Banks look at what people have and what the banks can take away from people as the basis for giving a loan. Poor people, however, don't have anything. Really, it assures you that your prospective clients are good. People don't want to be in a group where they know someone else in the group is irresponsible. It creates a self-selection process, so that when a group comes for a loan, you already know they're responsible.
Banks have a problem with the cost effectiveness of keeping track of so many very small loans.
If one loan officer has to go out and visit 700 or 800 people every month, it's impossible. But we organize these 700 or 800 people into community banks. All the loan officer has to do is run the community bank meeting, while the community bank structure supervises the specific businesses. It's a decentralized lending process that allows us to provide capital at a reasonable cost. The Grameen Bank pioneered the practice of offering loans to poor people with no other access to formal credit.