Sustainable micro-finance

ACCION will: provide TA to emerging financial institutions in accessing formal financial markets; expand the capacity of its Bridge (loan guarantee) Fund; and support related policy analysis and dialogue. Services will be provided at two levels. First-tier countries will include Bolivia (BancoSol), Colombia (ACTUAR/FinanSol), Dominican Republic (ADEMI), Ecuador (Fundacion Ecuatoriana de Desarrollo), Paraguay (Fundacion Paraguaya), and Guatemala (Genesis). Second-tier countries will include Mexico (ADMIC), Argentina (Empender), Chile (Propesa), Nicaragua (FAMA), and Peru (ACP). ACCION will provide its affiliates the TA they need to access commercial financial markets and thereby expand their operations on a massive scale. Two major activities are proposed: (1) TA in developing business plans that provide a comprehensive review of the affiliate and its environment and address future goals systematically, with attention to funding, human resources, cost structures, and profitability; and (2) TA in issuing specific financial instruments such as bonds, certificates of deposit and equity, and brokerage services, as well as in undertaking research and development initiatives in areas such as securitization of loan portfolios, risk management in derivative markets, and innovative uses of guarantees to facilitate formal market entry. Second, ACCION will add $300,000 in USAID funds to the loan loss reserve of its Bridge Fund, the guarantee vehicle which has opened the doors to the formal financial sector for ACCION affiliates. The $300,000, which should leverage 30 times its value in loans, represents 37.5% of the $800,000 ACCION needs to add to the fund in order to issue the total amount of letters of credit it expects will be required by 1997. Finally, the project will support dialogue on policies governing financial regulation and supervision and how they affect the provision of financial services to the poor. Proposed activities include: production and dissemination of up to five short policy essays; a 2-day conference for high-level economic and financial policymakers; and up to 5 study tours a year for high-level policymakers, private sector leaders, and government officials to institutions inside and outside Latin America.