1. Rural and Agricultural Lending
Bob Price
FINCA International
Microfinance is a powerful tool to fight poverty. When poor people have access to financial services, they can earn more, build their assets, and cushion themselves against external shocks. Poor households use microfinance to move from everyday survival to planning for the future: they invest in better nutrition, housing, health, and education.

2. Overview of Microfinance
FINCA: Village Banking and Rural Applications
Case Studies: Rural Microfinance
The Frontier: New Directions & Products

3. Why Microfinance? 4.0B people $2.6T income
The traditional financial service market
4.0B people
$2.6T income
Sub-tier 1 “$2-$4/day” 1.3B - $730-$1500 income - $1T
Sub-tier 2 “$1-$2/day” 1.6B - $360-$730 income - $890B
Sub-tier 3 “<$1/dy” 1.1B - <$360 income - $198B
1.7B people $6.8T income
$1,500-$20,000/year
100M people >$20,000/year
Rural Problem
70-75% of poor live in rural areas; most depend on agriculture for livelihoods.
Limited access to financial services
“The poor stay poor, not because they’re lazy, but because they have no access to capital.”
Milton Friedman, Economist & Nobel Laureate
Click Once to Highlight Traditional Market (top of pyramid)
Click Again to Demonstrate Gap (in bottom)
Sources: World Bank, CK Prahalad, The Fortune at the Bottom of the Pyramid; Visa estimates

4. How Finance Helps Access to financial services
Increases & diversifies income
Builds assets & security
EMPOWERS WOMEN
Microfinance is a powerful tool to fight poverty. When poor people have access to financial services, they can earn more, build their assets, and cushion themselves against external shocks. Poor households use microfinance to move from everyday survival to planning for the future: they invest in better nutrition, housing, health, and education.
Household income
Financial services can improve poor people’s lives by providing needed financing for business activities, which can increase their household incomes. While increased earnings are by no means automatic, reliable sources of credit provide a fundamental basis for planning and expanding business activities, which can enable clients to save, manage cash flows, and reduce the need to sell assets to in times of crisis.
Asset building
Due to increased income, and the ability to save and take on credit, microfinance can provide the means for poor people to acquire land, construct or improve their home, purchase animals and consumer durables, or create or expand their businesses. Studies show that clients who take part in microfinance acquire more productive assets over time than those who do not.
Empowering women
Many microfinance programs target poor women. For women, money management, greater control over resources, and access to knowledge leads to more choices and a voice in family and community matters. Economic empowerment is accompanied by growth in self-esteem, self-confidence, and new opportunities. Many qualitative and quantitative studies have documented how access to financial services has improved the status of women within the family and the community. Women often become more assertive and confident. In regions where women's mobility is strictly regulated, women have often become more visible and are better able to negotiate the public sphere. Women involved in microfinance may also own assets, including land and housing, and play a stronger role in decision making. In some programs that have been active over many years, there are even reports of declining levels of violence against women.
Reducing vulnerability
By increasing earnings and savings, financial services allow poor households to make the transformation from every-day survival to planning for the future. Households are able to send more children to school for longer periods and to make greater investments in their children's education. Increased earnings can lead to better nutrition and better living conditions, which translates into a lower incidence of illness. Increased earnings and access to microinsurance also mean that clients may seek out and pay for health care services when needed, rather than go without or wait until their health seriously deteriorates.
Builds confidence in the future and willingness to make long-term investments

5. Impact of Microfinance
have 12-56% higher household income
show family-wide improvement in nutrition
are 14%-68% more likely to move up the economic ladder
invest more in their children’s education
Compared to non-clients, microfinance clients…
Sources: Measuring the Impact of Microfinance: Taking Stock of What We Know, Grameen Foundation USA Publication Series, December Doocy et al., Journal of Microfinance. Vol. 7, #1, 2005.

6. Overview of Microfinance
FINCA: Village Banking and Rural Applications
Case Studies: Rural Microfinance
The Frontier: New Directions & Products

7. Where FINCA Works Eurasia Armenia Azerbaijan Georgia Kosovo Kyrgyzstan
Russia
Tajikistan
FINCA HQ
Washington DC
Greater Middle East
FINCA has learned over the past two decades that our methodology is transferable to different regions because, and we make adjustments to our products and services, based on the needs of the area we are serving. We currently operate programs in 20 countries of Latin America, Africa and Eurasia and have established a regional hub system to provide technical assistance and oversight. Regional headquarters offices are located in Kampala, San Jose and Kiev.
Afghanistan
Jordan
Latin America
Ecuador
El Salvador
Guatemala
Haiti
Honduras
Mexico
Nicaragua
Africa
DR Congo
Malawi
Tanzania
Uganda
Zambia
Regional Hubs
San Jose, Costa Rica
Kampala, Uganda
Kiev, Ukraine

8. Vital Statistics * Indicator Region Total Latin America Africa Eurasia
GME
Active clients
Loans outstanding
Disbursements†
Client savings
FSS**
130,425
$27.8M
$106M
$11.6M
99%
286,826
$90.8M
$314M
$10.9M
100%
263,900
$225M
$371M -
115%
47,561
$7.5M
$15.3M
$102k
46%
741,576
$341M
$806M
$22.7M
98%
* data as of 31-Dec-08
† Annualized
** Financial self-sufficiency

9. Profile of FINCA’s Clients
70% of clients are women
20-50 years old
Support five family members plus other relatives, neighbors and orphans
Typical Businesses
Rural clients: smallholder farmers, animal husbandry, agricultural marketers, food processors, etc.
Urban clients: street vendors, service providers, artisans, etc
Our clients are the productive poor, mostly women, who have lived their lives in severe poverty. Although FINCA does not discriminate, it targets women clients because they are the least able to access credit, and because women with children are typically the poorest segment of the poor.
Of the 1.3 billion people living in poverty worldwide, women account for 70 percent. In the developing world, and even in the United States, a woman's chances of receiving credit are markedly lower than a man's, and yet, in an increasing number of families, the woman provides a substantial portion—or all—of the family's income. Our clients typically feed and clothe their families on a cash budget of $3 per week.
In addition to supporting their immediate family, our clients often provide some income for their extended family and, in many areas (especially Africa), our clients also care directly, or indirectly, for multiple children orphaned by acts of violence or AIDS.

10. FINCA’s Products Credit Savings Insurance Remittances
Village Banking (i.e., group loans)
Individual
Rural Loan Product
Housing, etc.
Savings
Insurance
Credit Life
Accident
Health
Remittances
Additional loan services
Second generation loans
Education loans
Additional social services
Health education (i.e., maternal health, HIV/AIDS prevention education)
Business training services

11. How Does Village Banking Work?
Group Lending
Solidarity Guarantee
Step credit
Group Repayment
Group Loan
Village Bank
-Interest -Principal -Savings
Individual Loan
Food
Health Care
Education
Client
Self-Employment Activities
Income
Sales
Customers 11

12. Rural Loan Products (RLP)
The RLP is a specialized loan product is:
designed for
rural communities
where there is a huge unmet demand for financial services
supports
rural income generating activities
crop planting, animal husbandry, market gardening, dairy production, processing, and trade in rural produce
Delivers loans from
$200 to $1,000
with a term of up to twelve months (varies by locale)
Relies on
group solidarity
to guarantee loans, capitalizing on the value of a client’s reputation in the community

13. Traditional Agricultural Lending
Finances a specific commodity or growing activity.
High risk for client and lending institution.
staple crop production

14. FINCA Rural Loan Product
salaries
pensions
remittances
trade income
market gardening
services income
dairy production and sale
Analyzes all income streams.
staple crop production
Constructs a suitable loan treating the rural household as an integrated economic unit.

15. Overview of Microfinance
FINCA: Village Banking and Rural Applications
Case Studies: Rural Microfinance
The Frontier: New Directions & Products

16. FINCA & Food for Progress (FFPr)
Partnership
Began in 2000
Ecuador, Georgia, Guatemala, Nicaragua, Tanzania, Uganda, Zambia, to date
Purpose
Infuse capital into rural & agricultural economies
Increase ag production, processing & marketing
Increase on and off-farm incomes
Increase access to food
Outcomes
116,000+ clients served
676,000+ lives benefited
$93 million in recycled FFPr loan capital disbursed every year
Click once for Partnership
FINCA has monetized 119,300 metric tons of US ag products
Click once for Purpose
USDA’s own goal is: strengthening private sector agricultural and economic development and enhanced food security in recipient countries
Click once for Outreach
FINCA Zambia has disbursed 26,413 loans to new clients, surpassing the original target by 267%

17. FFPr Impact in Ecuador FFP #2 FFP #1
Click once for emphasis on text
FINCA Ecuador doubled its client targets to 16,000
10-fold increase in client outreach and 50-fold increase in loan portfolio

18. 2006: Exceed client target by 35%
FFPr Impact in Georgia
2006: Exceed client target by 35%
FFP
(Click for emphasis on text)
As a result of FFPr, FINCA Georgia:
More than doubled its client outreach
More than tripled its portfolio.
In 2004 disbursed a total of $7.5M. In 2007 disbursed $25M.
To put this figure into perspective , $25M is $10M more that USAID provided to Georgia for Econ Growth in 2004 ($14M).
Developed an ag. loan tailored to crop cycles
Grew its agricultural portfolio to 32% (2006)
Focused on the poor as shown by an average rural loan size of $673 USD, compared to $ USD for other rural lenders
Grew its geographic footprint from 9 to 27 offices
Doubled outreach, tripled portfolio, introduced an agricultural loan product (grew it to 32% of portfolio), grew from 9 to 27 offices

19. FFPr Impact in Guatemala
Click once for text highlighting:
In 2007 alone, FG disbursed $23M, which is more than 5 times what USAID invested in econ freedoms strategic objective, and more than half what USAID invested in all programs in Guatemala that year.
Client outreach increased 115%, loan portfolio increased 180%” 3 new offices opened in secondary cities 19

20. FFPr Impact in Guatemala
Food Security Enhanced.
In 2006, 30% of clients reported food insecurity…
only 18% reported the same in ‘08.
Jobs Created.
The number of clients with employees nearly doubled, from 8% in ’06…
to 15% in 2008.
Agricultural Economy Strengthened.
Nearly 70% of clients used their loans to build and grow ag. / ag-related business, a sector dominated by the poor.
Avg. USDA client loan size grew 29% from $406 in 2006 to $570 in 2008.
Click for sequence.
Ag sector includes production, processing and sales – value chains
Standard of Living Increased.
Daily per capita spending grew from $2.92…
to $3.17 (inflation-adjusted).

21. Overview of Microfinance
FINCA: Village Banking and Rural Applications
Case Studies: Rural Microfinance
The Frontier: New Directions & Products

22. Challenges Long-term Problem: Reaching the Remote Poor
75% of world poorest reside in rural areas
60%+ of rural families depend on agriculture (85% in Africa)
Tactical Challenges: Operational Roadblocks
Developing a sustainable service model is challenging
Dispersed and uneven demand
Poor infrastructure
Lack of client information
High risk enterprises
Lack of useable collateral
Prevailing Circumstances: Global Economic Slowdown
Donations – stable, but at risk
Investments – drying up
Clients – remittances down
increase transaction costs
increase provisioning

23. Penetration of Microfinance
68.0% Coverage
11.4% Coverage
20.2% Coverage
28.8% Coverage
* State of the MicroCredit Summit 2004

24. Future Directions & Innovations
Goal: Reach the remote, rural poor via a sustainable financial services delivery model.
Build Partnerships & Strengthen Existing Sectors and Mechanisms (e.g. Value Chains)
FFPr support in Zambia stimulated value chain project
FINCA exploring provision of financial services to the dairy value chain
Applying Delivery Technology to Reduce Costs
Using handheld / mobile technology, ATMs, Point of Sale devices to save costs while:
Expanding into remote, un-served rural areas
Reducing human resource costs (time, tasks – e.g. recordkeeping)
Improving availability of client information (performance / risk)
Providing Products to Enhance Resiliance
Provision of financial products that reduce vulnerability & build safety nets
Savings, micro-insurance, and targeted loan products (micro-energy loans)

25. Future Directions & Innovations
Build Safety Nets to Enhance Resilience
savings, insurance, targeted loan products (e.g., micro-energy)
Deploy Technology (mobile phones, ATMs, PoS)
expand to un-served rural areas
reduce human resource costs
improve availability of client information (performance / risk)
Build Partnerships & Strengthen Existing Mechanisms
provide credit to the dairy value chain (outgrowth of FFPr activity in Zambia)
Goal: Reach rural poor via a sustainable financial services delivery model

26. Thank You