1980s – 1990s: Expanding Opportunity – Building a Model

Over the next decade, Accion helped start microfinance programs in 14 countries in Latin America. Accion and its partners developed a lending method that met the distinct needs of microenterprises. Small, short-term loans built confidence and a credit record; site visits replaced paperwork.

With a loan repayment rate of 97 percent, Accion's clients soon shattered the myth that the poor were bad credit risks. Given access to affordable capital, they could and would improve their lives.

Accion soon found that microlending had another revolutionary quality: it paid for itself. The interest each borrower paid helped cover the cost of lending to another.

The ability to cover costs, augmented by Accion's new loan guarantee fund, the Bridge Fund, enabled Accion's partners to connect with the local banking sector and dramatically increase the number of microentrepreneurs they reached. Between 1989 and 1995, the amount of money loaned by Accion's Latin American Network multiplied more than 20 times. Yet Accion was reaching less than two percent of the microentrepreneurs in need of its services.

Accion remained convinced that microfinance had the potential to transform the economic landscape of Latin America. To do so, however, Accion knew that microfinance institutions (MFIs) would need access to a much larger pool of capital.

In response, Accion helped create BancoSol, the first commercial bank in the world dedicated solely to microenterprise. Founded in Bolivia in 1992, BancoSol is a bank of the poor: its clients are typically market vendors, sandal makers and seamstresses. Yet today, BancoSol offers its borrowers a range of financial services including savings accounts, credit cards and housing loans – products that previously were only available to Bolivia's upper classes.

In 1994, Accion helped BancoSol sell certificates of deposit in the U.S. financial market, certificates backed by nothing more than the good word of a woman selling oranges on the streets of La Paz. For the first time, the world's premier financial institutions invested in microenterprise – not out of charity, but because it was good business.

BancoSol is no longer unique: many of Accion's partners are now regulated financial institutions, and others are on their way. With the power to access the financial markets, they have the potential to reach not just thousands but millions of the hardworking poor.

 

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