Loans, Not Grants

Loans—at market rates of interest—are the central service provided by the village banking method. FINCA offers loans, not grants, to low-income microentrepreneurs, because at the root of their poverty is lack of opportunity, not lack of desire to work. While many poor families have ideas for fostering their own employment by creating small businesses, few can access the capital they need to begin. They are excluded from conventional financial sources (e.g., commercial banks) because they lack credit ratings and assets to pledge as collateral. Even a small loan can stimulate productivity, enabling the microentrepreneur to build assets and purchase inventory at the best prices. By investing the loan and increasing his or her business as a result, the borrower reaps an additional reward—increased self-esteem through self-help.
Loans are a renewable resource, which can impact entire communities. A loan is borrowed, invested, and repaid, after which it can be used to stimulate yet another fledgling business. FINCA loans circulate throughout low-income communities until their effect is multiplied many times.

Mission

FINCA's mission is to provide financial services to the world's lowest-income entrepreneurs so they can create jobs, build assets and improve their standard of living. FINCA also works in some of the poorest communities in the world. All poor people need financial services, and different microfinance providers specialize in different niches. FINCA has a 20-year institutional commitment to serve the poorest of the poor. We operate in communities that other microfinance providers have declined to enter, and our average loan size, among the very lowest in the microfinance industry, suggests that we are succeeding in our mission.

FINCA position

FINCA is the pioneer of the village banking method of microcredit, which gives the decision-making power of who may borrow, how much, and for what purpose to the 10-50 neighbors who come together to form the village banking group. FINCA has no say in these matters, and only refuses to recapitalize groups that are not current with their payments. The autonomy given to the participants is one reason why some 300 organizations worldwide are using FINCA’s village banking method to run their own microcredit programs.

Borrower-Run Banks

FINCA does not simply extend loans to low-income families, it helps to create community-run, community-focused credit and savings associations, particularly in areas untouched by the formal financial industry. The village banking method is highly participatory in nature. It gives the beneficiaries a voice and it involves them in the development process. Members not only receive loans, they form cohesive groups who manage and collect repayments on those loans, who save diligently and decide on ways to invest those savings, and progress together, forming networks for mutual support.

Community and Individual Development

FINCA lends to groups of neighbors who come together to guarantee one another’s loans, and work together to ensure that the bank runs smoothly. The group is critical; without it, individuals cannot realize their full potential. By sharing their problems, challenges and successes, clients learn and progress together. Village banking groups are a great source of moral support for start-up enterprises. Members network, advertise for, and patronize one another’s businesses. Cooperation takes precedence over competition. Microentrepreneurs know that if one member’s business attracts customers to the neighborhood, all are likely to benefit. The working capital brought into the neighborhood by a village banking group seldom stops working. As FINCA loans rotate among members of the community, and as members’ savings are re-invested in the neighborhood, opportunity and economic vitality increase.