Case #305
Title: Microfinance Program Aids Devastated El Salvador
Summary: Operating with the philosophy of "small solutions multiplied a million times," FINCA (Foundation for International Community Assistance) provides small, life changing loans to poor entrepreneurial women. FINCA has been extremely successful in Latin America, especially in El Salvador. Reaching more than 21,400 borrowers in over 1,0229 village banks, the program has given families throughout the entire country a means to establish a small business and to work their way out of poverty.

In January and February of 2001, El Salvador experienced two of the most devastating earthquakes in Central American history. These quakes took an enormous toll on the entire country, both emotionally and physically. FINCA borrowers sustained devastating losses as well, as many borrowers work out of their homes and lost not only their shelter but their livelihood.

?With no homes and no immediate means to bring in income, these victims of the Salvadoran quakes need access to additional funds immediately,? says FINCA El Salvador country director, Hilda Menjivar

The Village Banking methodology enables FINCA to circulate funds by reissuing loans to additional borrowers once a borrower pays her loan back. Menjivar continues, ?Since a large number of Salvadoran Village Banking Group members have lost their homes and businesses, many borrowers will be forced to break their loan cycle. This creates a `hole' in this country's loan portfolio. This interruption of service, at a time when the need for loans for rebuilding businesses is greatest, will bring new tragedy to our borrowers who are already suffering so much.?

Menjivar says ?(Additional) financial support now will help FINCA to mobilize funds to restructure the current loan portfolio in El Salvador. This allows for continued lending at current amounts to our borrowers, so they can get back in business. It will also help us provide additional funds that can be given to clients who need to rebuild their homes and businesses.
Comments: FINCA?s microfinance program provides small loans and savings services for poor entreprneurial women in Third World countries. It does this through the establishment of Village Banks which become financially self substainable and are controlled by the members of the village bank. FINCA has been involved in microfinance programs in Latin America since the 1970s. Their village bank model is unique and is now replicated in other parts of the world. When a natural disaster hits a country where FINCA has programs, their whole village bank financial system is endangered - women are not able to repay their loans on time. By making a broad based appeal for additional funds, FINCA will be able to, hopefully, recapitalize their program in order to restructure and extend loans. This will enable the loan and village bank system to continue.

Time: 1970s to present
Location: El Salvadore
Action: Economics
Setting: Third World
Extent of Action: National
Categories: Economics
Year(s):
Outcome successful for now
Source: Foundation for International Community Assistance, 4/30/2001, Funds Appeal Letter
Contacts: FINCA, www.villagebanking.org, 1101 14th Street, NW, Washington, DC 20005, 202-682-1510
Prepared By: sl, 11/01
Rating: 1