Fellow Since 2000
This profile was prepared when Juan Padilla was elected to the Ashoka Fellowship in 2000.
An economist by training, Juan Padilla is introducing bank loans as a tool to help civil society organizations access financial resources that will enable them to improve the efficiency and impact of their work.
The New Idea
Building on the ten years he spent leading a nonprofit organization that lends microcredit to small-scale entrepreneurs in Argentina, Juan is developing a model that offers bank loans to civil society organizations. Significantly larger loans allow organizations to develop their capacity and sustainability through infusions of working capital and fixed asset investment. Civil society groups can access one-year credits of up to $500,000 with interest set at the best available rates and borrowing criteria, similar to those governing traditional clients, which promotes the adoption of more businesslike practices. The credit line is provided by four private banks, each of which will make available.$2.5 million and will make lending decisions according to the banks' credit committee, guaranteed by funds backed by a prestigious international banking institution. By educating banks about the financial needs of civil society organizations and helping organizations understand the potential benefits of credit, Juan bridges the long-standing gap between the two sectors so that banks can gain access to a profitable new market at very low risk and nonprofit organizations can grow well beyond former institutional boundaries.
In Argentina, as in other countries of Latin America and around the world, civil society organizations are facing increased demand for their services, which translates into increased financial needs. At the same time, however, traditional funding sources have proven unable to provide the resources required to meet this growing demand. As the primary holders of vast amounts of capital, banks are in many ways a natural potential source of funding for these organizations. However, in most societies there is a long-entrenched division between the banking world and civil society institutions. While individual citizens may turn to banks for home, education, or small-business loans, they would not even consider asking for a loan to finance social initiatives, tending to view the financial world as somehow elitist or evil. Accordingly, banks also tend to regard civil society organizations as unreliable creditors, without the necessary collateral to merit loans.
In order to transform the relationship between the citizen and banking sectors while enabling civil society organizations to heighten the impact of their work, Juan has developed Creo, or "I Believe," a financing mechanism that allows nonprofits to access large, traditional loans.Juan first focuses on identifying and approaching institutions to participate in the project. Recognizing that the actors on both sides of the project will have varying information needs and varying degrees of knowledge about the institutions with whom they will be collaborating, Juan works in parallel with both sides to raise awareness and address concerns. He has established relationships with four of the largest, most respected private banks in Argentina, who will each lend up to $2.5 million per year at extremely competitive interest rates. Moreover, the Buenos Aires branch of the United States' largest banking institution will administer a fund financed by an Italian bank that guarantees all loans made by the four participating lenders. On the civil society side, Juan has built on the network of far-reaching and respected nonprofit organizations he established during his years in microcredit. He conducts workshops on financing and bank loans for civil society organizations for as many as two hundred fifty citizen sector leaders each year. Lastly, Juan works with a public relations firm to increase awareness of Creo among lesser-known organizations and expand the potential pool of new lenders and creditors.
With a penchant for numbers, Juan studied economics at the University of Buenos Aires, Argentina's largest public university and a place that he hoped would bring him into contact with the social reality of his country. At age twenty, Juan began work at a private national bank, where his talent was quickly noted and where, within three years, he had ascended to a managerial post with two hundred employees under his charge. After a few years though, Juan grew eager to escape the hustle and bustle of Buenos Aires and relocated for four years to Tucumán and Salta, small cities located in the country's poor, northern provinces. While managing the bank's regional operations in the north, Juan specialized in lending to small producers and came into contact with levels of poverty that were a far cry from the relative economic prosperity he had seen in the rest of the country. It was within this context that he realized the potential of banks to make a difference in alleviating poverty and began to feel a huge contradiction between his work and what he wanted to do. Despite his successful fast-track banking career, Juan decided to leave the profession in 1989 to pursue other ambitions. While remaining for several years in the private sector, he and a group of banker friends created a foundation that focused on creating employment opportunities for young people in a particularly impoverished slum of Buenos Aires. In 1991, Juan and his associates turned to a prominent local businessman to help them find ways to increase the impact of their foundation's work. They started to learn about microcredit and decided to focus their energies on the application of the Grameen Bank model in Argentina. During his eight years as Executive Director of this microcredit lending organization, Juan built an institution of high national and international renown and $3.8 million in credit. In order to identify and support microenterprises, Juan came into contact with hundreds of community-based organizations and witnessed firsthand the power of credit to transform the lives of families and communities. He also experienced the challenges of funding and securing significant financing for civil society organizations. It was at this time that he began to develop the idea of a mechanism that would serve as a bridge between large-scale financiers and civil society institutions. In 1999, Juan left the management of his foundation to his partners to launch Creo.