Comments on: Will the Global Financial Crisis Hurt Microfinance?

By: Diana

Diana — Tue, 20 Oct 2009 16:42:01 +0000

MFIs are have been affected by the crisis… the article below outlines some strategies to mitigate vulnerability in future.

http://www.microsave.org/briefing_notes/india-focus-note-23-the-global-financial-crisis-and-indian-microfinance

By: Jerry Ostradicky

Jerry Ostradicky — Tue, 24 Feb 2009 21:45:59 +0000

Hi Vivek,
Microfinance Institutions (MFI) are definitely getting affected, but I don’t think that it should deter you from looking for a job at one. The smaller MFIs are hurting more than the big ones, so if you are hesitant and are looking for more stability, you can look for an MFI that has been around for a while and has deeper roots.
Here is a link to an article the Forbes did about that top 50 MFIs:
http://mykro.esmexecdesigns.net/forbes-top-50-mfis/2008/06/

Or you can look at the Mix Market which does a pretty thorough job analyzing MFI performance: http://www.mixmarket.org/

Jerry Ostradicky

By: vivek kumar

vivek kumar — Mon, 16 Feb 2009 07:51:41 +0000

i am a ‘masters in social work ‘ student. previously i was planning to join a microfinancing institution. given the econommic meltdown , should i still go for it or i should head for any government funded institution?

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Fri, 30 Jan 2009 07:10:04 +0000

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Global Financial Crisis And Its Effect On Microfinance | myKRO — Fri, 21 Nov 2008 01:58:18 +0000

[...] month Ryan Calkins started a discussions about whether or not the global financial crisis will hurt microfinance.Â CGAP is currently hosting a Virtual Conference on the Financial Crisis and I’ve seen some [...]

By: Leslie Forman

Leslie Forman — Mon, 20 Oct 2008 08:01:53 +0000

I agree with other commenters that it will be increasingly difficult to generate donations for microfinance organizations. However, I found this excellent BusinessWeek interview with Muhammad Yunus, in which he says that actual microfinance portfolios are much more stable than those of larger financial institutions, because their assets are real. Here's the video.

By: Michelle Grocke

Michelle Grocke — Thu, 16 Oct 2008 05:29:29 +0000

I think that we have to keep in mind what got us into this financial mess – greed, consolidation of wealth, unsustainable and unbalanced development…in a nutshell too many people were focused on short-term growth and investment.
We are now in a rebuilding phase, and this time around we have to ensure that we are building from the bottom up and are placing the emphasis on long-term development, growth and stability. The 1.4B billion people living in extreme poverty are merely sitting on the sidelines of this global economic crisis – the more we invest in Microlending, the more individuals will be working toward bettering our economy as a whole.
With that said, I think it should be noted that poverty leads to instability, it leads to insecurity and it threatens U.S. interests. In this time of financial instability, I think our efforts should be even more invested in those people who need it most in order to ensure that this does not happen again.

By: Bhagirath Iyer

Bhagirath Iyer — Mon, 13 Oct 2008 10:44:27 +0000

As an integral part of the financial system of a country, microfinance is bound to be affected by the present financial crisis, which is threatening to trigger an economic recession even in India. The effects, I believe, will be visible in the following ways:

1. MFIs will find it difficult to borrow from banks and would have to revise their Business Plan targets downward. This is not because microfinance is considered a risky business (MFIs do lend to sub-prime customers, after all!) but because of the overall sentiments in the market, which makes any lender prefer liquidity to investing his/her funds. Large corporates are equally likely to be affected by this market sentiment-induced credit crunch.

2. MFIs seeking equity investment or donor funds from abroad will definitely be affected as not many investors would like to invest now, in an uncertain economic environment.

3. If the crisis triggers a recession leading to loss of jobs, MFIs may also face a situation of default on some loans. This is not unlikely, as low-income households in India have at least one person dependent on casual wage labour, mostly in the construction industry or other similar “brick-and-mortar” companies, which are likely to be affected by recessionary conditions in the economy. A loss of job affects the household income and the effect of this is likely to be seen even in rural areas, where most households have at least one bread-earner engaged as a migrant labour in cities. MFIs may see a rise in demand for consumption credit, which is not “bad” inherently, but is more risky and should be given out cautiously.

MFIs are, however, likely to recover easily from the financial crisis soon, provided that it does not evolve into a full-blown recession.

My advice to MFIs: Be cautious. Be firm. Be transparent in you operations. Be sure to maintain your relationship with your customers.

By: Dave Schappell

Dave Schappell — Sun, 12 Oct 2008 17:40:57 +0000

1) I think that MFI’s will find it increasingly difficult to generate donations and other charitable capital, if the economy continues to worsen — I don’t think that can be doubted. I don’t have access to research on past recessions, but I’m positive that all charities will suffer.

2) That said, I think that MFI’s that have built their organizations to be sustainable (i.e. grown large enough to generate positive financial returns, charged enough to cover their costs, and are located in areas with sufficient growth opportunities) will be much less affected by the economic situations. Because, their clients will largely be unaffected by the broader market issues; so, if they have the capital already (i.e. aren’t largely dependent on donations), I’d think that they’d be much more likely to not only survive, but possibly prosper during these times… as they have been to date (i.e. MFIs like SKS, Bandhan, and others)

By: Drew Meyers

Drew Meyers — Sun, 12 Oct 2008 05:07:47 +0000

Ryan-
You know, you haven’t yet offered your own opinion on the subject