WHO’S WHO IN MICROFINANCE: John Hatch, Foundation for International Community Assistance (FINCA)

Microfinance-pioneer Dr. John Hatch is the founder of the Foundation for International Community Assistance (FINCA) and the creator of Village Banking, a highly successful method of delivering microfinance services to the poor through neighborhood savings and loan cooperatives called Village Banks.

Dr. John Keith Hatch was born on November 7, 1940 in Pullman, Washington. He has a BA in History from Johns Hopkins University, and received an MA in Economic History, and a PhD in Economic Development from the University of Wisconsin-Madison.

Dr. Hatch has spent his entire professional career serving programs that assist the world’s poor. As a member of the Peace Corps from 1962 to 1964 in Colombia, he served as a community development volunteer, and then as a regional director supervising 65 volunteers at an agricultural cooperative in Peru from 1965 to 1967. It was his time spent in the Peace Corps that sparked his interest in sustainable development.

After his Peace Corps service, Dr. Hatch entered graduate school at the University of Wisconsin where he received a Fulbright grant to conduct research for his doctoral thesis in Peru, spending 18 months as a hired laborer working for subsistence farmers and documenting their traditional agricultural practices.

In 1976, Dr. Hatch and two partners formed Rural Development Services (RDS), an independent consulting firm, where he developed the Village Banking model in 1984 upon which FINCA international was founded.

The Village Banking model is essentially a local savings and loan cooperative. A Village Bank receives a group loan from a microfinance organization, which then can be used to disburse, invest, and collect loan capital as the group cooperative sees fit. The loans are guaranteed by the Village Bank as a group, allowing individuals to borrow collateral-free working capital for their micro-enterprises.

Previous to Village Banking, outside loan organizations held most of the decision-making power. Dr. Hatch’s breakthrough idea was to put local people in charge of their own banking. Dr. Hatch was convinced that village communities would make the best managers of their own banking systems. Village Banking is designed to reach the poorest of the working poor, creating jobs, raising incomes, and building assets.

Another important factor that distinguishes the Village Banking model from other solidarity group finance programs is that Village Banking aims to develop permanent community institutions that control their own finances and do not depend on loans from external organizations. Village Banking emphasizes savings, using members’ deposits to finance loans rather than receiving group loans from an outside source.

Because Village Banking is done in groups of thirty to sixty members, it can effectively be used even in sparsely populated rural areas with very little infrastructure, thus it is widely regarded as an effective method of reaching even the bottom-rung extreme working poor. Village Banking gets its strength from community loyalty developed within the groups.

As a result of the Village Banking model’s success in Latin America through the 1980s, NGOs around the world began adapting Dr. Hatch’s method. In the late 1980s, Dr. Hatch assisted numerous NGOs including Freedom from Hunger, Katalysis, CRS, CARE and Save the Children.

Dr. Hatch considers himself to be a social entrepreneur because he puts the social bottom line above the financial bottom line in his microfinance endeavors. He measures the success of his programs by how much positive social impact they generate such as the increase in employment in a region, number of children in school, and family well-being.

The Village Banking model is directed towards women with families, since they make up the majority of the world’s poor. Dr. Hatch believes that targeting mothers is the most effective way to improve the well-being of children. Currently, seventy percent of FINCA’s clients are women.

In recent years Dr. Hatch has developed an innovative way of measuring social impact through the creation of an internship program involving the use of handheld personal digital assistants (PDAs) where interns chose two Village Bank countries over a summer to interview borrowers using a fifteen-minute long questionnaire programmed by FINCA into the PDA. This portable, inexpensive method of data collection proved to be a highly successful method of gathering useful information regarding the Village Bank method’s social bottom line. Using data gathered at the PDA internship’s launch in the summer of 2003, Dr. Hatch was able to accurately quantify the social impact of Village Banking on 3,361 clients in eleven different countries. He discovered that his Village Banking clients were earning 130 percent more than non-client poor, also keeping more of their children in school, with improved over-all living conditions.

In 2006, after twenty-two years of service, Dr. Hatch retired from FINCA, but remains a member of the board of directors as secretary and historian, and continues as an advisor, speaker, lecturer, and fundraiser, as well as remaining actively involved in research on the impact of Village Banking. Dr. Hatch is also involved in FINCA’s annual student symposium and research awards competition.

He currently resides in Santa Fe, New Mexico, where he is campaigning with the Alliance of Students Against Poverty (ASAP) which he co-founded in 2004 with the goal of eradicating global poverty by 2025 through a “mega-fund” raised, managed and distributed by students to support self-help efforts of the world’s poorest families.

Dr. John Hatch has published four books on the farming practices of subsistence farmers previous to founding FINCA:

Corn Farmers of Motupe: A study of traditional farming practices in northern coastal Peru, 1976
Our Knowledge: traditional farming practices in rural Bolivia: a textbook by subsistence households, 1980
Peasants Who Write a Textbook on Subsistence Farming: report on the Bolivian traditional practices project, 1981
Second External Evaluation of the Bolivian Food For Development Program (PL480-Title III): its institutional performance and impact on farmers,

He is also the co-founder of the Global Microcredit Summit.

By Melissa Duscha

Additional Resources:

Alliance of Students Against Poverty

FINCA Afghanistan

FINCA Internship Handheld PDA Social Impact Results

FINCA International Annual Report 2006

Foundation for International Community Assistance (FINCA) International

Interview with John Hatch: Social Edge