FINCA International - Background and History

Background and History

In 1984, Hatch, a Fulbright-trained economist and international development expert, conceived a new method for delivering assistance to the poor. In an airplane high above the Andes, Hatch was en route to a consultant assignment in Bolivia, when inspiration struck. He grabbed in-flight cocktail napkins, scraps of paper, and a pen and began writing down ideas, equations, and flow charts as fast as he could. By the time he landed in La Paz, he had the outline of a radically different approach to poverty alleviation: a financial services program that put the poor in charge. “Give poor communities the opportunity, and then get out of the way!” he said. He called the idea "village banking". This approach gave the poor the opportunity to obtain loans without collateral-the poor's main obstacle to accessing credit—at market-level interest rates.

Hatch first had to convince a group of USAID officers that his epiphany would pay off—for the rural poor and the government of the United States, whose grant dollars would fund the first projects. Remarkably, the officials liked his innovative idea and provided an initial grant of $1 million. Hatch and his Peruvian business partner, Aquiles Lanoa, launched the program in five separate geographical areas of Bolivia and within four weeks, they had created funds in 280 villages serving 14,000 families with loans worth $630,000. Hatch's clients in Bolivia were puzzled at first by village banking because it represented a significant departure from business as usual. They were intrigued enough to try it, however, and it was an immediate success. When Hatch's client in Bolivia changed its in-country team, the new representatives shut the program down. More cautious than the original client team, the new group acknowledged the program's success but still felt that uncollateralized lending to very poor people was too risky. Undeterred, Hatch spent the next few months training others in the village banking methodology, helping open new programs throughout Latin America, and building the institution that would come to be known as FINCA International. FINCA incorporated in 1985.

Its ability to achieve financial sustainability allowed FINCA to make considerable expansions in the 1980s and 1990s in Latin America, the Caribbean, Africa, and the Newly Independent States of the Former Soviet Union. In 1995, FINCA entered the former Soviet Union by establishing a Village Banking program in Kyrgyzstan. In 1997, FINCA co-sponsored the first Microcredit Summit, with over 2,000 policymakers, practitioners, and donors discussing ways to expand microcredit programs. In 2000, FINCA became one of the first economic development organizations to enter Kosovo after the June 1999 cease-fire. In the 2000s, FINCA continued its penetration into the Newly Independent States by establishing new programs in Central Asia. Its most recent programs were launched in Afghanistan, in 2004 (see FINCA Afghanistan), and Jordan in 2007. In April 2009, FINCA Kyrgyzstan became the second program to pass the 100,000 client mark.