The impact of the COVID-19 crisis on microfinance institutions

ADA, the Grameen Crédit Agricole Foundation and Inpulse release a report summarising the results from a joint survey initiative conducted among their partner MFIs during the crisis. Learn more about the operational constraints, financial impacts and prospects for the future in this study conducted among our partner institutions.

The Covid-19 pandemic has hit the world hard, impacting fragile economies in particular, and calling on the entire microfinance sector to act in a responsible way.

As early as February 2020, the Grameen Crédit Agricole Foundation began to investigate the unprecedented effects of this global crisis on microfinance institutions (MFIs). An initial survey was launched by the Foundation in March among 75 institutions to understand how they were preparing and adapting to the impact of the pandemic.

In May 2020, ADA and Inpulse partnered with the Foundation to expand the scope of the study to more than 100 MFIs, which made it possible to cover almost all regions where microfinance is developed: Africa, South America, Asia and Europe. 6 waves of surveys were conducted since the inaugural questionnaire in March. The information was shared with stakeholders in the sector and helped to obtain a global vision of the situation and to provide more appropriate responses to it.

OPERATIONAL CONSTRAINTS
Surveys conducted throughout 2020 revealed three major difficulties: the impossibility of meeting clients in person, difficulties in collecting repayments and complications in disbursing loans.

FINANCIAL IMPACT
The operational constraints encountered have inevitably had significant financial repercussions. We observe two major consequences for almost all MFIs: an increase in the portfolio at risk (PAR) due to lower repayments, and a reduction in outstanding loans due to lower disbursements. Other problems have also arisen from time to time: temporary lack of liquidity, the impact of depreciating local currencies and a slowdown in disbursements from donors.

PROSPECTS FOR THE FUTURE
In the face of the crisis, most MFIs have shown resilience. Among the levers envisaged to return to financial stability: increasing the volume of their portfolio and the number of clients, and opening up to new products and services, and even to new markets, in 2021.