COVID-19 Threatens the Microfinance Sector and the Livelihoods of Those We Serve: Building a Coalition for Collective Action
This post is part of the FinDev blog series "A Call to Action: How Donors, Investors and Policymakers Can Help MFIs Survive COVID-19" in partnership with the Center for Financial Inclusion.
There is no individual action that can address the effects of COVID-19 on the lives and livelihoods of the base of the pyramid (BOP). Collective action is needed.
Over the past couple of months, we have seen unprecedented coordination among investors, donors, and other industry actors all seeking to support the BOP and the institutions that serve them. We are building a coalition so that these institutions that serve the poor with financial services also have a voice in the COVID-19 response.
Under the leadership of Andrée Simon of FINCA Impact Finance, a new coalition is forming to raise the profile of microfinance organizations as critical players in the response to the unfolding crisis. The coalition began under the umbrella of the Partnership for Responsible Financial Inclusion (PRFI) which is housed at the Center for Financial Inclusion (CFI), but quickly extended far beyond PRFI membership. Members of the coalition include:
Collectively, these organizations and their partners and investees serve more than 80 million active customers, 69 percent of whom are women. Each of these institutions has expanded their capacity to deliver financial services - especially in mobile and agent banking - and strengthened their infrastructure through technological innovations and digital communications, with the aim of accelerating responsible financial inclusion.
Most importantly, the microfinance institutions represented in this coalition operate in the corners of the world that are often hardest to reach. We collectively operate or support microfinance partners in 23 of the 47 least developed countries.
But more than microfinance, many of the coalition partners are also directly engaged in the delivery of additional services including education, agriculture, health and energy – reaching tens of millions of clients with other forms of assistance beyond the provision of financial services.
If leveraged strategically, the infrastructure of this group of providers could save millions of livelihoods. First, we offer critical access to credit, savings and other financial tools – increasingly through digital means – to tens of millions of people around the world who do not have formal employment opportunities. These financial services enable clients to operate small businesses that are frequently more resilient than the formal sector in the face of severe economic shocks, and which will be even more needed in a post-pandemic world in which formal employment has been decimated.
Second, these institutions collectively constitute an essential “last mile” network, meaning we have deep reach into communities in which individuals might otherwise miss out on support because of limited access, literacy, infrastructure or technology connections (where digital experience is limited and novel). Combined, these elements position microfinance as a critical tool to not only mitigate the economic impact of the crisis, but also to accelerate recovery from it.
This coalition has come together to outline what we believe is needed to support and protect our customers, now and into the future. We will articulate our collective position over the course of three blogs in which we outline our calls to action to investors, donors, and policymakers.
We invite other microfinance networks and organizations to join this coalition and to make their voices heard.
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This is an excellent initiative. We must fight the odds throughout these unprecedented times and we are even stronger when we are together. In a pandemic like this, you don't have much time to take decisions as they got to be quick and it's now or never. Such a coalition will definitely help MFIs and countries to learn from each other quickly and will make us better combat ready.
At a time like this, it difficult for Microfinance Institutions to survive because they serve small/petty businesses and people who are at the bottom of the income pyramid (poor and deprived). Already, these people and their businesses are the worst affected in this trying time of COVID-19. Therefore, it is fitting for government and International Development Institutions to provide MFIs with stimulus packages that will rescue those institutions from total collapse.
At the same who will come to the rescue of the human beings in MF industry from victimization of COVID 19 pandemic .
In hast any economic resurgence without health protection safety is more harmful
I am sure many more associations in Latin America would join if this call to action were shared in Spanish.
Excellent. Thanks for thinking about MF clients.
Thanks you David for the support to the views on welfare concerns of poor MF clients during the Corona impact period
This is a critical solution for business continuity of MFIs all over the world. This is particularly important because privately funded MFIs. The clients of MFIs are hard hit by the lock down measures of their governments and their business that has been funded by MFIs is almost going into extinction. MFIs themselves are totally excluded by most Central Banks of their country (at least in Nigeria)from any form of buffer that could help in refinancing their clients at very low interest rate. I really hope that MFIs that are partners to members of this Coalition benefit from this bail out plan. Failure to achieve this will keep increasing the poverty and more micro clients will fall below the poverty line and milestones already achieved in Financial Inclusion will regress.
Economic revival package should not confine with fresh dose of micro credit and recovery collectively or individually in MF sector without a social oriented package for nurturing on health care awareness and for adherence of mandatory norms of preventive measures namely social distancing Face mask, hand wash by the poor clients in the last mile. Any assumption on this factor is dangerous.The latter which ensures the basic survival of the clients from Corona SHOULD PRECEDE the former one or simultaneously with it to create a resilient eco system from interdisciplinary perspectives. Other wise another MF crisis is imminent..
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