Microfinance - Response & Recovery from COVID-19: Regulator and Industry Perspective
Monday, 13 July 2020
Opening Remarks by Dr. Alfred Hannig, Executive Director, AFI
Ladies and gentlemen,
Allow me to express my gratitude by thanking everyone including the lineup of panelists for taking the time regardless of the differences in time zones and circumstances, to speak in today’s session. It is pleasing to note that over 70 participants are attending this virtual event as it attests to the relevance of AFI as a member-driven network. Let me also recognize the presence of Superintendent Dr. Margarita Hernández from Superintendencia de la Economía Popular y Solidaria de Ecuador (SEPS) who has taken time out to participate in this webinar. I also understand that this webinar is held in two sessions, to ensure we meet our members demand from different regions. The AFI Management Unit recognizes and appreciates this effort, as it is an evidence of a fruitful cooperation between AFI members, private sector partners and key stakeholders that is even strengthened at this time of COVID-19 crisis.
Dear colleagues, since the start of the COVID-19 pandemic, evidence is abound on its devastating effect on economies particularly small businesses in our network. Collapse of small businesses, debt distress owing to lockdowns and social distancing restrictions though required have had a far reaching impact. Data from Cambodia Microfinance Association for instance shows that there is more than 2.6 million microfinance borrowers with an average microloan debt per borrower at USD3,804 (more than double its GDP per capita). This scenario is similar in most of our countries. As this pandemic prolongs, many customers – individuals and MSMEs – will continue finding it increasingly difficult to repay their loans.
The microfinance sector is crucial and impossible for us to neglect on our work to enhance financial inclusion as the segment they address involve women, small or informal businesses, rural and urban poor as well as the forcibly displaced persons (FDPs). Globally there are 140 million microfinance customers and the gross loan portfolio stands at USD 124 billion. From this number, 80% are women borrowers. According to the Microfinance Barometer 2019, the Latin America and Caribbean (LAC) region presents the highest number of MFIs (248 institutions) and the largest credit portfolio (USD48.3 billion). As part of the strategy for inclusive and sustainable financial services, microfinance services are recognised as key tool for alleviating poverty through social and economic development especially where special emphasis is made on empowering women.
To stimulate economies, governments all around the world rolled out different stimulus packages during and post-pandemic to mitigate and sustain the macro-economic impact which include a mix of shorter-term stimulus measures as well as longer-term structural policies. The budget for stimulus packages can run as high as 10% (Thailand) and 6% ( Cambodia and the Philippines) of GDP for examples. The situation may be particularly challenging for emerging economies, who are less likely to absorb the fiscal costs and more likely to face binding constraints to borrowing on international market.
Colleagues, noting on the facts and challenges, today, we gather as regulators, implementers and key stakeholders to discuss the impact of COVID-19 on the microfinance sector from the customer, MSMEs, and policy perspective. This webinar was designed to be a technical deliberation among AFI member institutions to support the regulated microfinance sector, to address the challenges and possible policy interventions to minimize impact on its customers – individuals and MSMEs, especially small businesses that are owned by women, ensure sustainability and business continuity of microfinance institutions and support recovery of the sector from a medium to long term perspective. More importantly, we will also explore the role of regulators in engaging with and supporting microfinance institutions during these difficult times.
We hope by the end of the webinar, we could instil policy responses taking into consideration market needs and optimise the true potential of microfinance sector to be sustainable and mitigate the impact of Covid-19 for its consumers.
On this note, I will leave you to take forward your deliberations and wish you a fruitful discussion. Thank you.