3c hapter - Index of

128 Locavesting
Although Grameen’s loans are modest—typically just a few
hundred dollars—they have helped millions of people, mostly
women, invest in sewing machines, milk cows, or looms to start
micro- enterprises. Defaults have been surprisingly low, historically
ranging between 1 percent and 5 percent. Grameen’s success had
a lot to do with its reliance on peer pressure, or “social collateral,”
to encourage repayment. Borrowers are required to form a small
group of fi ve entrepreneurs, who are each responsible if another
member misses a payment. To date, the bank has made $9.4 billion
in loans to 8.3 million borrowers, at interest rates of 20 percent or
less. These borrowers also own 95 percent of Grameen’s shares.
The need for microfi nance is not limited to the developing
world. As the recession wore on, another 4 million Americans
slid into poverty in 2009, according to the U.S. Census Bureau,
raising the number of Americans living below the poverty line to
44 million, the highest in 15 years. 1 In recent years, the gap between
rich and poor in the United States has widened. In the fi ve- year
period from 2001 to 2006, the wealthiest 1 percent of Americans
pocketed more than half of total income gains. 2 Indeed, the top
1 percent owns more than a third of the country’s private wealth—
more than the entire wealth owned by the bottom 90 percent. So
it is no small irony that, in 2008, Grameen America opened its fi rst
branches in New York and Omaha, Nebraska, the homes of Wall
Street and billionaire Warren Buffet, respectively.
At the opening of the Manhattan branch, Professor Yunus
was pointed in his remarks. “In these skyscrapers that New York
built, they control world fi nance. . . . They do the banking with
the world but they don’t do the banking with their neighbors. We
are here to show that there is nothing wrong with doing banking
with neighbors.” 3
From Patronage to Profits
Kiva brought microfi nance to the masses by tapping the power
of the Internet and appealing to people’s humanitarian instincts.
From the start, Kiva’s founders sought to put a human face on
their borrowers, posting photos and a story for each—whether