Lorenzo decided that he did not understand microfinance. He could not explain why microfinance, which seemed to be mostly about credit, was included in so many development projects when he had been told in his development course that credit schemes in the past were generally regarded as failures. He decided he had to find out more about it.
How did it all begin?
Lorenzo found some stories from the early days. Here is one from Latin America:
ACCION International was founded in 1961 by an idealistic law student named Joseph Blatchford. He was an accomplished tennis player and was sent on a goodwill tennis tour of 30 Latin American cities. He returned haunted by the images of Latin America’s urban poor. Determined to help, Blatchford and his law school friends raised $90,000 from private companies to start a new kind of organization: a community development effort designed to help the poor help themselves.
In the summer of 1961, Blatchford and 30 volunteers flew to Venezuela and set to work. Initially greeted with scepticism, the fledgling “ACCIONistas” were soon working closely with local residents to identify the most pressing community needs. Together, volunteers and residents installed electricity and sewer lines, started training and nutrition programs, and built schools and community centres.
By the early 1970s, ACCION’s leaders became increasingly aware that their projects did not address the major cause of urban poverty in Latin America: lack of economic opportunity. Jobs were scarce and many people tried to survive by starting their own small enterprises. If these small-scale entrepreneurs could borrow capital, they wondered, could they lift themselves out of poverty? ACCION’s Recife program coined the term “microenterprise” and began issuing small loans. Maybe they even launched the field of microcredit.
ACCION and its partners developed a lending method that met the distinct needs of micro enterprises. Small, short-term loans built confidence and a credit record; site visits replaced paperwork; solidarity groups gave guarantees. With a loan repayment rate of 97 percent, ACCION’s clients soon shattered the myth that the poor were bad credit risks.