Finca microfinance

finca microfinance

What sort of profit does FINCA anticipate bringing in following the transformation?

What kind of returns will your partners receive and over what time period?

Will FMH pay out dividends to investors?

What is FINCA Microfinance Holding Company LLC (FMH) and why did you create it?

After a 25-year proven track record, FINCA developed an exciting new growth model to serve millions more people in need of life-changing financial services. In order to gain access to the capital needed to strengthen our offerings for current clients and reach millions more people, FINCA International, Inc. launched FMH, a new subsidiary of FINCA International.

FMH is a first-of-its-kind, socially responsible investment partnership for microfinance which brings in equity partners from among a small number of carefully-selected, socially-responsible investors who share our poverty alleviation mission.

How is FINCA different from FMH?

Based in Washington DC, FINCA International is the parent of the 23 operating Microfinance Institutions (Subsidiaries) located on five continents, and manages these global microfinance activities through a holding company that allows us to bring additional resources to our mission.

FINCA International, Inc. is a non-profit entity that raises funds to drive research and development that enhance microfinance services; create new services that enhance the lives of clients; carry out demographic, market, and social research that allows us to better understand and measure benefits to clients; and maintain FINCA’s ownership level in FINCA Microfinance Holding Company. FINCA’s current leadership manages the nonprofit, the holding company, and the network to ensure mission compliance.

FINCA Microfinance Holding Company LLC (FMH) is a subsidiary of FINCA International, Inc. that leverages the funding of socially-responsible partners like the International Finance Corporation, an arm of the World Bank, who share FINCA’s mission of providing services to low-income people so they can increase their employment, incomes, and standard of living. FINCA’s country-based subsidiaries are held by FMH, creating a global network of shared expertise.

Who are the investors?

We are honored and grateful to be joined by six outstanding partners who share our mission. IFC (International Finance Corporation), a member of the World Bank Group; KfW, the German development bank; FMO, a Dutch development bank; Zurich-based responsAbility Global Microfinance Fund; Triple Jump, a Netherlands microfinance investment firm; and Netherlands-based Triodos Bank.  All of these investors are long-term supporters of FINCA.

The partners’ initial investment was $74 million, with an expected total investment of $93 million over a three-year period.

The historic transaction closed on December 6, 2011. FINCA and its partners provided more than $200 million in equity investments, which includes the contribution of FINCA’s 22 subsidiaries, and creates a platform for future capital as the network grows and expands.

In October 2013, a second round equity raise of approximately $48 million was signed with four of FMH’s current equity partners, the IFC, KfW, FMO and responsAbility, and with the addition of long-time FINCA partner Triodos.

An added benefit of partnering with these carefully-selected investors is the expertise that FINCA can tap into to enhance our position with governmental institutions around the world, as well as the technical assistance that may be available to our subsidiaries.

What are the terms of the investment?

FINCA International, Inc. holds a majority stake (66.3%) in FMH, ensuring the holding company’s continued focus on the FINCA mission. This “golden share” gives FINCA veto power over any mission changes. FINCA also holds a majority of the board seats.

FMH owns all FINCA subsidiaries so that our network remains intact, allowing for continuous sharing of expertise among the group. FINCA and FMH will benefit from the IFC’s and others partners’ technical assistance support and expertise.

FINCA’s senior leadership continues to manage the

network and FMH, but now has access to greater resources.

Why can’t this be done without investors?

FINCA launched FMH to gain access to the capital needed to expand our offerings for current clients, and reach millions more people with life-changing financial services.

Donor funding is still essential, but our network has reached the size where donor funding alone does not meet the demand we have for our services. In the past, we have borrowed from development institutions, making sure we remained conservative in managing our financial risks. Equity capital provides funding that can allow us to grow without undue risk of being too highly leveraged.

The investors were selected based on rigorous standards. We are working only with those who support our mission, share our double-bottom line approach of maximizing social benefits with financial gain, and who have long-standing lending relationships with FINCA.

How will you use the funds raised?

The creation of FMH has concrete benefits for our clients:

  • A substantial number of new people will be reached with FINCA’s services
  • Clients will receive expanded and new financial and life enhancement services, like savings accounts, that can be used to build safer, more secure livelihoods

In addition, FMH will create efficiencies in the FINCA network that will reduce costs and improve delivery of services.

What are the new services you will offer?

While FINCA’s current offerings vary from country to country, FMH makes it possible for us to greatly expand the array of products and services available to our clients, based on their identified needs. FINCA offers an array of financial products tailored to local needs: Individual, agriculture and business loans, savings accounts, money transfers, mobile banking and more. In each country, we offer products and services tailored for our clients.We plan on expanding into new countries to serve even more clients.

In addition, FINCA International will develop new offerings through partnerships with other organizations to bring new life-enhancement services to our clients through the FINCA network, such as health care, clean energy, housing and education.

Are there protections in place to ensure the funds are used prudently?

Enormous care was taken to protect FINCA’s poverty alleviation mission during the creation of FMH. All of the equity raised will go into FMH, and these investments will be used to support our Subsidiaries’ operations. No employee of FINCA will be allowed to invest in, or benefit financially from, FMH. This provision has been mandated by the governing bodies of FINCA, and has been built into the documents creating FMH. This absolute ban will ensure that employee motivation will continue to be aligned with the interests of our clients and our mission, rather than by financial gains.

FINCA has also established a Social Performance Audit Committee of the Board, a first-of-its-kind body in the industry, to identify and track social performance indicators on an ongoing basis to ensure that FINCA remains focused on client welfare and protection; increases transparency with partners; and develops new products that are tailored to enhance client well-being.

What sort of profit does FINCA anticipate bringing in following the transformation?

Turning a profit is not our motivation, but it will help attract new investments for FMH, which we believe strikes the right balance between attracting capital and protecting the priority of our charitable mission.

What kind of returns will your partners receive and over what time period?

FMH is an opportunity open only to socially-responsible investors whose missions explicitly align with FINCA’s own goal of alleviating poverty in the developing world, and who were willing to prioritize that goal over maximizing financial returns.

Will FMH pay out dividends to investors?

Source: fmh.finca.org

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