FINCA International

CharityWatch's rating of FINCA International also includes the financial activities of the entities controlled by FINCA and its subsidiaries, which are consolidated in the FINCA International audited financial statements for the fiscal year ended December 31, 2018. All intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, have been eliminated in the consolidated audit, according to audit Note 2.

According to the FINCA International consolidated audit of December 31, 2018 (Note 1, Nature of Activities):

"As of December 31, 2018, FINCA, through FMH [FINCA Microfinance Holdings Company, LLC], has microfinance operations in 20 developing countries in Latin America (Ecuador, Guatemala, Haiti, Honduras, and Nicaragua), Africa (Democratic Republic of the Congo, Malawi, Nigeria, Tanzania, Uganda, and Zambia), Eurasia (Armenia, Azerbaijan, Georgia, Kosovo, Kyrgyzstan, and Tajikistan), and the Middle East and South Asia (MESA) (Afghanistan, Jordan, and Pakistan) (collectively, referred to as 'Subsidiaries'). The Subsidiaries principally provide loans to individuals and to groups of individuals that lack access to traditional financial institutions. In most cases, FINCA loans are made to either groups, individuals, or small and medium-sized enterprises..."

Whenever practicable, CharityWatch obtains consolidated or combined audited financial statements that include all of the entities of a charity. Such an audit eliminates transactions among related entities and allows us to determine how efficiently an organization is operating on the whole. For more information on this topic, please see our section on Treatment of Related Organizations, which can be found on the Our Process page.

According to CharityWatch's July 2020 correspondence with FINCA International, FINCA received contributed services and gifts-in-kind in 2018 on which it placed a total value of $2,326,333.

[Note: CharityWatch generally excludes the value of in-kind (non-cash) donations of goods and services from its calculations of Program % and Cost to Raise $100. More information on how grades are calculated and the treatment of in-kind donations can be found on the Our Process page.]

According to the FINCA International consolidated audit of December 31, 2018 (Note 24, Notes Payable):

"The Company and its Subsidiaries have two broad categories of debt: charitable and commercial. The majority of the Company loans are sourced from international financial institutions supporting microfinance, but the Company has also borrowed from private sources. Interest rates paid by Subsidiaries range from six months' London Interbank Offered Rate, plus 450 bps up to 19.0% floating and up to 33.9% fixed in local currencies for commercial loans in countries with high perceived risk or with depreciating currencies.

"In some situations, FMH [FINCA Microfinance Holdings Company], as the parent company, may be directly liable or may offer support for loans provided to Subsidiaries without adequate credit standing, which may be in the form of a direct guarantee, letter of credit, comfort letter, or another form of credit enhancement.

"As of the reporting date, some Subsidiaries have breached covenants contained in financial agreements underlying these obligations. Management believes that these breaches are primarily due to recent global economic conditions which have affected microfinance, or in some cases due to local political and economic developments. A breach of a loan covenant could permit a lender to accelerate payment of the loan but would not permit a cross-default beyond the particular Subsidiary. As of December 31, 2018, subsidiaries in DRC, Malawi, Tanzania, Zambia, Kyrgyzstan, Haiti, and Nicaragua were in breach of financial covenants regarding loans from international financial institutions amounting to $48.8 million. As of December 31, 2018, Subsidiaries had obtained formal waivers for these breaches of covenants accounting for $8.6 million. ... Although management has obtained formal waivers of some of these breaches or assurances from lenders that the covenants will be waived, there is no assurance that these waivers or assurances will be extended indefinitely or that performance can be brought into full compliance."

According to the FINCA International 2018 tax filing, FINCA reports re: Business Transactions Involving Interested Persons, a transaction in the amount of $37,490 involving Julie Houser, "family member, CEO." The transaction is described as "employment" (IRS Form 990, Schedule L, Part IV).

Also according to the FINCA 2018 tax filing, FINCA reports re: the existence of a family or business relationship among officers, directors, trustees, or key employees (IRS Form 990, Part VI, Section A, line 2):

"The Chairman of FINCA International's board of directors, Robert W. Hatch, has a family relationship with the founder, John Hatch, who is also a Director and retired employee of the organization.

"FINCA International directors Richard Williamson, Harold Jastram, and Rupert Scofield are all members of the board of directors and minor shareholders of Cereal Ingredients, Inc. which is owned by Robert Hatch. John Hatch is also a minor shareholder of Cereal Ingredients but not a director" (IRS Form 990, Schedule O).

FINCA reports having 15 voting members on its governing body at year-end 2018, with 13 being independent (IRS Form 990, Part VI, Section A, lines 1a & 1b).

According to the FINCA International consolidated audit of December 31, 2018 (Note 29, Discontinued Operations):

"In 2017, FMH [FINCA Microfinance Holdings Company] sold its interest in Microfinance Company FINCA Joint Stock Company (FINCA Russia)."

[...]

"Results of the discontinued operations in 2017 include the net income or loss for FINCA Russia for the period up to disposition."

FINCA reports a "Loss from discontinued operations" of $(5,046,945) for the year ended December 31, 2017.

According to the FINCA International (FINCA) 2018 tax filing, FINCA reports re: Compensation, Supplemental Information (IRS Form 990, Schedule J, Part III):

Regarding severance payments to officers, directors, trustees, key employees and highest compensated employees (Schedule J, Part I, Line 4a):

"Jeffrey Flowers, former key employee, received a severance payment of $55,736 in 2018."

FINCA reports Jeffrey Flowers as VP-Regional Director, with total compensation of $261,265 in 2018 (IRS Form 990, Schedule J, Part II).

In addition, FINCA includes in its reporting for Compensation Information re: Officers, Directors, Trustees, Key Employees, and Highest Compensated Employees, "Bonus & incentive compensation" paid to 10 individuals in 2018. The reported bonus & incentive compensation amounts include the following (IRS Form 990, Schedule J, Part II):

— Andree Simon, CEO: $235,200, with reported total compensation of $614,261;
— Roman Hingorani, VP & CFO: $150,000, with reported total compensation of $505,984;
— Jeffrey Smith, Chief Audit & Risk Officer: $150,000, with reported total compensation of $452,788; and
— P. Daniel Smith, VP & General Counsel: $150,000, with reported total compensation of $507,080.