A gradual recovery of MFIs in sync with their clients' recovery

19 November 2020 Covid-19 crisis
A gradual recovery of MFIs in sync with their clients' recovery

ADA, Inpulse and the Grameen Crédit Agricole Foundation have joined forces to closely monitor and analyse the effects of the COVID-19 crisis among their partners around the world.

Following a third joint round of survey in July that gathered the views of 108 MFIs from around the world, ADA and the Grameen Crédit Agricole Foundation present the results of a fourth round of survey, Inpulse having chosen to join the initiative every other time.

This monitoring is done on a regular basis and will be carried out throughout 2020 in order to obtain better insights of developments. ADA, Inpulse and the Grameen Crédit Agricole Foundation hope this regular and in-depth analysis will contribute to building strategies and solutions adapted to the needs of their partners, and also to the dissemination and sharing of information among the various players in the industry.

The responses were collected between October 1 and October 20 from 73 microfinance institutions (MFIs) in 38 countries in Sub-Saharan Africa (37%), Latin America and the Caribbean (25%), Eastern Europe and Central Asia (18%), Asia (15%) and Middle East North Africa (4%).

Given that previous surveys had revealed that the main financial difficulty for MFIs was the increase in their Portfolio at Risk (PAR), the new survey took a closer look at how MFI clients and their businesses were doing as this is what MFIs mainly depend on. Above all, the results of this survey confirm the gradual resumption of MFI activity, along with a reduction in most of the operational constraints initially encountered. The major remaining constraint has to do with loan recovery which explains the increase in PAR as the main financial difficulty for MFIs.

This difficulty in loan recovery may be due to external constraints, such as mobility or moratoria imposed by authorities, or to difficulties encountered by the clients themselves whose activities have not yet restarted or are slowed down by the impact of the crisis. Indeed, even if the peak of the health crisis has passed and it has affected to a lesser extent region such as sub-Saharan Africa or South-East Asia, thus allowing a number of business sectors to restart, it is all too soon to expect a return to normal. Especially the restrictive measures and the overall economic situation has negatively impacted — and still does — activities in a certain number of industries, thus restricting the sources of income of the populations. Consequently, this affects MFIs and their financial situation which is why it seems crucial to monitor closely how the crisis is experienced by their clients in order to be responsive in adapting to their needs by offering solutions allowing all of them — clients and MFIs alike — to survive this crisis.