Microlending Methodologies: Breaking New Ground with Banks Presented by: Marisa Barrera ACCION New Mexico October 10, 2006 Dallas

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.

Catalyst for Innovation Challenge: How to achieve cost-effective statewide reach given NM’s 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 offices”—informing potential clients about the program, assisting with applications, and closing ACCION loans.

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.

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.  ACCION’s 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%.

Implementation Lessons  Secure and maintain buy-in at the bank leadership level.  Continually cultivate and sustain awareness of the partnership at the branch level—sharing 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.

Looking Ahead…  ACCION NM has designed and tested an exciting microcredit delivery innovation—building 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.