Accion International Loan Fund Gives New Hope to Colombia’s Poor : Economy: Philosophy of nonprofit organization is simple: Lend money to people who really need it and are industrious enough to pay it back.

Eighteen months ago, Manuel Colorado’s prospects were as dim as his dingy bakery in La Paz, a Bogota slum, because no bank would lend him the money to fix the place up and buy a new oven.

Then he found Accion International, a U.S.-based nonprofit organization that makes small, short-term loans to the working poor. For Colorado, the result has been a much brighter future in a sparkling new bakery.

He is among 75,000 of Colombia’s poorest who have borrowed more than $40 million from Accion International since 1983. All work in the unregistered “informal” economy, so traditional credit is closed to them.

There are free-lance carpenters and seamstresses, owners of tiny neighborhood markets, bakeries or brick factories. One man combs the trash for discarded shoes to repair and sell; another makes Byzantine figures for churches.

Accion is financed by nearly 50 corporations, including Citibank and Morgan Guaranty Trust, and contributions from scores of churches, public agencies and individuals. It operates in 13 Latin American countries and the United States, where it targets Latinos, but does 40% of its business in Colombia.

“Colombia is a real bright spot,” William Burrus, the director, said in a telephone interview from Accion headquarters in Cambridge, Md. “There’s a real openness and desire to help micro-enterprises on the part of the government.”

Experts say Colombia has managed its informal economy better than other nations in the region by giving a greater role to private groups.

The government coordinates programs, but seeks outside financing and leaves the actual implementation to Accion and other private organizations.

Accion now operates in 15 cities and towns across Colombia, and has plans to expand into rural areas. By 1994 or 1995, it hopes to have its own bank with nonprofit groups as the main shareholders.

Officials of Accion say its philosophy is simple: Lend money to people who really need it and are industrious enough to pay it back.

A potential borrower must have been in business for a least six months, be the family’s principal earner and have assets worth less than $500.

Anyone who meets the criteria joins a group with up to six others, and they guarantee each other’s loans. The idea is that peer pressure and support will keep payments on time and foster a sense of community.

Loans generally run for six months or less and are not cheap. Monthly interest is 2.3%, and the cost of other services increases the annual rate to roughly 50%, said Charles Castello, Accion’s director in Colombia. The annual commercial rate in Colombia is about 36%.

“Clients must pay for the services so they will learn how to be self-sufficient and get along in the real business world,” he said.

Colorado formed a group with a beautician, a grocer and a food salesman, all neighbors and friends.

His first loan was for the equivalent of $90. Because he made the payments on time, the baker became eligible for increasing amounts and now is paying off a $1,000 loan in semimonthly installments of less than $120.

No one in Colorado’s group has been late with a payment or defaulted on a loan.

Borrowers are required to take, and pay for, one course in an aspect of business management for each loan obtained, and are encouraged to save 1% of each loan.

“We’ve broken two myths,” Castello said. “First, that the poor are bad credit risks and second, that they aren’t capable of saving. We have people who didn’t know where their food was coming from one day to the next who are now thinking about the future.”