Exploring the Linkages between Food Security and Microfinance: A Study by FINCA in Zambia and Guatemala

As of the end of 2010, FINCA had over 700,000 active clients and a total active loan portfolio of over $300 million. The organization launched a Strategic Learning Initiative (SLI) in 2010 to better understand the link between access to microfinance and food security by surveying its new and continuing clients in Zambia and Guatemala. The study, conducted by TANGO International, looked at various measures of food security and explored the connections between food security, livelihoods, and access to finance. The study found that access to financial services is correlated with improved dietary diversity and indicated some ways in which food security could be enhanced. FINCA is now in a position to incorporate food security into its programming and social performance framework. The study was situated in Guatemala and Zambia, two countries where populations are affected by food insecurity. FINCA has been operating in each country for ten years or more and had a combined client base of over 41,000, as of the end of 2010. The average loan size in Guatemala was $415 and in Zambia $315. Two random samples of approximately 300 clients were taken in each country, with the first sample consisting of new clients and the second sample consisting of continuing clients. The study found that the vast majority of both new and continuing clients are food secure according to most metrics, although the continuing clients were much less likely to have to resort to coping strategies during times of distress. In Zambia, 87% of households reported always having food and in Guatemala 95% always have food in the house. However, signs of vulnerability to food insecurity appear in the type and frequency of coping strategies employed, and for all groups there remain opportunities to increase dietary diversity and the quality of food consumed.