Ensuring the survival of microfinance institutions during times of crisis

Ensuring the survival of microfinance institutions during times of crisis

May 1, 2020

The crisis we are currently going through will have devastating economic consequences in developing countries and for those who are most vulnerable, such as women and young people.

While the inclusive finance sector has a key role to play in reducing the negative impacts of the crisis on these segments of the population, many microfinance institutions (MFIs) may themselves be unable to survive this crisis without support measures tailored to the situation. Immediate and concerted efforts are therefore essential on the part of regulators, lenders, investors and NGOs, in order to:

  • enable MFIs to remain solvent by: recognizing the impact of the crisis on MFIs and offering them a temporary easing of the rules, conditions and terms imposed on them when needed; supporting them in the development of business continuity plans; offering them informed support in managing their liquidities; and preparing their recapitalization so that they will be in a position to start lending again and play their critical role in the recovery.
  • inject capital into the real economy through MFIs: present in the areas of climate protection, poverty reduction and gender equality, impact investments play a key role in the economies of developing countries and provide the real economy of these countries with the funds they urgently need. It is precisely during periods of crisis that households and businesses need money to continue operating.
  • promote the implementation and use of digital financial services: these services are a significant driver of development, an accelerator of financial inclusion, for women and young people in particular, and an element that supports social distancing and the lockdown.
  • accelerate and expand the transfer of expertise remotely: through the use of learning and training platforms.

It is therefore essential that development actors and microfinance institutions work together to have an effective, sustainable impact, both short and long term, on the resilience of the inclusive finance sector.