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COVID-19 and the Future of Microfinance: Evidence and Insights from Pakistan
#MMPMID40504182
Malik K
; Meki M
; Morduch J
; Ogden T
; Quinn S
; Said F
Oxf Rev Econ Policy
2020[May]; ? (?): graa014
PMID40504182
show ga
The COVID-19 pandemic threatens lives and livelihoods, and, with that, has
created immediate challenges for institutions that serve affected communities. We
focus on implications for local microfinance institutions in Pakistan, a country
with a mature microfinance sector, serving a large number of households. The
institutions serve populations poorly-served by traditional commercial banks,
helping customers invest in microenterprises, save, and maintain liquidity. We
report results from 'rapid response' phone surveys of about 1,000 microenterprise
owners, a survey of about 200 microfinance loan officers, and interviews with
regulators and senior representatives of microfinance institutions. We ran these
surveys starting about a week after the country went into lockdown to prevent the
spread of the novel coronavirus. We find that, on average, week-on-week sales and
household income both fell by about 90%. Households' primary immediate concern in
early April became how to secure food. As a result, 70% of the sample of current
microfinance borrowers reported that they could not repay their loans; loan
officers anticipated a repayment rate of just 34% in April 2020. We build from
the results to argue that COVID-19 represents a crisis for microfinance in
low-income communities. It is also a chance to consider the future of
microfinance, and we suggest insights for policy reform.
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