The Cumulative Economic Impact of ACCION TEXAS

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The Cumulative Economic Impact of ACCION - TEXAS

• Presented by TXP November 6, 2007

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Overview/Background

• Microenterprise Approach
• Alleviates poverty and promotes economic
  development, versus transfer payments of
  traditional welfare. Small loans are made to
  allow borrowers to invest in capital assets,
  creating ongoing income.
• Goals related to leaving public assistance,
  rebuilding inner city neighborhoods, and creating
  jobs and a return on investment that extend well
  beyond the recipient of the initial loan.

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ACCION

• International and Domestic History
• ACCION International founded in early 1960s in
  Latin America microlending became focus during
  1970s. ACCION USA created in 1991, currently
  serving nine states. Largest microlender in U.S.
• ACCION Texas founded in 1994 in San Antonio, with
  current additional offices in Austin,
  Brownsville, Dallas/Ft. Worth, Harlingen,
  Houston, and McAllen. Over 60.8 million in loans
  since inception, with average loan amount at
  7,900.

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ACCION Presence in TX
Total Loans by Year
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ACCION Presence in TX
Distribution of Loans by ZIP Code
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Economic Impact

• ACCION lending throughout Texas creates
  additional economic effects, as capital invested
  increases overall economic activity.
• The 60.8 million in total loans since inception
  translates into 112.9 million in economic
  activity, 36.1 million in labor compensation,
  1,426 permanent jobs, and 6.6 million in total
  new state and local tax revenue.
• The following tables and charts provide detail by
  community and sector of the economy.

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Economic Impact (continued)
ACCION Texas 60.8 million in lending is
diversified across sectors of the economy and
communities
Communities
Rio Grande Valley 8.9 m
San Antonio 19.0 m
Austin 3.4 m
Sectors of the Economy
Other 7.2 m
Development/Mfg. 13.2 m
D/FW 8.4 m
Rest of TX 4.0 m
El Paso 7.2 m
Houston 9.2 m
Services 25.4 m
Retail Trade 15.1.3 m
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Economic Impact (continued)
Capital invested ripples through the economy,
creating additional economic activity

• Direct Effects total ACCION loan amounts to
  small business.
• Indirect Effects amount of new sales generated
  by regional business to support ACCION loan
  recipients
• Induced Effects Increased spending due to
  household income generated by direct and indirect
• Total Impact sum of the above

Direct
Indirect
Induced
Total Impact



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Economic Impact (continued)
ACCION Texas 60.8 million in lending translates
into economic activity, labor compensation, jobs,
and tax revenue.
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Additional Impacts

• Avoided Social Costs
• Microenterprise helps reduce social costs such as
  welfare and food stamps participants in 1980s
  federal study cut welfare dependence 52 and
  receipt of food stamps 43.
• 1998 ACCION US study shows that
  microentrepreneurs drew over half of their
  household income from their business, and 40
  felt that it enabled them to avoid welfare,
  disability, retirement and minimum wage work for
  income.

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Additional Impacts

• Qualitative Benefits
• Over 2/3 of ACCION participants in the 1998 study
  believe that the program offered benefits not
  easily measured, such as ability to obtain
  credit, confidence in business abilities,
  independence, financial security, and networking.
• Participants felt the program had positive
  effects on their families additional income,
  flexible scheduling. Positive community effects
  included job creation, skills development, and
  filling market needs.

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Additional Impacts

• Effect on Minority Communities
• Vast majority of ACCION Texas clients are from
  the minority community creates an opportunity
  for skills development and financial literacy and
  education in an under-served segment of society.
• Economic connection to the community creates a
  range of additional linkages if the neighborhood
  is your market, you have a larger stake in its
  welfare.
• Access to Spanish-speaking personnel in all of
  the ACCION Texas offices means that one of the
  barriers to successful entrepreneurship is
  eliminated.

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Additional Impacts

• Second and Third Order Outcomes
• In addition to the economic impacts outlined
  above, other important outcomes of
  microenterprise include formation of social and
  human capital, the spread of economic literacy,
  and the transformation of the disenfranchised
  into economic actors.
• An additional impact is the effect on future
  generations. Intergenerational cycles of welfare
  and poverty can be broken, and influence of
  children observing their parents success can have
  a profound impact on their lives.

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Conclusions

• The impact of ACCION Texas and its lending
  programs on the Texas economy and individual
  communities is clear, as the capital and
  knowledge that ACCION provides translates into
  economic activity, income, jobs, and tax revenues
  for both the state and local governments.
• Beyond the economic impacts, ACCION funding and
  programs help individuals escape poverty, avoid
  other social problems, build self-esteem, secure
  the economic future of their families, and
  contribute to the overall development of their
  neighborhoods and communities.

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Conclusions (continued)

• One of the ways of evaluating the impact of
  ACCION and its lending programs is measure the
  return on investment associated with its lending.
  Given the focus on creating sustainable income
  for loan recipients, labor compensation appears
  to be the most appropriate yardstick by which to
  measure returns.
• Using this standard, the 60.8 million in
  invested capital to date has yielded a total of
  36.1 million in total annual compensation a
  60 rate of return.

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Conclusions (continued)

• When avoided social costs, community development,
  and the additional benefits outlined are factored
  into the equation, ACCION lending represents one
  of the best investments available today.