Financial health of microfinance institutions
When COVID-19 struck, it did not take long for questions to emerge about whether the worsening economic conditions posed an existential threat to the microfinance sector. Through its global pulse survey of microfinance institutions and subsequent partnership with Symbiotics, CGAP showed that the widespread liquidity crises many feared did not materialize; however, the data did highlight the need to carefully monitor solvency in the longer term as the effects of the pandemic continue to ripple across the industry well into 2021, especially among smaller microfinance institutions. Explore CGAP’s data and analysis in the resources below.
Responding to the COVID-19 crisis effectively will require a coordinated approach among key stakeholder groups — donors, governments, development finance institutions, and private investors — to put the interests of low-income customers at the center of decision-making. CGAP has worked with development finance institutions and other stakeholders since the start of the pandemic, coordinating information on institutions’ perspectives and convening technical discussions on possible ways forward. The resources below summarize the main findings to date.
Microfinance institution responses
CGAP’s consultations with nearly 100 microfinance stakeholders revealed that COVID-19 caught many institutions unprepared, especially those that had not digitized their core operations to facilitate contactless client interactions and payments. In response, CGAP developed a crisis management roadmap for microfinance institutions and a report on debt restructuring that blends the perspectives of institutional creditors and debtors. Resources will be added on the digitization of microfinance, which has taken on increased urgency in the wake of the pandemic.
CGAP is gathering information about actions taken by governments to provide relief to borrowers and lenders, assessing their impact on MFIs and low-income customers, and working to ensure that regulatory responses incorporate best practices.
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