Grameen Bank starts operations in US

Bank plans to lend US$176 milllon in New York city over next 5 years

Grameen Bank has recently made its first loans in New York in an attempt to bring its pioneering microfinance techniques to unbanked people in the United States.

The bank’s entry into the US, its first in a developed market, comes as mainstream banks’ credibility has been hit by the mortgage meltdown and many people are turning to fringe financial institutions offering loans at exorbitant interest rates, the UK Financial Times reported.

“Now is a good time because of the subprime crisis and that highlights the issue that the financial system is not perfect,” said Muhammad Yunus, the bank’s Nobel Prize winning founder. Grameen has loaned US$50,000 in the past month to groups of immigrant women in New York’s borough of Queens. Over the next five years, it plans to offer US$176 million in loans within New York City, and then expand to the rest of the US.

In the US, about 28 million people have no bank accounts and 44.7 million have only limited access to financial institutions. People often do not hold bank accounts because they have had credit problems, have no access to a local branch or they distrust the mainstream financial system, said Jonathan Morduch, a microfinance expert at New York University.