Macro Impact Coming From Microloans in LA

January 22, 2015
Yunus and Borrowers2

Los Angeles entrepreneurs and Grameen America borrowers with Grameen founder Professor Muhammad Yunus.

What is entrepreneurship, after all? Bigness is not the issue. Poor people are the ones who take challenges every day. The guy who sells a hot dog on the street is as much an entrepreneur as anyone else. — Muhammad Yunus, Nobel Peace Prize Laureate and Grameen America Founder

We need to rethink our image of the entrepreneur.

We all know the stories of the savvy young entrepreneurs changing technology. Major financial institutions and venture capitalists take a gamble on their incredible ideas with the goal of seeing a handsome return on investment. But there is another entrepreneurial movement in our midst. It may not be as sexy, but the socioeconomic return on investment is boundless — and felt in our neighborhoods and communities every day.

It starts with $1,500.

I’ve seen what a loan of this size did for Sarah, a housekeeper with no formal business training or credit. She decided to grow her tiny business by buying a carpet cleaning machine to reduce her costs. She discovered that she could rent the machine to other housekeepers and repaid her loan in six weeks. She then turned around and bought another machine for herself, adding another revenue stream to her family. Her family is more secure and more hopeful. She sees more opportunities ahead.

This is what an entrepreneur does. And this is what our country is built upon — the initiative of the immigrant who pursues the American dream.

This is the beauty of microfinance — really a misnomer since the potential to change lives is far greater than the word implies. Borrowers like Sarah have nowhere to turn for capital and support. The “payday” lenders charge 400 percent interest. Borrowers like Sarah need a chance to earn a livelihood and improve the well-being of their families and communities. These “micro” loans keep hope alive and the doors of small businesses open. These “micro” loans create jobs and give thousands of women a sense of purpose in their lives.

Officially launched in Los Angeles County, Grameen America is bringing this to our entrepreneurs — all of whom are women and many of whom are immigrants. Grameen’s globally-successful model is aimed at giving low-income women business owners the incentive they need to start or grow a business. With first-time loans of up to $1,500, Grameen America is not only helping entrepreneurs achieve the American dream, but helping communities thrive.

I can’t think of a better place to unleash this concept than in Los Angeles, where our future is being driven by small business entrepreneurs, especially immigrants.

Los Angeles is a city of dreams. We have among the highest entrepreneurial activity in the country. We have more than 300,000 women-owned businesses. Los Angeles is now home to the largest diaspora outside of 39 countries; but also the largest population of families in poverty in the United States.

Grameen America has recognized that this mix of great need with great opportunity is a perfect storm to make a big and lasting impact. A story like Sarah’s can transform a family and a community. This is a long-term, sustainable investment in the dignity and promise of L.A. entrepreneurs, in addition to the region’s economic well-being.

We have already piloted $4.2 million in loans in Los Angeles County and plan to expand that to $650 million in the next few years. Grameen America borrowers here have a repayment rate of 98 percent — not something most traditional banks can say.

There are no collateral requirements, credit checks or notarized documents.

Here’s why the model works: The loan is combined with financial training that teaches borrowers about loans, savings and credit building. They form groups of five for weekly peer support meetings to stay on track for repayment. These women are empowered to take control of their finances and invest wisely in their businesses. They are given the opportunity to learn from small groups of women who are going through the microloan process and share best practices.

In other words, these women are set up to succeed. It’s a success where everyone wins. Women improve their businesses and the lives of their families and, ultimately, strengthen the local economy.

The concept of microlending goes back to 1976. Muhammad Yunus, an economics professor and social entrepreneur from Bangladesh, believed microlending could be a viable business model. He started with a $27 loan to 42 women in the Bangladeshi village of Jobra and quickly saw the huge difference a small loan could make in their lives.

Seven years later, he officially established Grameen Bank (“Village Bank”). He went on to win the Nobel Peace Prize in 2006 for pioneering this revolution and for his “efforts to create economic and social development from below.” Grameen was founded on the principle that everyone can be an entrepreneur.

Yunus has said: “Grameen is a message of hope, a program for putting homelessness and destitution in a museum so that one day our children will visit it and ask how we could have allowed such a terrible thing to go on for so long.”

Recognizing the need for this program in the United States, he expanded microfinance in 2008 through Grameen America, which now has branches in 11 U.S. cities with plans to scale and incorporate technology to make lending, borrowing and repayments even easier.

I’m heartened by the stories of economic and personal triumph around the world — including in my own backyard — that start with a microloan and supportive services and convert that into a macro opportunity for dignity and independence. I’m excited that we in Los Angeles are unlocking the spirit and ambition of our entrepreneurs every day. Our whole community benefits as these entrepreneurs turn their dreams into reality.

In the spirit of this season of giving, I urge you to get involved by learning more or contributing at

John E. Kobara is Executive Vice President and Chief Operating Officer of the California Community Foundation, which has partnered with Grameen America to launch microfinance in Los Angeles. This article originally appeared as part of his blog on Huffington Post, in which he writes regularly on philanthropy and Los Angeles County. You can follow him on Twitter @jekobara.

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