Microlending as a Tool for Economic Development

Throughout my life, I have been involved with many non-profit activities in Argentina in my capacity as a volunteer with the Junior Achievement Foundation. However, I had never worked in an area that involved managing or shaping the programs that were offered, since I had mostly focused on working as a mentor or outside collaborator. So when I learned about the HBS Nonprofit Summer Fellowship Program, I thought it would offer me a great opportunity to work in one of these companies and understand how they are run while simultaneously trying something that is distinctly different from my past working experience. Furthermore, I would collaborate with an organization that is having a great impact on the development of communities in Latin America.

When I finally decided to work with ACCION, I did not anticipate how challenging -yet fulfilling- a job in the nonprofit sector could be. By learning to understand the intricate details behind microlending activities, I was able to experience first hand how the application of some of the business skills acquired at HBS can help me develop new tools that pertain to the social development area.

ACCION International is a private, nonprofit organization dedicated to reducing poverty by providing loans and other financial services to poor and low-income people who start their own businesses. An international leader in the field, ACCION is an umbrella organization for a network of microfinance institutions in 15 Latin American countries and 24 U.S. cities and towns.

The organization’s main goal is to help eradicate poverty. In a world where three billion people live on less than $2 a day, it is not enough to help 1,000 or even 100,000 individuals. ACCION’s goal is to bring microlending to millions of people–enough to truly change this hemisphere and ultimately, the world. It is a rather known fact that no single donation or loan, no matter how large, would be able to accomplish such a monumental task. That’s why ACCION has created an anti-poverty strategy that is permanent and self-sustaining. Unlike traditional charities and most other microlending efforts, ACCION’s programs are designed to cover their own costs. Microlending is a smart strategy because it builds on the one asset found even in the poorest communities: the power and determination of the human spirit.
My position in ACCION was very much like that of an outside consultant. I worked with a team of people in the Research & Development department of ACCION who had had considerable experience in the field. The team’s main objective was to generate, coordinate and utilize new financial products in different markets, support the technical consulting area (which is in constant contact with the microfinance institutions), and spread the knowledge that is necessary to keep the organization up to speed.

My task consisted of heading two projects in areas where ACCION had specific needs. The first project consisted of the development and testing of costing models for new product development initiatives. Given that one of the primary activities of the Research & Development department is identifying, developing and testing new financial services for the low-income population in Latin America, it became evident that the key step in this process is evaluating the potential sustainability/profitability of proposed products. During my time at ACCION, few of the affiliates had the ability to conduct such an evaluation in a meaningful way. My primary responsibility was to build a generic projections model that could be used by affiliate banks with little technical and financial skills to accurately forecast the potential profitability of a new financial product. Leading the project implied coordination with other members of the R&D department and ACCION’s technical assistance staff, as well as the microlending institutions. The model was first applied towards the end of the summer with projects in the Dominican Republic and Ecuador.
The second project consisted of the refinement of market research strategy & training manuals and guides for conducting qualitative market research. Based on my previous experience in the marketing area, I reviewed the existing strategy, processes and manuals for conducting qualitative market research (e.g., focus groups) and made recommendations as to how they could be improved. The process mainly consisted of revising the existing materials and manuals used by the technical consulting area, developing a plan for integrating my “on the job” experience into ACCION’s processes, and finally developing new guidelines and materials to be used for future market research consulting and on site application.

Overall, the experience was very positive. I had a unique opportunity to compare my previous “for profit” work experience with a job in the nonprofit area. I also gained a deeper knowledge of the development opportunities that are helping shape the future of many people in the Americas, and was introduced to a large network of professionals who work in the nonprofit area. Whether you are thinking of just doing something different during the summer or you are targeting a career in the nonprofit world, I would highly recommend considering the Summer Fellowship Program for a challenging and rewarding summer experience.
Since 1982 the HBS Nonprofit and Public Management Summer Fellowship has provided financial support to current MBA students who choose to work in nonprofit and public sector organizations during the summer. Over the life of the program, over 350 students have participated in the program, with a record 48 students for summer 2001.
Sponsored by the HBS Initiative on Social Enterprise and the Social Enterprise Club, the Fellowship is funded by the School and alumni donors. The program has three principal goals:

o To enable students to take jobs in nonprofit and public enterprises where their HBS training will provide significant benefits to the organization and the community it serves;
o To expose students to the rewards and challenges of public and nonprofit management;
o To enrich the HBS community and the quality of the MBA education by increasing the number of students with experience in the nonprofit and public sectors.

March 11, 2002
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