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Off-Balance Sheet: Microloans Are Big Business

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Grameen is angling to establish a presence in the United States-an incursion that some long-established organizations in the domestic microfinance game may see as a threat to their market dominance.

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Relax, it's only money. Here in the 'Ville we like to keep things smart, but we also love to laugh. All work and no play...you know how it goes. With that in mind we give you The "Off-Balance Sheet," a place where Minyans can experience humorous takes on the world of finance, personal stories from our Professors and Minyans and all the other stuff that makes life worth living. So take a break from the flickering ticks and dive in.



What do you do if you want to start a business, have no money or collateral, and live in Bangladesh?

You call Grameen Bank and get a microloan. Actually, if you live in Bangladesh and don't have any money, chances are you don't have a telephone. So, let me rephrase that. You ride your water buffalo to Grameen Bank and get a microloan.

Like myriad other big ideas, Grameen began as a research project by Muhammad Yunus and the Rural Economics Project at Bangladesh's University of Chittagong.


Muhammad Yunus

Today, Grameen extends microcredit to the impoverished everywhere from Bangladesh to Uganda.

So helpful has Grameen Bank been to the poor, the company and Muhammad Yunus were jointly awarded the Nobel Prize last year.


Grameen Bank headquarters

Now, Grameen is angling to establish a presence in the United States-an incursion that some long-established organizations in the domestic microfinance game may see as a threat to their market dominance. Add websites like Prosper.com-an online microlender-to the mix, and things start to get pretty crowded.

To take the temperature of people in the industry, I arranged a meeting with Mr. Joseph Esposito, a community-based lender on Cross Bay Boulevard in Howard Beach, Queens.


Esposito Partners headquarters

I was greeted by Chief Compliance Officer Mickey G. (pictured below), who offered me an anisette before telling me that Mr. Esposito was "in the (expletive deleted) field" and would not be able to honor our appointment. A Thai masseuse wrapped herself in a robe and quietly made her way to the basement.


Mickey G., Chief Compliance Officer

To prevent my trip from being a total washout, I bought three-quarters of a pound of cappicola and asked Mickey G. for his thoughts on increasing competition in the industry.

"We've never had a problem maintaining (expletive deleted) market share," he told me. "Competition is healthy for business. Just not for our (expletive deleted) competitors."

Sensing my disappointment about the canceled interview, Mickey G. arranged for me to meet with a gentleman named Frankie the Visor, another key player in the microlending arena. I made my way to his office (seen below) in the Belmont section of the Bronx.



When I arrived, I heard what sounded like a goat being drawn and quartered in the back room.

A few minutes later, the door swung open and a man emerged, wiping blood on his shirt.

"Frankie the Visor?" I asked.

"Who the (expletive deleted) wants to know?"

"Mickey G. said you might be able to answer a few questions for me about the microfinance business."


Frankie the Visor

"What's a microfinance?"

"Loaning small amounts of money, relatively speaking, to borrowers. Somewhere around $25,000 is generally the upper end of the microloan spectrum," I explained.

"You need a (expletive deleted) loan?"

"No, I just wanted to ask you a few questions, now that microloans are becoming increasingly available, through companies like Prosper.com as well as foreign companies entering the U.S. market."

"Who are you to ask me these kinds of (expletive deleted) questions?"

"Well, I'm writing an article about-"

"Where the (expletive deleted) do you get the stones big enough to ask me questions like this?"

We were then joined by the president of Frankie the Visor's collections unit, Sal Casso.


Sal Casso, President, Collections

"Nice to meet you, Mr. Casso," I said, extending my hand.

Sal left me hanging, the expression on his face a mixture of contempt, suspicion, and a look I can only describe as something bordering on primal.

"Mr. Casso, one of the problems faced by originators of small loans is the high rate of default. How does your company avoid being hurt by this?" I began.

"Well, we once had a (expletive deleted) guy who was what we call in the business a 'slow-pay'."


Slow-Pay

"He (expletive deleted) pays on time now."

"What about delinquencies?" I asked.

"Like a (expletive deleted) charge-off? Also had one of those, once."

"Once?"

"Once. And only (expletive deleted) once."


Charge-off

"So, do you see the other options consumers now have at their fingertips as a threat to-"

"Whoa, slow down J. Edgar. Who said anything about (expletive deleted) threats?"

"I didn't mean-"

"You wearing a (expletive deleted) wire, Serpico?"

"Wait-I'm only asking you if you think your business will be affected by others encroaching on your space."

"Get the (expletive deleted) out of here, Donnie Brasco."

I guess I was a little slow leaving for Sal's taste, because the next thing I remember is waking up in the ICU at Montefiore Hospital two weeks later with the taste of fish in my mouth.

Good thing I wasn't a charge-off.
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