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July 24, 2003
ACCION Creates Self-Sufficiency by Providing Microfinance to Microenterprises
    by William Baue

Social investors can support ACCION's international and national microlending initiatives, which seek to break the cycle of poverty through several mechanisms.

Munah Smith, Fish Vendor, Staten Island,
Munah Smith Fish Vendor
Staten Island, NY

After moving to Staten Island, New York to escape civil war in her native Liberia, Munah Smith opened a small business selling dried fish. However, lack of capital prevented her from buying in bulk and growing her business. That was until she heard of ACCION New York, a network affiliate of ACCION USA, a nonprofit organization that provides loans to small businesses that do not qualify for financing at traditional lending institutions. She secured a $2,500 ACCION loan that allowed her to buy wholesale and save up to 40 percent on each box of fish.

"If you want to make a life, you have to move on with your business--keep growing it," said Ms. Smith, who hopes to move the business from her apartment to a storefront.

One reason ACCION and its borrowers tend to succeed is that they share a similar goal: self-sufficiency. Just as many of its borrowers want to escape reliance on government welfare, so too does ACCION want to avoid reliance on government and donor funding. It does so by funneling earnings from loans back into its loan pool to create a self-sustaining cycle of lending.

"What has set ACCION apart internationally is our absolute belief in and commitment to building microfinance institutions (MFIs) and microlending organizations that are financially self-sufficient and indeed profitable so that they can be fully integrated into the financial system of the country for the long haul," said Robin Ratcliffe, vice president of communications for ACCION USA.

ACCION USA was founded in 1991 as an affiliate of ACCION International, which made its first small loans in Recife, Brazil in 1973. Since then, ACCION International has made $4.6 billion in loans averaging $590 to more than 2.7 million microenterprises with a 97 percent repayment rate. Over the last dozen years, ACCION USA has made more than $66.9 million in loans averaging about $4,700 to more than 8,000 small businesses with a repayment rate "somewhere between 94 and 95 percent, which isn't bad," according to Ms. Ratcliffe.

"ACCION International and ACCION USA are dependent upon donor funding in the sense that we do the institution building with a technical assistance team of more than 50 people who are experts at launching and growing microfinance institutions," Ms. Ratcliffe told "What we don't want to do is depend upon donor funding for operations and lending at the institutional level--what ACCION does is lend the expertise to get MFIs to the point of self-sufficiency."

ACCION USA has received major grants from Bank of America (ticker: BAC), Citigroup (C), Deutsche Bank (DBKG), Fleet Bank (FBF), and JP Morgan Chase (JPM), as well as several foundations.

Social investors can support ACCION's microlending initiatives in multiple ways. Domestically, they can invest a minimum of $2,000 for a minimum term of 18 months in the ACCION USA Loan Fund, which is funded at $4.25 million as of June 30, 2003 and has $310,000 in reserves. The fund lends money directly to microentrepreneurs or to one of ACCION USA's nine affiliated regional programs. The regional programs then lend to small businesses.

"Investors lend anywhere from zero percent interest, to simply maintain their equity, up to one, two, or three percent interest," said Ms. Ratcliffe.

Socially responsible investment (SRI) mutual funds could even invest in the loan fund "if they can sit in the fund for a while," according to Ms. Ratcliffe.

Social investors can also invest in ACCION International through several mechanisms. The Latin America Bridge Fund, which was established in 1984, allows social investors to support microfinance institutions (MFIs) by enabling ACCION's Latin American partner programs to borrow from local banks. The Bridge Fund, which currently holds more than $6.2 million in loans from social investors, has provided guarantees averaging $5 million per year that have enabled more than 27 MFIs in 12 countries to access local commercial funding.

Larger scale social investors can invest in ACCION Investments in Microfinance, an offshore segregated portfolio company that provides equity financing to microfinance institutions (MFIs) in Latin America, the Caribbean and Africa. ACCION International launched ACCION Investments earlier this year as a separate entity with a capitalization of more than $18 million.

"ACCION Investments in Microfinance could very definitely accept investment from SRI mutual funds," said Ms. Ratcliffe.


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