FINCA is an acronym for the Foundation for International Community Assistance. They are working for improving the living standards of poor masses. Recently they started their operations in Pakistan with full dedication to kick out poverty from the country.
While doing research on FINCA i found few new financial terminology prior i was not aware about it like Financial Inclusion, Village Banking.
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.
Village Banking is a methodology for delivering credit that FINCA 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.
Why does FINCA charge interest on their loans?
FINCA 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 is committed to a double-bottom line: creating healthy, sustainable microfinance institutions that have a positive impact on clients’ lives and livelihoods and which 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.
Who funds FINCA?
FINCA 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 investorsincluding 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 funds go to administrative and fundraising expenses?
For fiscal year 2013, 4.5% of FINCA funds went to administrative; 1.1% went to fundraising; and 94.3% went to program activities.
How is FINCA different from other microfinance organizations?
Global presence: with local operations across 23 countries serving over one and a half million clients, FINCA’s outreach is among the broadest and most comprehensive of today’s microfinance networks. FINCA owns all of its subsidiaries and provides direct services to its clients.
Products: FINCA 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.
FINCA’s mission is to alleviate poverty through lasting solutions that help people build assets, create jobs and raise their standard of living.
FINCA’s vision is to build a global network of sustainable and scalable social enterprises that improve lives worldwide.
I think it’s great initiative by FINCA. Indeed! World was demanding such a institution who helps the poorest people of our surroundings, those who have no collateral, even no reference to take loans. For them, $100 is big amount they can generate more income by buying some value adding product/services which increase their efficiency.