I have been on Finastride for over 5 years (1 mg/day), and during the past 2 years, I have been experiencing progressive thinning and hair loss on my stomach and chest. Although I am not confident this is related with a prolonged use of Finasteride, I will stop taking it for a while and see how it goes. Note that I am an excessively hairy guy.
Yes, Finasteride can cause reduced body and facial hair. However, if you stop taking Finasteride, you can develop what I call “catch-up hair loss” which means that all of the benefits will disappear in 3 months; if you go back on the drug, these benefits might not return.