Between braiding clients’ hair in her salon, Matou Mukamabano checks that her two daughters are doing their homework.
With a $1,500 microloan from Grameen America, Mukamabano opened Africa Hairbraiding, her salon on West 116th Street in Harlem, in 2009 and now spends up to 16 hours a day there. Most days, her daughters come to the salon after school, eat lunch and sometimes dinner there and watch a DVD or two after they’ve finished their assignments.
“This job requires a lot of man – no, woman-hours,” Mukamabano said. “African women work harder than African men.”
Immigrant women are one of the nation’s fastest-growing groups of entrepreneurs, according to a 2007 report by the Ewing Marion Kauffman Foundation of Missouri, and have attracted investment from local and international microfinancing organizations. The Kauffman Index of Entrepreneural Activity reported that immigrant women started businesses at a rate 57 percent higher than American-born women.
Among their supportersis Grameen America a division of Grameen Bank, a microfinance enterprise, founded by 2006 Nobel Peace Prize recipient Muhammad Yunus, that provides small loans to women.Grameen America entered New York in 2008, the lender’s first operation outside Bangladesh.
Since 2008, the organization has disbursed over $16 million to more than 5,500 members living below the poverty line in the United States, with immigrants making up about 65 percent.
While microfinance loans oftencarry very high interest rates – Mukamabano is paying 15 percent a week, the Grameen standard – microfinance firms do not require collateral or credit histories, which can be major obstacles for immigrants.
Many immigrants turn to family members for financial assistance, and when that isn’t an option they approach predatory lenders who exploit their situation.
By contrast, “Grameen’s model allows women to form support groups, so they are not alone,” according to Noor Shams, a former Grameen America employee.
Grameen America has expanded to a number of U.S. locations, including a branch in northern Manhattan, launched in 2009. In 2010, the Upper Manhattan Empowerment Zone Development Corporation gave Grameen a $500,000 loan and a $125,000 grant to serve borrowers in Harlem, Washington Heights and Inwood.
“We were pleased to provide this funding to Grameen America which shares our goal of providing loans to those businesses which are too often considered ‘unbankable’ by many of the traditional commercial banks,” corporation CEO Kenneth J. Knuckles said in an e-mail.
This branch has grown to nearly 400 borrowers with a growth strategy to increase to over 4,000 borrowers over the next five years, with most borrowers starting food carts, hair salons, and home-based child care services or selling beauty products door-to-door.
Among other microlenders operating uptown is ACCION USA which, since its establishment in the U.S. more than 20 years ago has provided 18,000 microloans with a total value of $119 million, according to Gwendolyn Bonilla, an intake officer at ACCION. The companygives 40 percent of its loans to women. While Grameen America requires its borrowers to have legal status, ACCION USA also lends to illegal immigrants, provided they have individual taxpayer identification numbers, which can be issued without Social Security numbers.
With average loans of about $5,100 and interest rates between eight and 15 percent a month, Bonilla admits that she would advise entrepreneurs to seek bank loans instead because interest rates are so much lower.“But the challenge is, many immigrants don’t qualify for bank loans because of their poor credit history or immigration status,” she said.
Grameen makes loans of between $500 and $3,000, with a maximum of $1,500 for first-time borrowers. Borrowers need not have collateral, a bank account or credit history, but must have incomes below poverty level (in New York, $22,350 for a family of four). With four others, each borrower takes a five-day business training program and open a savings account, after which shecan take out her loan. Once theborrowersstart generating income, they begin repaying loans and deposit savings, about $2 a week. Once they have repaid their loans, they may take out another. Grameen America boasts a 99 percent repayment rate.
Makumabano, who moved to New York with her husband from Senegal in 2000, worked in retail stores and was a store security guard before opening her braiding salon. Over a few years, she managed to save enough money to start braiding hair in her home, then with her Grameen loan rented this small space near St. Nicholas Avenue, where she sees 10 to 15 clients a day. She charges $50 to $200 for her braids.
Whatever obstacle she faces, she prefers being a business owner to being employed by someone else, especially as an immigrant.
“When I first came here I didn’t know anything about New York culture,” she said. “Some of my friends had lots of family support here, but my husband and I didn’t know anyone and people took advantage of this.”
“Immigrants are vulnerable to employers, especially if they are not familiar with the financial culture here in the U.S.,” agreed Foulis Peacock, an immigrant from England who last month launched a website called IMMPRENEUR.com, aimed at providing immigrant entrepreneurs with research and financing to help them start businesses.
Peacock believes that immigrant entrepreneurs have a cultural advantage: They can bring new ideas from their home countries. He also agreed that microfinancing often represents a good option for immigrants and features microfinancing organizations on the website.
But the microlending industry has also generated controversy. Last year, officials in the Indian state of Andhra Pradesh urged people not to repay microlender loans to protest against high interest rates. The state also passed stringent laws to regulate the microlending industry.
“The problem is that some lenders have tarnished the reputation of microlending institutions that truly have the interests of the poor at heart,” Shams said. “They jumped onto the microlending bandwagon because of its do-good reputation and were using the opportunity to make exorbitant profits.”
While microloans do carry higher interest rates (interest on Grameen’s loans in India can be up to 60 or 70 percent monthly), they remain a better alternative for immigrants who, when they do not qualify for traditional bank loans, are forced to borrow from non-traditional institutions in the U.S. such as payday lenders or check cashing services. Moneylenders can charge up to 300% in interest, according to Shams.
Despite high interest rates, microlending institutions like Grameen America do have a future in the United States especially in light of the economic downturn when banks are keeping credit tight, says Jeffrey Ashe, director of community finance at Oxfam America.
But while the microfinance movement is growing in America, Ashe said, there still aren’t enough microfinance firms to serve immigrants. He pointed to another system used by ethnic communities in the U.S.: rotating savings and credit associations, small groups that save and borrow together. Each member contributes the same amount at each weekly or monthly meeting, and the whole sum is lent to each member until everyone has received funding. At that point, the club disbands.
“ROSCAs are popular among all types of immigrant communities, from Nepalis to Bolivians,” Ashe says. “The simplicity of the program makes it suitable for immigrants with low levels of literacy.”
Mukamabano said some immigrant women need more help than she did, adding that she had a formal education in Senegal and spoke English before she arrived. In particular, few lenders help illegal immigrants. “They don’t speak English, don’t have papers and don’t know the city,” she said.
She emphasized the importance of helping each other, adding that she would be happy to teach other women how to make it in New York.
“If you teach one person he can teach another, and so on until you reach 100 people,” she said.