Debt Relief in the Pandemic: Lessons From India, Peru, and Uganda

The widespread use of debt moratoria in response to the COVID-19 health and economic emergencies has succeeded in stabilizing financial systems and given borrowers all over the world immediate, if temporary, relief. Financial regulators in at least 115 countries in March and April 2020 issued special permission for financial services providers (FSPs) to provide moratoria and other debt restructuring, unleashing an extraordinary effort to reprocess millions and millions of loans. As poverty rates and food insecurity rose worldwide, the moratoria have helped millions of people, especially the more vulnerable, better manage their shrinking resources.

This Briefing examines how the debt moratoria unfolded in three countries - India, Peru and Uganda - to better understand the impact on consumers, especially low-income borrowers, and the tradeoffs regulators and FSPs made between achieving financial stability and meeting consumers’ needs. It builds on CGAP’s preliminary assessment of risks to borrowers to provide recommendations for regulators and FSPs on managing credit in emergencies in a way that gives consideration to balancing the needs of low-income and vulnerable customers.