Manuel Orozco, senior research associate at Georgetown University's Institute for the Study of International Migration and a former adviser to Tochisako, said these nonprofit lenders are backed by the U.S. Agency for International Development and other international development organizations. Their main business is to issue micro-loans, usually less than $5,000, to entrepreneurs and residents in low-income Latin American communities. The loans are mostly used to finance home-repair projects and to invest in small businesses.
Other organizations have thought of using this network of micro-finance institutions as a way to lower money-transfer costs, said Inter-American Development Bank spokesman Peter Bate.
After Atsumasa Tochisako retired, he raised $3 million and founded MicroFinance.
(Marvin Joseph -- The Washington Post)
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Bate said the Inter-American Development Bank "wants financial institutions that are focused on low-income clients to get into this business, and that's happening at an increasing rate. You have more alternatives, and consumers get better deals out of it."
MicroFinance and other money-transfer companies are regulated by state officials. Thus a remittance sender whose relatives have problems collecting money sent via a money-transfer agent in Maryland should contact the Maryland Commissioner of Financial Regulation. Money-transfer companies also are monitored for money-laundering violations by the Treasury Department.
Relatives are allowed to pick up the money the day it is transferred. The Salvadoran nonprofit groups have agreed to wait 10 days before collecting the money from MicroFinance, although if the nonprofit group is low on cash, MicroFinance will make the remittance money immediately available.
During the 10-day period, MicroFinance collects interest on the remittance funds. MicroFinance has agreed to make part of that interest available to the nonprofit groups to provide loans in low-income communities.
Tochisako said he plans to expand to other Latin American countries if the business is successful in El Salvador. MicroFinance, which has 400 customers, plans to break even in three years and be profitable in five years, he said.
About 74 percent of the Hispanic immigrants living in the District send money to relatives regularly -- a total of $94 million a year, according to the Inter-American Development Bank.
MicroFinance's fee of $9 to send from $150 and $2,000 is one of the lowest. A few local credit unions charge $10 to send up to $1,000 to Mexico. Western Union charges $30, according to the company's Web site. Banagricola and Bancomercio, subsidiaries of two large Salvadoran banks with operations in Adams Morgan, charge about $10 for a $1,000 remittance to El Salvador.
Western Union Financial Services Inc. spokeswoman Danielle Pereira said the company has remained dominant despite cheaper competitors because it has numerous locations in Central America and is trusted by its customers. "We've been in the business for more than 150 years, and we comply with the laws that govern money-transfer services," she said.
In addition to MicroFinance, Tochisako founded MicroManos Corp., a Rockville-based staffing company that hires Hispanics and bids for hotel, construction and other service contracts. MicroManos hires and trains workers and pays their salaries. If they remain on the payroll for more than three months, the firm pays health benefits and workers compensation insurance, he said. The company had revenue of $3.5 million last year but is not profitable.
Tochisako said he knew he wanted to find a way to help poor Latin Americans when his job sent him to a rural village in northern Mexico 25 years ago. He met Mexicans who invited him into their home and served him beef soup, although they had little to eat. Later he lived and worked in Ecuador and Peru.
"I knew giving money to beggars on the street was not productive, but I began to think about what finance companies could do," he said. "I began to think, when the time comes I will do something."
Staff researcher Richard Drezen contributed to this report.
