In 1984, John Hatch saw that lack of capital was keeping poor Bolivian farmers poor. Traditional loans were too large and too expensive, and without collateral, the farmers couldn’t borrow. So he came up with an idea; if the farmers formed groups to share a loan and guarantee repayment, they could access the funds they needed to invest in their farming operations. It was the dawn of what we know today as microfinance.
The idea proved versatile and revolutionary.
“Village Banks”—groups of low-income entrepreneurs who come together to share and guarantee one another’s loans—became engines of development.
In urban and rural areas, and in economies as diverse as Mexico City and Kitunda, Tanzania, Village Banks allowed those with scarce resources to borrow, invest and grow their businesses. They also allowed women—who were routinely denied credit—to build enterprises that kept food on their tables and their children in school.
Today, many of our subsidiaries worldwide still offer this service. Neighbors come together in “Village Banking” groups. Individuals borrow working capital for their microenterprises, and the group guarantees those loans. Village Banking also encourages neighbors to support each other while growing their businesses; these mutual support groups can help invigorate entire communities.
Remaining true to its original idea, FINCA has become a global network of secure, sustainable microfinance institutions that help low-income families create jobs, build assets and improve their standard of living.