Grameen America Says Independent Study Shows Value of Making Loans to Poor Women

Grameen America makes loans to low-income women who want to start or expand a business. To find out if it’s making a difference, Grameen commissioned an independent research organization to study the impact of its lending program.

Early results are in — and they’re promising, leading the organization to suggest that this may be an effective poverty-fighting tool for nonprofits and philanthropy to spread.

The study looks at 1,492 women who applied for Grameen America business loans in Union City, N.J. The applicants were randomly divided into two groups: Half of the women received loans, and half did not. Comparing people who receive a service with a similar group who does not is considered the most rigorous way to assess a program’s impact.

More nonprofits are starting to invest in independent evaluation efforts to figure out if their programs work and how to improve them, but experts say they are still rare.

In the Grameen study, more than 94 percent of the women who received loans said that their financial situation is better than it was the previous year. That’s 13 percentage points higher than the women in the control group.

Other findings:

• Women who received loans were 13 percentage points more likely than people in the control group to report they could afford to buy the things they need.
• More than 95 percent of women who got loans reported running their own businesses six months after joining the program, which is 11 percentage points higher than women in the control group.

Andrea Jung, chief executive of Grameen America, says she gets to see the program’s impact on individual participants as she visits the group’s 21 locations across the country. But, she says, site visits aren’t as good a measure as a solid research study.

“It validates what those of us that are involved in the program get to see,” she says, but objective, rigorous methodology make it even more persuasive.

$1 Billion in Loans

The study also found that program participants are more likely than women in the control group to attain or improve a credit score. Jung says that’s important because most people come into the program with a low credit score or no credit score at all.

Since Grameen America got its start in 2008, the organization has lent more than $1 billion to low-income women entrepreneurs with a 99 percent repayment rate.

Despite that track record, many people think of micro loans as a way to fight poverty just in developing countries, Jung says. She hopes the research study will increase support for microfinance in this country.

“The issue of financial mobility is a deep problem here in the United States,” she says. “I don’t think we realize the kind of impact it could actually have domestically right here in our own backyard.”