better than the previous year. That was 13 points higher than a control group of women who were not eligible to receive Grameen America microloans.
Low-income female entrepreneurs usually don’t have access to the capital they need to get started in business, a problem Grameen America has set out to solve. “We’re looking at how do we encourage people to create their own small businesses and create more employment in those businesses,” Grameen America CEO Andrea Jung told Forbes. “Women have the potential to serve as powerful economic engines in their communities.”
According to Chron.com, the women who received Grameen America microloans also were more likely to have credit, with a VantageScore in the “prime” area between 650 and 850. And they reported improvements in certain measures of hardship, including how often they ran out of money in the three months before the study and their ability to afford necessities.
“Our goal in embarking upon this rigorous study was to determine whether the Grameen America model leads to the alleviation of poverty for borrowers,” MDRC president Gordon Berlin said in a news release. “The early results are promising.”
Founded in Queens, New York, in 2008, Grameen America helps entrepreneurial women living below the poverty line to build their own businesses. It provides microloans, starting at no more than $2,000, as well as financial training and support to its member entrepreneurs. A member first forms a group of four other women, who undergo a training program covering loans, saving money and credit-building. The members receive a microloan to start or build a business. The groups meet weekly to repay the loans at an interest rate of 18 percent over a six-month period, continue their education and build support networks. Over time, they increase their incomes, build their credit scores and create jobs in their communities. They can receive larger loans, up to $14,000, to continue growing their businesses.
According to its website, Grameen America has 21 branches in 14 U.S. cities. It has disbursed 433,000 loans totaling more than $1.08 billion, served 113,000 women and created 119,000 jobs. Ninety-nine percent of the loans have been repaid, and the organization reports a 91 percent retention rate.