Microlending Methodologies: Breaking New Ground with Banks

1
Microlending Methodologies Breaking New Ground
with Banks

• Presented by
• Marisa Barrera
• ACCION New Mexico
• October 10, 2006
• Dallas

2
ACCION New Mexico Overview

• Statewide non-profit organization dedicated to
  helping emerging entrepreneurs realize their
  dreams and be catalysts for positive economic and
  social change.
• Offer credit from 200-50,000.
• Since 1994, financed the start-up and/or growth
  of more than 2,145 microenterprises through some
  3,576 loans totaling more than 19 million.
• Local, independent licensee of the U.S. ACCION
  Network.
• Based in Albuquerque.

3
Catalyst for Innovation

• Challenge How to achieve cost-effective
  statewide reach given NMs large size small
  population?
• Goal Formulate a methodology that allows for
  significant increases in scale in terms of
  clients served and service area while also
  delivering gains in self-sufficiency.
• Innovation Get banks in target communities to
  serve as ACCION field officesinforming
  potential clients about the program, assisting
  with applications, and closing ACCION loans.

4
Benefits of the Model

• ACCION New Mexico
• Increases program capacity, efficiency, and
  scale.
• Contributes to greater mission fulfillment.
• Banks
• Positive Community Reinvestment Act impact.
• Increased community goodwill.
• New point of entry to nurture microenterprise and
  cultivate customer loyalty.
• Clients
• Access needed credit quickly within own
  community.
• Establish working relationship with a local
  financial institution.

5
Reaching for Scale

• Since ACCION NM launched its collaborative
  lending with banks in late 1999, the initiative
  has grown to include nine bank systems
  representing 41 bank offices in 31 communities.
• In 2005 approximately 53 of the 479 loans
  disbursed by ACCION NM went to entrepreneurs
  outside of Albuquerque.
• ACCIONs loan portfolio increased from just over
  400,000 at YE 99 to 8.5 million at YE 05.
  Portfolio quality has remained comparable.
• Over the same period, financial self-sufficiency
  went from 19.4 to 67.

6
Implementation Lessons

• Secure and maintain buy-in at the bank leadership
  level.
• Continually cultivate and sustain awareness of
  the partnership at the branch levelsharing
  success stories is key to relationship mgt.
• Create recognition events and opportunities to
  reward and motivate participants.
• Understand bank incentives beyond CRA such as
  increasing customer loyalty, cultivating future
  business, differentiation in a crowded market,
  and enhancing community goodwill.
• Make it as easy as possible for the partner bank.

7
Looking Ahead

• ACCION NM has designed and tested an exciting
  microcredit delivery innovationbuilding a system
  of commercial bank partners to cost-effectively
  deliver ACCION loans to entrepreneurs across a
  statewide area.
• This collaborative lending system holds promise
  for U.S. microcredit programs to significantly
  increase program efficiency, scale, and impact.