By: Eric Bank
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FINCA Impact Finance (FIF) is a company engaged in socially responsible banking and microfinance services to help low-income individuals and businesses around the world. It runs a network of 20 subsidiary community-based banks that offer loans, savings, money transfers, and other services, increasingly using financial technology. And it pays close attention to customer feedback concerning its outreach, usage, and impact. FIF and its majority shareholder FINCA International are actively engaged in helping individuals and communities respond to the COVID-19 pandemic.
Eugénie Kabeya was in trouble. Her thriving 17-year-old sewing business in Kinshasa, Democratic Republic of the Congo, was crippled by COVID-19, losing 70% of its revenue in the first month of the pandemic. Kabeya had first become a FINCA Impact Finance (FIF) customer in 2003, when microfinance services helped her secure critical financing to fuel her success.
Facing ruin and the loss of up to a dozen employees, she wondered how she would keep her business and her livelihood afloat during this time of crisis. That’s when FIF stepped in.
“One day, I was talking with the manager at my local FINCA branch about the difficulties I was facing with my business and she reminded me: I am a tailor! I could easily put that to use to make masks and help my business by selling them to compensate for the losses I was experiencing because of COVID-19,” said Kabeya.
Kabeya procured the necessary materials and has, to date, produced more than 5,500 masks, with many more on the way.
This is what FINCA Impact Finance is all about — providing socially responsible financial services to help low-income communities and individuals build a better future. FIF is a network of 20 banks and microfinance institutions that help build financial health in four different regions across the globe: Latin America, Africa, Eurasia, and the Middle East.
“We have nearly 3 million customers,” said Seth Spiro, Chief Marketing Officer. “And we have about 10,000 dedicated, mostly local staff working across our nearly 800 branches. We hold ourselves accountable for both financial performance and social impact.”
FINCA Impact Finance Provides Unbanked Entrepreneurs and Small Businesses with Powerful Financial Tools
About 1.7 billion people around the world are unbanked, which means they are not served by or do not have access to formal financial services. FIF recognizes the need for these people to access essential financial products and services without being required to step foot in a bank.
FIF’s portfolio of innovative products and services includes:
- Group loans: Village Banking™ and small group loans, ranging from 4 to 25 people, are designed to support very low-income entrepreneurs with the smallest enterprises.
- Individual loans: Business loans with flexible terms to help entrepreneurs grow their businesses and generate jobs.
- Agricultural loans: Business loans that are timed with the harvest cycle, allowing clients to purchase seeds, fertilizer, livestock, and equipment when they need it and repay the principal once the harvest comes in.
- Home Improvement and Energy Loans: Loans for clients to purchase or lease clean energy systems or products for use at their home or business.
- Consumer Loans: Loans for clients to use to purchase goods for their livelihoods.
- Education Loans: Loans to support clients to pay school fees or for educational purposes for themselves or their children.
- Women Entrepreneurship Loan: Loans for female entrepreneurs to begin or build a business, rates tend to be lower to promote female financial inclusion.
- Savings Accounts: Savings accounts offer clients a safe place to build a cushion against hard times or to a nest egg for future investments.
- Insurance: Credit, disability, and funeral insurance help reduce the financial stress of meeting major or unexpected expenses.
- Money Transfers: Domestic and international money transfers offer an affordable way to receive and send money for business and personal purposes.
FIF tailors its solutions to a region’s needs. “In some countries, we have different types of licenses,” explained Spiro. ”In 12 of our countries, for example, we offer savings. And then in the other eight, we are a credit-only institution. In some countries, we offer remittances. The products and services we offer in each market are thoughtfully tailored to the needs of each respective community.”
As a result of FIF’s growth and its focus on delivering financial services in ways that are most convenient for clients, FIF processes 55% of its transactions through branchless channels, and banking agents process 51% of its African transactions.
FINCA Impact Finance Assesses Its Outreach, Usage, and Impact
FIF rigorously surveys its customers to find out how they use the company’s products and what new tools they desire. The company assesses its social performance by measuring outreach, usage, and impact.
Outreach looks at certain user indicators such as gender, poverty level, and location, to measure FIF’s reach.
The company knows that women are disproportionately affected by poverty, and so it regularly measures how many women it’s reaching. In terms of location, it looks at rural versus urban.
FIF works in some of the harder-to-reach places, including some areas where bigger banks don’t go. Accordingly, it has branches in three cities in the Democratic Republic of the Congo, including the capital, Kinshasa, more than 130 branches in Pakistan, and about a dozen branches in Ecuador because it knows that people in rural areas deserve responsible financial services just as much as anyone else.
Product usage is what connects outreach to impact, because people utilize financial services in different ways to advance their families’ aspirations, such as saving for school fees or investing in better housing. For FIF, usage also tells us whether the services we provide are creating value in the communities we serve. For example, the company measures the percentage of people for whom FIF is the main source of credit.
It also looks at customer satisfaction with loan size and the use of savings accounts.
The best measure of our impact is whether clients are meeting their own goals for a better life. “We approach this question through the concept of financial health,” explained Spiro, “meaning, are we helping families manage their resources better, both on a regular basis, and towards the future.”
To achieve its goal of delivering socially responsible investments, FIF has adopted a hybrid business model in which it uses technology to enhance its reach while maintaining responsible customer relationships.
FINCA International Looks to Expand Its Range of Social Enterprises in Emerging Markets
FIF’s founder and majority shareholder FINCA International is looking to expand the types and locations of social support it offers for enterprises. The foundation will help fund new social enterprises, investing in sanitation, water, and other small enterprises that have both a social impact mission and focus on financial sustainability. FINCA International continually works to broaden the spectrum of these types of social enterprises in emerging markets.
In addition, FINCA International is currently engaged in a fundraising campaign, the FINCA Emergency Response Fund (FERF), in response to the COVID-19 pandemic.
“This has been a test of endurance for both customers and microfinance providers,” noted Spiro. “We are seeing the pandemic affect countries differently. Ecuador or Pakistan, for example, are seeing cases that are pretty significant. But you are seeing different realities for different countries.”
The pandemic is having a ripple effect on FIF’s clients, their families, and their employees. Businesses, like tailoring shops and restaurants, have been shut down because of the physical distancing that’s been imposed by some countries.
For example, FIF did a study in Uganda, a country that locked down quickly. It found that about 70% of the populace had no emergency funds and was unable to continue working in their businesses because of the lockdown, the disruption in the supply chain, and demand-related issues.
Clearly, FIF has its work cut out for it in the current environment.
“Many of our clients are telling us that they have had to cut down their family meals to one a day,” said Spiro. “Many are relying on their own social networks or subsistence farming to maintain the food supply. It’s hitting low-income folks very hard. It’s just incredibly difficult.”
You can help support FIF and contribute to the FINCA International Emergency Response Fund on this web page. Charitable donations to the Emergency Response Fund are tax-deductible to the full extent of the law.
Editorial Note: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.