Two women looking at a cell phone
By
Deanna Neiers
19 September 2019
Photo Credit
FINCA International

DID YOU KNOW? Almost 50% of the world’s population, more than 3 billion people, live on less than $2.50 a day. Additionally, more than 1.3 billion people live in extreme poverty and somehow survive on less than $1.25 a day. For comparison, many Americans spend more than $2.50 a day on a cup of specialty coffee, and $1.25 isn’t even enough to purchase a newspaper.

Many nonprofit organizations are working to eradicate poverty. They employ various approaches and run a wide variety of programs. So, what is working?

One of our long-term charity partners has found success by taking an innovative approach in their mission to alleviate poverty through lasting solutions that help people build assets, create jobs and raise their standard of living.

FINCA International was founded in 1984 on a radical notion: they believed that giving small loans to the poor had the power to transform entire communities in a sustainable way. Sometimes referred to as the “World Bank for the Poor,” FINCA is the innovator of the village banking methodology in microcredit and is widely regarded as one of the pioneers of modern-day microfinance.

Today, FINCA operates in 44 countries around the world, and their programs benefit millions of people across five continents. They believe that the solutions to poverty must empower people to improve their own lives and that these solutions must be sustainable.

Let’s look at three ways FINCA is transforming lives of those that live in poverty worldwide.

1.    The BrightLife Project

FINCA realized that access to consumer products, like clean energy products, can be critical for improving health and well-being, increasing productivity, and alleviating poverty. BrightLife is a social enterprise that distributes and finances solar home systems, improved cook stoves and other basic service products. These items are critical to advance education, boost economies, reduce toxic emissions and keep families safe.

You know how frustrating it is when the power goes out during a thunderstorm. Imagine the nearly 300 million kids who cannot study after sunset, leaving them at an academic disadvantage. Businesses have to close up shop at sundown, reducing available working hours and shopping opportunities for consumers.

Poorer households rely on toxic cook stoves to prepare their meals. Globally, over 3 billion people use either coal, kerosene or biomass for cooking, and the fumes from these indoor fires constitute the second leading environmental cause of death in the world.

Through BrightLife, FINCA distributes high-quality clean energy products, backed by warranties, and then helps users pay for them by offering financing and monthly payment plans. Additionally, they provide training on product use and maintenance. They even go the extra mile and conduct market research on clients’ experience with the products in order to share feedback with manufacturers. 

2.    Microfinance: FINCA Impact Finance

Did you know that over 2 billion people globally are financially excluded, without critical access to credit, savings or other basic financial services? “Microfinance” is a type of banking service offered to groups who otherwise would have no other access to financial services, such as unemployed or low-income individuals. This includes banking services such as small loans, savings plans, insurance and money transfers. Conventional banks usually do not serve the “micro” loan segment in developing countries because they lack knowledge to support this channel properly, it is too expensive for them, or they are worried about the expense and repayment ratios. Thankfully, FINCA understands that people can receive and pay back small loans if given the opportunity, and that these loans could transform their lives.

FINCA’s microfinance program is called FINCA Impact Finance. The program is comprised of a network of 20 microfinance institutions and banks providing a wide variety of responsible financial services: group and individual business loans, agriculture loans, insurance, money transfers, energy loans and savings accounts.

The FINCA Impact Finance program runs in 20 countries throughout Africa, Eurasia, Latin America, the Middle East and South Asia. These services empower low-income entrepreneurs and small business owners to invest in their future and change their lives – and the lives of their families and communities.

3.    Banking without traditional office branches

Mobile Banking
Americans are used to seeing banks on every corner. In developing countries, it can be difficult to find bank branches and the availability of financial services in general is low. However, mobile phone usage is on the rise. What if a program could help people bank by using their mobile phone, even in developing countries? Mobile credit, savings, payment and e-wallet solutions can help individuals in even the most rural of communities access financial services, save time and make secure transactions anytime and anywhere. Mobile banking innovations are creating new opportunities for financial inclusion.

In September 2017, FINCA Tanzania became the first microfinance institution in Africa to launch a mobile network operator-led savings product. This program reached 100,000 users in just three months, and customer deposits and withdrawals continue to increase. More than two-thirds of Tanzanians still live in rural areas, and only 37% of these adults live within three miles of a bank branch. Before this program began, it is not surprising that just 8% of Tanzanians held a formal bank account.

After setting up a free account, FINCA clients in Tanzania can now conveniently and securely save money to a mobile wallet. The program also allows users to set savings targets, like paying for their children’s education, to encourage a behavior of saving. Additionally, as clients reach their financial goals, they will earn free mobile airtime to make calls or send text messages. In 2018, mobile banking accounted for 13% of all transactions across the FINCA Impact Finance network. Programs like this are truly making a difference.

Agency Banking and Biometrics
Though a lot can be accomplished via a mobile phone, there are instances where a physical location is required. In the U.S., many people bank online but still need to visit a branch to use an ATM or deposit cash. FINCA came up with a solution that works well in the developing world. In areas without a physical branch presence, banking agents are able to provide responsible financial services. A banking agent is a local merchant who is contracted to process financial transactions for clients of the program. A banking agent comes in many forms: it could be the owner of the local hardware store, produce stand or corner shop. FINCA supplies each agent with a point-of-sale (POS) terminal that connects to the subsidiary banking network and client accounts. Common transactions include: paying bills, making deposits, and withdrawing or transferring funds.

For additional security, banking agents utilize POS terminals equipped with fingerprint scans which is a form of biometric recognition. This technology allows clients to access their FINCA accounts safely and securely, giving them control over their finances and the peace of mind to not have to worry about identity theft.

FINCA’s agency banking program began in the Democratic Republic of Congo in 2012. By the end of 2018, FINCA DR Congo had a network of more than 1,000 agents that processed over 80% of its clients’ financial transactions. The program continues to grow and expand to new regions, reaching thousands of new clients each year.

A founding principle of FINCA is that the solutions to poverty must empower people to improve their own lives and that these solutions must be sustainable. The BrightLife Project, FINCA Impact Finance and banking solutions without physical branches are three of the many ways that FINCA is furthering their vision to build a global network of sustainable and scalable social enterprises that improve lives worldwide. They will continue to innovate, and make strides to end poverty and provide financial empowerment globally. Visit finca.org for more information.

Support FINCA’s impactful work to alleviate poverty through lasting solutions that help people build assets, create jobs and raise their standard of living:

  • Learn more about how Global Impact promotes the work of FINCA and their mission.
  • Quiz yourself to learn about the challenges and opportunities with women’s financial inclusion in honor of International Women’s Day.
  • Petition the World Bank to build its commitment to mobile banking as part of its Universal Financial Inclusion 2020 campaign.
  • Give to support FINCA’s work through your employee giving program.

Photo credit: FINCA International

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