Wisconsin Public Television University Place Entrepreneurialism in Society  Katherine Rosenberg: "Microfinancing and Community Development"  November 17, 2010 UP525   cc >> Jeanan Yasiri: This is Entrepreneurship in Society. It is a course that is offered through the University of Wisconsin School of Human Ecology. I'm Jeanan Yasiri. As we begin today, I'd like to extend thanks to our partners in supporting this course, the UW Office of Corporate Relations, the UW College of Engineering for their technical support and financial support from the Ewing Marion Kauffman Foundation which is committed to advancing academic education in entrepreneurship. Additionally, we'd like to thank our media partners, Wisconsin Public Television and their University Place crew for taping today's lecture. I'm quite pleased to introduce our special guests today, Seema Gohill and Katherine Rosenberg with Grameen America based out of New York. Grameen America was founded by economics professor Muhammad Yunus, who was awarded the Nobel Peace Prize in 2006 for his ground-breaking work on developing a microfinance movement that provides affordable microloans to financially empower low-income entrepreneurs worldwide. The organization's vision is to help create a world free of poverty. They envision a market where any individual with a dream can achieve affordable financial products regardless of income, regardless of their previous credit history, education or business experience. And they foresee a world where burgeoning entrepreneurs are empowered to lift themselves out of poverty through hard work and determination to forge better lives for themselves and their families. 

Katherine Rosenberg, with Grameen America, is director of evaluation and education. Early in her career, Katherine served as a Peace Corps volunteer in Senegal where she designed and implemented numerous health education and community development initiatives, including establishing a village-operated cooperative pharmacy. Katherine holds degrees from Union College in American Studies, and has a master's in public health from Columbia University. Seema Gohill is Grameen America's director of finance and development. And her professional background has been in corporate finance. Prior to joining Grameen, Seema worked in the investment banking division of Morgan Stanley. She holds a bachelor's in finance from the University of Miami. As we explore social entrepreneurship and the innovative ways to empower communities across the world to be entrepreneurial despite their current income and wealth status, understanding microfinance and microlending is a very important component to that equation. So please join me in welcoming our Grameen guests starting with Seema Gohill. [APPLAUSE]  >> Seema Gohill: Thank you for that great introduction, and thank you to the university for hosting us here today. 

Katherine and I both are very excited to talk to you today about microfinance. We'll talk a little bit about the history of Grameen Bank, and Grameen America specifically, and how a simple concept has the power to change so many lives. And it's not just by financially empowering people in the developing world but it's by financially empowering people right here in the US as well. We all think of poverty, we all think of health issues, we all think of diseases. All of these sound like huge economic problems that seem so daunting to actually change, and it seems like such a big challenge to change all these things. But little concepts actually do have the power to change lives globally. And hopefully by the end of this presentation we'll prove to you that this can be done. I think most of you may know Professor Muhammad Yunus. He's actually been dubbed the father of microcredit. He started the concept of microfinance with a very, very simple concept. 

In 1976 he was a professor at the University in Bangladesh, and he went out in the villages one day and what he found is that there were 42 people, 42 borrowers who owed $27 to payday lenders. They were stuck in this virtual cycle of poverty because the payday lenders were charging them exorbitant interest rates and thus they could never break out of that cycle. What he did was just take out $27 from his own pocket, give it to them and said there you go, you're now free from them. You can now build your businesses. These were all people that lived in the villages. Nobody ever found them credit worthy. No bank would lend to them. And he basically never expected a return from them. What he found was that all 42 borrowers paid the full $27 back. As an economic professor he was shocked. 

He actually went out and redid this, and what he found again was people repaid him. So this was the beginning of the global microfinance movement. Professor Yunus was awarded the Nobel Peace Prize in 2006 based on this concept. What's remarkable is that that $27 has now grown to a bank that has now lent out $8 billion and serves eight million borrowers in Bangladesh. These borrowers, eight million people, meet on a weekly basis. All of them attend weekly meetings where they make interest payment, they pay down their principle and they also get financial education. Every week, this bank lends out $100 million and gets $90 million back in repayments. All of these loans are as small as $250. This is remarkable when you think of the actual scale of the program. What we've done now is actually replicate this program in the US. 

So as you can see, there are a number of replication projects that Grameen has worldwide. Specifically, there's eight projects that are staffed by Grameen senior managers that work in different countries around the world to implement the microfinance project. Grameen America is actually one of them. In 2006, when Professor Yunus won the Nobel Peace Prize, people said it's great, it works in the developing world, it will never work in the US. And his response to that was why not? There are poor people everywhere. Everybody deserves a chance, everybody wants an opportunity to make a better life for themselves. So what he did was actually staff one of his most senior managers who worked with him since the beginning, and he actually came to the US and started the lending program in Jackson Heights in New York. Since then we've grown a lot, and Katherine will go through the program and the model. We have a short video that we'd like to play for you that kind of goes through the first year of our operations before we jump into the model.  >> I was teaching economics in one of the universities in Bangladesh. 

I'm teaching in my classrooms about the five-year plans with the millions of dollars or billions of dollars that are being invested to change the lives of the people. Here next door, people needed less than a dollar a piece and there's nobody who can help them. So I went to the local bank to arrange loans for them and the bank manager said he cannot lend money to the poor people because they are not credit worthy.  I said I'll become a guarantor and take the money to the people and see whether this is true.  Our workers started giving loans to 42 people. A total amount of $27.  Today, it grew into a big bank. Right now we give loans to seven and a half million borrowers in Bangladesh, no collateral, no guarantee, no legal papers. 97% of them are women, and one after another loan to change their life. They move out of poverty consistently. 

We can create a world absolutely free from poverty.  After the Nobel Peace Prize suddenly everybody's willing to listen, suddenly all the doors are open, the doors that we had been banging for many, many years.  Thank you so much.  Looking back, the guy who lends money, less than a dollar, coming to Malibu... [LAUGHTER] Telling them the importance of money. [LAUGHTER]  I've got to take advantage of this opportunity, because this opportunity may not last forever.  [INDISTINCT TALKING] >> How you doin'? Yeah, you wrote that book. >> That's right. >> I know your face. >> You saw it? >> I put it... 

>> Oh, my God! Thank you! >> I never shook your hand... >> Thank you. >> All right, have good day.  >> I would like to add that the book is number 18 on next week's New York Times Best Seller List... >> It can work everywhere. Despite the fact this is New York City, this is the capitol of capitalism itself, but still there are things that doesn't work out perfectly.  We have borrowers of this program already here. [APPLAUSE] Hey! Congratulations to you. You have been in the forefront of a big, big history that you are going to make. It's almost like landing on the moon. 

Your small step will be a giant step for all of America because if your program, you make it successful, then this will open the door for many, many millions of people in this country who do not have this service from the other kind of banks. You will be opening this door for the rest of America. All right, go! [CHEERS AND APPLAUSE]  >> Two dollars in her savings account, and $66 for her loan repayment. >> I got two small mixers, and I was able to purchase a big mixer, so I could do my business on a larger scale. [SPEAKING SPANISH]  >> I bought my first machine to clean the carpets. It was $1,100. >> Thank you very much. >> I bought an ice cream trunk. >> It's amazing how things are happening exactly the way Grameen programs work in Bangladesh and how women benefit from that, and how women have been suffering because all their hard work never brought them any return because they didn't have the money to invest and carry on at their own terms. Now having this money from Grameen program, they can control their own lives. 

They can change their own lives with their own initiatives.  >> Katherine Rosenberg: So, Professor Yunus and our borrowers are a little challenging of an act to follow, but one of the reasons we're here is because Professor Yunus saw such a need in the United States to operate microfinance. Everybody was incredibly supportive of what happened in Bangladesh and in other replication projects throughout the world but nobody believed that something like this actually would work in New York City. So one of the things we were actually talking about earlier today is how there is such a need and there is such significant poverty here in the US and how so few people recognize that need and how we oftentimes look abroad before we look in our own backyard. If you can imagine, I'm sure you've all seen the recent census updates of the increases in poverty due to the economic recession, but one thing that people don't often look at is the unbanked and how incredibly important that is. So one in five Americans, one in five families has no access to banking services. So if you look at this room, and we think of it as a class of a hundred give or take attendance, only 20 people in this room, if we're thinking of a microcosm of the United States, only 20 people in this room have either a savings account or a checking account or can walk into your local bank and ask for a loan. That is actually unbelievable when you're trying to think about growing businesses and this budding entrepreneurial spirit that America's is pretty much founded upon. Our biggest competitor in the United States is what we call payday lenders. Payday lenders are individuals on the street that are offering loans and it's easy money, it's either a check casher or somebody who says hey, yeah, I'll give you $1,000 or I'll give you $500 but they're actually charging 300% interest rate. 

So that's the same kind of situation that Professor Yunus saw in Bangladesh in the late '70s where people that want to start a business are now trapped because they've taken out this loan. Oftentimes they don't have the same education that many of us in this room have and they think it sounds like a great idea. Sure I'll give you $1,000 and all I have to do is pay $20 a week. But in fact, they're tied to that loan and they can never grow their business because they're tied to just paying down the interest and they can never grow to the point where they're paying down the principle. So what we've done is Professor Yunus started and he took his program of microfinance and this peer lending model that we'll get into in a second and he put it down right in Jackson Heights, Queens. We have four main programs that we focus on. The first one is access to capital, which is the most obvious. The second one is financial literacy. The third is building credit, and the fourth is access to savings. So all of these, it's this holistic approach to alleviating poverty. 

And I think it's important to say that we don't think that this is a panacea. This isn't going to solve world poverty overnight, but this is a great product for some entrepreneurs out there that have had no access before. So let's talk a little bit about the model. This is one of the quirky things that Grameen and that Professor Yunus has sort of coined as the microfinance peer lending system. And it's different. And a lot of people sort of claim they do this lending model, but what's unique to Grameen and Grameen America is that this is exact model we're about to go through that they run in Bangladesh. We picked it up and we put it here in the United States. We haven't changed a piece of it. And everybody said that this model is why we would fail because this would never work in the United States. So can I ask you your name? >> Mine? >> Yeah. 

>> Victoria. >> So, say Victoria walks into our field office in Jackson Heights, Queens, and she says, hey, I really want a loan. And we're going to say, okay, that's great, let's talk about it. We're going to ask Victoria whether she lives below the poverty line. Not making any generalizations to Victoria but for purposes of the conversation let's assume she says she does. And we'll say, okay, you live below the poverty line, do you want to start a business? Hopefully she's going to say yes. Assuming those two questions are yes, we're going to say this is great. This is a wonderful first step. But Victoria can you turn around in your community and ask four of your friends or acquaintances or friends of friends if they also want to start a business? And then we're going to force her to go out into the community and build a group of her own. So we'll never just lend to Victoria. 

We're only going to lend to groups of five. And this is a huge social component of the Grameen system. It really builds peer pressure into the model, and it also says Victoria is not going to jump into a group and this loan process with like Joe on the corner who she knows has no business aspirations, can't repay his loan. She knows her community better than we know the community. We're not asking Victoria for collateral, we're not asking her for a credit score, but we are asking her to work in a group of five. So then Victoria has her group of five, say it's this first row-ish. The group of five comes in, they all fall below the poverty line, they all want a loan, they all want to start a business. It's important to note that our maximum first time loan is $1,500. So that's larger than we see in Bangladesh but also, and we'll talk a little bit more about what people do with that loan, but we're trying not to get back into that mortgage crisis that we're still trying to get out of. We really want to give people just the amount of credit that they need without forcing them into debt that they can never get out of. 

So we've got this group of five, they all live below the poverty line, they all want to start a business and the first thing we do is we put them through a five-day continuous group training. So that group of five is going to meet for five consecutive days for an hour every single day. And they're going to meet with our staff that we call in Grameen lingo our center managers which is essentially a loan officer. Every day, we're very focused on transparency. So we're going to ask them to learn about the interest rate. We're going to ask them to learn about the requirements of the program which are a lot. And we're going to just kind of get them to talk to each other, think through their businesses, what are they going to do. The other important piece of the program is the savings model. So during that five-day training period everybody's going to walk to our local bank, which in New York we're either working with Citibank or Capital One, and they're all going to open a savings account. And for many of our borrowers this is a brand new phenomenon. 

Most of them fall into that four and five that have never had access to a bank before. So they've got this new savings account, and in the long-term they feel much more comfortable, we hope, walking into a formal banking institution because we're helping them develop this relationship. So they've got a savings account, they're meeting for five consecutive days, they're meeting with that group, they're learning all the details of the weird Grameen model, and as a part of the savings program everybody is going to deposit $2 every single day and they're going to give it to Victoria day one. So on day one, Victoria and going to go home with $10. The next day she's going to come back with that same $10, and everybody is going to give another $2. So the next day, sorry, what's your name? >> Nick. >> Nick's going to take $20 home, and Nick's going to come back the third day and then Nicks going to have $20. Sorry, what's your name? >> Ashley. >> Thank you. You guys could have those, too. 

So we're going to have $30 the next day and so on and so on and so on until at the end of the week everybody's got $10. But it also builds this trust within the group where all the sudden everybody gets to know each other an a different level and they all, it's the first step in building trust. So after that first five days of training, the first two people get the loan. It depends on what they're going to use the loan for. But people need to have an exact idea of what they want that loan for, and they need to say I want to buy an industrial mixer. And the mixer is $800. And they're going to show us that it's $800, and then the first two people that are elected by the group get that $800. They have to show proof of purchase and receipt within the first seven days of receiving that loan, and then once they start paying back, the other three people in the group are going to receive the loan as well. So then for the next 50 weeks of the year that group meets every single week in a borrower's home. So we're not asking our borrowers to come to us, we're actually going to them. 

And again it's important to remember that this is actually in New York City, this is not in the rural villages of Bangladesh or wherever. But our center managers are meeting with these groups every single week. And what happens in these groups is that everybody's repaying the principle of their loan, they're also repaying the interest and then they're depositing a minimum of $2 in savings. And then informally they're talking about sort of financial education. So what we do, and we can probably go to the next slide, what we do is we don't actually have a formal financial curriculum. So we're not going to say on week one we're going to teach of accounting, week two is budgeting, week three is marketing. And Professor Yunus has really found that the borrowers actually know the businesses in their communities better than we could ever know their communities. They know the business, they know the market but a lot of times they're all a little different. So one person may know one thing, another person in the group knows another and they all kind of come together to teach each other. So licensing is a huge challenge to our borrowers. 

So we have a lot of food carts. One borrowers may come in one week and say, hey, I just got this great license for my food cart. I'm selling it in this corner of Jackson Heights, Queens, and another borrower says actually I was just trying to figure out how to get a food license. So then we create this conversation. It's an organic conversation within the group where it's not us teaching them things that they may or may not want to know, but it's them teaching each other. And we feel like, and Professor Yunus feels like it's a much more sustainable form of development and forcing these community groups to work together and it's building this network of a community. The access to capital is really the hook that gets everybody in, but as you can see there are a lot more pieces to the program. Savings, as we talked about, is another powerful piece. The other piece is financial literacy and then credit building. So credit building is something that's specific to the United States. 

They don't have credit ratings or credit scores in most other countries, certainly not in Bangladesh. And what was news to me when we started researching a lot of this, is that it actually costs borrowers or individuals that don't have a credit score upwards of $3,500 a year, either if you don't have a credit score or if your credit score is bad. So what I mean by it costs you up to $3,500 a year is if you're going to open a cell phone account with AT&T, you walk into the cell phone store and you say, hey, I want the family plan and I want this great awesome iPhone. AT&T is going to say, okay, we'll sell you whatever you want, but then they ask for all those things like your social security number and your address and all those things. And they're doing a credit check, actually, in the background. And if your credit is poor or if you don't have credit, they're going to say, all right, well we need a $250 deposit. The same thing happens with when the people are looking to rent apartments in New York City and I'm sure anywhere in the country. They want to know what your credit is. They want to know whether you're a reliable renter. So all of our borrowers are forced to put down all these deposits that they oftentimes don't have the cash to do it. 

So we're reporting all of our borrowers' repayments for their small loans to Experian, which is one of the three major credit agencies in the United States. And what we've found is that for the majority of our borrowers who don't have a credit history, they're actually building their credit up to 650 points after just six months of working with Grameen, which gets them out of the AT&T deposit, gets them out of opening utility bills and renting apartments. So that's actually saving them money just in a short period of six months. They're are obviously some of our borrowers who have adverse credit history which is takes a little bit longer to improve that credit. But through these weekly conversations and having our program focus on credit as one of the main components, we're really starting to help people learn about credit, whereas I had no idea what credit was before I really started thinking about it. It's certainly not a common piece of education that we learn about. So those are kind of the big fun pieces of the program. Just to talk a little bit about some of our borrowers, as I mentioned all of our borrowers fall below the federal poverty line. The federal poverty line is the same in any US city, whether you're in New York City, whether you're in rural Arkansas, it's all dictated upon the number of people in your family. So if you're a family of four, this is sort of the one of the standards that we use, if you're a family of four, you have to make below $22,050 a year which is pretty unbelievable, especially living in New York City. 

If you guys have ever been there, it's sort of a pricey place to live. But many of our borrowers live far below that poverty line. Last year we found that our average income from our borrowers was just under $12,000. The majority of them, I think about 90%, are single moms. Most of them with three to four school aged children. So they're trying to juggle their kids, their finances, most of them have at least one part-time job if not two, although most of those are actually below the minimum wage line. A lot of people wonder what do our borrowers actually do with $1,500 which seems like a tiny amount of money. And there's a huge spectrum. The majority of our borrowers are running salons or food carts or doing sort of like an AVON model. One of my favorite success stories that we talk about is a woman who came to us, and she was one of our first borrowers in 2008. 

And she had a part-time job that was below minimum wage, and she was sort of just scraping by. She had two kids, she was married and she lived in Jackson Heights. And she came to us and she had been working at children's birthday parties making cupcakes and cakes and stuff like that. And she said, hey, I'd really like to buy an industrial mixer. And she had her group of five and everybody had their own individual businesses and so we gave her a loan for just under a thousand dollars. So her first purchase was an industrial commercial sized mixer that she put in her home kitchen. And she started growing her business day by day and eventually, we're now at three  years later and she's on her fourth loan, I think, and she's been able to leave her part-time job, open a store front in Queens, she has her own bakery, I mean it's tiny, it's maybe like the size of this area. So it's not a huge bakery, but she's got a store front. This is her main job. She's employing two people and this is her entire business and she's done this all starting with like a $900 loan, which is amazing, and that's one of our wonderful success stories that we like to brag about. 

And for a lot of people it takes a lot longer to pull yourself out of that poverty line. So certainly we have borrowers that have been with us since 2008 and they're still taking loans and they're still growing their businesses. There's a spectrum of success, but if you really are dedicated to the process, and sometimes it's just luck, but you can really make your business grow and then all the sudden you've got your kids graduating from high school and they're going to college and it's just this long trajectory of poverty alleviation. So that brings us to our current operations. As we said, we started in 2008 in Jackson Heights, Queens. We've since expanded to four different locations. So we're in Jackson Heights, Queens, we're also in Brooklyn, New York, and we're in sort of upper Manhattan which is also servicing the south Bronx. So we've got three branches in New York City. We've also opened a fourth branch in Omaha, Nebraska, last summer, summer of 2009. We've grown to nearly 5,000 borrowers in just under three years. 

We've lent out about $11.5 million in loans, and we've collected savings or our borrowers have deposited savings of just over $600,000. So this is what we've done in just a couple of years. So we can't wait to see kind of what happens over the next five years as you guys get to know microfinance and get more excited and help to spread the word. This is just a different form of showing kind of our success. Jobs created is another really exciting thing that we look at in terms of every borrower, some borrowers hire one person and some don't, but in this economic recession it's really exciting to see that our borrowers are actually growing their businesses to the point where they need additional employees. So they really are becoming the small businesses of America. So what Seema and I really kind of wanted to talk you to guys about was this idea of social business. Has anybody heard of social business before or this new concept? Yes? No? Maybe? So Professor Yunus is really, he initially really pushed this world of microfinance, but what he wants to push now is the idea of social business. So social business is what essentially Grameen America is on track to be where you can make a profit from your business. He's not saying everybody has to be a 501(c)(3) and everybody has to be a nonprofit, but the idea is that you take investors that want to give you money so you can help build your business. 

And they can certainly take their initial investment out when we're able to pay it back, but they're not going to take dividends, they're not going to make a profit off of their investment. And then as a social business, as Grameen America, once we become sustainable we're not going to start paying dividends, we're not going to go public like a lot of other microfinance organizations are starting to do but what we're going to do is with the interest that we charge we're going to first cover our operations which makes us sustainable and second all the profit we make on top of that is actually just going to be folded back into our business so we can expand, so we can come to places like Madison or we can open in the San Francisco Bay area. There's a huge demand across the country for services like microfinance. And once we become sustainable, that's when we'll be able to expand. So some of our challenges to becoming sustainable, and this is why we love to engage with you guys to see if you have any ideas, is it's really a scale question. So the faster we scale, the faster we can become sustainable. So in sort of this microfinance world we actually want our loan money out in the world because if our money is out, it's making money, it's gaining interest. So that's what we want. And in order to get more money out in the world, we have to reach more people. And how do we do that effectively is something, it's certainly a challenge to us in the US, and we're on track to be sustainable within the next 12 to 18 months which is great news, so that would be probably around year five in total, but how do you make that happen even faster. 

Some of the ideas that we're exploring and some of what Professor Yunus talks about is how to become sustainable in terms of becoming a bank. So one of the big differences between Grameen Bank in Bangladesh and Grameen America is that Grameen Bank is actually a deposit-taking institution. So they can loan out that savings and those deposits that borrowers are making. Whereas, we as Grameen America, right now we aren't a deposit-taking institution. And that's really just because it's a complete challenge in the United States. Regulations are obviously different here than they are overseas. We haven't been able to tackle that, but it's something we're looking at. Other pieces, other ways to become sustainable is to actually take those deposits, those savings deposits that our borrowers are depositing into Citibank and Capital One, how can we leverage those savings to actually loan those back out into the world or loan those back out. So these are a lot of the challenges that we're facing, and what we love to get you guys to start thinking about is how do you reach scale? Even whether it's microfinance or how do you start a social business? What Grameen Bank has done in Bangladesh is they have tons of social businesses. So they have Grameen healthcare, they have Grameen education programs, they have Grameen agricultural programs and they're all social businesses. 

And it's this idea of you can make a profit and you can start a business that actually solves the world's problems and makes the world a little bit better place. So hopefully we'll have some of you guys starting social businesses soon. Do you have any questions? [INAUDIBLE] >> I know that we had a question down here.  >> Hi, guys. Thank you so much from coming all the way from New York. It's a real pleasure to have you here, and on behalf of the class I just want to say thank you. My question for you is I noticed on your website that Grameen America is a 501(c)(3) and that you guys are taking donations from the public, but you guys are also making interest on all of your loans, which do you see as being more important for your business and which do you see being more important like 10-15 years from now? >> Seema Gohill: Sure, I guess I'll tackle that. I think it's actually a combination of both. So Katherine talked about sustainability. Until we get to that point, which is basically year five, where when I say sustainability it's actually at the point where the interest covers our operations. 

So today our largest operational cost is actually the salaries of our loan officers. They're actually the face-to-face person with the borrowers. They're the people that are working out in the community, and so it's basically covering their costs and covering the costs of that lending model. It takes about five years for each branch. Each branch is about 4,000 borrowers. So for each branch to become sustainable or for the portfolio to generate enough interest income takes about five years. Until we get to that point, we will need donations and we will need to rely on grants, but after that point we can definitely, like Katherine said, reinvest in the community and continue to scale from there. >> I have a question. I was wondering if you could just address the things that are different about promoting this model in the United States compared to places, like why did people say that it wouldn't be able to work in the United States? >> Katherine Rosenberg: Sure, so I think sort of what we were trying to touch upon is the idea this peer lending system is really a community-building exercise. And everybody looked at New York City and said there is no way in the world that you're going to get, first of all, one person to find four other people, second of all that those five people are going to actually meet every single week. 

For some reason in Bangladesh that just seems like such a simple idea. Although, that was like 30 years ago. Whereas now, people just never thought that this peer lending model would take off. And that's one of the interesting pieces of the peer lending model is that there are a lot of organizations that have brought microfinance and a peer lending model to the United States, and they claim that they're doing a peer lending model, which they very well may do, but they say, hey, we actually don't think this is actually going to work, it's only going to be groups of three and we're only going to meet every other week and they tweak all of these pieces of the model. And those are the groups, I forgot to mention sort of one of our most important pieces which is that we have less than a percent default rate. So if you think of that and the world commercial banks, especially with the financial crisis, banks are like, I don't even know, like 80% or 20% default rates, 15% default rates. So there's something that's working, and I feel like the proof is sort of in the numbers. But people were really skeptical of whether we would be able to get individuals working together in these community systems. And then one of the other cool parts about the community system is that there is this microeconomy that's going on. So people aren't going to the Gap and J Crew, they're actually buying from each other. 

So you've got this group of five and Seema says to Victoria, hey, I really need to get my hair done and Victoria says, oh, there's this other Grameen borrower who just started a salon service. So then Seema goes to that salon and it just kind of happens all the time. They're recycling and they're doing their own marketing, and as the Grameen community grows, it's just building this kind of microeconomy that's at the base of the pyramid, really. >> Katherine I'm going to hand the mic off to a student in just a second. As you were talking, and this seems to be a good segue to this question, I was thinking, do you ever facilitate helping find those five people or is it truly five people that they've already known, worked with, in some way engaged with? >> Katherine Rosenberg: We never put five together. Especially in the beginning when we start in new markets, we'll have one person or two people walk in together in the morning and then three people in the afternoon and while it seems really common to us that you would just lump that group of five together, Yunus really found that that doesn't work because it is really based on trust. And people need to know one another, and they need to have that cohesive group from the beginning as opposed to strangers. One of the pieces of the group model is that it's a very public repayment system. So if I'm late repaying my loan one week, Seema is going to know that I'm late repaying my loan. And Seema is not financially responsible at all for my loan, but she's going to say, Katherine, why do you not, what's going on with your business? Were you sick or did something happen? And maybe it's a marketing issue and she's going to say, you shouldn't be selling ice cream on 181st and Broadway because there's that Haagen Dazs across the street. 

You should really be selling it on 191st because I saw this other guy who was on 191st and he was making a killing. So we never put people together. And then there's just so many pieces to the model that it's hard to get it all in one conversation, but one of the reasons, our biggest complaint from our borrowers is that we haven't given them enough money. So $1,500 really isn't a ton, although it's enough to get businesses started, but everybody wants more money. About 95% of people, of our borrowers that take a first loan, take a second loan. And the way the group model is built is that if I, as an individual, or Victoria or Seema, if these guys repay perfectly after the first year, you can get up to 10% more on your second loan. If your entire group of five repays perfectly, you can get up to 15% more for your second loan. And then what we do, not to complicate things even more, but we actually put multiple groups of five together. So we have centers meeting every single week, and if that center repays perfectly, you can get up to 20% more on your second loan. So there really is, I like to call it peer support, but it's really just a peer pressure system that everybody knows when you're late and nobody wants you to be late because everybody wants more money. 

>> I think you might have just answered this question, but you said it was a maximum of $1,500 for your first time loan, is that for the whole group or just for one person, like each person can get that much? And if it is, why $1,500 and why a group of five? >> Seema Gohill: She gives me the hard questions. The $1,500 is individual. So each person can actually get $1,500, and each person has to have their own business and has to have their own business idea. And then the group of five, it's not a magic number. I think they looked at groups, this was when they were developing the Grameen model actually, they looked at groups of two as two small, three could have worked, and then they looked at seven and nine as too large, and then so the five number was kind of the magic number that fell out of it which is the history, I guess, behind five. And then, sorry, what was the final part or was that it? >> I think that was it. >> Okay. >> Hi, I'm Monique. I just wanted to know, I saw in the intro video it looks like that your program is empowering a lot of women, do you see that as a major step as for women getting a say in what they do? >> Katherine Rosenberg: So there's been, actually that's are really great question. There's a lot of research in the world of microfinance and sort of women's empowerment that when you actually give, no offense to all the men in the room, but when you give to the money the woman, the money actually goes and any profit made actually goes back to the family. 

So it goes back to the kids in the form of education. It goes back to themselves in terms of maternal care and healthcare for the entire family. Whereas, unfortunately, and again I am just the messenger, but when you give it to men it goes more, they'll stop and buy cigarettes along the way, and then they'll buy some alcohol, a couple beers or whatever, and then by the time they get home it's like they only have half the profit that they made. So our program in America is not, it is 100% women but it's really just the nature of who wants to go through the program. So we've certainly had men walk in our door and say, hey, I want a loan like I heard you guys are giving loans at really low interest. And we'll say, that's great but you need a group of five and you need to meet every week and you need to spend an hour with that group every week, and they're like no, no, no this is not happening. But in turn, they sometimes there actually send their wife which isn't a bad thing because then it becomes this family loan and the money goes to the woman and then all those awesome things in theory happen. >> Seema Gohill: 90% of our borrowers are single mothers. So that's actually, I think just for the program in the US, that's actually been very empowering for them as well. >> Hi, I'm Marnie. 

I'm actually from New York City, and I see, so you guys are helping mostly women open these small businesses like hair salons, etc. I see constantly like living there, every week maybe a hair salon goes up or a little boutique goes up, I'm from Washington Heights, or a bodega goes up but then it falls down within like a few months. And your program is catering to uplifting poverty globally, but how are you helping for these people who are able to open these small businesses but then don't really have success? What does the aftermath look like for you guys? >> Seema Gohill: Sure. I think one of the unique parts and one of the reasons that a lot of these small businesses fail, and not just in the $1,500 range but even the larger businesses in the $20,000 range, is because they don't have the support. And I think the peer model actually provides them with that support. So having a group of five people or having four other people that you're constantly meeting every week, you can go through some of those challenges, you talk to people about it. What we found is all of our borrowers didn't have any support before. So if they had an issue with licensing, they didn't know who to go to before. Now they not only have four other people that they can rely on for that knowledge but they also have our center managers to rely on. So our center managers we actually provide them with the resources so they know who to go to if there is a licensing issue, whether it's the city government or who in the city government to talk to. 

If it's other solutions like marketing plans, we will provide them resources for the New York City small business solutions. So we can actually connect them to a lot of different partners and resources across the city that they on their own wouldn't have known. So that actually gives them a lot of support and that actually helps their businesses succeed. So like Katherine mentioned, Patricia was one of those people who without the support, I'm not saying she couldn't have done it, but I think the support of the program actually really did help her succeed. And over the course of the next five years we're hoping to see a lot more of those success stories. >> Katherine Rosenberg: I want to add to that, and I think it ties into again a little bit of the mortgage crisis, but we're not giving somebody $25,000 on day one to open a bodega. We're really starting them from the smallest, smallest possible rate. So we're going to give them $1,500 and maybe they'll be able to buy a food cart or an ice cream cart. We're on 207th street in Washington Heights. So we can appreciate what you're thinking. 

And they start small.  And then with that second loan maybe they get a bigger food cart. So I think one of the problems is people want immediate gratification and they want to open something today and they want it to be big. But what we're forcing people to do with these small loans and with this peer lending model is that you need to start small and you need to grow your business. And you know what, if your business fails and you only $1,500, that's a lot better than having a $50,000 loan from a loan shark charging 300% interest rate and your bodega just kind of went under. We also help to make sure one of the processes of vetting with the borrowers is that if a borrower comes in and she says to her group, hey, I want to be a tailor and everybody says you have no idea how to sew, that's the worst idea ever. And that happens a lot. So it's really people understanding within their community who's good at what and who could be a great entrepreneur in a food business or in a salon type service. >> I've had the opportunity to chat with Katherine and Seema not only today but actually over the course of the year prior to their coming, and we've been talking about how Grameen America will grow and expand over time. I noticed that in the course of your talking about where you're located it was New York, New York, New York and Omaha. 

Why Omaha? >> Seema Gohill: That was a result of somebody in Omaha actually wanting the program there. The family actually stepped up and fully funded the project there. So for us to actually open in a new market it's a little bit of a challenge currently is to be able to fund-raise for that. So to the extent that we do have the funds available in a market, we can try and replicate the program there as well. So Omaha was one of those. >> One of the other things that Katherine and Seema and Grameen America are doing is developing a partnership with the University of Wisconsin. They're going to be here over the course of the next couple of days celebrating global entrepreneurship week and actually meeting with another class that is doing a project with you right now. Can you describe that project just briefly so that students have some context of where we're moving in terms of our partnership with Grameen America? >> Katherine Rosenberg: Sure. We have a great brand name, which we're really proud of, and we oftentimes get phone calls of people wanting to bring us to new cities. And what we've found is that in any urban environment there's certainly always demand. 

And one of our first steps in terms of that demand is to really take a deeper dive and to do a market analysis. One particular organization has asked us to focus on the Native American community, and this is something that is brand new to us. So this is nothing like New York City. They've asked us to look at reservations and what a Grameen type model would look like on a reservation. So Seema and I work in a very small office so what we've actually asked the students from University of Wisconsin to do is take a close look at what a Grameen peer lending system would look like on a Native American reservation. And one of the reasons we've stayed in urban areas is because of that population density. So, again, I feel like I keep saying peer lending model but the idea is that you've got this group of five, and in Bangladesh you've got this rural village, it might be a thousand people in it and it's in kind of the middle of nowhere, but you've got five groups of five or ten groups of five. So when a center manager goes out to that village he can actually meet with 50 people over the course of an hour, an hour and a half. And then he gets on his Moto and he goes another five miles and he meets with another hundred people. So at the end of the day he's met with a hundred to two hundred people. 

So that's why in New York City we've really focused it, and in Omaha, we've really focused it on these urban areas because we know we can work with densely populated populations where we can't get a hundred people in a New York City apartment but we can certainly get 20 to 25 and then you walk five blocks and then you've got another 25. So that's why the idea, this concept of working on a Native American reservation is really something that we don't want to jump into without knowing too much about it. So we've had our Wisconsin team do a market analysis, talk to a lot of local leaders in the Native American communities and see whether this is something they want, and whether it would actually work in a population like that. >> And, of course, we're talking about Grameen about other projects that Wisconsin students will have the opportunity to work on, not necessarily just in a class but, in fact, there is a microfinance club on campus that is also going to be meeting with you to talk about what they want to embark on next semester. We've talked a lot about Grameen America and the domestic version, and obviously that's what you represent. I don't want to put you on the spot, but I'm wondering in looking at the map of the world and where else Grameen is now situating itself, are there other anecdotal stories that you're finding coming out of China or Zambia or the others places that you're opening up operations that are interesting lessons to learn? >> Katherine Rosenberg: I think the most interesting is that it works no matter where you go. And that's everybody's challenge is that just because it worked in Bangladesh and it worked in East Africa, it's never going to work in New York City. And we're like, okay, we'll go to New York City. And then all the sudden it's working in New York and it's working in East Africa, Zambia, it's working Bangladesh. And now we're working in Kosovo which is amazing. 

So you've got these completely different cultures that everybody says it won't work. And so we're going to step by step and we're saying we'll just take it slow and we'll prove you wrong as we go because people are people and it's just really a social experiment. >> Seema Gohill: I think that ties into the entrepreneurship concept as well. Because if you think about it, every country in the world has budding entrepreneurs. Whether it's at the $1,500 level or it's at the larger levels, there are people all over the world who want an opportunity. So I think that's one of the biggest lessons is that whatever country you go to you're going to have a lot of people that will embrace the opportunity, and that's all that they're asking for. I think one of the things is also the concept of sustainability and charity. I think one of the reasons that we can't work or this question of the Native American communities came up is because we want to be sustainable. So you could, from a charity perspective, you could service that area, but will it ever be sustainable to be able to do that is the question that we're struggling with and that's what the students are helping us out with. >> I'll ask one final question unless I see a hand. 

I hate to make this sound ageist but you're both very early in your careers and you're working for, as you said, a very highly branded nonprofit organization that obviously you both have significant responsibilities with that, what do you think helped you get to what you're doing today? We have a lot of students in this group that are interested in social entrepreneurism and as well as working in nonprofit organizations. So from your perspective, what helped you in moving maybe out of an industry or where you were into this role? >> Seema Gohill: I'll start. I think it's persistence. I think one of the things that, just looking around over the last few years, one of the things that I'm inspired by is the entire social business movement I think is amazing. And there are so many people that now from an age perspective that I'll look over across the table and say, wow, you just graduated a couple years ago but you suddenly have this business that you're running and that's very inspiring to me. From a personal standpoint, I did go down the corporate route and I did do that for a few years, and what I always found was that I wanted more responsibility, I wanted to take a very entrepreneurial approach to things. And sometimes I felt that in a corporate world you kind of get lost in that shuffle. And so I did look to, microfinance was always a passion of mine and so I did look to that. It was really persistence that gets you in the door. I think you kind of have to narrow it down what you're interested or at least the broad industry that you're interested in and then look at players out there and then just really go after it. 

I don't think, there's a lot of organizations out there that do great work and I think everybody is really looking for talent and I think that is very helpful too. >> Katherine Rosenberg: I totally second what Seema said. I also think you can kind of, whether you're going to be an entrepreneur and you're going to start your own business or you're going to be your own best advocate, you need to walk into an interview or identify a company and say, hey, this is what I think you need, whether that's a job posting or not and you need to kind of sell it. So one thing, Seema and I work in a very small office in terms of the headquarter office but one thing that we always say is that if there's a project in our office and you're coming to interview and you're coming to talk to us, if there's something you see that needs to be done, let us know because Seema and I don't have time to do but if you guys want to do it and you're a social entrepreneur and you can sell yourself and sell that project, that's the best way to sort of work into that field. And you really are your own best advocate. >> Your final slide suggests that maybe you'd like to say more about how students could get involved. >> Katherine Rosenberg: Yeah. So we just launched this really fun Grameen university campaign which is a grassroots project. We've currently got about 25 universities signed up across the country. And we're really engaging with those universities, and we have a Madison representative to talk about microfinance and to talk about domestic microfinance. 

I think one of the things that we didn't really talk about was just this broad scope of domestic microfinance or microfinance in general. And we'd love to kind of talk to you guys more about it and have you guys be our ambassadors on the campus or as you get out into the working world and talking about, not only Grameen America because we're just one piece of the puzzle, but get to know what social business is, get to know what microfinance is and obviously talk about Grameen America. But if you guys are interested, you can certainly talk to me and I can connect you with Megan who is the leader on campus. >> All right, well I know the students join me thanking you very much for traveling in to talk with us. [APPLAUSE]