Grameen Australia, the local branch of the microfinance institution that started in Bangladesh in the 1970s, is preparing to launch its first microfinance project in this country.
Grameen has been in Australia for 20 years but for all of that time its work has been fund raising for operations in other countries. In the next few months it will launch a community microfinance project in Broadmeadows, Victoria.
Broadmeadows was chosen from a number of locations that were the subject of a feasibility study led by Shah Newaz, who launched Grameen in the United States in 2008.
Grameen Australia chief executive Kat Dunn says the organisation will partner with a local bank to offer a micro loan and savings products. The program will also include financial education.
Dunn says Broadmeadows was chosen because it is an old industrial area in need of transformation. Following deindustrialisation, the area has an unemployment rate above 20 per cent.
Loans will be around $5000, offered as working capital for small business ventures. Terms will be for six months with repayments due weekly.
Grameen will not do consumer loans in Australia.
Borrowers must be suffering some form of financial exclusion. Dunn says a typical borrower might be a group of migrant women who want to start a cleaning business and need money for equipment.
Grameen lends on a group basis, not to individuals. Its experience is that when people borrow in a group they are more likely to repay their loans.
Prospective borrowers will be put through a business financial literacy program. They will need to make it through the program to be eligible for the loan.
Groups will draw up a social development agenda – a code of conduct.
Grameen will charge interest of around 10 per cent. Dunn says the rate will ensure the viability of the scheme and reflects that the loans come with additional services.
Grameen’s funds come from a range of sources, including government, philanthropists, corporations and impact investors. “We have some philanthropists signed up. We are talking to a family office. We are open for investment.
“The aim is to lend to viable businesses, while helping solve financial exclusion.”
Australia has an established microfinance sector but Dunn says the great majority of lending under existing programs is consumer lending. She estimates that only about 10 per cent of microfinance activity in Australia is working capital for small business.