COVID-19 and the Future of Microfinance: Evidence and Insights from Pakistan
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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.
The paper reports 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. The paper finds 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. The paper builds 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 the paper suggests insights for policy reform.
|Author||Kashif Malik, Muhammad Meki, Jonathan Morduch, Timothy Ogden, Simon Quinn and Farah Said|
|Year of Publication||2020|
|Publisher||fai (Financial Access Initiative at the NYU Wagner Graduate School)|
|Number of Pages||44|
|Region / Country||Global / Pakistan|
|Primary Language||English (en)|
|Keywords||Microfinance, Coronavirus (COVID-19)|