Microfinance, widely acknowledged as an innovative tool to supply entrepreneurs of the developing world with access to credit, is now breaking new ground in the developed world too – in New York City.
Grameen America, a microfinance organisation headquartered in NYC, and Citi Microfinance, part of Citigroup, on Monday announced that their joint project to provide low-income entrepreneurs in the U.S. with savings accounts from Citi to complement microloans from Grameen America had led to the creation of more than 2,500 savings accounts in Upper Manhattan and Queens areas.
Under this scheme the borrower-clients of Grameen America may use their Citi savings accounts to “build their assets as well as access mainstream financial services, such as ATM networks,” a spokesperson for Citi said.
Shah Newaz, CEO of Operations at Grameen America, said his organisation provided “micro-loans to our low-income clients so that they can start or invest in an income generating activity. Citibank has developed a system to extend their savings service to our clients in Queens and Manhattan.” He added that Grameen America clients were able to increase their income through such micro-loans and the savings service from Citi enabled them to form create assets and thereby escape poverty.
In a statement Bob Annibale, Global Director of Citi Microfinance, said, “The Citi-Grameen partnership is an important one at a time when the economic slowdown has shown how critical it is to build savings where possible… This partnership reflects Citi’s commitment to encouraging underserved individuals save and build assets.”
According to Grameen America a majority of borrowers lacked access to mainstream financial services and frequently turned to wealth depleting, high-cost financial service alternatives such as payday lenders.
Yet using the Grameen group lending model, developed and refined over 30 years by the Grameen Bank in Bangladesh, residents of NYC are now enrolled in the peer group system wherein members encouraged, supported and learned from each other.
Since January 2008, Grameen America – also established by Grameen Bank founder Muhammad Yunus – has disbursed over $9 million in microloans to over 4,000 micro-entrepreneurs. Mr. Yunus serves as Chairman of the Board of Directors of Grameen America. Citi Microfinance provides more than 100 microfinance institutions and networks in over 40 countries with products and services such as financing, access to capital markets, transaction services, to credit, savings, remittances and insurance.