On a recent Thursday, dozens of Latina immigrants clustered in a small, noisy second-floor office in the Jackson Heights neighborhood of Queens, waiting for one of a half-dozen loan officers to call their names and hand over a check. Children loitered in the stairwell or sprawled, calflike, over their mothers' laps.
The loans were recorded the old-fashioned way, with ink, in green passbooks that enumerated the borrowers' commitments to "exercise responsible financial behavior," "seek preventative health care" and meet each week in a "comfortable and safe place." Aside from these words, little secured the loans in question, which ranged from $1,500 to $8,000.
This form of microcredit — the smallest of small loans, with no collateral and few questions asked — was pioneered by Grameen Bank in Bangladesh and has long aimed to ease poverty in the world's developing countries, where rural villagers use it to buy livestock, repair motorcycles or otherwise increase their income. Since the financial crisis, microcredit has taken off in the United States, attracting thousands of clients who do not qualify for credit cards or traditional bank loans.
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The purpose of the loans, as conceived by Muhammad Yunus, the Nobel Prize-winning founder of Grameen Bank, is to help countless millions of poor people unlock their inner entrepreneur, to "use money to make money," as he put it in a telephone interview. But its newfound popularity may say more about the increasingly unstable nature of American poverty, in which credit is hard to come by and sustenance is cobbled together from part-time jobs and threatened by unpredictable expenses.
"Families in rural Africa are more like U.S. families than everyone wants to believe," said Jonathan J. Morduch, the executive director of the Financial Access Initiative at New York University, who has studied microcredit and is taking a close look at the financial lives of low- and moderate-income Americans. "The hidden inequality in America is about fundamental security, the ability to plan."
In the United States, microcredit has generally been defined as loans of less than $50,000 to people — mostly entrepreneurs — who cannot, for various reasons, borrow from a bank. Most nonprofit microlenders include services like financial literacy training and business plan consultations, which contribute to the expense of providing such loans but also, those groups say, to the success of their borrowers.