Citi announces it has entered into a five year contract with ACCION Texas to purchase up to $30 million in micro enterprise loans. The innovative transaction marks a first for the US microfinance industry that both institutions believe will change the perception of microfinance in the US and at the same time give ACCION Texas the capital it needs to expand.
ACCION Texas will become Citis 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,” says Robert Annibale, Citis global director of microfinance. “This will lead to wider and more innovative access to finance for US microfinance institutions. ACCION Texas has significant experience in supporting emerging micro entrepreneurs, both through business development services and by providing these enterprises with often their only source of formal access to financing.”
“The demand for microfinancing is high,” says 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 US, 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,” says 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.”