Insights
Grameen America: Championing Business Success for Underserved Entrepreneurs
By Melody Yuan
How Grameen America and East West Bank teamed up to provide microloans to women and immigrant entrepreneurs
When Lorena first came to America she supported her family by selling cosmetics door-to-door. “It was hard work with not that much pay,” she says. But she always held out hope for something better. When she learned about Grameen America from a friend, Lorena immediately jumped at the opportunity. “I joined in 2014 and got my first loan of $1,400. I already knew that I was going to open a general store inside a local swap meet,” she recalls. Lorena continued building her business with Grameen America, and today, she owns her own mini-mart in Inglewood.
Beyond her business success, Lorena is grateful for the financial opportunity Grameen America provided for her family. “My two daughters were accepted to college, and I am so proud of their academic achievements. It felt good to be able to help my husband, who worked long hours, and contribute in paying for my children’s tuition,” she says proudly. Lorena’s oldest daughter graduated this year with a degree in business, and her younger daughter is currently in her third year of college.
“I am grateful for Grameen America and the community that I was able to build through them,” says Lorena. “It has helped me and my family through so much.”
Lorena’s story is one of many success stories that are coming out of Grameen America, a nonprofit microfinance program that is committed to helping low-income entrepreneurs, especially women, through the power of microloans.
The microfinance nonprofit began in 2008 by giving small loans to low-income women in Jackson Heights, Queens. “A lot of people asked why we would open a non-recourse lending program at the height of the financial crisis,” says Andrea Jung, president and CEO of Grameen America. “We know with a hand up, women can transform their lives to build businesses that lift their communities.”
Since then, Grameen America has disbursed more than $1.29 billion across 495,000 loans in the U.S. alone. The nonprofit has an impressive track record with a repayment rate of 99 percent and a member retention rate of nearly 90 percent. “The numbers speak for themselves,” says Jung.
East West Bank donated $2 million to Grameen America to help with the launch of their Long Beach branch and is funding another $1.5 million in loan capital to help Grameen America members.
A simple mission with a simple financial solution
“This whole movement started when I was walking down the street in my hometown of Dhaka [Bangladesh],” says Muhammad Yunus, Nobel Peace Prize Laureate and founder of Grameen Bank. “I saw a woman making bamboo stools on the side of the street, and I asked her how she made them. She said that a man would loan her $5 to purchase bamboo materials and then would buy them from her once they were finished. She made 20 cents a day.”
Yunus asked her what she would do if he gave her $5, to which she replied that she would start her own business. “She was our first entrepreneur,” he says, “and what our bank does for people is, it brings out a sense of entrepreneurship. People who had never thought about being an entrepreneur or owning their own business are doing it with our loans.”
“What our bank does for people is, it brings out a sense of entrepreneurship. People who had never thought about being an entrepreneur or owning their own business are doing it with our loans."
While there are many nonprofit organizations that donate money to underserved communities and individuals, Yunus believes that Grameen America has a more defined social mission. “We set our members up for success,” he says. “Every dollar that comes back, we can reinvest in the futures of more people and empower them to not only pay their loans back, but to build a sustainable business. It’s a very powerful dollar that we’re talking about.” Yunus believes that these loans can act as the catalyst to pull women out of poverty.
Growing impact with a new Long Beach branch
“We have a very unique and innovative partnership where we plan to provide low-income women in underserved neighborhoods with access to capital,” says Jung. “Because of East West Bank, Grameen America will have the opportunity to actively promote financial inclusion and help people realize their American dream.”
Grameen America’s Long Beach branch will serve as their third branch in Los Angeles County, bringing the total to six branches in California. With the financial backing of East West Bank, the Long Beach branch hopes to serve thousands of Los Angeles County residents over the next five years.
“People ask us all the time what this capital can really do, because it may seem like just a small amount,” says Jung. “The first-time loan when you come into this Long Beach branch will be no more than $2,000 for a six-month period. Requirements include requiring borrowers to join a community of 25 to 30 other entrepreneurs who meet weekly along with their loan officer to hold each other accountable to progress. That’s the alchemy of Grameen America. It’s a social capital business where the trust between members has yielded more than a 99 percent return on investment rate.”
Giving women entrepreneurs a chance
What also makes Grameen America unique is their emphasis on financial inclusivity for minorities. “One in eight women live in poverty, and among minority women, the rates are even higher,” says Jung. “Not to mention, women only receive 4 percent of all small business loans from mainstream financial institutions.”
Grameen America offers loans to women affected by poverty in the United States through a group lending model. By establishing a support network among a group of entrepreneurial women who meet weekly, requiring members to attend financial education classes, and building up credit scores for members who may not have had a credit score before, Grameen America ensures that their members are armed with the knowledge, tools and networks required to become successful.
“I always knew how to work hard,” says Prudencia, who emigrated from Guatemala more than 30 years ago. “But I didn’t know that I would start my own business!” For Prudencia, joining Grameen America meant financial independence. “I thought it was too good to be true,” she laughs. Prudencia took out her first loan in 2014 for $1,000 to start her party supply business in Los Angeles. “During my first loan cycle, I bought stuffed teddy bears and flowers, and then I arranged them in a basket to sell during Mother’s Day,” she recalls.
Today, at the age of 67, Prudencia is on her 11th loan cycle and has taken out $7,300. “My business today is much larger, and I now have three to five workers who help me,” she says. “We’ve expanded to sell party supplies and items specifically catered to calendar events like Mother’s Day, Father’s Day, Valentine’s Day. We also sell items related to sports teams. I’m a big fan of the L.A. Dodgers.” Prudencia has since gone on to open her second party supply store in Texas and hopes to open more stores along the West Coast.
“I am grateful for Grameen America and the community that I was able to build through them. It has helped me and my family through so much.”
The shared goal of financial inclusion for underserved communities from Grameen America and East West Bank is closely aligned. “Forty-six years ago, several community and civic-minded business men and women got together and started the East West Federal Loans Association for one sole purpose: to help new immigrants,” says Dominic Ng, CEO and Chairman of East West Bank. “These new immigrants were having a hard time assimilating to American society, not just because of a language or a cultural barrier, but most importantly, because of the financial barrier. They wanted to get their first credit cards, but no banks wanted to issue them a credit card without a pre-existing credit score. They wanted to buy a car to get to work, but couldn’t get an auto loan. They wanted to buy their first home to start living the American dream, but they couldn’t save enough money to buy an entire home in cash, and no traditional banks wanted to give them mortgages. Many of these new immigrants were forced to live in a dangerous cash society.”
Establishing East-West Federal Bank helped new immigrants find access to capital, and today, East West Bank is the largest independent bank in Southern California. With Grameen America’s vision reflecting East West Bank’s own history of financially empowering underserved communities, Ng is optimistic about the partnership: “I have personally witnessed that just because someone may not necessarily fit the conventional credit scoring, it doesn’t mean that they aren’t capable of having good credit.”