A partnership between the Foundation and CA Romania to support microfinance

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©Philippe Lissac

The Grameen Crédit Agricole Foundation and Crédit Agricole Romania have signed a partnership to support Romanian microfinance institutions that serve people excluded from the traditional banking system.

Through this partnership, CA Romania will finance the country's microfinance institutions. The Grameen Crédit Agricole Foundation will provide its expertise in the microfinance sector and guarantee the loans granted by CA Romania. This cooperation scheme will help multiply the Foundation's impact and consolidate CA Romania's work in the areas of entrepreneurship and social development.

"After Egypt, India and Morocco, we are establishing a new cooperation agreement with a Group entity, Crédit Agricole Romania. This partnership fits perfectly with the Group's project, which integrates the societal dimension, in this case supporting low-income people, at the heart of development activities," says Eric Campos, General Delegate of the Foundation and Director of CSR at Crédit Agricole SA.

With this partnership, the Foundation strengthens its position as one of the leading players in the sector in the region, while strengthening its ties with the various entities of the Group.

"Our goal in the Romanian market is to strengthen our presence in agricultural financing and contribute to economic and social development by leveraging our group's expertise. This partnership is a tremendous support for achieving these goals," said Luc Beiso, Managing Director of CA Romania.

The first microfinance institution to receive the loan is Vitas Romania, which received a €1.5 million loan, guaranteed up to €100 million by the Foundation. Founded in 1996 by the American NGO CHF International, Vitas offers financial products and services to support the development of income-generating activities. The institution has 1,772 active borrowers, of which 451 are women and 451 live in rural areas. It manages a portfolio of €14.1 million and operates in western Romania through a network of nine branches, with its head office located in Timisoara.

Microfinance institutions anticipate the first effects of a recession

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By Grameen Credit Agricole Foundation

The crisis is beginning to produce its economic effects

A few days after our last publication, the impact of the coronavirus continues to spread and intensify. The milestone of one million infections worldwide has been surpassed, and new outbreaks of the epidemic are being confirmed.

The Grameen Crédit Agricole Foundation, in constant contact with its network of nearly 80 partner microfinance institutions (MFIs) in 40 countries, continues its work of collecting information, analyzing, and sharing its observations. Over the past few days, we have focused our monitoring on the consequences of the crisis and the work of MFIs to address it. This information is very important. It allows us, at our level, to make the most relevant decisions for the management of the Foundation, for the support of our partners, and for the effectiveness of our action as closely as possible to their difficulties and anticipations. It also contributes to the sharing of information among the actors in this sector who are organizing collectively in these times of crisis.

The results we obtained confirm the trends anticipated in the information reported during the first weeks: the crisis is very severe, undoubtedly beyond our initial forecasts from early March, but resistance is being organized. The effect of the health crisis is systemic. No stress model had anticipated it. The response must therefore also be systemic if we are to avoid a major failure of this industry.

Small local businesses are entering a recession

78% of our partners are seeing the first effects of the economic recession on their areas of activity.

In the initial feedback we received, rural areas seemed to be escaping the initial effects of the crisis, especially in food-producing areas. Now, regardless of the size of the institutions (the smallest have a financing portfolio of less than $10 million, and more than $100 million for the largest) and their geographical location, they are all, more or less, facing similar problems: the impossibility of travel (74%), the decline in disbursements to borrowers (77%), the ban on group meetings (63%) are the reasons most cited by our partners regarding the causes of the slowdown in their activity.

“As indicated in the first analysis, the expected direct impact (up to 6 months) is the possible deterioration of the quality of the portfolio in the tourism, transport and hospitality sectors, as well as that of loans financed by remittances from abroad. A medium-term impact is also expected due to the general slowdown in the economy and the reduction in the solvent clientele.” – Partner in Georgia

More than a third of our partners are experiencing near-total lockdowns (36%) and the others are adapting to restrictive pre-lockdown measures.

“[Our] business has been significantly impacted so far, with clients’ businesses being primarily affected by general public fears and more directly by the strict guidelines put in place by the government to try to control the spread of the virus. It is also anticipated that there will be an increase in the cost of living […]. Imports are decreasing, production costs are increasing. It is likely that Kenya’s GDP will fall and inflation will increase, which will affect the country’s economy.” – Partner in Kenya

“We are seeing increasing government action to restrict travel and business activities. For example, one regional government has clarified that all microfinance activities in the region must be suspended during the month of April. We are receiving similar requests from village authorities in other regions.” – Partner in Myanmar

Effects that now impact the institutions' accounts

These difficulties are beginning to be reflected in MFI figures. For example, 74% of the institutions report an increase in their portfolio at risk (PAR 1) compared to the end of 2019. This increase is currently contained to less than 10% in absolute value for 8 out of 10 institutions.

Institutions are clearly accelerating and intensifying their use of digital technology to compensate for the inability of sales teams to travel and arrange in-person disbursements. For example, 681,300 respondents reported increasing use of digital services to carry out their activities remotely.

Loan restructuring operations have already begun for nearly one in two MFIs (43%). The announced intervention of regulators and legislators in the financial sector is confirmed: nearly half of the respondents (44%) are encouraged to proactively propose moratoria and restructurings for the benefit of their borrowers (the countries that have imposed these measures include Kazakhstan, Kyrgyzstan, Sri Lanka, Cambodia, India, Uganda, Burkina Faso, Rwanda, Senegal, the DRC, Egypt, Morocco, and many Eastern European countries). New initiatives are also beginning to be considered, such as the implementation of emergency products (such as minimum subsistence allowances) in the coming months.

Institutions are putting in place crisis plans

This systemic crisis has prompted an in-depth review of MFIs' business plans and financing needs. Upon examination, the increase in loan deferrals granted to borrowers has not yet significantly translated into additional financial resource needs for the MFIs surveyed. Thus, at the time of the survey, 48% of them did not yet perceive any changes in their liquidity needs compared to the projections made for the year, and a third even envisaged a decrease in their needs due to a significant decline in their activity.

At this stage, only one in five MFIs (19%) anticipates an increase in its financial needs, linked to the increase in the price of inputs (seeds, fertilizers, raw materials, etc.), which will trigger an increase in borrowers' financial needs, mainly in the rural areas of our intervention territories. The major international microfinance networks are behind this prospective analysis.

“In addition to the Covid-19 crisis, Kazakhstan has been hit by the sharp drop in oil prices, which weakened the national currency from 380 tenge to 445 per dollar” – Partner in Kazakhstan

Our partners' responses now reveal other factors of concern, particularly in their ability to finance their activities: a quarter of them anticipate a loss in the value of their local currency against the dollar (26%) and a significant increase in currency hedging in their future financing (23%). One in five MFIs is already experiencing financing difficulties with their usual donors.

To be able to more closely manage the rise in risks and financing changes, more than half of MFIs (55%) report having finalized, or are in the process of doing so, a Business Continuity Plan including precise liquidity monitoring. This responsiveness is remarkable, and such plans are an essential element in helping MFIs cope with and manage the consequences of the crisis.

Our analysis leads us to observe an apparent correlation in the quality of Business Continuity Plans following the Coronavirus crisis and the past experience of a major crisis that has already affected the MFI. The lessons learned from past crises thus seem to play a very important role in the resilience of institutions in the face of a crisis, whether financial, political, health-related, etc. However, many institutions with less experience in this area also demonstrate a remarkable willingness to innovate and an ability to anticipate.

Donors also reacted very quickly. Also informed by lessons learned from past crises, they have demonstrated, in recent weeks, a remarkable capacity for intervention and anticipation in a sector that is, despite everything, still young. Thus, in all regions of the world, international lenders, foundations, investment funds, and local banks are working on joint action plans. Multiple meetings are being organized around the world to anticipate the crisis and ensure that its effects, which would be devastating without this awareness and rapid and determined commitment, are absorbed; all agree on the need for effective information sharing and coordination between the various stakeholders. Donors are organizing their actions around responses tailored to the financing needs of MFIs impacted by the crisis, but also by offering monitoring tools, technical assistance plans, and training to strengthen the capacities of MFI teams in the face of this sudden and exceptional situation.

All these elements underscore the extent to which this crisis is a matter for all microfinance stakeholders. The involvement and rigor of local institutions, the coordination of international networks, the support of public and private donors, and the confidence of investors will be the key values of our collective ability to overcome the challenge of this health tsunami.

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Discover other articles on: Covid 19 Observatory.

ADA publishes a guide to ensure the continuity of MFIs during the crisis

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© Didier Gentilhomme

The health and economic crisis generated by Covid-19 is severely impacting microfinance institutions and their clients. To support the microfinance sector in this unique context, the NGO ADA is continuing its mission of promoting inclusion for all by leveraging its knowledge and expertise in risk management with a guide to best practices for the continuity of microfinance institutions.

Available in French, English and Spanish, this guide offers recommendations to microfinance institutions for organizing crisis management and ensuring business continuity.

The document can be downloaded from the ADA website, on a page exclusively dedicated to managing the Covid-19 crisis, a space that offers articles from partners, guidelines, testimonials and videos in order to provide a place for exchanges and sharing of experiences between professionals in the sector.

This guide describes some points of attention for analysis and measures to be taken to organize appropriate crisis management and ensure business continuity in the face of the COVID-19 pandemic.

To access it, click here.

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Discover other articles on: Covid 19 Observatory.

[INTERVIEW] “Life must go on, we must not lose hope”

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Interview with Dara Huot, Director, Phare Performing Social Enterprise

©Philippe Lissac

CambodiaMag interviewed Dara Huot, Director of Phare "Performing Social Enterprise," a partner of the Grameen Crédit Agricole Foundation. He shared his concerns and hopes regarding the Phare circus' social enterprise.

Since March 17, performances at the Phare Circus, one of the main attractions in Siem Reap and Battambang, have been suspended...

Yes, we were implementing a government decision against performance venues. Before that, we had implemented all the necessary measures to disinfect the premises between each performance and respect social distancing between spectators. The temperature was checked for each person entering the big top, and hand sanitizer dispensers were placed throughout. But in any case, the number of spectators was gradually dwindling. The government decree only hastened a closure that would have been inevitable.

How did the staff react to this closure?

Phare is a very large social enterprise, split between Siem Reap and Battambang. Here, we have 40 artists and 70 employees. The Battambang school, which offers training in circus, but also in graphic animation, dance, painting, and theater, has 110 teachers for 1,200 students. When the closure was decided, we took the opportunity to resume our "to-do" list—you know, all those little things that accumulate over time and that we generally reserve for the off-season.

We cleaned everything, repainted, and did all the maintenance work... And then, when we finished all that, everyone went home. The vast majority of the staff comes from Battambang, so many have joined their families there. All the artists continue to train hard, for the resumption of shows, but also for the upcoming tours. Some have been canceled, but we hope to be able to do the one planned in France for this winter.

Are salaries still being paid?

All salaries were paid throughout the month of March. Starting in April, they were reduced by 50 %, and this will continue for the following months. It is unthinkable to leave our employees without any income, and we do not hesitate to dip into our cash flow to do so. But how long can we continue like this? After 3 or 4 months, the coffers will be empty... Especially since we still have to pay all our rent.

Do your employees receive support from institutions?

No, it's not like in France, where compensation is granted to people who find themselves unemployed. Nothing is planned for them here, and the situation is all the more difficult because many employees have contracted debts with banks and microfinance organizations. The interest they have to repay each month is very high, and I don't see how they'll be able to get out of it. The only hope would be for these organizations to relax the repayment terms. Perhaps by reducing interest rates, spacing out repayments, or even suspending them until things return to normal. A moratorium on rent could also help many Cambodians see out the crisis. As things stand, repaying a loan, paying rent, and supporting one's family when one has a reduced salary or, worse, when one finds oneself unemployed will pose major problems for a large part of the population.

How will this crisis change Siem Reap?

Since the city opened to mass tourism, that is, some twenty years ago, the number of visitors has only grown exponentially. Infrastructure, however, has not necessarily kept pace. The environment has suffered greatly from the increase in visitors, waste is not always well managed, and access to water and its quality are still problematic in certain neighborhoods. Electricity needs have increased, but outages remain numerous. Why not take advantage of this involuntary "pause" to renew ourselves, question ourselves, and thus beautify the city? We must remain positive, try to see what we can learn from this ordeal. Life must go on, we must not lose hope, and continue to be positive despite the circumstances. We must, more than ever, take care of ourselves and our loved ones, and stay strong. This is important for ourselves, but also for those around us. Everyone hopes that this pandemic will last as short a time as possible. 2019 was a difficult year, and 2020 will be even worse. But we will get through it, and I hope we will come back tougher from this ordeal. Even if it will, of course, be very difficult to get back on our feet.

The microfinance sector is organizing itself to face the effects of the health crisis

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By Grameen Crédit Agricole Foundation

The COVID-19 virus continues to spread across the world, with more than 450,000 confirmed cases as of March 26, 2020. Governments, even those that deny it, are implementing increasingly stringent containment measures. As the situation evolves more rapidly every day, microfinance stakeholders are preparing to face this crisis by taking initial, beneficial steps.

Following its survey launched two weeks ago, the Grameen Crédit Agricole Foundation has created an observatory to continuously update the information collected through daily exchanges with its partner microfinance institutions (MFIs). The goal is to better understand how to support them and also to share its analyses with other financial stakeholders in the inclusive finance and development aid sectors.

Adapting to slow the spread of the virus

MFIs quickly recognized the health implications of the crisis. They immediately sought to adjust their operating procedures to address the risk of contamination by adopting recommended barrier measures and launching awareness campaigns among clients and employees.

“Handwashing is mandatory in all branches, with buckets and soap provided for everyone entering the offices. Hand sanitizers are provided on the counter for all customers transacting with tellers. […] The process of acquiring protective masks for tellers is underway. All staff members experiencing symptoms are strongly advised to stay home during monitoring. We have strongly recommended that all staff avoid visiting branches given the evolving situation unless absolutely necessary.” – Partner in Sierra Leone

MFIs have also had to adapt to decisions taken by local authorities to slow the spread of the virus. Organizations in the highest-risk areas have been forced to partially or completely cease operations and close some of their local branches.

“All operations will be closed from 12:00 on March 26, 2020, in accordance with the President’s announcement on Monday, March 23, and to allow staff to return home for the lockdown period. […] Disbursements to clients have been deferred until the end of the lockdown period.” – Partner in South Africa

Teleworking or staff rotation systems were quickly implemented at the vast majority of our partners. Faced with numerous bans on gatherings, institutions now work with a representative of the credit solidarity groups and stay in touch with their clients through instant messaging services.

Digital solutions are particularly suited to this context. They allow microcredit disbursements and remote debt collection to continue. At a dairy in Senegal, for example, payment to farmers for milk collection has not been disrupted because it has been made via a mobile payment system for several weeks.

“We encourage our customers to use mobile payment platforms for refunds via SMS, as it is the safest method available today.” – Partner in Uganda

While MFIs have been able to quickly adapt their operating procedures, the time has also come to prepare for the looming economic slowdown. Crisis meetings are multiplying at headquarters, or via video conferences from managers' homes, in order to put continuity plans in place.

New regulations

A growing number of countries are introducing new credit regulations to cushion the economic shock and the likely risk of insolvency among vulnerable customers. Regulators are encouraging financial institutions to grant payment deferrals to their clients affected by the crisis and to restructure loans. Such measures are already beginning to be put into practice.

 "The government is also implementing measures to help local businesses, such as reducing interest rates. For example, the borrowing rate for secured loans has been lowered from 1%" – Partner in Myanmar

“The Central Bank of Kyrgyzstan has taken the following support measures: 1) cancel the accumulation of penalties for all borrowers; 2) review loan repayment terms and provide for a payment delay of at least 3 months when borrowers request it; 3) when restructuring loans related to changes in borrowers' cash flows due to the coronavirus, institutions should not consider them bad loans if the cause is the health crisis” – Partner in Kyrgyzstan

"The Central Bank has announced that financial institutions must accept all requests for repayment deferrals until April 30." – Partner in Kosovo

The microfinance sector is demonstrating a high degree of responsibility and maturity in addressing this global crisis. The Grameen Crédit Agricole Foundation's partner institutions are producing regular financial statements and forecast analyses of their financing needs for the coming months. Although we have not yet observed any significant increase, changes in portfolio at risk (PAR) levels are systematically monitored with a very high degree of vigilance. Numerous exchanges between lenders, specialized nongovernmental organizations, and microfinance institutions are now taking place daily.

The Grameen Crédit Agricole Foundation maintains regular contact with its partners and colleagues in a reciprocal effort to pool ideas and resources. We share our analyses and best practices implemented by microfinance institutions with our partners, responsible investment stakeholders, and our peers.

Pooling available information, analyses, and anticipations, followed by the concerted implementation of shared decisions, are vital principles for our sector today. Through this transparency, this consultation, and a necessary adaptation of our intervention principles, we should be able to overcome the effects of this exceptional health crisis, which risks taking with it many microfinance institutions, leaving vulnerable populations in desperate situations. Because we know that the crisis will hit the most deprived populations first and foremost. Hard. Let us rise together to this humanitarian challenge.

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Discover other articles on: Covid 19 Observatory.

The Foundation continues its investments in Kosovo

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© Philippe Lissac

The Grameen Crédit Agricole Foundation has just granted a new loan in local currency equivalent to 1.5 million euros to the Kosovar microfinance institution Kreditimi Rural i Kosoves (KRK), which it has supported since 2009.

KRK is a project initiated in 2000 by ADIE International under the name Rural Finance Program of Kosovo (RFPK). The project transformed into a microfinance institution shortly after, when the new regulations on financial institutions came into force in Kosovo. KRK's mission is to provide sustainable access to financial services in rural areas of Kosovo, with a priority for the agricultural sector. To date, the institution has nearly 17,000 clients, including 16% women and 84% rural clients.

With this investment, the Foundation now has an outstanding portfolio of €22 million in the Eastern Europe & Central Asia region, representing 23% of its portfolio, and has 18 supported partner organizations, representing 21% of the microfinance institutions and impact businesses it finances.

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Created in 2008, under the joint leadership of Crédit Agricole SA's management and Professor Yunus, 2006 Nobel Peace Prize winner and founder of Grameen Bank, the Grameen Crédit Agricole Foundation is a multi-sector operator that contributes to the fight against poverty through financial inclusion and social impact entrepreneurship. As an investor, lender, technical assistance coordinator, and fund advisor, the Foundation supports microfinance institutions and social enterprises in nearly 40 countries.

A TA program to strengthen microfinance in West Africa

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© Didier Gentilhomme

Actors committed to microfinance

With over 10 years of experience in the microfinance sector, the Grameen Crédit Agricole Foundation finances and supports microfinance institutions with technical assistance. It represents over €200 million in financing, a presence in nearly 40 countries, and more than 85 institutions supported since its inception. With 37% of investments in Sub-Saharan Africa, the continent is at the heart of the Foundation's actions and its mission to contribute to the fight against poverty.

Alongside the European Investment Bank (EIB) and the Luxembourg government, the Foundation will strengthen its support for microfinance institutions in West Africa as part of a new technical assistance program. Both of the Foundation's partners have extensive experience in developing microfinance: the EIB has already committed more than €1.3 billion to the sector since the first microfinance operations in 1992, and Luxembourg accounts for 611,000 million of global microfinance assets under management.

Strengthening the Foundation's impact in West Africa

After granting the Grameen Crédit Agricole Foundation a loan equivalent to €12 million in CFA francs in 2019 to support microfinance in West Africa, the EIB has awarded, on behalf of the Government of Luxembourg, a grant of €332,000 to provide technical support to five microfinance institutions supported by the Foundation.

This two-year program will enable the Foundation to support Caurie (Senegal), Kafo Jiginew (Mali), Graine (Burkina Faso), ACEP Burkina Faso, and ACEP Niger to facilitate their digital transformation, improve risk management, and strengthen social performance management. Through this partnership with the EIB and the Government of Luxembourg, the Foundation is expanding its presence in West Africa and strengthening its value proposition to its partners in the region.

UGAFODE, the Foundation's partner in Uganda, expands its services to refugees

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UGAFODE Microfinance Limited (MDI) has opened a branch in the Nakivale refugee camp in Uganda as part of a program for the financial inclusion of refugees launched by the United Nations Refugee Agency, the Swedish Cooperation Agency, and the Grameen Crédit Agricole Foundation. The initiative aims to create sustainable livelihoods, resilience, and self-reliance for refugees in both settlement and host communities. This follows a successful pilot financial inclusion project for refugees in Kampala. As part of the project, refugees continue to have access to credit, savings, and money transfer services.

During the pilot phase, UGAFODE adjusted its procedures, including documentation requirements, such as identification (refugee ID card issued by the Prime Minister's Office – Department of Refugees). "Serving refugees fits well with our mission to transform the lives of low-income but economically active populations. Refugees are economically active and have financial needs like everyone else and deserve the utmost attention," said Shafi Nambobi, Director General of UGAFODE.

Nakivale camp hosts more than 100,000 refugees from 13 countries, most of whom work in agriculture and trade. Through the Nakivale branch, UGAFODE will expand financial services to smallholder refugee farmers and host community members to improve household incomes. Nambobi announced that the institution plans to roll out financial services for refugees to other settlements in the future.

According to the refugees interviewed, the UGAFODE Nakivale branch saves them from traveling long distances to access financial services in Mbarara or Isingiro. “With the establishment of this UGAFODE branch in our camp, financial services have been brought to our backyard. We can now be served easily,” said one of the refugees. Another refugee said that previously, due to poor road conditions, it took a day just to get to the bank, and that the branch would help them save on transportation costs and time wasted traveling.

More information about the program here.

The Foundation strengthens its support for the microfinance institution Graine

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© Didier Gentilhomme

In February, the Grameen Crédit Agricole Foundation signed a new financing contract in Burkina Faso, in favor of the microfinance institution Graine, for an amount in local currency equivalent to 380,000 euros. This financing is provided as part of the program of the African Facility, a system set up in 2013 by the Grameen Crédit Agricole Foundation, in partnership with the AFD, to support a greater number of rural microfinance institutions in sub-Saharan Africa.

GRAINE (GROUPE d'Accompagnement à l'Investissement et à l'Epargne) is a microfinance institution whose mission is to "contribute to improving the economic and social conditions of poor populations in Burkina Faso, mainly rural women, by offering them appropriate financial services." To date, the institution has more than 24,000 clients, including 97% women and 80% rural clients.

With this new funding, the Foundation's outstanding loans in sub-Saharan Africa reach €35.5 million, representing 371,000 million of the Foundation's total outstanding loans. With 40 partners, sub-Saharan Africa represents 471,000 million of the Foundation's institutions and companies as of the end of February 2020.

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Created in 2008, under the joint leadership of Crédit Agricole SA's management and Professor Yunus, 2006 Nobel Peace Prize winner and founder of Grameen Bank, the Grameen Crédit Agricole SA Foundation is a multi-sector operator that contributes to the fight against poverty through financial inclusion and social impact entrepreneurship. As an investor, lender, technical assistance coordinator and fund advisor, the Foundation supports microfinance institutions and social enterprises in nearly 40 countries.

How Coronavirus Affects the Microfinance Sector

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By Grameen Crédit Agricole Foundation

Created in 2008, at the joint initiative of Crédit Agricole SA and Professor Yunus, founder of the Grameen Bank and 2006 Nobel Peace Prize winner, the Grameen Crédit Agricole Foundation is an operator committed to promoting a better shared economy.

An investor, funder, technical assistance provider, and fund advisor, the Foundation has more than 80 partners (microfinance and social business institutions) and operates in some 40 countries with nearly €100 million in outstanding financing. The Foundation focuses on microfinance institutions serving women and rural populations. These institutions support approximately 4 million clients.

The microfinance sector is exposed and worried

On March 19, according to figures from Public Health France, the coronavirus had infected 213,000 people worldwide. 8,800 deaths have been reported. After announcing the closure of many institutions and businesses, containment measures continue to be implemented around the world. Africa and South America were not officially affected by the virus for a long time, but they are now facing this pandemic with hundreds of cases already identified.

The global health crisis is gradually becoming an economic crisis. Economic activity has slowed in all countries, and stock markets have lost nearly a third of their value in less than a month. The microfinance sector will undoubtedly be severely affected by the effects of this global crisis.

The Grameen Crédit Agricole Foundation team quickly launched a survey of its partners on March 11th to gather their initial impressions and analyses, the impact on their financing activities, their clients' activity, and their anticipation of future needs and challenges. All the information contained in this article comes from this survey. Fifty-six microfinance institutions (MFIs) responded, out of 75 partners surveyed (participation rate of 75%). The last responses were received on March 19th.

All our partners have expressed real concern in their responses about the expected effects of this global health crisis.

Local government decisions are already impacting small income-generating activities

48% of the MFIs surveyed estimated that their clients were already affected by the effects of the coronavirus outbreak at the time of the survey, and 68% of them believe they will be in the near future. In many countries of operation, governments have decided to close schools and non-essential activities, restrict movement, or ban gatherings. This is already the case in Sri Lanka, Cambodia, Romania, Myanmar, Sierra Leone, Jordan, Mali, and other operating countries. These changes are taking place everywhere today, and new countries are added to this list every day.

Such decisions are already having a direct impact on our partners' clients. Many microfinance borrowers rely on imports for their business. Border closures and travel bans have a direct impact on their operations. China's travel ban affects not only Asian countries but also African countries.

“Since the border with China has been closed, some agricultural product prices are decreasing, so our farmer clients are not getting good prices for their crops.” – Myanmar Microfinance Institution

“We have customers who travel to shop (China, Ivory Coast, Togo, Benin, etc.). Informal traders are afraid, and this could affect their business.” – Microfinance institution in Burkina Faso

The inability to gather impacts all operations taking place in markets and fairs. Traders are prohibited from carrying out their activities and have no alternative income. The travel ban is severely impacting global tourism and, consequently, all small local businesses dependent on tourism (hotels, drivers, guides, restaurants, souvenir sellers, etc.). Remittances are declining, which also affects families back home who rely, to a large extent, on these transfers.

“If the travel ban continues in the Gulf region and Europe, Jordan's economy is likely to suffer as it also depends on tourism revenues and remittances from the Gulf” – Jordan Microfinance Institution

With the exception of one case, we have not received any information on the implementation of any economic mitigation plans that local authorities may have put in place, which likely reflects a difficulty in adjusting or intervening in this context, and likely also a lack of accurate data or available budgetary means. The only specific example provided to us is that of Palestine. Through eight guidelines, the Palestinian Monetary Authority intervened by urging financial companies to continue providing lending services to individuals to ensure the continuation of the commercial and economic cycle and to consider deferring the periodic monthly payments of all borrowers for the next four months (six months for the tourism and hospitality sectors). The measures also stipulate that no additional fees, commissions, or interest on deferred payments may be charged during this period.

Financial institutions' activity could contract

Although concerned about the evolution of the crisis and its first signs, 59% (33) of the MFIs surveyed indicated that their activity was not yet affected by the epidemic at the date of the study (between March 11 and 19). 23 MFIs (37%) felt concerned at the time of this survey, giving several explanations such as the risk to field staff, restricted travel, and working from home.

One of the main concerns is the ban on meetings, which will affect all institutions whose microfinance methodology is based on a "solidarity guarantee group" approach. Some partners are already adapting by appointing group representatives to limit meetings or by relying on "group representatives" from among their clients.

In some countries where no clear decision has yet been made, MFIs are considering postponing disbursements if their loan officers are unable to travel or need to temporarily adapt their collections process.

“During the emergency period until May 29, 2020, customer center meetings will not be held as usual. Instead, the “Pay and Go” method has been implemented as follows: only “group leader” clients, two to four people per center of generally 15 to 20 clients, are invited to attend the regular center meeting. Group leaders will collect the deposit from their members.” – Indonesian Microfinance Institution

“We have implemented a special procedure to meet individually with members of the joint and several guarantee groups. We provide advice to clients on how best to deal with the situation.” – Senegalese Microfinance Institution

Our partners must also adapt to the situation faced by their employees by ensuring their health above all else. The risk of virus transmission is an important factor to consider for the work of loan officers. The responses to the questionnaire show that the lockdown rules are directly and immediately preventing the smooth running of business for all departments of the institutions. Some staff members are already working from home in some institutions.

“Almaty, where the head office is located, will be quarantined from March 19, employees will work remotely” – Kazakhstani microfinance institution

“Field staff are at significant risk of contracting the virus, so employees are reluctant to work with clients. The quarantine will hit the entire MFI market.” – Microfinance Institution in Uganda

The risk portfolio and liquidity needs are under surveillance

Many institutions express concern about rising risks. But according to our survey, at the time of their responses, only 11 MFIs (20%) noted an increase in their portfolio at risk. Our African partners seemed more concerned than their peers on other continents. However, a large number of them across all our areas of operation (40 countries across 3 continents, Africa, Asia, and Europe) are worried about the future: 36 MFIs (64%) anticipate an increase in their portfolio at risk.

“We are likely to experience a potential increase in the delinquency portfolio and a reduction in credit demand. This increase in delinquency is expected to be around 2%, but our portfolio growth will undoubtedly slow down.” – Cambodian Microfinance Institution

Surprisingly, some partners believe they are no more at risk than usual. These reactions come from institutions that are mostly located in rural areas.

“Overall, since our clients are mainly rural (70%), we expect that they will not experience a significant deterioration in their business or income due to the increase in the prices of their agricultural products. We will have a clearer picture in the second half of April.” – Kyrgyzstan Microfinance Institution

“As of March 16, 2020, our business is continuing as usual. We have not yet seen any impact on loan repayments in Cambodia, particularly in Siem Reap and Phnom Penh. However, we expect some increase in Siem Reap starting later this month. In this part of the country, however, our clients live primarily in rural areas. Our exposure to tourism, hospitality, and the service industry is minimal.” – Cambodian Microfinance Institution

This health crisis will have an impact on the liquidity needs of institutions. According to our survey, 29 MFIs (52%) anticipate changes in their financing needs. Most small MFIs (portfolios less than $10 million) do not anticipate changes over time. Their size seems to be a factor in agility, but we are attentive to this point, which does not seem particularly obvious to us. The majority of medium-sized institutions (portfolio size between $10 and $100 million) anticipate changes in their financing needs from donors (including the Grameen Crédit Agricole Foundation). Many institutions expect problems refinancing their activities. An increase in the cost of foreign exchange hedging mechanisms is expected, and discussions with the various lenders are or will be initiated shortly.

“Indirectly, the exchange rate is becoming very volatile due to the epidemic. We have an increase in microloan requests in US dollars and a decrease in requests in local currency, which affects the volume of loans we can disburse.” – Myanmar Microfinance Institution

Liquidity problems are anticipated. Indeed, non-repayment by microcredit beneficiaries could hinder the ability to disburse new loans. Rising provisions for risks and potential losses are seen as an obstacle to securing new financing from traditional lenders.

“If the situation continues until mid-year, we will need liquidity as most of the liquid assets will have been wiped out by high provisioning for impaired assets (expected losses) due to increased non-repayment” – Microfinance Institution in Uganda

 "Loan default leads to decreased liquidity. Yes, we have taken measures to limit this potential situation" - Malian microfinance institution

Microfinance sector calls for appropriate measures

Some MFIs have already asked the Foundation if it would be possible to help their institutions get through the period when the effects of the pandemic will be the harshest.

“We would like advice on how to avoid the disease and on available and effective treatments for treatment in case of infection” – Microfinance Institution of Benin

“We would like the Grameen Crédit Agricole Foundation to compile information on the measures to be put in place to avoid the coronavirus, and also, for institutions around the world, on how to meet the challenges that lie ahead.” – Microfinance institution in Uganda

One partner recalled that during past natural disasters, particularly tailored measures had been put in place. Some, which may seem counterintuitive, had resulted in increased funding to enable clients to recover from the shocks and overcome this difficult period. Drying up funding would only intensify the difficulties and impacts of the crisis.

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Discover other articles on: Covid 19 Observatory.

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