FINCA is an acronym for the Foundation for International Community Assistance. The organization’s roots are in the the Latin American agriculture sector.
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What is financial inclusion?
Financial services—including credit; savings; business, education and home improvement loans—and insurance—affect our lives every day. These services are important to the poor, too, but they often can’t access them. Financial inclusion means finding ways to deliver important financial services to people of all means and backgrounds that otherwise are not reached by the financial sector.
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What is microfinance?
Microfinance is the provision of financial services to poor or low-income people on terms that they can afford. It is a means of promoting financial inclusion.
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What is Village Banking?
Village Banking is a methodology for delivering credit that FINCA International pioneered. It entails groups of 10-20 low-income entrepreneurs who meet weekly, biweekly or monthly to provide themselves with self-employment loans as small as $50 or $100 to start or expand a business while enjoying camaraderie and mutual support for business development. Since low-income entrepreneurs don’t have the kind of collateral most commercial banks require, Village Banking group members guarantee each others’ loans. And they run a democratic organization, electing their own leaders, designing their own bylaws, keeping the books, managing funds, supervising loan repayments and enforcing penalties for non-compliance.
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What good can $50 or $100 do?
To many micro-entrepreneurs in the developing world, $50 is a fortune. They can invest that money to make their labor far more productive. They might buy a used sewing machine to make dresses faster than sewing by hand. They might invest in a used refrigerator to keep the food they sell from going bad overnight. They might buy weaving thread in bulk at wholesale prices to increase their profit margin on every item. Economist Milton Friedman once said that “the poor stay poor, not because they’re lazy, but because they have no access to capital.” FINCA International provides them with capital to help them break out of poverty.
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Why does FINCA charge interest on their loans?
FINCA International was founded on the idea that the world’s lowest-income families don’t want handouts; rather, they want opportunity. They want to build and grow their small businesses through their own initiative.
As an institution, FINCA International is committed to a double-bottom line: creating healthy, sustainable microfinance institutions that have a positive impact on clients’ lives and livelihoods and are dedicated to remaining operational over the long term. Interest is a key part of this equation. FINCA charges interest in order to cover its costs and achieve operational sustainability. The interest charged on our loans supports our credit staff in the field, allowing us to bring services to customers, even in remote areas; enables us to borrow, re-lend and repay commercial capital, which means we can reach many more low-income customers; and ensures that we remain a reliable resource for our customers. Before we lend to customers, we provide training that ensures they understand not only our rates, but what it will mean for them and their business to invest and repay a loan. Interest rates vary greatly around the world and reflect a variety of factors, such as local regulations, the type and size of the loan, prevailing inflation rates and local costs of borrowing. FINCA endorses the Microfinance Transparency (MfT) fair pricing initiative which promotes transparent pricing standards and publishes prices of microfinance products.
What is a “sustainable microfinance institution?”
FINCA International strives to build permanent local microfinance institutions. After an initial investment, these institutions require no outside subsidies, and can cover their own operating costs with the income they receive from doing business. Because they are sustainable, FINCA subsidiaries provide a constant, reliable source of microfinance products for low-income customers in the communities where they operate.
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Who funds FINCA International?
FINCA International is funded through donations, social investment and loans.
Donated funding comes from a variety of sources, including U.S. and international governmental development agencies, private foundations, corporations, service and religious organizations, and individual donors.
Investment funding from FINCA Microfinance Holding Company LLC (FMH) is funded by socially-responsible investors including International Finance Corporation, a member of the World Bank Group; KfW, the German development bank; FMO, the Dutch development bank; responsAbility Global Microfinance Fund, an investment fund advised by the Zurich-based asset manager responsAbility Social Investments AG; Triple Jump, a Netherlands-based microfinance investment firm, and Triodos Investment Management, owned by Triodos Bank. FINCA International, Inc. is the majority shareholder.
What percentage of FINCA International funds go to administrative and fundraising expenses?
For fiscal year 2013, 4.5% of FINCA International funds went to administrative; 1.1% went to fundraising; and 94.3% went to program activities.
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Why isn’t FINCA International listed with Charity Navigator?
For seven consecutive years, Charity Navigator rated FINCA International as one of the most efficient and effective charities in operation, placing us in the top 1% of rated charities. But with FINCA’s transition to a new business model in 2011, Charity Navigator’s evaluation methods no longer provided an accurate assessment of our operations and impact.
Charity Navigator only considers information reported on United States IRS Form 990, thus, it fails to take into account FINCA International’s consolidated financial statements, which represent our international network of 23 subsidiaries. Charity Navigator has acknowledged that their current evaluation model is not designed to evaluate the specifics of FINCA’s unique business model. Therefore, FINCA International and Charity Navigator mutually agreed that FINCA should delist from the ranking service.
For more information about FINCA International’s Charity Navigator rating and our effectiveness in managing your contribution click here>>
How is FINCA International different from other microfinance organizations?
Global presence: with local operations across 23 countries serving over one and a half million clients, FINCA International’s outreach is among the broadest and most comprehensive of today’s microfinance networks. FINCA International owns all of its subsidiaries and provides direct services to its clients.
Products: FINCA International offers an array of financial products tailored to local needs: small loans and savings products, insurance and remittances. In each country, we offer several types of loans that are compatible with customers’ needs and the local economy; in predominantly Muslim areas, we offer Islam-compliant financing; in Ecuador, we offer health insurance; in Uganda, we offer a unique loan program for small solar generators. We are constantly innovating to create products that will improve our clients’ businesses and quality of life.
Business model: FINCA operates with a unique, integrated business model that accepts donations and investment dollars. Our approach leverages available capital and promotes greater transparency, sustainability and higher standards of business practices. Our business model allows us to achieve balanced financial and social performance that is unmatched in the industry.
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