FINCA - Building tomorrow together

A couple of days back, UK retail banks got a bit of a shock when the government regulator stepped in to tell them they needed to innovate and use the latest technologies to keep their customers happy. It surprised me too. You’d think that these huge organisations would know a thing or two about customer satisfaction and the use of FinTech. But according to the watchdog, they’re not doing enough.

That made me wonder if there were things that retail banks across the world could learn from microfinance about anticipating your customers’ needs and using FinTech for their benefit.

In Africa, 77 per cent of adults remain excluded from the formal banking system. They have no hope of getting a loan from a retail bank, even if many of them could travel to the nearest one. Back in May this year, FINCA announced a collaboration with FinTech company First Access.

This partnership created the world’s largest and most sophisticated alternative credit-scoring approach by a microfinance institution. For our clients, this means that even if they have never been in the formal banking system, they can access a FINCA loan – and much faster too.

This collaboration is just the next step in our work to democratize banking and give disadvantaged people the financial services they want, and need. For a number of years, we’ve also been working in Tanzania with Vodacom, the largest mobile network operator (MNO) in the country.

Through this partnership, FINCA customers can use Vodacom’s mobile wallet platform, M-PESA, to make transactions to a FINCA account for both loan installments and savings. This arrangement enables FINCA customers to transact directly from their e-Wallet, saving them significant travel and other transactional costs typical of microfinance operations. And this is in one of the world’s poorest countries, where around 90 per cent of the very poorest people live in rural areas.

It’s this kind of big thinking that retail banks need to move towards. As a business, it’s easy to focus on what you do best and be happy with that. But if the retail banks want to grab the attention of the next generation of customers, the Millennials, then they will need to innovate, anticipate and start building products that suit their needs right now. Change and innovation should come from within and never be ordered by a government regulator.

Today, across the world in Guatemala, I had a FINCA client who has a hardware shop in the market of Chichicastenango and makes extra money working as an agent for Tigo, a telco FINCA Guatemala partners with to allow our clients to make loan repayments electronically from where they live without having to travel to our nearest branch in Quiche, 28 km distant. The world is going digital, and every business must adapt or become extinct.

I recently had the pleasure of visiting Guernsey to meet with some business-leaders, money managers, and speak with the media about FINCA. I’ve not been to the Channel Islands before so I wasn’t sure what to expect. But the first things that hit me when I landed were how beautiful the island is, and how welcoming the people are. I made a point of telling BBC Guernsey Radio how jealous I am of the people who live there! I said it reminds me of Bermuda — just less pink!

Sadly, it was a very short visit. It was a particular pleasure to be on BBC Guernsey Radio and the interview was perhaps one of the most satisfying I have ever done. If you want to listen to it then you can do so HERE! (The interview starts at 1 hour 43!)

The interviewer was fantastic – we chatted about everything from corruption to the American election, as well as (of course), FINCA, microfinance and the progress that we’ve made all around the world, alleviating poverty and providing people with the resources they need to create sustainable sources of income for themselves.

The highlight of my trip though has to be a private breakfast I held about impact investment. Guernsey is a well-known financial centre, and I wanted to talk to some experts about what their experience was of impact investing. In particular, I was interested to hear about the growing number of their clients who were starting to think about using their money in socially responsible and positively impactful ways, such as microfinance.

I have to confess, I was at first a little anxious about the appetite for this type of discussion. But I came away feeling very positive. Many of the people who attended sent me very kind emails after, saying that, although they hadn’t thought about impact investing before, it was something that they now would. And some even said it was a topic they wanted to bring up with their clients!

I know this won’t be my last trip to Guernsey. It’s a place I definitely want to visit again. There’s so much more of the island to explore. Thank you Guernsey – I’ll be back!

RS

‘You can’t go home again’, so said American author Thomas Wolfe, but I did. Not back to Levittown, Long Island where I grew up, but to Blantyre, Malawi, which I consider one of my 23 other homes, where I founded FINCA subsidiaries over the past 32 years.

The occasion was the celebration of the day, 22 years ago, when we organized the first village banks in Blantyre, with $100,000 from Rotary Clubs in Colorado, led by an orthopedic surgeon named Dr. Richard Kemme, who had a prosperous practice built on the back of the many skiers that flew down the slopes of the Rockies and collided with trees, rocks and most often with each other, breaking limbs.  Dr. Kemme came to Malawi to work on polio victims, but when he learned of FINCA’s work in Latin America from other Rotarians he decided he needed to persuade us to bring our small loans to help the women of that country. It wasn’t difficult; we had founded FINCA Uganda just a few months before it and was running beautifully, so on one of my trips there I just hopped on a plane from Entebbe to Nairobi and from there down to Blantyre.

In those days, raising money for FINCA was easy, and on my maiden trip I came back with two other big grants, one from the World Bank and one from USAID.   In a week, with Dr. Kemme’s help., I recruited a board, hired a director and a credit officer, and organized four village banks.   On this trip, I carried with me the coveted “Silver Tree” award, to recognize FINCA Malawi for having reached 50,000 clients.

Man, it was so easy back then.  Today, microfinance is complicated, we do it through regulated banks and finance companies instead of NGOs, we have stiff competition from other banks, payments companies, telcos, retailers, even public utilities, in some cases.  Our managers mostly come from the banking sector, not the Peace Corps, like me.

I was only in Blantyre for two days, but we packed in the inauguration of our new branch, which is enabled to take savings, a celebration of our 20th anniversary, and, of course, a visit to a village bank.   The Deputy Governor of the Reserve Bank of Malawi was on hand to open the first savings account, which went off without a hitch, except that our core banking system failed to print his receipt.  The entertainment at our dinner was provided by a dancing troupe of convicts from the nearby prison farm.   (They were close to their release dates; that’s why they didn’t run after the show)  As they danced, you could feel the pent up energy from their years of confinement released into the room.

The village bank was located in a slum on the outskirts of Blantyre, a city which has grown up from the small burg I visited 22 years ago.   The roads through it are dirt and gouged with rivulets from past rains, and gansta rap blares from sound systems in the neighborhood shops.   The women are waiting on a large sheet of plastic so as to not soil their colorful red and maroon dresses emblazoned with the FINCA tree brand.   Considerate of their guest, they face into the sun while I have my back to it.  I ask them to tell their stories.   One woman is a serial entrepreneur; she buys maize at harvest time, stores it and then sells it during the “hungry season” six months later at three times the price.  She also as a general store, and she shows me a blouse that she has hand embroidered constituting her third source of income.   Another woman describes how, with the income from her dried fish business, she has been able to educate her three children, one of whom is now a doctor, another a teacher, and the third a mechanical engineer.   Looking at the humble dwellings with their brick walls and tin roofs, it is obvious what these women’s priorities are:  they invest in their children.

But the one I found most interesting is a younger mother the women of this village bank has adopted.  In a departure from our usual credit policy, this woman had no existing business when she joined the group and got her first loan; the President of the group convinced the others to guarantee her loan and told them not to worry; she would mentor her.   It worked, and now this young mother was on her third loan and had a thriving business selling used clothing.   As our SUV rocks back down the dirt road out of town, I find myself swaying to the music blaring the sound systems, Dr. Dre from the sound track from Straight Outta Compton.

This is FINCA:  Straight Outta Malawi.  Financing women micro entrepreneurs in poor neighborhoods around the world, helping them help themselves and their families.   The model is still dead simple, but it works.

Billions of people around the world remain financially excluded.

Without savings, they are unable to build up the money they need to pay for their children’s education; without loans, they are unable to open and grow their businesses; and without insurance, they are constantly at risk of losing everything.

New technology — from mobile to app-based banking — now provides us with the tools we need to provide more people in ever more remote locations with financial services.

But there are also risks. Without safeguards — such as credit checking facilities and providing these people with lessons about financial literacy — there is a real risk that we could leave a whole generation of people in the developing world in debt.

That’s why last week I co-authored a column for the Financial Times with Andree Simon, my Co-CEO at FINCA, on the promises and pitfalls of the next era of financial inclusion.

Read now

In August I had the opportunity to visit our subsidiary in Nicaragua, and I was thrilled to see what a difference we are making there.

It was great to be able to spend time with our team in Nicaragua, ably led by Klau Geyer, our CEO, and also visit some of FINCA’s clients to see and hear how our financial services are enabling the growth of their businesses.

As always, I came away inspired by the enthusiasm and dedication of our staff, and their committment to helping our clients build a better future for themselves and their families.

I was especially moved by a client named Julia Ramirez, who despite her own very modest circumstances chooses to help the children of less fortunate families in her community. Like so many of our clients, Julia has overcome adversity in her personal life and presents a brave and generous face to the world.

I wanted to share some of their stories with you, so I made a short video blog of my time in Nicaragua. I’d love if you spared a few minutes to watch it.

My PR guy called me up to nag me the other day.

“You’re not blogging enough. You’re supposed to be a ‘Thought Leader’. It’s difficult to position you as such if you aren’t having any thoughts. People will begin to think of you as – “

“A ‘Thoughtless Leader”?”

“At best.”

I tried to give my usual excuse. I’ve been really busy lately.

“That’s what they all say. Look, I can’t do my job if you don’t do yours.”

“That’s right, put it on me.”

“The buck stops there.”

“One more cliché and I’m hanging up.”

But he beat me to it. Leaving me no alternative but to come up with a thought.

I went to Kansas City for a fundraiser last week, and afterwards met with two local entrepreneurs, one in the financial sector and the other of the social variety. Contrary to what some think, a ‘Social Entrepreneur’ is not someone who spends little time working and most of his time partying. The social entrepreneur was Gary White, CEO of Water.org, with whom FINCA is considering partnering in a water and sanitation project in Uganda. The financial entrepreneur was Bob Regnier, President and CEO and Bank of Blue Valley and a FINCA supporter. Bob is a ‘playah’ in the Kansas City entrepreneur space, financing entrepreneurs through both his bank and promoting new entrepreneurs through the Regnier Institute for Entrepreneurship and Innovation at the University of Missouri-Kansas City. Also in attendance at the fundraiser were the Hatch brothers, Bob and John, who co-founded FINCA back in 1984. We talked about some of the exciting new things going on in our organizations, both in the heartland of the U.S. and internationally, where FINCA and Water.org work.

FINCA and Water.org got together a while back when we both realized that working together in Uganda made sense, given that Water.org has the engineering and technical know-how to connect more poor people in Uganda to clean water and sanitation, and FINCA has a client base of over 50,000 families who need these services. Add to that the fact that FINCA Uganda, a microfinance company, can bring financing to the table and you have the makings of an interesting partnership. We have undertaken a feasibility study and are working on developing a pilot project to see how this could work.

The Uganda collaboration is part of a wider effort to bring affordable products and services in the areas of renewable energy, education, healthcare, and agriculture to our clients called FINCA Plus. After 30 years of providing affordable financial services to low income families in 23 countries of Latin America, Africa, Eurasia, South Asia and the Middle East, we decided to leverage that experience in these other non-financial sectors. Since we aren’t experts in these areas, we have decided to partner with other social enterprises that have developed successful products and services and are looking for ways to scale them. In order to do that they need money, and that’s where FINCA can help. It helps that we also have a client base of 1.8 million potential customers.

Well, that’s my 500 words for today. You happy, Paul?

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