By: Katharine Houreld
April 6, 2010
A Nobel prize winning expert in microfinance is expanding his operations to help poverty-stricken Americans but said Tuesday that reforms in U.S. welfare and banking law are urgently needed.
"People need money to start businesses and we are willing to give it," Yunus told The Associated Press in an interview Tuesday at the beginning of a financial summit in Nairobi. "Right now it's so hard to get off welfare once you are on. Many people are trapped in the system."
Yunus said the average loan to an American is around $1,500 and is usually used to open a small business like a hair salon, bakery, or daycare. Most customers are women trying to provide for their families.
The bank's rule of requiring prospective borrowers to form groups with trusted associates who are then collectively responsible has boosted its repayment rate to 99.3 percent.
U.S. welfare recipients are discouraged by laws from starting small businesses because their benefits would be withdrawn before they made enough money to live on, Yunus said. Strict banking laws also mean Grameen America, set up two years ago, has to operate as an aid organization in the U.S. rather than registering as a bank.
"Its ridiculous. Look at all these big banks that had bailouts," he said. "We are flourishing. We have an excellent repayment rate. We offer loans to the poor. We are trying to help people setting up small businesses but we can't get a license."
Instead of penalizing Americans trying to get back on their feet, Yunus said laws should be amended so that benefits aren't immediately withdrawn if a welfare recipient tries to start a business. Possible "bridging" payments should also be looked at so that small entrepreneurs would not be left penniless in the short term, he said.
Yunus was speaking ahead of a four-day summit in Nairobi that is bringing together representatives from over 80 countries to discuss innovations in the microfinance field.
Those include established banks like Grameen, set up in 1976, and newer organizations like the U.K.-registered MicroLoan Foundation, which offers loans to poor women in rural Africa.