Nobel Peace Prize-winner Muhammad Yunus opened a branch of his Grameen Bank in Manhattan on Monday, saying he hopes the big Wall Street banks just a subway ride away can learn from his success in granting small loans to the poor.
The nonprofit microfinance bank Grameen America has thrived with a loan repayment rate of more than 99 percent, said Yunus, an economist who founded Grameen Bank in his native Bangladesh in 1976 and won the Nobel Peace Prize in 2006.
Grameen America has been lending in the New York City borough of Queens since January 2008, while Wall Street's big banks have struggled to stay afloat with government bailouts after the global financial crisis exploded the same year.
New York City is the world capital of banking, Yunus told a crowd of borrowers and supporters at the branch opening. They do the banking for the whole world, but they don't do the banking for their neighbors, and we're here to show there's nothing wrong with doing banking with neighbors.
What we are doing is something rock solid, he added. It will not shake, it will not collapse, it will not melt away. It will be part of a bigger banking system, said Yunus.
Dubbed the banker to the poor, Yunus said many in the banking industry told him he was crazy to think he could loan money to the poor because they were not credit-worthy.
I think 2008 has brought us back to that question again, the question of who is credit-worthy? he said.
Reckless subprime mortgage lending sparked the U.S. housing crisis and economic downturn in 2008, with record numbers of homeowners unable to meet their mortgage payments and being forced into foreclosure.
The newest Grameen America branch is located in upper Manhattan, at the opposite end of the island from the city's downtown financial center. Grameen also has a branch in Brooklyn, a branch in Omaha, Nebraska and plans to expand to San Francisco and Washington D.C.
It has provided more than $6 million to 2,800 borrowers, mainly women, living below the U.S. poverty line. Those borrowers, who use the money to start or expand their small businesses, have deposited savings of more than $350,000.
Grameen America grants a maximum first-time loan of $1,500, and borrowers pay 15 percent interest on the declining balance of the loan. There are already 325 borrowers in the Manhattan branch.
It helped me grow my business, said Rosa Lopez, 36, an upper Manhattan resident who has two daughters and earns money selling jewelry and hair accessories. She has paid off her first $1,500 loan from Grameen Bank and has a second loan for $1,650.
I used to borrow money from money lenders or other people and the interest I had to pay meant I didn't see much profit, said Lopez, who is originally from the Dominican Republic and spoke through a translator. Now I see profit.
Yunus said the global financial crisis has shown that the banking system needed to be inclusive, not just exclusive for the privileged people.
We have shown that it can be done, he said. Just because we don't take collateral doesn't make us vulnerable. Just because you take collateral doesn't make you invincible.
So this is a lesson we have to learn, that we have to teach, he said.
While Wall Street has become the target of widespread public anger in the wake of the financial crisis as thousands of Americans lost their homes and unemployment soared, Yunus won a standing ovation from the several hundred people at the Manhattan branch opening. The children of some of the borrowers sang a song for him.
Your enterprise is small, your loan size is small, but the dream is big, Yunus told the borrowers. We will make the dream come true.
(Editing by Ellen Wulfhorst and Cynthia Osterman)