Microfinance Will Eliminate Severe Poverty – John Hatch
Tuesday, January 31, 2012
Dr. John Hatch is the founder of FINCA and the creator of Village Banking—a unique and influential method for delivering small loans, savings, and other financial services to the poor worldwide. Over 22 years with FINCA, Hatch served as president, and as chief of party for programs in El Salvador and Guatemala. He retired as FINCA’s director of research in 2006.
Hatch continues as a FINCA board member, advisor, speaker, lecturer, and fundraiser. He is continuing his research on the impact of Village Banking and is active in FINCA’s annual student symposium and research awards competition.
In an exclusive interview with Microfinance Focus, he discusses the future of microfinance industry and FINCA’s efforts to stay committed to its social mission.
Microfinance Focus: What are some of the factors that you think contributed to the accomplishments of FINCA?
John Hatch: FINCA has been extremely successful in terms of excellent management of its programs. I think it is the best managed microfinance program in the industry because we have been blessed with an outstanding Board of Directors and over the years we have developed very strong field staff team. From the very earliest times there has been a strong rigorous focus on loan repayment discipline and on administrative systems which allow us to monitor late payments very carefully. We have five or six programs with hundred percent repayments. Average payment for all our programs is in the high nineties.
When a client has not made a payment, our management knows about it within six or eight hours and a credit officer will be talking to this client within 24 hours. This type of oversight has created a great discipline among our clients. It is one of the reasons why external donors and investors have trusted us with their money. They see that our programs are extremely well managed. I think our management quality is our strongest suit.
Microfinance Focus: FINCA offers microfinance services in post conflict societies. Tell us about your experience in doing so.
John Hatch: What we have observed in most post-conflict societies is the destruction of a lot of social capital. People stop trusting each other and as a result it becomes harder for us to use the group credit model which we have been known for in other parts of the world.
Our primary methodology is called Village Banking where we create groups of 18-25 women borrowers, similar to Grameen lending model. But what we found in post conflict societies is that people don’t know that many neighbours they can trust.
So the group size in those kinds of setting has shrunk down to almost a solidarity group of 4-6 members. That is the best we can hope for in some of those societies.
The second thing, especially in former Soviet Union countries is the zero interest on the part of borrowers in Savings. They have lost their faith in banks and in savings. The only kind of service they want from the program is credit.