1. What is the relationship of Accion East to Accion International?
2. What are your repayment rates? Do they allow Accion East to be sustainable?
3. How do you know that microloans help borrowers succeed?
4. Who are your borrowers?
5. What are your microloan terms and amounts?
6. What can a business really do with such a small amount? And why not just go to a bank?
7. Do you offer training to help ensure the entrepreneurs' success?
8. Aren't microloans just for developing countries?
9. How is microfinance in the U.S. different from its international counterpart?
10. How can I support Accion East or learn more about your work?
Q: What is the relationship of Accion East to Accion International?
We were established in 1991 as the domestic arm of Accion International, a global microfinance organization. Today, we are an independent affiliate of Accion International. Headquartered in New York City, Accion East operates lending offices in Florida, New York, and Massachusetts. Microentrepreneurs nationwide can apply for a small business loan at us.accion.org.
Q: What are your repayment rates? Do they allow Accion East to be sustainable?
Accion East's borrowers have repaid their loans more than 92% of the time. Repaid loan capital is returned to Accion East's revolving microloan fund, from which new microloans are disbursed. Interest earned on microloans helps pay for Accion East's financial and operating expenses. Since earned income does not yet fully cover expenses, our work is made possible by charitable donations and social investments from individuals, corporations, and foundations. Accion East is proud to multiply the impact of our donors' dollars many times over.
Q: How do you know that microloans help borrowers succeed?
Accion East is committed to monitoring and evaluating our impact. Through ongoing relationships with satisfied clients, Accion East constantly uncovers new stories of success. We also evaluate outcomes quantitatively through periodic studies and client surveys. In 2012, Accion undertook a client outcomes study in partnership with the Aspen Institute. The study found that our clients' businesses:
- Create an average of 5.6 new jobs
- Survive at a rate of 97%
Q: Who are your borrowers?
Accion is the only U.S. microlender with a national footprint. Our borrowers hail from 46 states, Puerto Rico, and the District of Columbia. They run a wide range of businesses, from day care centers to small restaurants/cafes to home cleaning services. Nearly all of our borrowers are lower-income individuals, minorities, and/or women. They all share an inability to access credit provided by banks and other traditional lenders. With a hand up, their hard work and entrepreneurialism often lead to business success. As one successful borrower put it, "If I hadn't gotten a loan from Accion, I wouldn't have been able to do this."
Q: What are your microloan terms and amounts?
Accion East's microloans average $7,000. They range in size from $500 to $50,000, with terms from six to sixty months, and interest rates from 10.99% and 15.99%. Rates are fixed for the life of the loan, and are determined by factors such as the client's business experience, cash flow, and credit. Though more expensive than prime-rate commercial loans available at banks, Accion East microloans are far more affordable than financing a business with credit cards, invoice factoring companies, or payday loans (which often carry interest rates in excess of 400% APR). Business owners can learn more about our small business loans here.
Q: What can a business really do with such a small amount? And why not just go to a bank?
Microloans are used for a wide variety of purposes. Accion East's borrowers have used their loans to purchase a truck for a landscaping business, make repairs to a downtown storefront, or stock a retail outlet for a busy shopping season. Many of these types of businesses are seen as too risky by traditional banks, as are the startup businesses that Accion finances. Finally, because of the very small size of microloans, they are unprofitable for most lenders: a $2,000 loan costs Accion East roughly the same to disburse and service as a $200,000 loan would cost a bank.
Q: Do you offer training to help ensure the entrepreneurs' success?
Accion's primary focus is on serving the vast unmet need for credit among U.S. microentrepreneurs. However, we also recognize the importance of education and training to our clients' long-term success. Accion East loan consultants work extensively with applicants to analyze business records, cash flow, and credit issues. The one-on-one assistance that clients receive is supplemented by free financial education workshops held in cities where Accion East has physical offices and webinars for those located elsewhere in the United States. With our deep community-based roots, Accion East has also developed a wide network of partners to which we refer microentrepreneurs for additional assistance or training. These include small business development centers, law firms, banks, and myriad non-profit organizations.
Q: Aren't microloans just for developing countries?
It is true that microloans are best known for helping business owners in developing countries move out of poverty. However, microloans are also widely-recognized as an important financial resource in the United States:
- In the U.S. there are more than 22 million self-employed microentrepreneurs (owners of small businesses with five or fewer employees that require $35,000 or less in startup capital). Over half lack access to financial services.
- Since 1991, Accion East has provided over 20,000 microloans totaling more than $152 million to microentrepreneurs who could not access other forms of credit.
- Accion East's work has been recognized with the Presidential Award for Excellence by President Bill Clinton and has won praise from Federal Reserve Chairman Ben Bernanke, New York City's Former Mayor Michael Bloomberg, and U.S. Secretary of State Hillary Rodham Clinton.
Q: How is microfinance in the U.S. different from its international counterpart?
Like its international counterpart, domestic microfinance seeks to empower self-employed individuals with affordable and accessible business capital. However, there are several important differences between microfinance in the U.S. and internationally. These include:
- Loan size: While the average microloan in developing countries is less than $1,000, Accion East's average loan size is $7,000. In the U.S., higher costs associated with goods and overhead necessitate larger loan sizes to be useful to microentrepreneurs. While $60 might purchase a cow in Bangladesh, such as small amount would have less impact on a U.S. microenterprise.
- Group vs. individual lending. Internationally, the group lending methodology has achieved widespread adoption and well-documented success. (Small groups of individuals assume shared responsibility for one another's loan repayments.) Domestically, Accion has found the individual-lending model better suited to U.S. borrowers, who often resist peer collateralization, the sharing of sensitive information, and the perceived inequities in loan amounts among group members. The individual model also better prepares borrowers to enter the mainstream U.S. credit system.
- Credit. Some microlenders, especially those in developing nations, do not require of borrowers credit checks, collateral, or other financial standards. Because Accion helps borrowers build credit by reporting repayment to the major credit reporting bureaus, it is critical that we ensure our borrowers' ability to repay through these measures. Not doing so would jeopardize their credit and financial future.
Q: How can I support Accion or learn more about your work?
Accion East relies on the generosity of our donors to help our clients build better lives through self-employment. Learn how you can help by becoming a donor or read about our mission, history, and impact of our microloans on the lives of hardworking microentrepreneurs.