Dedicated to Deposits: Deals, Data, and Discussion
Featured Savings Rates
Featured Accounts
Back to Financial News

Interesting Article About Bangladeshi Bank Specializing In Micro Loans In U.S.

Saturday, July 24, 2010 - 5:20 PM
Interesting article in last week's Newsweek about a Bangladeshi bank that has opened in the U.S. and making significant inroads. Grameen America. It specializes in micro loans to poor people to start businesses. Turns out, poor people seem to have a significantly higher rate of paying back their loans than do more affluent people. Says the big banks are taking notice. It has the people take out loans as a group, with all of them each liable for the overall loan. That uses peer pressure to make sure the payments are made.

http://www.newsweek.com/2010/07/19/it-s-payback-time.html
3
me1004me1004346 posts since
Jan 16, 2010
Rep Points: 2,368
1. Saturday, July 24, 2010 - 6:15 PM
Great link, me1004.

There are a few things that stood out to me, in the article. 

RACE.  If the writer is going to make a point, I would like to see actual stats... that middle class whites are a bad credit risk, while poor from the latino or african american (what about poor whites?) are not a risk.  Why is RACE back to being the #1 topic lately?

INTEREST.  The lender is charging 10% interest, with multiple parties to be able to pursue for the loan obligation.  I didn't read anything about how they are offering 5% savings accounts (still a 5% spread) to loyal previous borrowers (or anyone else).  What kind of bank is this?

DEFAULT.  So, just what exactly does this bank do with a defaulted loan.  How are those people treated?  2% of the loans do fail.  So, how does the bank pursue that?  How are these poor people treated?

 

Bankdeals readers.  If this (foreign "bank") is a good idea, then why not pursue sites like prosper.com?  Why not be the lender earning up to 14% interest?
1
MikeMike327 posts since
Feb 22, 2010
Rep Points: 875
2. Saturday, July 24, 2010 - 8:03 PM
I have done a few threads on Lending Club and Prosper. As I mentioned in this thread, the true returns over several years may be much less due to defaults.
2
Ken TuminKen Tumin5,442 posts since
Nov 29, 2009
Rep Points: 123,743
Reply