Second stop on my whirlwind tour of microfinance institutions—ACCION New York.
The size and breadth of the organization’s outreach did not come as a surprise to either myself or my companion in exploration, the FAI research assistant, Lara. As soon as we stepped off the elevator on the seventh floor of the
At the receptionist’s desk, we were greeted by Laura, Manager of Communications Projects at ACCION. Unable to find an empty meeting room amid the hustle and bustle of the office, Laura herded us into the office’s pantry where she patiently proceeded to answer our long list of questions.
We learned that ACCION receives funding from a number of commercial and governmental sources, but about sixty percent of the organization’s operational costs are covered by self-generated profits. The MFI offers a variety of loan products, including business term loans, lines of credit, start-up business loans, and small credit development loans. Loans range from $500 to $50,000, though tend to average from between $7,000 to $10,000. Once a client is issued a loan, that client is monitored through formal accounting procedures and occasional check-ins with loan consultants until the loan is repaid. During the life of the loan, ACCION provides clients with a range of educational services that include financial literacy training and business plan development.
ACCION, like NYANA (see July 14th post) has managed to provide residents of NYC with efficient and effective microfinance services. It has done so by successfully adapting the Grameen model to fit the needs of clients operating within the
The Grameen Bank of
For a number of economic, structural and cultural reasons, the Grameen model is very effective in the developing world. However,
The first and most obvious difference between international and domestic microfinance is the size of loans—domestic microloans tend to be substantially larger than microloans abroad. Whereas a Grameen loan of a couple hundred dollars can sustain a Bangladeshi family business for a year, an ACCION loan of a similar size could achieve no such thing in
Secondly, domestic MFIs issue microloans to individuals rather than to groups. This is a result of the formality of the
Another consequence of the formal nature of the domestic business sector is that domestic MFIs are unable to work with the very poorest of the poor. Because of the operational costs of running a business, paying taxes, and the general expenses of the domestic formal sector, recipients of microloans in the
And finally, while MFIs abroad disproportionately lend to female borrowers, U.S.-based MFIs have a much more balanced gender breakdown. For example, in 2006, only 40% of ACCION’s clients were women, a figure that is roughly parallel to the gender breakdown of the
For all these reasons and many more, domestic microfinance is a very different phenomenon than international microfinance.