1970s: Microlending Begins

By the early 1970s, Accion's leaders were beginning to focus on addressing the major cause of poverty in Latin American cities: lack of economic opportunity. The employment situation in the urban centers was dire. Forced off land they had farmed for generations and drawn by the mirage of industrial employment, tens of thousands of rural migrants were arriving in Latin America’s cities each year. Once there, however, they found jobs scarce. The few that were available often did not pay a living wage. Unable to find work and lacking a social safety net, many of these urban poor started their own small enterprises. They wove belts, banged out pots and sold potatoes. But they had no way to expand their tiny businesses.

In 1973, Accion staff in Recife, Brazil, began to focus their efforts on helping informal businesses. If these small-scale entrepreneurs could borrow capital at commercial interest rates, they wondered, could they lift themselves out of poverty? An Accion organization in Recife called UNO coined the term "microenterprise" and began issuing small loans. To our knowledge, these were the first loans that launched the field of microcredit.

The experiment in Recife was a success. Within four years, the organization had provided 885 loans, helping to create or stabilize 1,386 new jobs. Accion had found a way to generate new wealth for the working poor of Latin America.

 

At the time we started this program [in 1973], there were really no sources for loans for the poor. The bankers and the general community just did not believe that the poor had the intelligence or the capability or the moral fortitude, to take loans and to pay them back.

We came up with the name ‘microenterprise’ to get the banking world to start thinking about these little economic activities as serious enterprises and it stuck. It worked with the bankers and it gave the microentrepreneurs status that they never had before.

Within the first year, we had 99.5 percent repayment. And so we could see that this was a group of people who could be counted on. Right from the early stages, we saw that if this could be done on a large scale it could have a huge impact on those communities.

– Bruce Tippett, manager of the Accion Recife Project in 1973

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