COVID-19 The impact of the crisis on microfinance institutions - Analyses and perspectives - Fondation Grameen Crédit-Agricole
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COVID-19 The impact of the crisis on microfinance institutions. Analyses and perspectives.
• CONTENTS •
COVID-19
The impact of the crisis
on microfinance institutions.
Analyses and perspectives.
4 CROSS VIEWS 24 Impact story N°1
Attadamoune
38 PROSPECTS
5 Editorial Micro-Finance FOR THE FUTURE
6 Executive summary 25
Impact story N°2 39 A matter of urgency:
OXUS Kyrgyzstan protect solvency
7 PARTNERS (OKG) 39 A key word: resilience
8 Grameen Crédit 41 Opening up to new
Agricole Foundation 26 FINANCIAL markets
10 ADA (Appui au IMPACT 44
Impact story N°5
Développement MDB Bénin
Autonome)
27 A strong impact on
portfolio development 45
Impact story N°6
12 Inpulse Investment 32 A structural increase Lider
Manager
in credit risk
35 A crisis with diverse 46 LESSONS
14 METHODOLOGY effects on clients LEARNT
36 Impact story N°3
16 OPERATIONAL Komida 48 APPENDICES
CONSTRAINTS 37
Impact story N°4
17 A gradual recovery MF Prisma
19 A real capacity
for adaptation
• EDITORIAL •
Eric Campos,
Managing Director,
Grameen Crédit
Agricole Foundation
& Head of CSR,
Crédit Agricole S.A
Laura Foschi,
Executive Director,
A s 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 pande-
ADA mic. In May 2020, ADA and Inpulse partnered with
the Foundation to expand the scope of the study to
Bruno Dunkel,
General Manager, more than 100 MFIs in four continents: Africa, South
Inpulse investment
Manager
America, Asia and Europe.
As part of the monitoring of our partners’ activities,
we receive regular information on their financial and
non-financial performance. These normative elements
have been complemented by 6 waves of surveys
conducted since the inaugural questionnaire in March
2020. As information sharing is essential in these
KWFT (Kenya) ©Godong
uncertain times, the results have been shared with a
wide range of stakeholders in the sector: international
development agencies, our peers, specialized infor-
mation platforms, the public. These results illustrated
the pronounced resilience of the sector and the adap-
tability of microfinance institutions, which played a
CROSS
crucial role in cushioning the effects of the crisis on
their clients and continuing to finance local
economies.
VIEWS Nonetheless, the crisis is not over. We will continue
to monitor its development with caution and res-
ponsibility as our three organisations advise and
guide more than two hundred microfinance institu-
The Covid-19 pandemic has hit the world hard, impacting fragile tions that rely on our support. This is why we have
economies in particular, and calling on the entire microfinance sector mobilized, together and in consultation, to support
to act in a responsible way. their activities in favour of a rapid and inclusive eco-
nomic recovery.
4 T HE IMPACT O F T HE CRISIS O N MICRO FIN A N CE INSTITU TIONS COVID-19: ANALYSES AND P ERSP ECTIVES CROSS VIEWS 5
• EXECUTIVE SUMMARY •
ANALYSES AND
PERSPECTIVES
All microfinance institutions and their clients have
seen their activities severely disrupted by the Covid-19
pandemic. The effects differ depending on
demographics, country, region, profile or size,
but some trends can be identified.
O
perationally, the measures impeding free The data collected shows that MFIs in the Middle
movement have had a profound effect East, North Africa, and Latin America and the Caribbean
on the disbursement of microloans, the have been more significantly affected, with a higher risk
collection of repayments and the ability ratio, a larger drop in the number of active clients, and a
to meet clients. decline in outstanding loans. In contrast, the performance
of the Europe and Central Asia region remained good,
During the summer of 2020, there were tentative with a controlled risk level, a limited decrease in the
signs of recovery, but activities were constrained again number of active clients, and stable portfolios. 80% of
in the autumn by epidemic outbreaks in some countries. MFIs in Europe report a gradual return to their pre-crisis
By the end of the year, the number of MFIs in difficulty activities, which again reflects a good adaptability. In
had fallen sharply, in part thanks to the many adaptive sub-Saharan Africa, a greater return to pre-crisis levels
measures they had taken over the months. of activity confirms the growth trend over the year, in
terms of both volume and number
Despite the (sometimes partial) of clients.
lifting of restrictions, the context
remains unstable. MFI clients conti- MFIs are still At the end of 2020, almost half
nue to suffer the economic conse- of the institutions recorded an in-
looking to the
Pahal (India) ©Pahal
quences of the crisis, which leads crease in provisioning expenses to
to a significant increase in credit future, reflecting cover the risk of default on overdue
risk among our partners. Similarly, loans. Client difficulties continue in
the outstanding loans of MFIs de-
on strategic 2021 and are reflected in the balance
clined in the first part of 2020, issues sheets of MFIs. For example, almost
mainly for three reasons: operatio- half of the institutions surveyed say
nal constraints, greater caution and that they will need recapitalisation
PARTNERS
less appetite for credit risk, and a in 2021 if they are to return to their
temporary drop in demand for new pre-crisis activities.
funding on the part of clients.
Ultimately, discussions with our
The return to growth in outstanding portfolio in the partners show a return to optimism for the majority of
second half of 2020 is partly attributable to the arrival them. MFIs are still looking to the future, reflecting on
of new clients but above all by an increase in the average strategic topics such as launching new products, digita-
loan size. The analysis to institution size and by region lising their processes and turning to other sectors such The Grameen Crédit Agricole Foundation, ADA and Inpulse:
allowed us to discriminate and better understand reac- as agriculture, savings, targeting women, green products three players in the inclusive finance sector harbouring
tions to the crisis based on these criteria. Smaller insti- and digital transition. For this to happen, the inclusive
a daily commitment to the fight against poverty.
tutions appeared to face more difficulties to adapt due finance sector will need to be strongly mobilised to advise
to their lack of resources in terms of human expertise and support them on the road to recovery.
and management tools (cash flow and risk).
6 CROSS VIEWS T HE IMPACT O F T HE CRISIS O N MICRO FIN A N CE INSTITU TIONS COVID-19: ANALYSES AND P ERSP ECTIVES 7
• FOCUS •
76
MICROFINANCE
€82.1 M
OUTSTANDING
UNDERSTANDING,
WORKING AND ACTING
INSTITUTIONS PORTFOLIO MONITORED
SUPPORTED 1 IN MICROFINANCE
TOGETHER IN A
Mec Fadec (Senegal) ©Godong
RESPONSIBLE WAY
Key figures - March 2021
91%
SMALL AND
7.3 M
CLIENTS OF THE
MEDIUM-SIZED INSTITUTIONS
INSTITUTIONS SUPPORTED, OF WHICH
SUPPORTED 73% ARE WOMEN AND
85% RURAL Since March 2020, the Grameen Crédit Agricole Foundation
has seen its activities impacted by an unprecedented context.
Observation, consultation and adaptation were the key-principles
of the Foundation to have a better understanding and to guide
the organisations it supports in the face of the Covid-19 crisis.
GRAMEEN CREDIT AGRICOLE FOUNDATION
A
A commitment to women t the end of February 2020,
the Foundation set up an
Observatory to monitor the
And from this collective work derive the key
measures taken by the Foundation and its peers
at the peak of the crisis: postponement of loan
and rural economies effects of the crisis on micro-
finance institutions and to
share useful information with
instalments, continued funding to support exis-
ting partners, and development of dedicated
technical assistance missions. In 2020, the
the sector. It was fed by the results of surveys Foundation granted rollovers to 28 institutions
S
conducted among the Foundation’s partners. for a total amount of €9.4 million. With 93 coor-
Founded on the ince 2008, the Grameen In addition to funding, the Foundation The aim is to garner their perception of the dinated technical assistance missions, the
initiative of Crédit Crédit Agricole Foundation supports these institutions through situation, understand their needs and address Foundation also contributed to the institutional
has been financing and sup- seven technical assistance pro- them by implementing effective measures. strengthening and adaptation of its partners’
Agricole and the porting organisations com- grammes, on themes such as refugee product offering throughout the crisis.
Grameen Trust, mitted to financial inclusion, inclusion, strengthening agricultural In May 2020, the Foundation joined forces
the Grameen Crédit women empowerment and value chains, digitalisation and with ADA and Inpulse to extend the scope of We responded to the crisis in two stages.
rural development. It grants 40% of microinsurance. the study to more than a hundred microfi- First, by understanding the effects of Covid-19
Agricole Foundation is
its outstanding loans to institutions nance institutions, which made it possible to and coordinating with other actors in the sector;
committed to fighting in sub-Saharan Africa, 31% to Eastern The Grameen Crédit Agricole cover almost all regions where microfinance is and then by adapting to the context and needs.
poverty and inequality Europe and Central Asia and 24% to Foundation works actively together developed. The information sharing and com- This is ultimately similar to what our partner
on an ongoing basis South and South-East Asia. with other entities of the Crédit parison of perceptions of the crisis made it microfinance institutions have done with their
Agricole group. A fund dedicated to possible to obtain a global vision of the situa- clients. The results presented in the following
through financial inclu- The Foundation finances small and rural microfinance and a skills vo- tion and to provide more appropriate res- pages reflect the historical resilience that MFIs
sion and social impact medium-sized institutions as a matter l unte e r i ng pro gramme c a l l ed ponses to it. have shown. Despite the difficulties encounte-
entrepreneurship. of priority. Thus, 91% of its partners «Solidarity Bankers» have been set up red, the institutions have managed to adapt
manage portfolios of less than $100 via cooperation schemes. In parallel, the Foundation facilitated the with agility, notably by developing new digital
million and 43% of them manage a implementation of an international coalition distribution channels, strengthening their offer
portfolio of less than $10 million. The To strengthen its financial and tech- of 30 inclusive finance actors. By adopting and protecting their staff and clients.
average funding granted by the nical support to microfinance, the rules of transparency, rapid action and protec-
Foundation to these smaller organi- Foundation works with institutional tion of final beneficiaries, we have contributed The return to normality is not yet in the
sations is €504,000, far from market donors such as the Agence Française collectively to a strong consultation and sus- cards. However, 2021 should be a year of gra-
standards. These target criteria accor- de Développement (AFD) and its sub- tained dialogue with microfinance institutions dual recovery for microfinance institutions in
ding to the size of the institutions sidiary PROPARCO, or the European in the face of the economic consequences of most countries. We must nonetheless remain
supported and the regions of inter- Investment Bank (EIB). The Foundation the pandemic. The unprecedented and antici- cautious: we still perceive a general increase
vention were maintained in 2020. The is also developing a programme for the patory testimonies of our partners, which you in risk. More than ever, we are mindful of the
Foundation focused on supporting its financial inclusion of refugees with the will find throughout these pages, led us to take needs of each MFI and will continue to help
existing partners in strengthening United Nations High Commissioner for this approach. them innovate and adapt.
Read more: their resilience while facing the Refugee (UNHCR) and the Swedish
gca-foundation.org/en/ Covid-19 crisis. Cooperation (SIDA).
1. 69 microfinance institutions financed and 7 institutions supported only through technical assistance.
8 PARTNERS T HE IMPACT O F T HE CRISIS O N MICRO FIN A N CE INSTITU TIONS COVID-19: ANALYSES AND P ERSP ECTIVES PARTNERS 9
• FOCUS •
370 51
FACED WITH THE CRISIS,
MICROFINANCE
INSTITUTIONS
SUPPORTED WITH
MICROFINANCE
INSTITUTIONS
SUPPORTED WITH
PRIORITY GIVEN TO OPENNESS
TRAINING AND/OR
TECHNICAL
ASSISTANCE
INVESTMENT FROM
THE LUXEMBOURG
MICROFINANCE AND RECEPTIVITY TO PROVIDE
AN AGILE RESPONSE
DEVELOPMENT FUND
Bolivia©Andres Lejona
Key figures 2020
137,000
CLIENTS HAVE ACCESS TO
NEW FINANCIAL SERVICE
In 2020, ADA quickly reorganised its activities and set up a Covid-19
crisis response programme to strengthen the capacities of its MFI
partners to overcome the pandemic and take measures to ensure
business continuity.
ADA (APPUI AU DÉVELOPPEMENT AUTONOME)
F
rom the beginning of 2020, our networks, which in some cases also enabled
An agent of change partners reported on the difficulties
caused by the pandemic. It quickly
became clear that we had to put
MFIs to take concrete steps to address their
clients’ needs.
in inclusive finance our ongoing projects on hold and
reallocate our human and financial
resources to new activities dedicated to crisis
Several lessons can be drawn from these
various initiatives. On the one hand, risk ma-
nagement support was relevant in all regions.
management: a budget of €1 million was thus Although the crisis hit Africa relatively less
A
reallocated to a response programme. severely, in terms of both health and restraint
ADA (Appui au DA’s work aims to stren- Furthermore, ADA assists govern- measures, the level of preparedness for crisis
Développement gthen the autonomy and ments and regulators in supporting The core of this programme consisted of management was lower than elsewhere. On
capacity of microfinance and structuring the microfinance sec- providing MFIs with grants for the purchase of the other hand, again from the experience of
Autonome) is a institutions (MFIs) so that tor at the regional and national level, health, IT and communication equipment to this programme, certain factors were critical
Luxembourg-based they can offer financial ser- and advises the Luxembourg ensure business continuity, and technical as- to the ability of MFIs to recover:
non-governmental vices adapted to their Microfinance and Development Fund sistance from consultants to set up business • First and foremost, the ability to analyse
clients’ needs. In 2020, thanks to di- (LMDF) on access to finance for MFIs, continuity plans, analyse and manage the port- portfolio data, to identify client segments to
organisation that has
rect support or via the networks and a fund that was initially created by folio, manage cash flow, identify digital solu- which to continue disbursing to or to restructure
been working for over professional associations, 300 MFIs ADA over 10 years ago. tions to be implemented, etc. In total, 72 MFIs loans with; as some MFIs do not always have the
25 years to improve benefited from training on subjects benefited from the programme (68 MFIs from resources to do this, the support of the expert
the living conditions of such as risk management, financial Finally, through its research activi- grants and 42 from technical assistance, with consultants on this topic has been crucial.
management or governance, and 126 ties, ADA aims to analyse the trends a number of MFIs benefiting from both), 46% • Listening to clients’ needs: some MFIs
vulnerable populations MFIs were supported with technical and needs of the sector, assess the of which were located in Latin America, 31% in have made special efforts on this front, for
through financial assistance to strengthen their capa- impact of its action, generate new Africa and 23% in Asia. example through client surveys, which have
inclusion in Africa, cities or develop a new service. knowledge and disseminate it to clearly paid off. This has actually enabled them
Latin America and other actors, notably through com- In parallel, the need for information on how to identify actions to be taken and to streng
Microinsurance, agricultural loans munication actions and organisation the situation was experienced by our partner then trust and their relationship with clients.
Asia. and digital distribution channels are of events such as the African MFIs and their clients also quickly emerged. In • Agility: MFIs that were able to use these
the main financial services that Microfinance Week or the Midis de la response, ADA embarked on a joint initiative portfolio data and the voice of their clients to
vulnerable populations have been Microfinance. with the Grameen Crédit Agricole Foundation adapt their procedures rapidly managed to
able to access thanks to ADA’s work and Inpulse to survey our partner MFIs regu- respond to the immediate needs of their clients
in 2020. In parallel, non-financial ser- larly in order to monitor the situation throughout while keeping the quality of their portfolio and
vices such as financial education, the year. ADA also contributed to the SPTF’s outstanding loans under control.
technical agricultural training and initiative to develop and use a single question-
entrepreneurship training have also naire for MFI clients to gain a better unders- These three key elements - the ability to
been developed and offered through tanding of the impact of the crisis on vulnerable make data speak, listening to the clients’ voice,
other types of actors such as incu- Read more: populations. As a result, surveys were conduc- and agility - are certainly part of the future
bators and accelerators. ada-microfinance.org/en ted among more than 6,000 clients of partner challenges for a resilient, relevant and innova-
MFIs or MFIs that are members of ADA’s partner tive microfinance sector.
10 PARTNERS T HE IMPACT O F T HE CRISIS O N MICRO FIN A N CE INSTITU TIONS COVID-19: ANALYSES AND P ERSP ECTIVES PARTNERS 11
• FOCUS •
LIDER Microfinance Foundation (Bosnia-Herzegovina) ©Inpulse
42 300,000 UNDERSTANDING THE
INSTITUTIONS
FINANCED
CLIENTS OF MFIs
SUPPORTED
PROBLEMS ENCOUNTERED
TO PROPOSE APPROPRIATE
SOLUTIONS
Key figures 2020
50%
WOMEN
70%
LOANS SUPPORTING
CLIENTS INCOME-GENERATING
ACTIVITIES. Inpulse has intensified its exchanges with its clients
from the beginning of the crisis in order to identify
their situations accurately.
O
INPULSE INVESTMENT MANAGER ur funds CoopEst, CoopMed hard the MENA region (more than the European
and Helenos were able to pro- Economic Community) and particularly the
vide their MFI partners with most vulnerable groups: women, informal sec-
Promoting inclusive, responsible rapid, flexible and appro-
priate responses according to
their particular needs and the
tor workers and refugee populations, catego-
ries over-represented in the portfolio of
CoopMed’s partners.
and sustainable finance specificities of each country.
CoopEst has always maintained close re-
Close monitoring was established by and
between MFIs and the co-donors in order to
adapt the contractual deadlines. Technical as-
lationships with its clients. At the beginning sistance (TA) was also requested for some
O
of the Covid-19 crisis, communication was in- clients to support the recovery.
Inpulse is a Brussels- n a daily basis, Inpulse fights which serve around 300,000 clients, tensified to understand the specific challenges
based impact fund against inequalities by pro- of which 50% are women, 49% reside and the type of support needed. CoopEst For Helenos, an equity fund, the Covid-19
moting financial inclusion and in rural areas and 63% are helped to ensure the liquidity of the sector crisis has been an opportunity to strengthen its
manager with distinc- entrepreneurship for vulne- micro-entrepreneurs. throughout 2020 by renewing and even increa- role as an intermediary catalyst for development.
tive expertise in social rable segments of the sing its loans to most of its MFI partners. At the height of the crisis, Helenos continued its
investment and micro- population. Furthermore, strategic partnerships A significant part of CoopEst’s MFI and bank investment activities, based on a strengthened
with institutional donors such as the portfolio is located in rural areas and finances screening process, and expanded its interven-
finance in Europe and
Inpulse supports microfinance actors European Investment Bank (EIB) and businesses that supply commodities to local tions through short-term loan contributions.
the Middle East/North and promotes social entrepre- the French Development Agency markets. This portfolio structure has enabled In 2020, Helenos partner banks saw their
Africa (MENA) region. neurship through three funds: (AFD) have enabled the development MFIs and cooperative banks to limit losses. level of deposits increase, which attests to the
CoopEst, founded in 2006, operates of a Technical Assistance fund to pro- Another asset has been their relatively comfor- confidence of their clients, but puts more pres-
in Eastern Europe. CoopMed, created vide support through targeted table capitalisation, which provides for suffi- sure on their capital. In addition, the Covid-19
in 2015, operates in the MENA region. strengthening missions to CoopMed’s cient leverage on increased borrowing. crisis has significantly accelerated the deve-
And Helenos, created in 2018, sup- partner institutions. CoopEst’s partners have proved resilient to lopment of digital financial services. These
ports mainly entrepreneurship in the crisis. They adopted effective measures recent developments reinforce Helenos posi-
Europe. Throughout the crisis period, we have quickly to ensure the safety of their staff and tioning as a fund which also targets alternative
worked to promote impact investing set up continuous communication with their lenders and social impact fintechs.
Inpulse funds are invested in 42 partner in our countries of intervention. In clients. While the quality of the portfolio de- One of the key challenges that Helenos will
institutions across 17 countries for a 2021, our efforts are focused on buil- creased and despite an increase in provisions, face after the crisis will be to deploy its tech-
total amount of €43 million. 68% of ding the resilience of our clients. We only two partners did not close the year with nical assistance fund, to provide targeted sup-
the portfolio is allocated to small and continue to renew our financing lines a profit. Moreover, the crisis has greatly acce- port in terms of digital solutions, impact indi-
medium-sized microfinance institu- and to support the creation of new lerated the process of digitalisation. cator monitoring, innovative financial services
tions that are strongly committed to funds dedicated to impact investing or product development.
financial inclusion and support local and ESG (Environmental, Social and In the MENA region, CoopMed’s area of
economic activity. The average loan Governance) strategies. intervention, the pandemic has not only had The recovery has been palpable since the
size to end clients is €2,485. direct impacts on our partner institutions, beginning of 2021. The major challenge in the
which have granted extensions to their clients coming months will be not only to emerge from
In 2020, Inpulse contributed through Read more: and restructured their working methods, but the crisis, but also to move forward thanks to
its funds to support its MFI partners inpulse.coop also on micro-entrepreneurs. The crisis has hit the lessons learnt from it.
12 PARTNERS T HE IMPACT O F T HE CRISIS O N MICRO FIN A N CE INSTITU TIONS COVID-19: ANALYSES AND P ERSP ECTIVES PARTNERS 13
I
n May 2020, ADA and Inpulse joined
forces with the Grameen Crédit
Agricole Foundation to analyse in A questionnaire
depth and with greater geographi- was sent to all our
cal coverage the effects of the
Covid-19 crisis on the microfinance partners to better
institutions they support worldwide. Five understand the
surveys in all were conducted jointly
between May and December 2020 among
effects of the crisis
some one hundred institutions.1 The re- and provide appro-
sults and analyses were published on our priate responses as
respective websites and relayed by mi-
crofinance institutions and several inclu-
quickly as possible
sive finance actors.2
This publication presents the responses
of 40 microfinance institutions, all of
which participated in three waves of the
survey (May, July and December 2020). were asked on an ad hoc basis so as to
The analysis sample is composed as fol- focus on a specific aspect at a particular
lows: 14 institutions from Europe and time of the year. We also enhanced the
Central Asia (ECA), 8 from South and analysis with quarterly data provided by
South-East Asia (SSEA), 8 from sub-Saha- the MFIs on financial indicators such as
ran Africa (SSA), 5 from Latin America the performance of outstanding loans,
and the Caribbean (LAC) and 5 from the the number of borrowers or the portfolio
Middle East and North Africa («MENA») at risk in 2020.
region. 3 They vary in size: there are 8
Tier 1 institutions (loan portfolio above The results presented in this study are
FATEN (Palestine) ©Godong
$50 million), 19 Tier 2 institutions (port- consistent with those of each wave of
folio between $5 and $50 million) and 13 surveys we have conducted, including
Tier 3 institutions (portfolio below $5 mil- particularities by region or by MFI size.
lion). Geographically, Tier 1 institutions The findings in this document are conse-
are mainly located in the Europe, Asia quently representative of what we have
and MENA regions, while smaller Tier 3 observed not only through our different
institutions are more numerous in waves of surveys, but also through other
sub-Saharan Africa. complementary analyses carried out by
METHODOLOGY
each of our institutions. We would like
Longitudinal analysis (tracking the to thank all the participating organisa-
«Covid-19 effect» over time) enables us tions that helped us understand the im-
to observe the development of the crisis pacts of the crisis on microfinance and
over the past year. Some questions were the responses we can provide to better
common to all waves of the survey, others support the sector.4
The Grameen Crédit Agricole Foundation, ADA and Inpulse
have joined forces to provide appropriate responses
to this global crisis with its unprecedented effects.
1. 110 in May, 108 in June, 91 in July, 73 in October, 74 in December
2. Each of the five articles can be found on the respective websites of our organisations:
https://www.ada-microfinance.org/en/covid-19-crisis ; https://www.gca-foundation.org/en/covid-19-observatory// ; https://www.inpulse.coop/news-and-media/
3. ECA: Bosnia, Bulgaria, Georgia, Kosovo, Kyrgyzstan, Macedonia, Moldova, Romania, Tajikistan, Lithuania, Denmark; SSEA: Cambodia, Indonesia, Burma, Sri Lanka;
SSA: Benin, Madagascar, Mali, Senegal, South Africa, Togo, Uganda; LAC: Dominican Republic, Guatemala, Peru; MENA: Lebanon, Morocco and Palestine
4. The list of MFI partners participating in at least one survey in 2020 is available in the appendix
14 T HE IMPACT O F T HE CRISIS O N MICRO FIN A N CE INSTITU TIONS COVID-19: ANALYSES AND P ERSP ECTIVES METHODOLOGY 15
Adapting rapidly to
operational constraints
Surveys conducted throughout 2020 revealed three Covid-19, declared that they had not experienced any
major difficulties: the impossibility of meeting clients difficulties in meeting their clients in 2020. The 35
in person, difficulties in collecting repayments and others, although hampered by this lack of physical
complications in disbursing loans (Figure 1). contact, managed to keep in touch with their clients,
particularly by telephone.
Looking at the results of the sample surveyed, we
see that these problems are partly related to mobility
constraints, although they do not explain in and of A gradual recovery
themselves the problems in collecting repayments or after the first few months
disbursing loans. MFIs in sub-Saharan Africa, for exam of severe constraints
ple, were all affected by repayment and loan disburse-
ment impediments, but only 63% of them were unable The proportion of MFIs experiencing operational
to meet their clients physically. In point of fact, the difficulties fell sharply during the year in all regions.
surveys indicate that the financial difficulties faced by By the end of 2020, one third of them even claimed
clients are also part of the factors contributing to the to have overcome the problems.1 The first signs of
difficulties of MFIs. We will come back to this issue. recovery appeared in July, with a slight improvement
in loan disbursements and the collection of repay-
More generally, only 5 institutions, i.e. 12.5% of the ments (Figure 2). Physical meetings with clients have
sample, located in countries little or not affected by contributed to the gradual resumption of activities.
Figure 1 — O
perational difficulties encountered by MFIs
(all surveys combined)
Benin ©Godong
Collect loan repayments as usual 87,5%
OPERATIONAL Disburse loans as usual
Meet clients physically
87,5%
85%
CONSTRAINTS Provide non-financial services as usual
Collect savings as usual 35%
62,5%
Communicate with clients, albeit remotely 32,5%
As a result of the lockdown and the ban on travel and 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
gatherings, the activities of microfinance institutions
were severely disrupted.
Reading: M
ore than 80% of MFIs in the sample mentioned that they had experienced difficulties
collecting repayments and/or disbursing loans as usual at least once during the year.
1. By the end of 2020, 22 out of 74 MFIs indicated that they no longer faced operational constraints in their activities.
16 T HE IMPACT O F T HE CRISIS O N MICRO FIN A N CE INSTITU TIONS COVID-19: ANALYSES AND P ERSP ECTIVES OPERATIONAL CONSTRAINTS 17
evelopment of operational difficulties encountered by MFIs
Figure 2 — D Figure 4 — T o what extent do these different constraints weigh on your activities?
(December survey)
83%
80%
Total
68% 68%
65%
48% SSEA
38% ECA
33% 33% Region LAC
MENA
20%
SSA
13%
10%
1
Tier 2
Meet physically with Collect loan Disburse loans Communicate
clients repayments as usual with clients, 3
as usual albeit remotely
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
May 2020 July 2020 December 2020
Our activities remain Our activities recovered Our activities are recovering We have resumed activities
very limited gradually but are again gradually as before the crisis
limited
SSEA: South and Southeast Asia
ECA: Europe and Central Asia
LAC: Latin America and the Caribbean
MENA: Middle East and North Africa
SSA: Sub-Saharan Africa
Figure 3 — Development of operational difficulties per region
100%
90%
80%
The evolution by region shows that difficulties in
70% disbursing loans in Latin America and in the MENA A real capacity
60% region persist at the end of the year (Figures 3 and 4). for adaptation
50%
Moreover, behind the overall improvement trend,
there are regional particularities: for example, the MFIs were quick to adapt their organisation, mana-
40%
return of the restrictive measures in Europe at the gement and operations by taking appropriate mea-
30% end of 2020 again caused difficulties to meet clients sures while maintaining a responsible approach
20% physically in December. Nevertheless, this does not towards their clients. From the beginning of the crisis,
10%
translate into increased difficulties in conducting bu- institutions prioritized hygiene measures by providing
siness, as 80% of MFIs in the region report that they hygiene equipment to their staff (93% of them, as
0%
SSEA ECA LAC MENA SSA SSEA ECA LAC MENA SSA SSEA ECA LAC MENA SSA have resumed their activities as before the crisis or shown in Figure 5). Furthermore, teleworking was
are gradually resuming them on an ongoing basis, widely implemented. Only 40% of the institutions sur-
Meeting clients physically collecting loan repayments disbursing loans as usual which probably reflects a good capacity for veyed resorted to compulsory leave (paid or unpaid),
as usual adaptation. and only 3% had to proceed to redundancies.
SSEA: South and Southeast Asia
ECA: Europe and Central Asia Overall, MFIs in the sub-Saharan Africa region seem Many MFIs have been proactive in response to the
LAC: Latin America and the Caribbean to be the least constrained at the end of 2020. crisis, preparing and monitoring: crisis committees,
MENA: Middle East and North Africa
SSA: Sub-Saharan Africa May 2020 July 2020 December 2020 business continuity plans, scenario simulations of their
performance, etc. Most have taken the lead to find
appropriate measures quickly.
18 OPERATIONAL CONSTRAINTS T HE IMPACT O F T HE CRISIS O N MICRO FIN A N CE INSTITU TIONS COVID-19: ANALYSES AND P ERSP ECTIVES OPERATIONAL CONSTRAINTS 19Figure 5 — W
hat measures did you implement with regard to human resources? Figure 7 — O
perational measures put in place to address the crisis in 2020
(May survey) (all surveys combined)
Provision of hygiene equipment to staff 93% Adaptation of the loan offering and procedures 92,5%
Posting of hygiene rules in the premises 85% Implementation of measures to support clients 87,5%
Use of a communication/meeting online solution 78% Intensified communication with clients 87,5%
Disinfection of the premises 73% Adaptation of the disbursement strategy 85%
Teleworking as much as possible 68% Priority given to loan repayment 72,5%
Limitation or prohibition of movement on the field 65% Greater use of existing digital services 60%
Use of an online document sharing solution 53% New health provisions at work 55%
Provision of laptops or tablets for the staff 53% Adaptation of the business plan and growth objectives 50%
Reduction of opening hours of branches 50% Implementation of new digital solutions 50%
Reduction of working time 43% Closing of some or all branches 15%
Team rotation 43%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Mandatory paid leave 40%
Provision of company phone for the staff 33%
Training on IT tools for the staff 18%
Reading: M
ost MFIs mention having adapted their loan offering and procedures at least once
Mandatory unpaid leave 5%
during the year.
Redundancies 3%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Reading: In May, 93% of MFIs report having provided their staff with hygiene equipment.
Some requested financial assistance from funders
and partners, particularly for cash management, while
others requested technical support (Figure 6). We
Figure 6 — W
hat crisis management measures have you put in place? noted that for loans this could take the form of State
(May survey) guarantees or government grants, which larger MFIs
were more likely to receive.
Institutions have also stepped up their efforts with
their clients. In terms of communication, they intensi-
Crisis management and monitoring committee 85% fied contacts with clients, used different channels to
Operations continuity plan 78% communicate, and conducted surveys and polls to
gauge their needs and the impact of the crisis on their
Updated liquidity plan 73%
activities and lives. Most MFIs have also put in place
Worst-case scenario simulation 65%
direct assistance measures for clients: disbursement
Negotiation with funders for the rescheduling 58% of emergency loans, provision of kits containing food
of loan repayment
Request for technical support from funders / partners 43% and hygiene equipment, partnerships with humanita-
Request for financial support from funders / partners 43%
rian organisations, and launch of hygiene awareness
Discussion with the supervisory authority campaigns via SMS and videos, etc. However, the most
©Andres Lejona
40%
for possible exemptions from prudential rules cited measure is the adaptation of the loan offering
Adaptation of the information system 35% and procedures (Figure 7), which was mentioned by
Resorting to external consultant(s) for crisis management 20% more than 90% of MFIs in the course of the year 2020.
The aim is to restructure the loans of clients (mainly
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% by granting moratoriums), but also to implement new
lending policies and, to a lesser extent, to launch new
products.
20 OPERATIONAL CONSTRAINTS T HE IMPACT O F T HE CRISIS O N MICRO FIN A N CE INSTITU TIONS COVID-19: ANALYSES AND P ERSP ECTIVES OPERATIONAL CONSTRAINTS 21Figure 8 — C
orrelation between the number of reported difficulties and Figure 9 — P
ercentage of MFIs (per region and size) reporting
the number of measures implemented by MFI (May survey) that they have implemented the following measures:
Adaptation of loan offering Intensified communication
and procedures with clients
Number of measures implemented
30
25
80% 70%
Average 85% Average 73%
20
68% 43%
15
SSEA SSEA
10
ECA ECA
5
Region LAC Region LAC
0
MENA MENA
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14
SSA SSA
Number of reported constraints
1 1
Tier 2 Tier 2
Note: The graph shows the correlation between the total number of operational, human resources
and management problems and the total number of measures implemented by MFIs.
3 3
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Adaptation of disbursement Priority given to
strategy loan repayment
To restore their financial stability, most MFIs gave the other hand, these same Tier 1 MFIs continued to
priority to recovering loans. They also adapted their adapt their offer and procedures throughout the year, 75% 50%
disbursement strategy, with a slowdown or voluntary unlike the smaller MFIs. Finally, MFIs in the most im- Average 70% Average 45%
stop at the beginning of the crisis and a gradual re- pacted regions (LAC and MENA) also continued to 60% 47%
sumption later in the year. The crisis was also an op- adapt their disbursement strategy throughout the year
portunity for some MFIs to embrace digitalisation fully (Figure 9). SSEA SSEA
and to accelerate the digital transformation process.
Some reported increased use of existing digital ser- ECA ECA
vices, others implemented new digital solutions.
Region LAC Region LAC
A general trend is emerging from the surveys: the
MENA MENA
operational measures put in place by MFIs to cope
with the crisis have become fewer and fewer over the SSA SSA
year, as the operational constraints progressively
eased. The responsiveness of MFIs to the crisis is illus-
1 1
trated by the positive correlation between the number
of problems identified and the number of measures Tier 2 Tier 2
put in place: Figure 8 shows that the greater the
number of problems encountered by MFIs, the greater 3 3
the number of measures put in place.
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
However, a detailed analysis of the measures taken
during the year shows that the proportion of MFIs that SSEA: South and Southeast Asia
May 2020
ECA: Europe and Central Asia
give priority to loan recovery has remained stable over LAC: Latin America and the Caribbean July 2020
time, with the exception of Tier 1 MFIs, for which this MENA: Middle East and North Africa
December 2020
SSA: Sub-Saharan Africa
proportion has largely decreased over the year, thanks
in particular to their better control of credit risk. On
22 OPERATIONAL CONSTRAINTS T HE IMPACT O F T HE CRISIS O N MICRO FIN A N CE INSTITU TIONS COVID-19: ANALYSES AND P ERSP ECTIVES OPERATIONAL CONSTRAINTS 23• I M PA C T S T O RY N ° 1 • • I M PA C T S T O RY N ° 2 •
Read more: Read more:
attadamounemicrofinance.ma/ www.oxusnetwork.org/
ATTADAMOUNE MICRO-FINANCE – MOROCCO OXUS – KYRGYZSTAN
Response to the crisis A crisis response designed
on several levels to benefit customers
Focusing on clients, consolidating achievements and improving Despite the difficulties encountered since the beginning
the organisation were key points in Attadamoune Micro-Finance’s of 2020, OXUS Kyrgyzstan (OKG) is proving that it remains
resilience to the health crisis. a reliable company for its clients, while maintaining its
«zero exclusion» approach.
Foundation since 2017, it provides
financial services to the working poor
in Kyrgyzstan. As of March 2021, OKG
serves 8,371 active borrowers (47%
women) through a network of
RESPONSES TO THE CRISIS 15 branches and 133 employees. In
• Governance: March 2020, the Foundation sup-
In order to deal with the crisis, the ported OXUS to organise an agree-
Board of Directors of Attadamoune ment with investors in order to smoo-
OXUS (Kyrgyzstan) ©Didier Gentilhomme
Micro-Finance has drawn up a Strate- then the liquidity risks caused by the
Morocco ©Getty/Crédit Agricole
gic Vision for Crisis Management, spread of Covid-19.
prioritising the preservation of the
institution’s equity and human RESPONSES TO THE CRISIS
resources. The business continuity plan was
• Asset Liability Management: launched at the onset of the crisis and
The consequences of the crisis were supported the activity of OKG
anticipated by creating alternative throughout the difficult times. OKG
scenarios and by developing the took the necessary measures to pro-
c orresponding measures to be
tect its staff from the start of the crisis
undertaken. (provision of health equipment and
• HR management and clients: extensive remote working). The insti-
Remote trainings were implemented tution ensured close communication
« We have CONTEXT to advise and guide both agents and with its branches and clients, in order
In Morocco, the tourism, catering and clients. An ad hoc listening unit was CONTEXT to implement the loan restructuring of
every reason to
hotel sectors were strongly affected set up to receive calls, SMSs and In Kyrgyzstan, 20% of the population those affected by the crisis. The credit
be optimistic »
Zakaria Jebbouri,
by the Covid-19 crisis, directly impac-
ting employment and the most vulne-
emails from customers.
• Flexibility:
8,371
ACTIVE BORROWERS
were living below the national pover-
ty line in 2019. With the sharp reduc-
policy was also strengthened in this
context, in order to prevent any addi-
General Manager rable segments of the population. Developing an integrated committees tion in economic activity, household tional risk on newly disbursed loans.
between operational staff and board incomes have fallen and unemploy-
THE MFI AND COOPMED members gave great flexibility in ment increased. The World Bank es- OUTLOOK
11,746 Attadamoune Micro-Finance is a
Moroccan microfinance organisation,
decision-making.
• Advocacy:
€6.9 M
GROSS LOAN
timates that the poverty level in-
creased by 11 points in 2020, pushing
Since the summer of 2020, the situa-
tion has improved and the country
ACTIVE BORROWERS
PORTFOLIO
geared to the financing of micro-en- Communication with local authorities 700,000 people below the national has not experienced any major new
trepreneurs. The institution has been has enabled to promote the impor- poverty line. restrictions. In 2021, OKG continues
supported by CoopMed since 2018. tance of the microfinance sector in to expand as it opened a new branch
€10.1 M
GROSS LOAN
Signed in February 2020, CoopMed’s
€500,000 subordinated loan has
times of crisis.
• Outlook:
62% THE MFI AND THE FOUNDATION
OXUS Kyrgyzstan (OKG) is a micro-
in the north of the country and a se-
cond one is expected to open this
PORTFOLIO CLIENTS
strengthened MFI’s equity and reas- The institution is currently working IN RURAL AREAS finance institution created in order to year. Other projects are underway,
sured other donors, both internatio- on an organisational improvement continue the microcredit activities of as the introduction of tablets to
nal and local, enabling the institution strategy which will focus on internal the ACTED NGO in the rural areas of speed up loan disbursement and the
63%
WOMEN CLIENTS
to continue to raise funds and over-
come liquidity tensions.
controls, digitalisation and the deve-
lopment of non-financial services.
the south of the country. Supported
by the Grameen Crédit Agricole
launch of green loans to help fight
air pollution.
24 OPERATIONAL CONSTRAINTS T HE IMPACT O F T HE CRISIS O N MICRO FIN A N CE INSTITU TIONS COVID-19: ANALYSES AND P ERSP ECTIVES OPERATIONAL CONSTRAINTS 25A significant and
sustained financial impact
The operational constraints encountered have ine- A strong impact on
vitably had significant financial repercussions portfolio development
(Figures 10 and 11). We observe two major conse-
quences for almost all MFIs: an increase in the portfolio The activities of MFIs were severely disrupted during
at risk (PAR) due to lower repayments, and a reduction the first and second quarters of 2020 by the measures
in outstanding loans due to lower disbursements. taken to contain the health crisis. The inability and/or
Other problems have also arisen from time to time: increased caution of MFIs to disburse loans unders-
temporary lack of liquidity, the impact of depreciating tandably led to a reduction in outstanding loans at the
local currencies and a slowdown in disbursements beginning of the crisis. Nevertheless, when looking at
from donors. our sample for the study, a U-shaped curve shows
resumed portfolio growth during the year (Figure 12).
In 2020, the increase of portfolio at risk emerged Thus, compared to the end of 2019, the portfolio falls
as the major difficulty faced by MFIs. However, the by -1.3% in Q1 2020, then down to -1.4% in Q2, before
liquidity crisis expected at the beginning of 2020 did increasing again in Q3 and Q4.
not materialise: only a minority of MFIs surveyed suf-
fered liquidity shortages. This observation is particularly true for Tier 2 and
Tier 3 MFIs, which experienced a portfolio decline in
the first half of 2020 and then a return to growth. The
MF Prisma (Peru) ©Lenin Quevedo Bardalez
Figure 10 — F inancial difficulties encountered by MFIs
(all surveys combined)
Increased portfolio at risk 98%
Reduced loan portfolio 93%
FINANCIAL Increased expenses for material and equipment
Slowdown or halt of disbursements by funders
55%
48%
IMPACT
Depletion/shortage of equity 45%
Lack of liquidity 40%
Increase of financing and/or hedging costs 33%
Significant depreciation of the national 30%
currency against the dollar
Difficulties to repay funders 28%
In 2020, all MFIs saw a direct impact of this unprecedented crisis on the Savings withdrawals by clients 28%
volume of their portfolio. In parallel, they also experienced an increase in are larger than usual
their credit risk, as a result of the problems caused by the crisis over time. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
26 T HE IMPACT O F T HE CRISIS O N MICRO FIN A N CE INSTITU TIONS COVID-19: ANALYSES AND P ERSP ECTIVES FINANCIAL IMPACT 27Figure 11 — Financial difficulties encountered by MFIs Figure 13 — Evolution of financial difficulties per size
90%88%
100%
78%
73%
65% 80%
53%
48% 60%
38%
28% 30%30% 30% 28% 40%
23% 25% 25% 23%25%
13%
10% 10% 20%
0%
Increased Reduced loan Increased Depletion/ Difficulties Slowdown Lack of Tier 1 Tier 2 Tier 3 Tier 1 Tier 2 Tier 3 Tier 1 Tier 2 Tier 3 Tier 1 Tier 2 Tier 3
portfolio portfolio expenses for shortage to repay or halt of liquidity
at risk material and of equity funders disbursements Reduced loan portfolio Increased portfolio Increased expenses Lack of liquidity
equipment by funders at risk for material and
equipment
May 2020 July 2020 December 2020
May 2020 July 2020 December 2020
Figure 12 — Development of the portfolio per region compared to the end of 2019 Figure 14 — A
verage development of portfolio per region
(in aggregate compared with December survey)
15% 15%
10% 10%
5% 3% 5% 3%
0% 1% 0% 1%
0% 0%
- 1% - 1% - 1% - 1%
- 5% - 5%
- 10% - 10%
- 15% - 15%
- 20% - 20%
Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020
Average Tier 1 Tier 2 Tier 3 Average SSEA ECA LAC MENA SSA
SSEA: South and Southeast Asia / ECA: Europe and Central Asia / LAC: Latin America and the Caribbean /
MENA: Middle East and North Africa / SSA: Sub-Saharan Africa
28 FINANCIAL IMPACT T HE IMPACT O F T HE CRISIS O N MICRO FIN A N CE INSTITU TIONS COVID-19: ANALYSES AND P ERSP ECTIVES FINANCIAL IMPACT 29Figure 15 — Average development of number of clients Figure 17 — Growth in clients and portfolio for growing MFIs in 2020
(in aggregate compared with December survey)
4% 14%
13,52%
2% 12%
0,00%
0% 10%
9,50%
- 0,05%
-2% 8%
6,43%
- 4% - 3,48% - 3,19% 6% 5,15%
- 4,23%
- 6% 4% 2,71%
- 8% 2% 0,78% 1,63%
1,99%
-10% 0%
Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020
Change in GLP 19-20 Change in clients 19-20
Average Tier 1 Tier 2 Tier 3
(if growth) (if growth)
portfolio contraction of Tier 3 MFIs, however, is much The development in the number of clients does not
Figure 16 — D
evelopment of the number of clients per region more significant. Tier 1 MFIs, on the other hand, seem follow the same trend (Figure 15). While the portfolio
(in aggregate compared with December survey) to have been spared, and have on average seen their has increased on average by 3% from 2019 to 2020,
portfolio continue to grow steadily over the year. They the trend in the number of customers is -3% in value.
suffered the least from financial difficulties during this The declining portfolio until the second quarter is due
period, as they were better equipped in terms of liqui- to the loss of clients: repayments are not offset by
10% dity, autonomy and processes (Figure 13). new disbursements and attracting new clients.
5% This trend of rebounding outstanding loans is also Resuming growth from the third quarter until the end
0,00% reflected in the analysis by geographical area of the year is driven only by a weak acquisition of cus-
0%
(Figure 14). All regions have improved, except for the tomers. This phenomenon affects all MFIs regardless of
- 0,05% - 4,23%
MENA region. Europe and Central Asia (ECA) is the their size. Overall, the number of clients has either de-
- 5% - 3,48% - 3,19% exception with a continuous and steady increase. In creased or increased slightly, but to a lesser extent than
this case, the curve resembles that of the Tier 1 MFIs the growth of the region’s loan portfolios. While 40% of
- 10%
(Figure 12). However, no link can be established as the the institutions in the Middle East and North Africa (MENA)
Tier 1 MFIs in our sample represent only a minority of and Latin America and the Caribbean (LAC) regions were
- 15%
the ECA region. For the other regions, while the still facing limited activity at the end of the year, MENA
upward curve is clearly visible, the portfolio decline MFIs suffered the largest loss of clients (Figure 16).
- 20%
did not start at the same time. This reflects the varia-
bility in the timing of the epidemic in each region. For For MFIs whose portfolio shrank in 2020 (Figure 17),
- 25%
sub-Saharan Africa (SSA), the portfolio decline only the drop in outstanding loans is accompanied by a
Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 appears in the first quarter of 2020. For Latin America drop in the number of clients (-14% and -19% respec-
and the Caribbean (LAC), it continues until the third tively). For MFIs that have increased their outstanding
quarter. For South and South-East Asia (SSEA), the loans in 2020, the increase is 13.5%, while the increase
Average SSEA ECA LAC MENA SSA
decline occurs only in the second and third quarter. in clients is 6.4%. Growth is therefore fuelled in parallel
by the increase in the average loan.1
SSEA: South and Southeast Asia / ECA: Europe and Central Asia / LAC: Latin America and the Caribbean /
MENA: Middle East and North Africa / SSA: Sub-Saharan Africa
1. T
hese results are also shown by the CGAP/Symbiotics studies, the latest of which is available at the following link:
https://www.cgap.org/sites/default/files/datasets/2021_4_CGAP_Symbiotics_COVID_Briefing.pdf
30 FINANCIAL IMPACT T HE IMPACT O F T HE CRISIS O N MICRO FIN A N CE INSTITU TIONS COVID-19: ANALYSES AND P ERSP ECTIVES FINANCIAL IMPACT 31Figure 18 — W
here do you stand on moratoriums? Figure 19 — Development of credit risk (PAR 30 and restructured) per region
(December survey)
30%
25%
Total 20%
15%
10%
SSEA
5%
ECA
0%
Region LAC
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
MENA
SSA
SSEA ECA LAC MENA SSA
1
SSEA: South and Southeast Asia
Tier 2 ECA: Europe and Central Asia Restructured
LAC: Latin America and the Caribbean
3 PAR30
MENA: Middle East and North Africa
SSA: Sub-Saharan Africa
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
We did not give A first moratorium A first moratorium A first moratorium A first moratorium A first moratorium
moratoriums to has ended and the is still in progress has ended and a has ended and has ended and the
our clients clients are repaying second moratorium the loans of clients loans of clients who
their loans has been given to who cannot repay cannot repay them
clients them have been are placed in the
restructured portfolio at risk
increase in PAR30+r2 between December 2019 and the end of moratoria or a deterioration directly attri-
December 2020, with a peak in this indicator in the butable to the crisis, but the Covid-19 effect is gra-
second quarter of 2020 (Figure 19). However, the dually fading.
Reading: In total, just over 30% of MFIs in the sample mention in December 2020 that PAR30+r of Tier 1 MFIs remained lower than that of
a first moratorium has ended and that the loans of clients who cannot repay Tier 2 and 3 MFIs throughout 2020, which is also In summary, the financial data show that MFIs in
them are now placed in the portfolio at risk. observed in the CGAP Pulse survey.3 the Middle East and North Africa (MENA) and Latin
America and the Caribbean (LAC) regions were more
An analysis of PAR30+r by region shows that this significantly affected by the crisis, with a higher
indicator has increased for all MFIs but in different PAR30+r ratio and a larger drop in the number of
proportions, depending on the maturities of each mar- active clients and portfolio at year-end. In contrast,
ket and the impact of the crisis in each country the performance of the Europe and Central Asia
(Figure 19). Thus, PAR30+r rates reached higher levels (ECA) region remained good with a relatively low
end of the year, several institutions in South and for MFIs in the Middle East and North Africa (MENA), and stable PAR30+r ratio throughout the year, a li-
A structural increase South-East Asia (SSEA) and sub-Saharan Africa Latin America and the Caribbean (LAC), and sub-Saha- mited decline in the number of active clients, and
in credit risk (SSA) had granted their clients a second moratorium. ran Africa (SSA) regions, than for the Europe and stable portfolio growth. It is also interesting to note
For the rest, at the end of moratorium periods, loans Central Asia (ECA) and South and Southeast Asia that Tier 1 MFIs were more resilient to the crisis. They
This small increase in the number of clients is lar- that are not repaid move into the MFIs’ portfolio at (SSEA) regions.4 were able to maintain portfolio growth throughout
gely explained by the difficulties they themselves risk. the year, fairly stable client growth and a lower level
have encountered. Their activities were in fact dis- Finally, the PAR30+r is composed of very few res- of risk.
rupted by the measures put in place to contain the As we saw at the beginning of this chapter, the tructured loans at the end of 2020. This is a gradual
epidemic, but also by the disruption of international main financial difficulty encountered by MFIs is the return to the pre-Covid-19 credit risk structure (i.e. At the end of the year, only one third of MFIs sur-
trade, the slowdown of certain sectors or the reduc- increase in portfolio at risk (PAR), inflated by client end 2019), where restructured loans were extremely veyed indicated that they had operational difficulties
tion in the amount of remittances from abroad. This defaults, exits from moratorium periods and poten- low. This is noted in all regions except MENA. 5 In collecting repayments, but 80% still experienced PAR
made it difficult for clients to repay their loans and tially by portfolio reduction. Thus, according to the general, this also shows the low share of loans res- issues. The increase in the portfolio at risk is therefore
prevented them from taking out new ones. Faced survey responses, only 20% of MFIs report that they tructured under the crisis that become loans with not or no longer linked only to operational difficulties
with this situation, a large majority of MFIs (notably have not experienced an increase in their portfolio late payments. In Figure 19, the decrease in restruc- but also to the impact of the crisis on clients, espe-
under the stimulus of their regulators) offered mora- at risk (i.e. portfolio at risk has decreased or remained tured loans goes hand-in-hand with a decrease in cially in sectors or regions particularly exposed to
toriums to their clients (34 MFIs out of 40 surveyed) stable). For the others, the PAR increased without PAR30. The increase in PAR30 is essentially linked to Covid-19.
at the very outset of the crisis (Figure 18). Only a doubling (40%), or more than doubled (also
very small proportion of MFIs in South and South-East about 40%). The information from the figures avai-
Asia, Europe and Central Asia, and sub-Saharan Africa lable to us is consistent with these survey data: re-
2. PAR30+r: all outstanding loans with payment arrears exceeding 30 days plus the renegotiated outstanding loans.
did not grant moratoriums. On the contrary, by the gardless of their size, all MFIs experienced a structural 3. https://www.cgap.org/blog/microfinance-and-covid-19-insolvency-horizon
4. https://www.cgap.org/blog/survey-shows-gathering-clouds-no-storm-yet-microfinance ;
idem, https://www.cgap.org/blog/microfinance-and-covid-19-insolvency-horizon
5. This is due to the figures of only one MFI whose end-of-year restructuring figures are extremely high.
32 FINANCIAL IMPACT T HE IMPACT O F T HE CRISIS O N MICRO FIN A N CE INSTITU TIONS COVID-19: ANALYSES AND P ERSP ECTIVES FINANCIAL IMPACT 33You can also read
