Source: Citigroup.

Original news wire available here.

San Antonio, TX, July 19 – Citi announced today it has entered into a five year contract with ACCION Texas to purchase up to USD 30 million in micro enterprise loans. The innovative transaction marks a first for the U.S. microfinance industry that both institutions believe will change the perception of microfinance in the U.S. and at the same time give ACCION Texas the capital it needs to expand. ACCION Texas will become Citi’s national service provider, handling underwriting, servicing and collections. In addition, both Citi and ACCION Texas will share the risks and the revenue from the loan portfolio.

“Citi and ACCION Texas are charting new territory with this unique business partnership,” said Robert Annibale, Citi’s Global Director of Microfinance. “This will lead to wider and more innovative access to finance for U.S. microfinance institutions. ACCION Texas has significant experience in supporting emerging microentrepreneurs, both through business development services and by providing these enterprises with often their only source of formal access to financing.”

ACCION Texas possesses the largest active micro-loan portfolio in the U.S., totaling over USD 19 million. President and CEO Janie Barrera said that ACCION Texas is achieving consistent growth and strong performance after years of experience and investment to develop a scalable credit and operating platform. ACCION Texas has the potential to serve many more clients, but it requires more capital than could be found through typical nonprofit funding by grants or loans.

“The demand for microfinancing is high,” said Barrera. “With the commitment from Citi, ACCION Texas can significantly expand lending services. We will create a multiplier effect that means more investment for small businesses, greater access to capital and increased economic empowerment for the underserved in our communities.”

Legal support for this landmark agreement, a first in microfinance in the U.S., was provided by Baker & McKenzie LLP, New York City acting for Citi, and Akin Gump Strauss Hauer & Feld LLP, Dallas office acting for ACCION Texas.

“Our goal is to transition underserved and even unbanked entrepreneurs to valued banking clients,” said Steve LaFredo, Citibank Marketplace Director. “Creating a scaleable and sustainable business model that provides financing to micro-enterprises will generate jobs and opportunities that benefit the wider community and economy.”

For more information about the difference between microfinance in poor countries and rich countries see the following stories from our archive:

“Microcapital Story: Microfinance Investment from Paris to Casablanca”

“Microcapital Monitor: Microfinance Investment from Paris to Casablanca”