Posts

Accion
Bernard McGraw survived the catastrophe of Hurricane Katrina in the summer of 2005. Without a job, McGraw moved his family—his wife and six children—to San Antonio, Texas. 

Upon arrival, McGraw opened Bernard’s Creole Kitchen in an abandoned shack. Hoping to improve his restaurant, McGraw received business counseling and two micro-loans from Accion’s local office. The first micro-loan was used to relocate his business to a local college campus. The second micro-loan was used to buy equipment and compete for a city contract to operate his business at Stinson Municipal Airport. McGraw states “If we hadn’t had the support of Accion, I don’t know if we would be here today.”

Many families similar to the McGraws fall victim to poverty worldwide. According to PBS, 1.3 billion people worldwide live in absolute poverty—living on less than $1 per day. Approximately 70 percent of those in absolute poverty are women. According to UNICEF, 22,000 children die daily due to poverty.

Something has to be done.

Accion has been fighting global poverty since 1961 by giving micro-loans—small, short-term loans—to individuals and communities in need. The recipients of these loans typically do not qualify for traditional bank financing.  These people frequently live in underserved, remote, developing places. According to Accion, the average amount of a micro-loan is $998. Micro-financing brings financial services to the poor and marginalized. Accion clients include market vendors, sandal makers, artisans, and seamstresses.

Accion was founded by a University of California-Berkeley law student, Joseph Blatchford who began questioning how young Americans might be able to serve those in need globally while on vacation in Latin America.

What started as a group of student volunteers helping local residents improve their communities developed into a company providing financial assistance through micro-financing. From 1973 to 1977, Accion has provided 885 loans that have created 1,386 jobs. Realizing their success, Accion helped create BancoSol, the first commercial bank solely dedicated to micro-financing. Accion expanded to Africa, Asia, South America and North America.

Besides micro-financing, Accion offers client education and industry training. Also, Accion’s philanthropic business model reaches further by creating new micro-financing lenders. By educating clients on financial literacy, technical understanding, management skills and business logistics, borrowers receive more than dollars; they receive power to escape poverty.

Accion’s multi-faceted attack on poverty has granted more than $56.8 billion in loans. Additional successes include the following: 63 micro-finance institutions in 32 countries, 15.8 million people served, 97% loan repayment and 2.3 million active savers with $3.4 billion in savings deposits.

Eliminating poverty is a complex task. However, the commitment, diligence, and expansion of Accion have benefited millions of underserved, excluded, and impoverished human beings. That deserves acknowledgement from us all.

Leonard Wilson, Jr. 

Sources: PBS, NY Times, Global Issues
Photo: Blogspot

microfinance

The values and benefits of microfinance lending to the world’s poor are mixed; but they have overall proven to be a mechanism for lifting individuals out of poverty.  The system of proving microloans is a well-oiled machine providing finance to individuals in low resource areas. One micro lender wants to go a step beyond microfinance and provide the poor with much needed savings and insurance products.To continue to help the poor life themselves up, Microlending pioneer Accion has called for more financial products typically common in the developed world.

These financial products such as insurance, saving accounts, and ways to move money are sophisticated tools many in the developed world don’t think twice about, but for the world’s poor these products are rarely available.  Accion, based in Boston, announced they would begin investing in start-ups that are working to provide more variety of financial tools to people around the world.  Unfortunately, business models and technology to deliver financial tools like savings accounts is much less tested in rural and poor areas. The lack of longevity in testing and practice causes many venture firms to be wary of investing in start-ups.

Accion’s Venture Lab will invest $10 million in ventures seeking to expand financial tools beyond microfinance.  This is not to diminish the effects and needs of microfinance, but to continue to take the poor a step beyond microfinance.   Accion’s first investments include Salud Facil, which helps low-income individuals in Mexico pay for health care, and Varthana, an Indian company financing low-cost private schools.  In addition, the fund is investing in payment companies in Asia and Mexico as well as a start-up in Hong Kong attempting to use data to improve credit scores.

Other investors are also offering money for financial products in the developing world. LeapFrog Investments has dedicated $135 million to bring insurance to underserved markets. Those in poorer income brackets need financial services beyond credit. Constant innovation and testing must be continued to find self-sustaining and profitable financial products to developing markets. Accion Venture Lab will continue to invest in start-ups to help them do the testing they need and continue to innovate in providing insurance and savings products to low-income individuals. Accion’s model is to help the start-ups and if they fail, to take the lessons learned and start over. Ultimately, the goal is improving the credit and lives of the world’s poor.

– Amanda Kloeppel

Source: Bloomberg Businessweek