SMEFACTSNEWS ABOUT WORLD BANK GROUP SMALL AND MEDIUM ENTERPRISE INITIATIVES

Vol. 2, No. 3 February 2001

Partner Profile

ACCION Internat ional

SMEFACTS is a publication

of the

World Bank Group

SME Department.

Director:

Harold Rosen

For Information

Contact:

Rob Wright

Rwright@ifc.org

Tel. # 202 473 7997

Fax # 202 522 3742

IN BRIEF

Name: ACCION International

Specialty: Microfinance

Established: 1961; active inmicrofinance since 1973

Structure: Nonprofit, workingthrough a network of nonprofit andfor-profit microfinance institutions(MFIs) both as an investorand technical assistanceprovider

Mission: “To give people thetools they need to work theirway out of poverty”

Impact: A world leader in itsfield, supporting MFIs withapproximately 500,000 bor-rowers in Latin America andthe Caribbean and the UnitedStates and average loan sizesof $580. Now initiating workin Africa with support fromIFC’s SME Capacity BuildingFacility

Funding: Annual budget of $7 million, raised frommultiple sources such as the Ford Foundation, the U.S. Agency for InternationalDevelopment, corporate givingarms, and other sources

ACCION International is many things, butfirst and foremost a poverty-fighter—onethat works through financial markets. It is:

n a microfinance pioneer with 27 years ofexperience

n at work in the United States and 14 countries inLatin America and the Caribbean, supportinglocally owned and managed microfinance insti-tutions (MFIs). Since 1991, the ACCION net-work has provided more than $3 billion inloans to 2 million low-income borrowers

Grassroots Lending: Norma Salazar built a small store with loans from ACCION’sGuatemala affiliate. The income helped her add electricity and water at her home and send her children to high school.

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n active in the World Bank-managed globalcoordinating body for microfinance, theConsultative Group to Assist the Poorest(CGAP)

n beginning to work in Africa for the first time,an initiative supported by IFC’s SME CapacityBuilding Facility

ACCION is something rarer still: an NGO with aprivate sector mindset and a long-term record ofachievement. Its contribution in the battle againstpoverty has been an important one: defining suc-cessful, replicable models that help poor peoplegain the financing they need to realize their busi-ness dreams and generate the income they need toimprove their lives.

It belies the myth that the poor are an unaccept-able credit risk, since only 2.5% of the borrowersin its network of MFIs fail to pay back theirloans. ACCION’s work has also helped show thatunder the right regulatory conditions and withproper management and technology, microfinancecan be a profitable industry—enough so thatsome commercial banks are now keen to enter thefield. The key, the organization believes, lies inthe strong technical support it provides to partnerinstitutions. ACCION does this primarily througha core operational staff of 30 experienced micro-finance management specialists working bothfrom a regional office in Bogotá and its head-quarters in the Boston area. All have at least fiveyears of experience and provide financially savvytechnical assistance, either as resident advisers orfrequent visitors to partner MFIs.

A Long History

Founded in 1961 by Joe Blatchford, an impas-sioned law student who would later head thePeace Corps, ACCION worked on a variety ofdevelopment projects throughout Latin Americafor its first 12 years. But over time it sensed theseefforts were not addressing the root cause ofpoverty—lack of economic opportunity—and

changed course. In 1973 it started offering micro-credit on a very small scale in Recife, Brazil,helping invent this vital field at roughly the sametime as others in Asia such as Grameen Bank inBangladesh and BRI in Indonesia.

A focused set of programs in this area slowlyemerged, and by the 1980s ACCION had devel-oped a well-defined methodology for expandingthe poor’s access to financial services. By helpingto found MFIs throughout Latin America andworking with already-existing organizations,ACCION soon became a leading supporter ofmicroenterprise, the source of 60% of GDP inLatin American and the Caribbean and the basisof at least 120 million jobs. Using funding fromthe U.S. Agency for International Development(USAID) and others, it helped set up NGOmicrolenders such as ADEMI in the DominicanRepublic and Prodem in Bolivia that became

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Technical AssistanceBuilding and strengthening programs for partner institutions in microlending,credit operations, financial management,organizational development, business andmarketing planning, information technology

InvestmentInvesting in sustainable MFIs through fundsthat offer equity and loan guarantees

Research and developmentAdvising policy makers, creating new loanproducts and services, researching anddocumenting innovative microfinancetechniques

What ACCION Does

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recognized as among the best in the business. It helped build the management capacity of thesegroups, enabling them to tap not only donorfunds, but in some cases, commercial funds as well.

Transformations

A major milestone came in 1992 when ACCIONhelped La Paz-based Prodem transform into a reg-ulated, for-profit bank, BancoSol. It thus becamethe world’s first commercial bank specializing inmicrofinance. Banking status enabled this institu-tion to broaden its services considerably, allowing

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it to take deposits as well as provide microloans.In its first five years after commercialization,BancoSol’s lending increased from $4 million to$45 million with only a 1% default rate. Otherpartner NGOs followed suit and became regulat-ed, commercial institutions in the 1990s, includ-ing Mibanco in Peru and FINAMERICA inColombia.

The impact was noticeable in Latin America,where 150 million people still live on $2 a dayor less. Today, spinning off profitable lendingoperations has become a goal for many NGO

■ South AfricaThere is currently no formal microlending facility in the North West Province. ACCION will seek to fill this gap by partnering with local institutions,adding its international expertise to their extensiveknowledge of the marketplace.

■ MozambiqueOnly 5% of potential microborrowers in capital cityMaputo are being reached. Tchuma, a local MFI,will enter into a long-term partnership with ACCIONto help expand its operations. Its aim is to doublethe number of clients served and begin a pilotsavings mobilization program.

■ GuatemalaGénesis Empresarial is a successful microfinanceNGO that wants to transform into a regulated financial institution and provide more microfinanceservices to more poor people. ACCION’s efforts willinclude analyzing and selecting a transformationstrategy, reengineering Génesis’ operations, andoffering technical assistance.

Scale-Ups and Start-Ups IFC’s SME Capacity Building Facility provides financial support for innovative approaches to strengtheningsmall business throughout the developing world. It has recently provided ACCION with $400,000 to beginnew work with four MFIs, two in Latin America and two in Africa:

■ BrazilACCION is seeking to facilitate a merger andtransformation of four to six local non-profit MFIsinto one commercial institution. The goal is toexpand beyond the 15,000 clients the MFIs arecurrently serving.

João Fernandes de Aranjo, Brazil

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microfinance institutions. This has required thecreation of new regulatory frameworks, whichACCION has been supporting since organizingthe first conference on this subject along with theWorld Bank in 1995.

ACCION also stresses the importance of havingdirect financial involvement and an increased rolein the governance of its partner institutions. Since1996, it has managed a $5 million investmentvehicle called the Gateway Fund which has madesuch involvement possible, financed by USAIDand CGAP. In addition to providing long-termcapital, the Gateway Fund participates in the gov-ernance of the MFIs, helping to ensure that theyremain financially sound and committed to theirsocial mission. ACCION also helped createProfund, a for-profit commercial entity capitalizedat $22 million that is designed to provide equityand subordinated debt to MFIs. Among Profund’sshareholders are ACCION, IFC, FUNDES, theCommonwealth Development Corp., and theInter-American Development Bank’s MultilateralInvestment Fund.

Another innovative ACCION project is in Haiti,the Western Hemisphere’s poorest country. Thecounterpart in that case is not an NGO, but thatcountry’s largest private commercial bank,SogeBank. SogeSol, a new MFI created inpartnership with SogeBank, began operations in Port-au-Prince in the summer of 2000, makingloans as low as $100. It expects to provide credit to 30,000 microentrepreneurs over the next fiveyears.

New Partnership

ACCION’s relationship with IFC is now growing,allowing it to begin bringing its expertise to a newcontinent: Africa. IFC’s SME Capacity BuildingFacility will support ACCION’s initial work withMFIs in South Africa and Mozambique while alsohelping to scale up existing partners in Guatemalaand Brazil. In each case, IFC funding will provide$100,000 to support ACCION’s technical assis-tance to those institutions.

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Impact on Women

When her husband left her, Cirila Juarez foundherself with three small children, little educationand few marketable skills. Fortunately her sistertaught her how to sew. “When I came to MexicoCity seven years ago, I needed work but I didn’twant to leave my kids,” she says. So Cirilabegan sewing children’s pants and shirts athome. By scraping together a few pesos hereand there, she was able to buy small amounts ofpre-cut material.

But to make a real profit, she needed to buymaterial in bulk. With a loan of just $165 fromACCION affiliate Compartamos, Cirila began tobuy in larger quantities. After another loan for$330, Cirila could buy 100 kilos for a fraction ofwhat she paid before. “Life is already better forus because of the loans. Now I make moremoney for the same amount of work,” Cirila saysproudly. “I bought glass windows for my house.Before there was just plastic.”

She is just one of the millions of poor peoplewho are working hard to make a better life forthemselves and their children. Many start theirown tiny businesses just to survive, but lackaccess to the credit they need to go ahead.Thanks to a new IFC-supported capital increaseCompartamos will now be able to reach threetimes as many borrowers like Cirila.

Cirila Juarez, Mexico

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This support comes at a time when IFC has justmade its first direct investment in an ACCIONaffiliate. Asociación Programa Compartamos hasbeen a leading microfinance NGO in Mexico for10 years, developing a highly profitable lendingportfolio and serving 60,000 borrowers, mostlywomen, in both urban and rural areas of Mexico.Many are in the poorest areas of the country, suchas Oaxaca and Chiapas. Technical assistance fromACCION has recently helped it spin off its micro-finance operations into a separate for-profit enti-ty, Financiera Compartamos SA. IFC is now sup-porting this entity’s capital increase, takingbetween 10% and 15% of the shares of this newentity by investing approximately $910,000 and it is also providing a loan of $1 million. Thefunding and guidance is expected to helpCompartamos increase its funding in the Mexican

capital markets and triple its numbers of borrow-ers in the coming years.

Giving people the tools they need to escape thechains of poverty is the mission of ACCIONInternational. In partnership with IFC, thousandsmore small-scale entrepreneurs in Latin Americaand Africa should see it happen. n

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Contact: Patty LeeACCION International120 Beacon StreetSomerville, Massachusetts 02143 USATel.: (617) 492-4930E-mail: plee@accion.org

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The ACCION Network(As of Dec. 31, 1999)

Active Active Average Country Clients Portfolio Loan

Argentina Emprender 4,024 $ 3,425,000 $858

Bolivia BancoSol 73,073 $82,273,000 $1,126

PRODEM 35,924 $21,769,000 $606

Brazil CEAPE Nacional 29,051 $9,685,000 $333

Chile PROPESA 3,328 $2,894,000 $870

Colombia Actuar Tolima 5,973 $2,062,000 $345

Cooperativa Emprender 72,362 $26,464,000 $366

FINAMERICA 9,337 $15,139,000 $1,621

Fundación Mario Santo Domingo 34,614 $11,038,000 $319

Ecuador Banco Solidario 12,217 $1,740,000 $142

Fundación Ecuatoriana de Desarrollo 10,499 $1,500,000 $143

Guatemala FUNDAP 5,709 $2,744,000 $481

Génesis Empresarial 24,896 $9,452,000 $380

Honduras FINSOL 12,773 $3,767,000 $295

Mexico ADMIC 2,825 $572,000 $202

Compartamos 48,835 $6,223,000 $127

Nicaragua FAMA 15,218 $6,231,000 $409

Panama MultiCredit Bank 3,101 $32,141,000 $10,365

Paraguay Fundación Paraguaya 5,037 $2,254,000 $447

Peru Mibanco 41,344 $19,274,000 $466

Venezuela BanGente 2,575 $1,989,000 $772

TOTAL 452,715 $262,637,000 $580

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