ABSTRACT
Most microbusiness credit projects seek to increase incomes and generate employment by providing less expensive alternatives to moneylenders for financing microbusiness activities. The key to success in any financial market is accurate information about perspective clients. ACCION provides technical assistance to microbusiness support programs throughout the Americas. Microbusinesses usually operate within a relatively small market and their commercial relations are few. Formal lenders rarely have the opportunity to establish broader commercial or personal relationships with microbusiness borrowers and must therefore rely on second-hand information to assess credit risk. Formal lenders traditionally require technical analysis, documentation of incomes and cash flows and collateral, none of which microbusinesses can offer. In Latin America, informal lenders to microbusinesses seldom resort to criminal means such as assault, arson, theft, or other such techniques to enforce repayment in spite of what the general public might think. All lenders must determine whether potential borrowers will be both willing and able to repay their loans.
