They learned that (at least in the developing world): (1) women were more open to seeking micro-loans than were their husbands, and (2) the money women earned in their micro-enterprise tended to get spent actually improving the standard of living of the children/family, rather than on non-family expenses.

Certainly part of Grameen’s success is educating borrowers, but one of the risk control factors that I think gets overlooked in comments is the concept of a peer review group of fellow borrowers. I don’t know if they use this universally in all their markets, but as I recall borrowers are part of a group who can share experiences and who also hold each other accountable for loan payback. So, there’s a certain amount of peer pressure to “do the right thing.”

Also, if I recall correctly, one of the reasons Grameen has been able to pull this off is bank employees expect to work hard for relatively nominal compensation. So while the administration of these loans would appear more time intensive, perhaps overall costs are less of a drag on earnings up and down the economic food chain. It will be very interesting to see how this flies in the US, where are expectations are probably quite different.

An excellent book for learning more about Grameen Bank is “Banker to the Poor: Micro-Lending and the Battle Against World Poverty” by Dr. Muhammad Yunus.

It’s an interesting experiment (or perhaps, agenda), but it’s hard to see how they can make it work unless they charge the high rates of interest typical of microfinance in other parts of the world.

In any case, the greatest need and greatest opportunity for positive impact is is still in the developing world. For one thing, a dollar goes much, much further there. For another, poverty in the developing world is more likely to be primarily due to lack of opportunity rather than other factors such as personality or character, and therefore is more readily remediable by access to credit. By contrast, in a developed country where there is considerable opportunity already, a certain number of the poor would not benefit from being extended credit. Consider the astonishing percentage of lottery winners who end up flat broke a few years after their big win.

PS,
The Bangladeshi organization BRAC is doing very interesting microfinance work in eastern Africa, in some of the most unlikely places (southern Sudan, for instance). One way for individuals to participate in a small way in this and other microfinance opportunities in various parts of the world is Kiva.org (which has been endorsed by Oprah and former president Clinton, and has received extensive press coverage).

Gramen’s success must be linked to risk control. Interesting