Fruit Stand Lending

Who's that man walking through the street markets of Ecuador, trying to make $50 loans? It's Michael Chu, a former executive of Kohlberg Kravis Roberts Co., the world's most powerful leveraged buyout operator.

Michael Chu has given up Wall Street to help micro-entrepreneurs in Latin America.

Who's that man walking through the street markets of Ecuador, trying to make $50 loans? It's Michael Chu, a former executive of Kohlberg Kravis Roberts & Co., the world's most powerful leveraged buyout operator.

While Chu is hardly the first Wall Street dealmaker to call it quits, he does get points for pulling off one of the more dramatic career switches.

As of this summer, the 45-year-old Chu, who grew up in Uruguay, became director of Latin American operations for ACCION International http://www.charity.org , a nonprofit group that lends to "micro-entrepreneurs." Its clients include small-factory owners in the Dominican Republic, market-stand operators in Ecuador and Peru, and a host of tiny businesses located throughout the Americas.

Chu's job: to oversee dozens of ACCION lending officers based in Latin America and to identify those exceptional micro-entrepreneurs who may be able to advance from a $50 loan to set up a fruit stand to a $50,000 loan to run a factory. Despite its nonprofit status, ACCION likes to pick its risks carefully. It boasts a 98% repayment rate on its loans - somewhat better than what KKR achieved on its leveraged buyouts.

So how does Chu's new line of work compare with the old?

First the contrasts: The perks are certainly worse. There are no more free rides on Henry Kravis's private jet, no more exquisite meals on Wedgwood china in KKR's spectacular offices. Instead, Chu takes regular old American Airlines flights to the Dominican Republic and tries not to sweat too much in the heat.

On the other hand, the deal flow is better. Even in its busiest year, KKR completed only four LBOs. Lately the annual flow has slowed down to one or two and its affiliates make more than 50,000 loans a year.

Now for the similarities: Competition is still fierce and unnerving. While there's no more jousting with rival buyout firms such as Forstmann Little & Co., ACCION must fight off local "loan sharks" who traditionally have lent small sums of money at rates as high as 20% for one week's loan.

And, as with the most successful buyouts, businesspeople empowered with fresh capital go on to do great things. Says Chu: "This is one of the few programs that effects change by giving people the financial tools to do well."

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