Microfinance Goes Macro
Margo Alderton , CRO Magazine, May 02, 2007

ACCION International was founded in 1961 by future Peace Corps Director Joseph Blatchford who was shocked by the poverty in South America. In 1973, it adopted the concept of microlending—giving small loans to help the impoverished start businesses—predating the work of Nobel Prize-winner Muhammad Yunus’ Grameen Bank by 10 years. Today, ACCION is working in 23 countries throughout Latin America, the Carribbean, Asia and Africa. Since 1996, it has loaned $9.4 billion to more than 3.97 million people. "What ACCION has sought to do and accomplished effectively is to develop a sustainable model for making capital accessible to poor people. That model is now being followed by most microfinance institutes around the world," says President & CEO María Otero.

Recent Successes
Part of ACCION’s mission is to provide local partners with the skills necessary to carry out microlending in their region. Several of ACCION’s partners have already made the transition from nonprofit organizations to banks. The three largest (Banco Solidario of Ecuador, Compartamos of Mexico and Mibanco of Peru), each reach more than 100,000 low-income entrepreneurs. On the micro level, Otero points to numerous examples where clients who started off with $100 loans a few years ago are now receiving (and paying back) loans in the thousands as their businesses grow. However, as Bruce MacDonald, Vice President of Communications for ACCION notes, "As far as impact studies, the industry still has a lot to do, but that is partly a reflection of the relative youth of the industry… Have we proven that microfinance has made a macro impact in a country yet? No, not even in Bangladesh, where Yunus and BRAC have had enormous success."

Current Initiatives
ACCION is expanding aggressively in Asia and Africa, recently reaching an agreement with Ecobank to set up a West African hub.

It is also opening operations in Inner Mongolia. In addition, ACCION is working with corporations to offer microfinance services beyond the realm of credit. In September, AIG pledged $5.25 million to help develop microinsurance products. ACCION has also partnered with other financial institutions such as Citigroup, ABN Amro Bank and Deutsche Bank. "With 750 million to one billion people in need of microfinance, there will never be enough donor dollars," says MacDonald. "Our approach is to enlist and engage capital markets and commercial entities in the field of microfinance so that it can scale to the level that it needs to to have a significant impact on global poverty. It is a social mission and a commercial approach—the two are not mutually exclusive."

Upcoming Trends
"The future is going to be driven by ways in which we can distribute financial products to very low income people faster and more cheaply. Technology will be a very important component of lowering cost and reaching people," says Otero. "The second driver is making a variety of different products available—not just capital. Poor households also need savings, health insurance and other kinds of insurance."

By involving partners that are not financial institutions (such as local retailers) and using technology such as ATMs, smart cards, point of sale devices and even cell phones, Otero envisions reaching additional underserved populations. She also notes that by showing that microfinance is a commercially viable practice, other financial institutions might help carry the torch. "Commercial banks have historically seen a population of people from below the poverty line as a population that is outside their market… In 20 plus years of lending, we have a repayment of 97 to 98 percent. This is far better than metrics that banks have. The demonstrated effects of showing that poor people can pay back loans and create banks that will be profitable has been why commercial banks are starting to look more seriously at microfinance as a business."

Where to Learn More
In addition to ACCION’s website (http://www.accion.org ), a good reference point would be one of the umbrella organizations for microfinance institutions, such as CGAP (Consultative Group to Assist the Poor: http://www.cgap.org ). Other sites such as Micro-fin-ance Gateway (http://www.microfinancegateway.org ) and Mix Market (http://www.mixmarket.org ) serve as global information exchanges for the microfinance industry.

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