SPRING-SUMMER // 2013

IN THIS ISSUE:

SUCCESS STORY

VOICES FROM THE FIELD

SPOTLIGHT ON OUR SUPPORTERS

NEWS FROM AROUND THE WORLD

THIS TIME IN HISTORY

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ust a few miles from the Amazon River in Manaus sits a maze of tarp-covered passages, rickety market stalls and dense crowds known as the Feira do Produtor. I’m here to meet clients of Accion Microfinanças – Accion’s majority-owned venture in this remote northern region of Brazil.

We flew into the tiny local airport and drove through the congested streets that connect this city of almost two million people – more than 40 percent of whom live on less than two dollars a day. This market was created by the city government to give farmers and consumers a venue to sell and purchase food. A row of brick-and-mortar stores surrounds the building, with tin roofs and proper doors. These are the upscale shops; I came here to meet the owner of one of them, Claudevan Liberato da Silva.

The heat is relentless. Beads of sweat roll down Claudevan’s forehead even in the shade of her store. She is 34 and smiles a lot. As we speak, she fiddles with a bunch of collard greens. She isn’t used to entertaining visitors, having practically grown up in this building. The city awarded her mother a stall when the market opened in 1986. Claudevan was just eight at the time.

“Things were much tougher then,” she explains, referring to the long days and nights she and her siblings spent helping their mother – who,

Behind the Scenes of Microfinance

A BRAZILIAN CLIENT’S EXPERIENCE SHOWS US HOW A MICROLOAN IS MADE

like their father, is illiterate – doing tasks such as negotiating prices with suppliers, tending the stall, handling cash, hauling out the trash, packing leftover goods and cleaning up at the day’s end to take an hourlong bus ride home, only to get up at 3:00 a.m. the next day and do it all over again.

“This type of work takes a toll on you,” she says, reminiscing about her childhood. “But I had to help my mother. I had no choice. My brothers were young, and Mom couldn’t handle everything by herself.”

Profits were small, and without enough working capital to purchase produce in larger quantities, Claudevan’s mother was limited in her ability to expand the business. To make matters worse, the lack of refrigeration at the stall, combined with high temperatures year-round, meant that a day’s buy had to be sold out or else they took a loss. And when you trade the same product as the next 10 stalls, your price must remain competitive. To stay afloat, Claudevan’s mother started borrowing money from loan sharks.

But things fell apart when Claudevan’s mother became ill from overwork and worries over mounting debt. At age 16, Claudevan took charge of the stall, working long hours to keep her family together and maintain a roof over their heads. She began to keep close tabs on her mother’s finances, slowly repaying the debt and starting to save.

BY JORDAN CORIZA

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DETERMINATION AND HARD WORK Today the successful owner of a produce shop, Claudevan da Silva had to overcome enormous challenges to build a business from scratch

She quickly realized that to save her business she had to invest in a proper store with space for more products and refrigeration. Denied credit by local banks, she made the bold move to borrow from a loan shark at a crushing 20 percent interest rate per month.

Loan sharks work in a simple way. They provide quick loans in cash at exorbitant rates – along with the promise to ruin the debtor, and sometimes the debtor’s family, if the loan isn’t repaid in full and on time. Despite being outlawed in Brazil – as in most countries – these predatory lenders abound in places like Feira do Produtor.

“See the gentleman in the white shirt?” Claudevan asks, gesturing toward a man that had been lurking in the background as we spoke. “He gave me my first loan.”

She used the money as a down payment on one of the stores across from her stall, though the price was well above her range – some 40,000 reals (U.S. $25,000). (For the sake of context, Claudevan’s home at the time was valued at 5,500 reals.) Over time, she took out a total of 30,000

reals. By the end of the two years it took her to pay it off, she had doled out more than 70,000 reals – 40,000 in interest alone.

Her achievement came at a tremendous emotional cost. The pressure was so great, she almost became sick herself. As she put it, “I didn’t know what stress was until I borrowed from a loan shark. It’s so stressful you even forget how to smile.”

But how did she come so far? Enter Accion Microfinanças – literally.

The megaphone car is parked at the market’s main gate, blasting a tune of forró – the popular, upbeat folk music of the region – and announcing the arrival of Accion Microfinanças.

Young men and women wearing blue polo shirts and hats bearing the Accion Microfinanças logo fan out

around the market. They distribute flyers and strike up conversations with stall owners. Clipboards in hand, these Accion promoters explain what microloans are and how Accion Microfinanças can help them improve their livelihoods. This is called a ‘market storm.’

Claudevan fills out a pre-approval form. The next day she is visited by a loan officer, who asks her lots of personal questions. What is her income? Is she the parent of a minor? Has she had a loan before? Does she own property? How does she get along with her fellow store owners? He then goes on to interview her neighbors. The answers to such questions are what microfinance institutions rely on in lieu of a credit score or collateral. This is called character assessment.

Behind the Scenes of Microfinance CONTINUED

PAGE 2 ACCION VENTURES // SPRING-SUMMER 2013

Claudevan has recently finished paying her second loan, having used the capital and profits not only to catapult her shop into one of the best at the Feira, but also to purchase her mother a store of her own.

She asks for close to U.S. $1,000 to buy produce in bulk, so she can increase her profits and install an air conditioner in her store. The loan officer takes the paperwork back to the office and, unbeknownst to her, puts it (along with his professional recommendation) through what’s commonly known in the industry as a ‘credit factory’ – the processing center of a microfinance institution that uses uncommon (and often proprietary) methodologies to make loan approval decisions. This is the approval process.

The following week, Claudevan gets a phone call from her loan officer. Her loan has been approved. All she has to do is go by the main Accion Microfinanças branch to sign paperwork and collect her check. Then she’ll be given a payment booklet with the amount and due date of each installment. Payments can be processed at any post office, at a select group of local banks or by authorized lottery agents. Later, Claudevan’s loan officer will visit her periodically to make sure her business is going well. In the unfortunate event that she falls behind her payments by more than 30 days, a collections officer will come by, and if she needs to, her loan officer will help her refinance her debt. This is the disbursement and collection process.

Claudevan has recently finished paying her second loan, having used the capital and profits not only to catapult her shop into one of the best at the Feira, but also to purchase her mother a store of her own.

The Feira do Produtor is familiar territory for Accion Microfinanças. They no longer carry out market storms. They don’t need to. New clients come to them by word of mouth. Today, the institution counts among its nearly 2,000 clients families from all over Manaus and the surrounding towns. Its loan portfolio is upwards of $1.5m, a remarkable achievement given the economic situation in that impoverished region of Brazil. Still, much work remains. Accion Microfinanças plans to expand operations to the neighboring state of Pará, where thousands of entrepreneurs living in poverty could benefit from access to safe and fair financial services.

It is said that only the poor and the rich get to meet their bankers in person. It is also said that microfinance interest rates are too high. But how else could such a people-intensive system exist and thrive to continue to reach millions?

In the years between her tarp-covered stall and the two stores she now owns, Claudevan finished high school. “I’m getting ready to go to college,” she says unflinchingly. “I’ll major in economics. I’m good with numbers.”

It’s hard to cast any doubt on that statement.

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Individual Microlending

Individual MicrolendingWHY PROCESSING A SINGLE LOAN CAN TAKE AS MANY AS 20 PEOPLE

1. CLIENT ACQUISITION

2. APPROVAL PROCESS

Since clients typically do not have a credit history or collateral, their credit worthiness is determined based on their character and perceived ability to repay a loan

The decision to approve a loan may also be made by committee, which can include several people

MFI staff collect a potential client’s pre-approval information via paper form or handheld device

Loudspeaker cars are a common method to announce MFI services; ads are placed in newspapers and on radio

3. DISBURSEMENT + COLLECTION When approved, the client signs a contract

and gets the loan in the form of a check

The client gets a payment book that details the due date and amount of each installment, which can be paid at several MFI partner institutions (e.g., post office, lottery agent, etc.)

Loan officers, call center operators and collections officers may all be involved in collecting an overdue installment

When approved, the client signs a contract

and gets the loan in the form of a check

Pre-approval information is processed at a ‘credit factory’

MFI employees prospect for new clients by

geographic location

It’s difficult to miss the bright yellow bicycle cart parked on the main market street of this Mexican city, and that is Pedro Melchor’s hope. Every part of this stand has been created with his customers in mind, and the yellow color attracts plenty of attention, even on a busy street. A hand-drawn sign advertises fresh juices and Mexican specialties like agua de jamaica (hibiscus tea) and horchata, a sweet rice drink.

Pedro comes from a family of vendors and, after working for many years selling coat hangers, he decided to start his own business. He purchased a small bicycle cart and began selling fruit juices around the city. When he married a few years later, his wife Maria Elena joined him at the cart, working from early morning into the evenings. Over the years, they have come to see their business as the means to providing a better future for themselves and their children.

Since taking his first loan of 2,000 pesos (about U.S. $160) from Accion partner CrediConfía several years ago, Pedro has been able to offer a wider variety of food and drinks. With the profits that have followed, he invested in two additional carts. Pedro has also made ongoing improvements, optimizing every available spot on his cart. He recently added a small grill and a frying pan to make sandwiches and rigged up a small faucet for a hand-washing station. In the winter (which lasts just two months a year in this part of Mexico), Pedro sells hot drinks such as coffee and hot chocolate. When asked about the meaning of his loans, he answers quickly: “The loan hasn’t only benefitted me; it has benefitted my family, too.”

Pedro’s motivation to build a thriving business comes into clear focus as he talks more about his family, especially his three school-age children, who

ACCION VENTURES // SPRING-SUMMER 2013 PAGE 3

SUCCESS STORY

From Bicycle Cart to Thriving Business

A FRESH IDEA Pedro Melchor, client of Accion partner CrediConfía, sells snacks and beverages from bicycle carts throughout the streets of Tehuacán, Puebla, Mexico

Last July, we launched Avanza, a new service that aims to make the microfinance lending process easier and more efficient for everyone involved. Working with our partner in Colombia, Finamérica, Avanza uses mobile teams of loan officers and a risk-adjusted approach to reach, enroll and process loan applications from new and existing clients. The program has already reduced the disbursement time from the average five days to as little as 24 hours. We hope that by year’s end, a client could meet with a loan officer in the morning and have credit by late that afternoon. Thanks to its efficiency and credit methodology, the program holds the promise of making microloans a more cost-effective service for clients and institutions alike. Already, more than 1,770 clients have benefitted from Avanza.

Among them is Carmen Adelia Castillo, who supplies homemade empanadas to local schools, businesses, cafeterias and special events out from her home in Bogota. A former street vendor, Carmen had previously taken out a loan with another bank but found the application and repayment process “was harder than giving birth.” As an entrepreneur who wakes up at 3:00 a.m., Carmen needs every hour of her day, and the time-consuming administrative challenges of dealing with more conventional lending practices came at too great a cost to her business.

Fortunately, she heard about Avanza, which made every step of the loan process easier: her loan was disbursed quickly, loan officers met Carmen in her neighborhood or at her house, and she makes payments at a local Finamérica branch or point-of-service nearby. Ten million pesos (about U.S. $5,500) and three months later, Carmen has repaired her kitchen’s roof and bought a deep fryer to replace the pots she and her eight employees once tended to manually.

One of Accion’s greatest strengths is our willingness to take risks. With Avanza, those risks promise tremendous opportunities – for Carmen and for millions of entrepreneurs like her in Latin America and around the globe.

sometimes join him at the carts to learn the intricacies of the trade. Through their hard work, Pedro and his wife have carefully built their business with their family’s future in mind. Though he’d be happy to have his children follow in his footsteps, Pedro is supportive of any career path they choose to follow.

The family’s hope is one day to expand their business to a small storefront in the area. Whatever they decide to do, it is clear that the legacy they will leave is not only the material support of a business or livelihood, but the dignity and knowledge to run it successfully.

SPECIAL FEATURE

Advancing Microfinance with AvanzaLOAN PROCESSING GETS A TURBO BOOST IN COLOMBIA

THIS MICROENTREPRENEUR SHOWS US HOW IT’S DONE, IN MEXICO

TIME IS MONEY Carmen Adelia Castillo’s microloan was disbursed in record time thanks to Accion’s new pilot, Avanza

PAGE 4 ACCION VENTURES // SPRING-SUMMER 2013

ne morning last September I at last saw for myself an event which has been repeated millions of times since the 1970s: the monthly gathering of women who run microbusinesses using microloans they have mutu-ally pledged to repay.

I’m outside Patna, India, with the staff of Saija, a young microfinance institution and Accion partner organization. We crossed the Ganges at floodtide this morning on a five-mile-long bridge; yesterday, we maneuvered around a “road jami,” a political protest that stopped all traffic – momentous events in themselves. Then we walk a kilometer through banana groves to a tiny grocery store where 10 women are seated in a semicircle, which we join, and business begins.

Each member presents her monthly loan repayment to the treasurer, who enters it in a record book and hands the results to the Saija loan officer. Each explains to the visitor how she uses her loan: for a cow; for a bicycle rickshaw to haul bananas to the market; for tents, chairs and tables to be rented out for weddings; and so on.

They’ve been together for three years, most are well into their second loan, and they obviously enjoy the time together, sitting close, laughing easily. There is a glow about them, each beautiful in her own way. It is ordinary for them but a privilege for me.

The loan officer has some news to deliver and over time has provided training and advice, but simply coming together with ritual consistency has been the reinforcement that has enabled group lending like this to succeed for 40 years.

Accion invented microfinance in Brazil in 1973. Muhammad Yunus did the same in Bangladesh in 1976, creating Grameen Bank. Of its 7 million loans in Bangladesh, 94 percent are to women and all are in ‘solidarity groups’ like this one. The government of India mandates

the Grameen

model for most of

that country’s 10,000 microfinance

institutions as well. Men’s groups are typically composed of five members. Worldwide, Accion still promotes the model, but its partners also have a large number of individual loans.

Women have powered microfinance and assured repayment rates in the high 90s from day one. The money goes for food and medicine, school tuition and uniforms. That’s not so certain with the guys.

I try to sink into the moment. By some happy accident I had a hand in starting Accion 52 years ago, yet I never sat in a circle like this until becoming an Accion Ambassador at age 76. But that thought comes later. For now I’m surrounded by bananas and a circle of women whose faces I want to remember for the rest of my life. Nothing I write will do this justice.

Soon we’ll be off to attend the enrollment of new circles of 10 women, because Saija and Accion added 9,000 more loans in and around Patna during the fall of 2012. In a country where 400 million still live on $1.25 a day, ‘getting to scale’ seems an impossible undertaking. But four decades ago there was not a single such circle in the world. One circle at a time.

Jerry Brady is a co-founder of Accion. Last summer, he traveled to India as an Accion Ambassador. The Accion Ambassadors Program is a volunteer program whose goal is to send dedicated individuals to the field to document the impact of microfinance on the lives of microentrepreneurs.

For more information, visit www.accion.org/ambassadors

VOICES FROM THE FIELD

“I try to sink into the moment. By some happy accident I had a hand in starting Accion 52 years ago, yet I never sat in a circle like this until becoming an Accion Ambassador at age 76. But that thought comes later. For now I’m surrounded by bananas and a circle of women whose faces I want to remember for the rest of my life. Nothing I write will do this justice.”

JERRY BRADY CO-FOUNDER OF ACCION

AMBASSADOR TO INDIA Jerry Brady and Pavithra YS, co-founder and chief operating officer of Vindhya eInfomedia, where Jerry worked last summer as an Accion Ambassador

O

ACCION VENTURES // SPRING-SUMMER 2013 PAGE 5

SPOTLIGHT ON OUR SUPPORTERS

Longtime Partners Make Financial Inclusion Our BusinessWHAT 47 YEARS AND TWO VERY DIFFERENT ORGANIZATIONS CAN DO FOR MICROFINANCE – AND HOW THEY GO BEYOND TRADITIONAL LENDING TO MAKE A LASTING IMPACT

Over the course of its 200-year history, Citi has built a vast multinational footprint and customer base, doing business in more than 150 countries and managing approximately 200 million customer accounts worldwide. The company has invested in many of the most transformative deals in history, including the transatlantic cable that allowed for instant communication between Europe and the U.S. in the 1860s, and the Panama Canal project that transformed global shipping. It has weathered political and economic storms, fueled technology adoption and product innovation, and become one of the world’s foremost financial services companies.

Similarly transformative but less-known have been Citi’s decades of philanthropic support for the microfinance sector. In addition to its early and ongoing commitment to helping the microfinance industry achieve scale and sustainability, Citi is distinguished in the field by its convening power and unparalleled on-the-ground presence in the numerous countries around the world where microfinance is making a difference.

Citi and the Citi Foundation have supported Accion for 47 of our 52 years in business, powering financial education programs, capitalizing under-funded MFIs, and fueling research and thought leadership activities. We first joined forces in 1965, with Citi’s initial contribution, and our partnership has since grown to include shared expertise, human capital and a range of other collaborative initiatives. Together, we’ve launched financial education programs, built microfinance institutions around the world, and fostered research and thought-leadership activities. A number of Accion leaders, including current president and CEO Michael Schlein and board chair Diana Taylor, even come directly from the Citi family – a testament to their deep-rooted belief in the broader vision of financial inclusion.

The Citi Foundation’s commitment goes well beyond traditional microfinance. More broadly, it has invested hundreds of millions of dollars in creating an inclusive financial system that provides high-quality service to low- to moderate-income individuals, families and communities. It has prioritized financial capability and asset-building programs around the world, encouraging people to set and attain financial goals, gain a greater understanding of the financial products available to them, and implement strategies for dealing with financial adversity.

Thus, it is fitting that, in 2012, the Citi Foundation became the lead partner and founding sponsor of the Financial Inclusion 2020 initiative, an effort spearheaded by the Center for Financial Inclusion at Accion. Using the year 2020 as a focal point for action, FI2020 aims to mobilize stakeholders around the world to work collaboratively toward full financial inclusion (see article below).

“Expanding financial inclusion is both a development imperative for underserved communities and a forward-thinking approach to unlocking the economic potential of new markets,” said Pamela Flaherty, president and CEO of the Citi Foundation and director of Corporate Citizenship at Citi. “Our founding support for FI2020 is built on our long history with Accion and the recognition that the organization has the record of achievement and convening power to work across sectors and industries in making meaningful progress toward full financial inclusion.”

HUMAN CAPITAL Pamela Flaherty, former Accion board member and president and CEO of Citi Foundation, traveled to East Africa to visit Accion partners, staff and clients in 2004

This past January marked the official launch of the Center for Financial Inclusion at Accion’s latest initiative: Financial Inclusion 2020. FI2020 is a global movement to engage not just the ‘usual suspects’ in microfinance, but all of the key players around the world – governments, corporations and NGOs – that have the ability to make financial inclusion a reality by the year 2020.

FI2020 is made up of two distinct projects. One, ‘Mapping the Invisible Market,’ is a series of research analyses complemented by interactive online maps that show how changing demographics and income in developing countries will shape the need for financial services around the globe. The other, ‘Roadmap to Financial Inclusion,’ is comprised of five distinct working groups concentrating on understanding some of the key challenges to reaching financial inclusion and what can be done to overcome them.

Though the program launched officially in January, the Center for Financial Inclusion has been researching, writing and collaborating on FI2020 for more

Financial Inclusion: How Do We Get There?WHAT ACCION AND THE CENTER FOR FINANCIAL INCLUSION ARE DOING TO HELP REACH THE 2.5 BILLION PEOPLE WORLDWIDE WHO STILL LACK ACCESS TO FINANCIAL SERVICES

than a year. The research findings and roadmap recommendations will be shared publicly throughout the course of this year and

will culminate with a global forum in London in October. This one-of-a-kind event will convene leaders from around the world and across industries to examine the roadmap and to strategize ways in which they can work together to make financial inclusion a reality.

FI2020 has already proven itself as a convener of diverse actors in the financial inclusion space. The

program is generously funded and supported by Citi, our Lead Partner and Founding Sponsor; Visa, Inc., our

Principal Partner and Founding Sponsor; MasterCard Worldwide, another Principal Partner; and by a host of other

Project Partners, including Western Union, CGAP, the IFC and the Bill and Melinda Gates Foundation, among others.

Go to the FI2020 website (www.financialinclusion2020.org) to read the research findings, explore the interactive data maps, review and provide comments on the draft recommendations and to sign up to receive program updates.

PAGE 6 ACCION VENTURES // SPRING-SUMMER 2013

NEWS FROM AROUND THE WORLD

In a country where almost half the population of 95 million – most of whom are rural residents – live on less than $2 a day, job creation and access to banking services is a high priority. That is why, in March, Accion launched a new partnership with a financial services company called Bridge, which is dedicated to building Filipino banks in provincial areas. Bridge will make investments in banks serving lower-income populations and micro- and small businesses, and also provide these banks with a range of management services and technical assistance to help them become more efficient and serve more people.

To learn more, visit www.accion.org/philippines

The Accion U.S. Network, in partnership with California microlender Opportunity Fund and the Aspen Institute, recently published the results of its lending outcomes study. The study, conducted with the largest national sample of microloan borrowers to date, concluded that microloans from Accion create or sustain 5.6 jobs on average. Additionally, results indicate that microloans contribute to an increase in small business owner take-home pay as well as business growth and expansion.

To learn more, visit us.accion.org/microtracker

IN THE

United States Philippines

For the second consecutive year, Accion Microfinance Bank (AMfB) has been named “Microfinance Bank of the Year” by the Lagos State Enterprise Awards (LEAD). The selection was made after a survey by an industry research group for LEAD awards, in which AMfB was honored for its “excellent performance and good understanding of microlending in the microfinance sector.” Despite the increasing risk in the Nigerian microfinance industry and other limiting factors such as the current global economic downturn, AMfB has exhibited prudent management and, as a result, has grown to serve more than 53,000 credit and savings clients in Nigeria.

To learn more, visit www.accion.org/nigeria

Nigeria

After more than two years of development and piloting, the Smart Campaign, housed at the Center for Financial Inclusion at Accion, has launched its Client Protection Certification Program, aimed at retail financial institutions serving the world’s poor. Six financial institutions have already been certified in Bosnia and India, serving a cumulative 1.6 million clients. The certification rating process, conducted by independent, third-party rating agencies licensed by the Smart Campaign, will help recognize financial institutions that meet the Campaign’s standards of client care while providing services to people living in poverty.

To learn more, visit www.smartcampaign.org

Awarded April 2013

Worldwide

Accion Microfinance China has recently received two industry awards: the China Best Microfinance Innovation Contribution Award and the Inner Mongolia Excellent Micro Credit Company Award. These awards – given at the Chinese Microfinance Industry conference in Beijing and by the Inner Mongolia Microfinance Association, respectively – underscore the hard work of our team in China and the potential for growth. Further recognition of our work in China came earlier in 2012 in the form of a $22-million investment from Sagamore Investments, a partner who shares our commitment to building a financially inclusive world.

To learn more, visit www.accion.org/china

For many people living in poverty around the world, access to a savings account is the first step to financial inclusion. That is why we recently set an ambitious goal for ourselves: We want to reach 600,000 savers in Africa within the next two years. We will work with our four partners – in Cameroon, Ghana, Nigeria and Tanzania – to support their contributions toward this multinational initiative. In places where the regulatory environment allows, our officers visit clients in the markets where they work to collect savings deposits, free of charge. In addition, all of our savings account bear interest. As of December 2012, our partners had collectively reached almost 400,000 active savers. To learn more, visit www.accion.org/africa

Africa China

CHINEDU ORJI Rubber vendor and client of Accion partner Accion Microfinance Bank in Lagos, Nigeria

MARY STAPLETON Electrician and client of Accion in San Diego

SALOM KPOUMIE Shoe seller and client of Accion partner EB-Accion Microfinance in Douala, Cameroon

ACCION CHINA TEAM showcases one of two awards received in 2012 for innovation and excellence in microfinance

ACCION VENTURES // SPRING-SUMMER 2013 PAGE 7

THIS TIME IN HISTORY

Ventures, published twice yearly, offers reflections on Accion’s work, regional news highlights, firsthand accounts from staff in the field, and stories of microentrepreneurs succeeding with the help of microfinance. Continue reading this and past issues of Ventures on our website, www.accion.org/ventures.

Write to us: Send an email: info@accion.org. Send a letter: Accion, 56 Roland Street, Suite 300, Boston, MA 02129. Customer service and change of address: Please call us at (617) 624-7080 or, toll-free, at (800) 931-9951. Back issues, reprints and permissions: contact us at info@accion.org. Copyright © 2013 Accion International. All rights reserved. Contributions to Accion are tax deductible under Section 501(C)(3) of the U.S. tax code.

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Photography: John Rae p. 1, 3 (top), 6, 7, 8 (bottom); Sebastián Guerrero p. 3 (bottom); Rodrigo Baleia p. 8 (bottom)

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This Year in Microfinance History: 1992

e went to a birthday party last year in La Paz – with 600 guests dressed in serious suits, fine bowler hats and elegant, embroidered chola dresses. We’d been invited to celebrate the 20th anniversary of the founding of BancoSol, a longtime Accion partner.

It’s unusual for a bank to celebrate with its customers, let alone its poor clients. But then, almost nothing about BancoSol could be considered ordinary, beginning with its creation – arguably one of the most important events in the history of microfinance.

Idealistic social activists first began microlending in Bolivia in the late 1980s, finding a ready market for small working-capital loans among the country’s informal sector, primarily Aymara-speaking entrepreneurs in La Paz and El Alto. Among the fastest-growing of these non-governmental organizations, or NGOs, was Prodem, backed by Accion with grants from USAID and the Inter-American Development Bank. Prodem quickly became the new industry’s flagship.

Following five years of rapid growth, Prodem eventually secured a banking license from the Bolivian authorities and came to market in February 1992 as BancoSol. BancoSol was the world’s first

commercial microfinance bank, and it was dedicated solely to serving the needs of the entrepreneurial poor.

BancoSol’s conversion to a for-profit institution spawned similar transformations throughout Bolivia, establishing a brand-new industry. The industry blossomed. Unfortunately, by the late 1990s, it also overheated. Yet within a few years, it began to right itself.

Today, microfinance in Bolivia is growing 25 percent per year, and represents 50 percent of the country’s commercial lending. The microfinance sector serves more clients than banks and other financial institutions combined. BancoSol remains the national leader in the sector, having loaned, over the last 20 years, more than U.S. $2 billion for more than 1.5 million microenterprise projects.

Yet BancoSol’s impact has arguably been greater abroad. The Bolivian model of sustainable, for-profit microfinance led to the transformation of dozens of MFIs not just in Bolivia, but around the world, nurturing small donor-funded NGOs into a global industry that today serves over 200 million clients.

Despite such milestones, BancoSol’s upward trajectory has never been a given. Having weathered the crisis in

the late ‘90s, Bolivia today contends with a populist government whose baseline view of power and the financial elite can be one of mistrust. But in contrast to Venezuela, Nicaragua and Ecuador, the Bolivian government has refrained from moves that might be politically popular in the short term, but ultimately harmful to microfinance. Bolivia remains one of the most favorable regulatory environments in the world for microfinance.

The government does hint at interest-rate caps on loans – which propels banks such as BancoSol to focus on greater efficiencies. Efficiency and competition have driven microfinance interest rates down to below 18 percent, among the lowest in the world. But the government has single digits in mind, and BancoSol general manager Kurt Koenigsfest remains ever-alert.

Nonetheless, the government is keenly aware of the sector’s importance – 95 percent of Bolivia’s population is employed in the informal sector. That’s one reason why Koenigsfest was elected president of ASOBAN, the Bolivian banking association.

That makes him the primary conduit between the government and the entire Bolivian financial sector – another reason to raise a celebratory glass in La Paz, and beyond.

CELEBRATING A MICROFINANCE MILESTONE From top left: clients mingle in BancoSol’s La Paz branch; clients and staff gather in 2012 to celebrate BancoSol’s 20th anniversary; BancoSol’s General Manager, Kurt Koenigsfest

HAPPY BIRTHDAY, BOLIVIAN-STYLE

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Mothers make the world go around. In the more than 50 years since Accion began, we’ve found time and again that investing in mothers benefits families and communities more efficiently than anything else.

Browse through Accion’s MicroMarket to give meaningful virtual gifts in honor of the special women in your life and help support hardworking moms all around the world.

Find out how it works at www.accionmicromarket.org.

Shop to Support Women This Mother’s Day

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