By: Abby Madan
February 21, 2014 – Last week, Rupert Scofield, President and CEO of FINCA International, visited UC Berkeley’s Blum Center for Developing Economies to share his personal journey and the remarkable story of the FINCA microfinance network, which has provided much-needed financial services to low-income entrepreneurs around the world since 1984.
Frequently referred to as the ‘World Bank for the Poor,’ FINCA is credited as being one of the pioneers of modern day microfinance. Under Scofield’s leadership, the organization has grown to serve over 1 million low-income entrepreneurs in 21 countries. Key to the organization’s success was a willingness to take chances and a commitment to building solid partnerships.
Scofield’s involvement with FINCA dates back several decades. After graduating from college, Scofield took a chance and deferred his military draft to Vietnam to work in Guatemala with the Peace Corps. It was while working on an agricultural project in rural Guatemala that Scofield witnessed how small-scale loans could transform lives and contribute to social good.
It was an experience that would define the rest of his life.
Memory of the successful lending initiative in Guatemala stayed with Scofield through several subsequent jobs, eventually inspiring him to co-found FINCA, which began as a small NGO serving communities in Latin America. After years of pitching their vision to investors and development agencies, FINCA secured their first major backer. USAID awarded FINCA $10 million to implement their innovative village-banking model, which relies on a system of social pressure and support and requires clients to build credit by saving 20% of their profits.
The village-banking model has since been replicated by many organizations, as it is seen to help transform how the poor find a foothold in local, national and global economies.
During his talk, Scofield described the resistance that often challenges the pursuit of innovation. Although FINCA’s efforts were successful in Latin America, any attempt to expand their initiatives to other developing regions was met with skepticism. Uncollateralized lending was thought too risky and region-specific to be successfully implemented elsewhere. But Scofield followed the advice of his long-time friend Muhammad Yunus: stick to what you know has worked.
Scofield partnered with socially responsible investors and pushed ahead to test the model in new regions, resulting in FINCA’s successful expansion to communities in Africa and Eurasia in the 1990s, and to the Middle East and South Asia in the 2000s.
FINCA is now launching FINCA+, an initiative to identify scalable and sustainable human and social development interventions. In Uganda, for example, FINCA has introduced a low-cost solar lighting device that can also charge cell phones.
FINCA’s story is an uplifting one, particularly at a time when the microfinance industry has struggled with allegations of loan sharking and reaping profits from poverty. “Not everyone who calls themselves a microfinance organization is like FINCA,” Scofield acknowledged. Many of the major microfinance groups, including FINCA, are now banding together to establish rules that protect clients.
Scofield also cautioned against treating microfinance efforts as an end-goal in global development and poverty reduction.
“This is not a solution to poverty for everyone,” he said. “This is a solution for survival.”