The Grameen Crédit Agricole Foundation has been promoting financial inclusion and social entrepreneurship for thirteen years now and continues to work in favour of the development of rural areas and female entrepreneurs. At the end of 2021, the Foundation had accumulated nearly €300 million in funding, 379 technical assistance missions in progress or completed and 136 organisations funded.
We are pleased to share with you this second edition of “Taking the floor”. It presents our daily support for entrepreneurs, rural communities, refugees and farmers. Enabling refugees from the Nakivale camp to access credit in Uganda, modernising agricultural practices in Moldova, financing access to water and ensuring the pay of breeders in Senegal, these are some of the actions highlighted in this second edition.
These stories demonstrate the resilience of the microfinance sector, this ability to cope with the health context, the economic difficulties and the effects of global warming. Resilience also refers to the ability to transform obstacles into opportunities to strengthen oneself. The digital transformation, the coordination between stakeholders and the innovation demonstrated by our partners throughout these last difficult months are a clear proof of it.
In 2021, the Grameen Crédit Agricole Foundation supported 81 microfinance institutions and social enterprises in 37 countries. In the context of the Covid-19 crisis, the Foundation supported its partners with funding and technical assistance. Spotlight on the interview with Eric Campos, Managing Director of the Foundation and CSR Director of Crédit Agricole SA.
How did you support microfinance institutions?
Contrary to what we thought, the entire year of 2021 was marked by the Covid crisis and the economic effects and measures taken by the States to protect the population. The Foundation therefore intervened in three ways with the partners. First, we have maintained a fairly high volume of financing, with 45 million Euros lent to microfinance institutions. We also granted deferrals, to give institutions a break, to allow them to deal with their own deferrals that they granted to their beneficiaries. Finally, we have increased our capacity, our coordination in terms of technical assistance since, and this is a record, we have coordinated 130 technical assistance missions, mainly to support institutions in terms of risks, counterparty risks, strengthening their risk team, their organisation, and also in terms of managing their cash flow.
How is the microfinance sector doing at the end of 2021?
2020 was a Covid year and the institutions coped, knew how to deal with this systemic crisis. 2021 has been tougher. They had been a little exhausted by this first year of 2020 and they had to pursue their efforts, their resistance. And therefore, the Foundation was indeed able to support these institutions, but some difficult cases appeared for which it was necessary to grant not only deferrals but also restructurings.
It is important to say that the entire microfinance sector, foundations, investment funds, were able to talk to each other to provide the best possible support to the institutions that were experiencing the most significant difficulties. The sector is still resilient. It is an attractive sector. We can say that it has faced this systemic crisis with a resilience that was probably even greater than what we thought.
What is the Foundation’s agenda for 2022?
2022 will be the year of preparation for our 2022-2025 medium-term plan. It will hinge on this climate crisis that is hitting the Foundation’s areas of intervention hard.
Better support rural populations, strengthen their economic resilience, in the aftermath of an extremely serious economic crisis; this will be the first axis on which we will work. And the second one is to support the most vulnerable populations, those who have also suffered from this economic crisis and who need us to be able to support them in accessing financing, in the development of income generating activities. These will be the two pillars of our 2022-2025 medium-term plan.
Small entrepreneurs across Africa to benefit from €10 million partnership between European Investment Bank and the Grameen Credit Agricole Foundation
Ongoing cooperation to strengthen access to microfinance by rural and underserved entrepreneurs impacted by COVID pandemic
Scheme to back microfinance institutions in different countries across Africa, with a focus on gender inclusion
Africa private sector to benefit from local currency financing and support for smaller microfinance institutions
Access to finance by entrepreneurs and businesses impacted by COVID-19 in rural regions in Sub-Saharan countries will be enhanced by a new €10 million targeted financing initiative launched by the European Investment Bank (EIB) and the Grameen Credit Agricole Foundation ahead of the first EU-Africa summit since the pandemic.
The latest cooperation between the European Investment Bank, the world’s largest international public bank and the Grameen Credit Agricole Foundation, a leading supporter of microfinance across Africa, will focus on ensuring that small business can access finance, create jobs and combat poverty.
“Ensuring that entrepreneurs and communities across Africa can access finance is essential to unlock opportunities, accelerate social inclusion and strengthen economic resilience to challenges unleashed by the COVID-19 pandemic. The EIB is committed to supporting microfinance across Africa and we are pleased to strengthen over long-standing cooperation with the Grameen Credit Agricole Foundation. The €10 million engagement launched today will directly benefit small businesses across the continent.” said Ambroise Fayolle, Vice President of the European Investment Bank.
“Delivering targeted financing in fragile regions is capital to beat poverty, prevent social exclusion and unlock opportunities that drive economic growth. This new cooperation between the EIB and our Foundation will strengthen access to finance by entrepreneurs in sectors impacted by COVID and in remote and rural communities.” said Eric Campos, Managing Director of the Grameen Credit Agricole Foundation.
The new pan-African microfinance partnership was formally agreed in Brussels earlier today ahead of the EU-Africa Summit at the EU-Africa Business Forum.
Improving private sector access to finance in disadvantaged communities
The new cooperation between the EIB and the Grameen Credit Agricole Foundation will help to scale up microfinance activity across Africa by providing long-term and local currency financing to local microfinance institutions.
The investment is expected to finance more than 147,000 loans to self-employed and micro-enterprises, alongside sustaining up to 36,000 jobs. Reflecting the importance of empowering women and girls across Africa the scheme will support an estimated 98,000 loans to female entrepreneurs.
Tackling challenges holding back microfinance in Africa
The new operation will support smaller microfinance institutions than those that the EIB can finance directly. These microfinance partners are often also unable to receive financing from local commercial banks and cannot scale up.
The initiative will benefit financial and social inclusion and is expected to support entrepreneurs in remote regions, micro business run by women and young people who have limited or no access to financial services. This vulnerable and underserved segments are also the most impacted by the COVID-19 pandemic.
Supporting fragile regions across Africa
The Grameen Credit Agricole Foundation will be able to allocate the loan across the many microfinance institutions in sub-Saharan Africa. The network of partner microfinance institutions spans sixteen countries across the region, including fragile ones such as Benin, Togo, Niger and Malawi.
Building on longstanding cooperation between microfinance partners
The European Investment Bank and the Grameen Credit Agricole Foundation have worked together to strengthen microfinance across Africa since 2018 and strive to enhance microfinance best-practice and help entrepreneurs to improve business skills through technical assistance projects.
The European Investment Bank is the world’s largest international public bank and since the pandemic has provided more than €8 billion for new investment across Africa.
The European Investment Bank (EIB) is the long-term lending institution of the European Union owned by its Member States. It makes long-term finance available for sound investment in order to contribute towards EU policy goals.
Created in 2008 at the joint initiative of Crédit Agricole and Nobel Peace Laureate Pr. Muhammad Yunus, the Grameen Crédit Agricole Foundation finances and supports through technical assistance microfinance institutions and social enterprises in around 40 countries.
Since the beginning of the pandemic, the Grameen Crédit Agricole Foundation has been monitoring the evolution of the health crisis in its countries of intervention to better understand its effects on supported microfinance institutions and their clients. After Covid-19: the impact of the crisis on microfinance, this new publication compiles data and analyses from some of the countries where the Foundation works.
The Foundation has chosen to use accessible, quantitative and qualitative measurement tools. The quantitative indicators focus on the number of Covid cases and the number of deaths, which are analysed on average over 7 days and as a proportion of 1 million inhabitants in order to have comparative data. The percentage of fully vaccinated inhabitants is also taken into account to assess the effectiveness of the vaccination campaign in the country. The qualitative measurement tools are based on the government’s actions in response to the crisis, the pandemic’s impact on the economy and the health mapping (red, orange or green countries) developed by the French government.
Sources are exclusively from relevant entities: the European Center for Disease Prevention and Control, International Monetary Fund, French Ministry of Foreign Affairs, French Ministry of Public Health, Organisation for Economic Co-operation and Development, World Bank and World Health Organisation.
With this publication, intended for policy makers, funders, operators and microfinance institutions, we hope to contribute to the understanding of the effects of Covid-19 on the microfinance sector in order to better prepare, innovate and respond to the crisis.
ADA, Inpulse and the Grameen Crédit Agricole Foundation joined forces in 2020 to monitor and analyse the effects of the COVID-19 crisis on their partner microfinance institutions (MFIs) around the world. This monitoring was conducted periodically in 2020 and 2021 so as to get a better view of the development of the crisis worldwide. The conclusions presented in this article follow the last study conducted in November 2021. With this regular analysis, we hope to contribute, at our level, to the charting of strategies and solutions adapted to the needs of our partners, as well as to the dissemination and exchange of information by and between the different stakeholders of the sector.
The results presented here are from the 8th survey in the joint series (1) of ADA, Inpulse and the Grameen Crédit Agricole Foundation. The 70 institutions that responded are located in 39 countries in Eastern Europe and Central Asia (ECA-24%), Sub-Saharan Africa (SSA-38%), Latin America and the Caribbean (LAC-20%), South and Southeast Asia (SSEA-9%), and the Middle East and North Africa (MENA-9%) (2).
1. Despite the recovery in operations, growth is limited by weak demand
The COVID-19 environment improved substantially for our partner microfinance institutions in the 2nd half of 2021. More specifically, as of November 2021, 64% of them reported that the measures taken to contain the epidemic in their countries had eased compared to those experienced in the summer, and 70% of respondents (49 MFIs) no longer faced COVID-19-related constraints in their operations.
MFIs in Eastern Europe (Bulgaria, Lithuania, Moldova and Romania) stand out as an exception to this dynamic, since some of them (7 MFIs out of 13 in this sub-region) report a hardened context during this period, linked to the resurgence of the epidemic in the region in the last quarter. This is reflected in the difficulties in meeting clients in the field or in branches and therefore in conducting activities in general (collection and disbursement of loans).
It is in this changing context that MFIs have been operating for almost two years now. Although conditions are improving, operational performance has remained below expectations as the surveys continue: 53% of respondents (37 MFIs) report that they have not met their disbursement targets since the beginning of the year. This phenomenon is encountered globally in every region, with the exception of LAC (where most partners are located in Central America).
The low levels of disbursements are related first and foremost to difficulties experienced by MFI clients. The two most common reasons given (54% and 49% respectively) for the MFIs that are not growing at the expected levels this year are the deteriorated risk profile of clients and the reluctance of clients to take out new loans. This justification is further confirmed by the fact that 53% of respondents still have a higher risk portfolio than before the crisis. This persistent increase in risk and the situation of a portion of the MFIs’ clients with little or no needs consequently limits the possibilities of MFIs for development.
2. Digitalization remains the top priority for microfinance institutions
A gradual and contrasting economic recovery notwithstanding, the proactive approach of MFIs to adapt to current and future challenges continues to be demonstrated as the months go by. We have noticed that the crisis has fuelled reflection on strategic issues since its onset. At the end of 2021, 47% of MFIs confirm that the important areas of work for the coming years have emerged with the crisis. Above all, the topics most mentioned at the beginning of the pandemic (product development for agriculture, adaptation of the offer, digitalization) are still at the heart of the directions that partner institutions should take.
The implementation of (internal and external) digital solutions is considered the main area of development. Digitalization is essential to overcome the difficulties of direct contact with borrowers, a subject that has been highlighted since the beginning of the pandemic. We also note that the appeal of digitalization is found in all regions, but that it is more or less pronounced depending on the size of the MFI: 69% (9 MFIs) of Tier 1 (3) institutions are thinking of launching new digital products and services, while this concerns only 47% (15 MFIs) of Tier 2 and 24% (5 MFIs) of Tier 3 institutions.
The other strategic areas cited are mentioned to a lesser extent. 30% of the respondents nonetheless plan to focus more on the agriculture sector. The responses on this subject do not show a marked correlation either in terms of MFI size or location; only the SSEA region shows a particular interest (67%). This echoes the testimonies we collected a year and a half ago: this sector appeared to be one of the least affected by the COVID-19 crisis. This intention to invest more in the agricultural sector is particularly positive as this sector represents an economic, social and environmental challenge for the years to come.
Finally, another point that stands out among the responses of our partners is the training and awareness-raising of clients on various topics: the use of digital solutions (27%), financial education (27%), health (11%) and environmental protection (11%). While these topics are less popular, they are related to the MFIs’ areas of development mentioned above and highlight the need to support clients so that they can adapt to these changes.
3. The capacity to implement these strategies varies according to the size of the MFIs
We note that 76% of the MFIs have already started to implement measures related to these strategic lines and 16% plan to launch actions in this direction in the coming months. Thus, only 7% of the sample have less clear perspectives on this point. A certain time lag in the implementation of these measures emerges however, depending on the size of the institutions: the vast majority of Tier 1 MFIs (93%) have already implemented such measures, whereas this proportion drops to 77% for Tier 2 and 64% for Tier 3 MFIs.
These differences by MFI size (which we already noted in our 2020 work on the direct consequences of the crisis on MFIs (4)) are also reflected in the level of support expected from external stakeholders (investors, donors, etc.). Whereas technical assistance (69% of responses) and dedicated funding (66%) are the two components that stand out the most for making progress on these issues, they are much more requested by Tiers 2 and 3 MFIs. Similarly, the ECA MFIs are the only ones to show a certain independence on this subject, with a third of the respondents in the zone not stressing any need for support.
The larger MFIs therefore appear to be better equipped and more autonomous after the crisis to meet their next challenges, as they were at the peak thereof. At the same time, some of the smaller MFIs also confirm strong orientations for the years to come, albeit to a lesser extent. They are no less ambitious even though they have fewer resources.
ADA, Inpulse and the Grameen Crédit Agricole Foundation joined forces in 2020 to monitor and analyse the effects of the COVID-19 crisis on their partner microfinance institutions around the world. This monitoring was carried out periodically throughout 2020 to gain a better insight into how the crisis has developed internationally. We are extending this work this year, on a quarterly basis. The conclusions presented in this article follow the second quarter of 2021. With this regular analysis, we hope to contribute, at our level, to the construction of strategies and solutions adapted to the needs of our partners, as well as to the dissemination and exchange of information by and between the different stakeholders in the sector.
In summary
The results presented in the following pages come from the seventh survey in the series shared by[1] ADA, Inpulse and the Grameen Crédit Agricole Foundation. Responses from our partner microfinance institutions (MFIs) were collected in the second half of July 2021. The 78 institutions that responded are located in 40 countries in Sub-Saharan Africa (SSA-32%), Latin America and the Caribbean (LAC-30%), Eastern Europe and Central Asia (ECA-22%), North Africa and the Middle East (MENA-9%) and South and Southeast Asia (SSEA-6%).[2]
The fairly positive overall trend nevertheless conceals highly contrasting realities, with the largest number of institutions returning to growth and others continuing to encounter difficult economic conditions. The first group shows growth in their assets and positive development projections for the end of 2021. This outlook remains measured nonetheless (mostly between 0 and 10% of portfolio growth) as factors such as client demand and risk management continue to affect expansion opportunities.
Conversely, some institutions are facing difficulties specific to health contexts, the effects of which are weighing on economic life and are having a strong impact on transaction volumes. As a result, the profitability of their financial performance has been affected to the point of having a negative effect on the equity capital of the most fragile.
An operating environment that continues to improve overall
The reduction of operational constraints and the gradual recovery of business activities are again confirmed in this latest survey. Needless to say, this trend hides some disparities that are less well oriented due to the measures taken to fight the spread of the virus. At the beginning of July 2021, 47% of the institutions surveyed said that they no longer faced operational constraints on a daily basis (Figure 1). Also, all constraints relating to traveling in the country and meeting clients do not concern more than 20% of respondents.
This is reflected in the level of activity of the institutions: 72% of the MFIs have either returned to a pace similar to that before the crisis or are experiencing a gradual recovery without major interruptions (figure 2). This phenomenon is particularly visible in the ECA region, where the level of activity has not declined for almost all institutions. In the LAC and SSA regions, a majority of organisations are in the same situation (63% and 68% respectively). In these areas, the difficulties are particularly acute in East Africa, Panama, and Honduras. Finally, for MFIs in the MENA region, the trend is towards recovery while those in SSEA are largely facing new difficulties (Cambodia, Laos, Myanmar, Sri Lanka).
Part of MFIs have returned to growth
It is in this context that MFIs continue to disburse loans to their clients. Whereas the increase in portfolio at risk (PAR) and the reduction in the loan portfolio were the major financial consequences of the crisis in 2020, only 36% of the MFIs surveyed in July still report a decline in their outstanding loans (figure 5).
This positive analysis masks a slow process, however, as shown by the response of our partners to whether they met their disbursement targets in Q2 2021. More than half (53%) indicated that they did not meet their disbursement targets in this period, a figure that is relatively close to that obtained in Q1. This result is not entirely correlated with an organisation’s level of operations: more than half of the MFIs in the LAC and SSA regions report unmet targets despite a favourable operating environment. Note that three major reasons are cited by MFIs that did not meet their growth targets this quarter: the drop in amounts requested by clients (45%), clients’ reluctance to commit to new loans (43%), and managing risk by focusing only on existing clients (38%). Thus, MFIs in the EAC region are the exception with excellent performance in Q2 2021.
Even if these indicators reveal an inconsistent pace of development, the year 2021 is expected to end with growth in outstanding loans for the vast majority of MFIs. In fact, 86% of the institutions surveyed expect to have more outstanding loans than in December 2020 by the end of the year 2021. This growth will be reasonable for a large proportion of them: 44% of respondents expect portfolio growth of between 0 and 10%, particularly in the MENA and Latin America & Caribbean regions. For slightly more than a third of MFIs (36%), it will be between 10 and 30%. Projections are split between these two estimates in the other three regions analysed. Finally, it should be noted that 10-20% of MFIs in each region expect to reduce their outstanding loans.
Credit risk remains under control but is still present
Despite these reassuring signs of portfolio growth, MFIs still face a high credit risk, a lingering remnant of the crisis. In point of fact, 58% of respondents in Q2 2021 stated that the current portfolio at risk remains higher than in early 2020. While some institutions still have an active moratorium (only 5%), the loans of clients in trouble at the beginning of the crisis are now showing up in the PAR as restructured or delinquent loans. In addition, there are clients in arrears who did not have a moratorium. All these loans are provisioned to cover the proven risk of default. The decline in profitability is another major financial consequence of the crisis, fuelled by the sharp increase in provisioning expenses and the reduction in the number of outstanding loans.
In detail, it appears that 59% of our partners have increased their provisioning levels compared with before the crisis (Figure 6). For most (71% of these 59%), the increase is between 0 and 25% of the usual amount, a situation that is found in every region except the SSEA. Conversely, there is a group of MFIs (40%) that no longer see a major increase in credit risk and whose provisioning expenses are similar to the past or even decreasing. In this respect, the ECA region again stands out, as this is the case for nearly 60% of the organisations surveyed in the region.
As we noted in our recent studies, however, this has not yet translated into a very large increase in loan write-offs. At the end of Q2 2021, 59% of respondents indicated that loan write-off levels for the year were either down from previous years or at the same level. Nevertheless, 13% of MFIs had to write off at least twice as many loans as they did before the crisis.
Equity has been largely unaffected so far
The profitability of microfinance institutions is affected by the return of business activities, the variation in outstanding loans and the risk coverage (factors presented in the foregoing paragraphs). The trend is downward for 51% of our partners (Figure 5). However, the information collected at the end of June 2021 is reassuring: 80% of respondents have a level of profitability that is at least balanced, which does not affect the capital of their structure (Figure 7). In the same vein, despite a negative result, 11% of respondents do not feel pressure on their equity. The situation is nonetheless more critical for 8% of the partners surveyed, whose level of capitalisation is at risk, leading to a potential breach of covenant with their funders or the regulator.
Given the difficulties faced by some of the clients, whom are up against new waves of complications related to COVID-19 or other factors, potential losses could affect the solvency of microfinance institutions. Some of them already require the intervention of their shareholders or investors. In our last study, we learned that the type of shareholder that institutions want to turn to depends on the reason why this support is needed (to cover losses or to grow). This survey shows that 20% of the respondents are already confronted by this issue: needs may arise despite recent capital support, but some MFIs are also without a solution in this regard (10%). These cases show that the impact of the crisis will still be felt by institutions already hard hit by this unprecedented period, but also by less robust MFIs. Vigilance on capital need remains necessary as the long-term impact of credit risk could turn the tables on other organisations if the overall situation does not improve, for example with the arrival of new epidemic waves.
The Covid-19 pandemic affected all economies impacting fragile economies and the most vulnerable populations in particular.
The Grameen Crédit Agricole Foundation began to investigate the unprecedented effects of this global crisis on microfinance institutions (MFIs). An initial survey was launched in March 2020 to understand how our MFI partners were adapting to the repercussions of the pandemic that had already had an impact on their activities.
In the following months, the Foundation collaborated with two other major players in inclusive finance, ADA and Inpulse, to extend the scope of this study to more than 100 MFIs in 4 continents: Africa, South America, Asia and Europe. Overall, 6 surveys were conducted since the inaugural questionnaire in March.
You will discover through this report the results of these studies divided into three main parts:
Adapting rapidly to operational constraints
Surveys conducted throughout 2020 revealed three major difficulties: the impossibility of meeting clients in person, difficulties in collecting repayments and complications in disbursing loans.
In an effort to address these difficulties, MFIs acted in a proactive and appropriate manner, showing the great resilience capacity of those organisations. However, all FMIs haven’t been impacted in the same way. This document describes those constraints and the measures that have been implemented.
A significant and sustained financial impact
The operational constraints encountered have inevitably had significant financial repercussions. We observe two major consequences for almost all MFIs: an increase in the portfolio at risk (PAR) due to lower repayments, and a reduction in outstanding loans due to lower disbursements.
Those two consequences fluctuated throughout the year depending on local contexts and other financial difficulties may have arisen in some cases. The analysis of performance indicators, detailed in this document, enables us to see the lasting effect of the crisis.
Prospects for the future
In the face of the crisis, most MFIs have shown resilience. Among the levers envisaged to return to financial stability: increasing the volume of their portfolio and the number of clients, and opening up to new products and services, and even to new markets, in 2021.
You will discover throughout the report other measures MFIs explored to adapt to the crisis, which are reassuring for the future of the sector.
Despite the often positive indicators, we remain vigilant in the face of the current volatile environment. For this reason, we have maintained our approach of regular surveys in 2021, on a quarterly basis.
Miren Bengoa, Director, member of Financial, Risks and Impact Committee,
Grameen Crédit Agricole Foundation & International Action Director, SOS Group
Director of the Grameen Crédit Agricole Foundation since 2020, Miren Bengoa has been, since January 2021, the new International Action Director of the SOS Group. Since 2011, she was at the head of Fondation CHANEL, which supports projects improving the economic and social situation of women. She shares her view on the impact of the Covid-19 crisis on gender equality and the responses to address it.
— What is the impact of Covid-19 on the status of women?
MB: One of the immediate consequences of the Covid-19 crisis is the rise in inequalities between women and men. We have seen during this pandemic an increase in violence against women and girls and a decline in girls’ learning as dropout rates and child marriage increase. Tens of millions more women have fallen into extreme poverty as they lose their jobs at a faster rate than men. Moreover, they suffer from difficulties in accessing new technologies and lack of digital skills.
— In a few words, what is the panorama of gender inequality in the world today?
MB: Current projections indicate that gender equality will not be achieved for another 130 years. In 2020, women represented on average (on a global scale) 4.4% of business leaders, 16.9% of Board members, 25% of parliamentarians and 13% of peace negotiators. Only 22 countries are currently headed by a female head of State or government (UN Women, 2020). We need better representation of women that reflects the diversity and abilities of women and girls.
— How can female entrepreneurship be an answer to the crisis?
MB: Women entrepreneurs have been at the forefront and strongly affected by the decline in economic activity. They are nonetheless also the bearers of innovative solutions and should be supported as much as possible by funders and public authorities. Being strongly involved in responding to community needs, they have been able to adapt their activities to the constraints of the pandemic. This has not been easy: they have sometimes been the first to give up a income generating activity so as to give priority to their families.
— Promoting women empowerment is one of the missions of the Grameen Crédit Agricole Foundation. What should be the priorities to boost this aspiration?
MB: Since its creation, promoting women empowerment has been at the heart of the Foundation’s action: among the 7 million clients of microfinance institutions supported, 73% are women beneficiaries of microcredits to create or develop income-generating activities. Maintaining funding, flexibility in rollovers and frequent analysis of the needs of these institutions are and will be key to enable them to regain a capacity for action in favour of female entrepreneurship.
Spotlight on the interview with Sylvie Lemmet, Chairman of the Finance, Risks and Impact Committee, Jérôme Brunel, Chairman of the Compliance and Internal Control Committee, and Bernard Lepot, Chairman of the Investment Committee.
Looking back on the outbreak of the crisis, could you tell us how you perceived it at the time?
Bernard Lepot: We all understood as early as March that we were in unknown territory for an indefinite period of time, with systemic consequences that were difficult to grasp. All continents were affected, including Africa and Asia, where we have most of our activities. The risk of serious difficulties for our partners was likely, with possible large provisions for the Foundation. Despite this lack of visibility, the Board had to define the Foundation’s position quickly, which we summarise as follows: support for our existing partners and consultation with other international lenders.
Sylvie Lemmet: Last March, we were completely in the dark. We felt that the crisis was going to hit developing countries hard and that we were going to face potential bankruptcies and losses for the Foundation. We were worried for our partners.
Jérôme Brunel: I feared that the impact of the pandemic, which I thought would affect developing or less developed emerging countries more strongly (though this has not been confirmed) would weaken the solidity of the Foundation’s counterparties, leading to a substantial amount of provisions. This has not materialised up to now thanks to the resilience of the organisations supported and the coordination and joint actions of the various stakeholders in the inclusive finance sector.
What has been the role of the Committee you chair in this context?
JB: The Compliance and Internal Control Committee has played its role by adapting the internal control system to the increase in Covid-19 risks, organising training on debt restructuring methods, adapting the provisioning policy and collecting more information on the end clients of our counterparties. But to be honest, it was the Finance, Risks and Impact Committee that had the primary role in mobilising the Foundation’s governance to deal with the consequences of the pandemic.
SL: The Finance, Risks and Impact (FRI) Committee already includes the Chair of the Compliance and Internal Control Committee among its members. Last year, we immediately felt the need to make the link with the Investment Committee, and its Chair also sat on the FRI Committee. The development of governance with this ad hoc committee has been extremely positive. It enabled us to build together, and with the Foundation’s Management Committee, a good understanding of the overall situation (the impact on the portfolio, liquidity and margin) and an intervention doctrine, which we developed as the crisis progressed. The objective is to provide the necessary oxygen to our partners while monitoring the risk of default.
BL: Once the roadmap was established, the Investment Committee continued to meet every month, but by videoconferencing, with a reduced number of new projects of course, but with close monitoring of the maturity extensions granted to microfinance institutions that requested them and, more generally, enhanced risk monitoring. The Board also decided to set up an ad hoc committee consisting of the three chairmen of the specialized committees to examine and discuss possible adjustments to the Foundation’s strategy. This body met several times to exchange views with the teams and to provide input to the Board before decisions were made.
What lessons have you learned from this experience one year later, and what prospects do you see for the Foundation in 2021?
SL: One year on, I am above all reassured by the quality of the men and women who make up the Foundation’s executive team and who have been able to respond to an unprecedented situation with great flexibility, professionalism and commitment. We were able to control the financial risks without abandoning our partners in difficulty, and to test the resilience of the organisations we supported, which reassures us as to their quality and as well as the resistance of the microfinance sector to shocks. This is a point that needs to be explored in order to gain a better understanding of the mechanisms that have been implemented locally and the real social impact behind the good financial performance. We all hope for a return to a less chaotic situation and the resumption of activities in 2021. We will have to learn the lessons of remote instructions and juggle with an activity that seems to be picking up though travel remains limited. The pandemic is not yet behind us, but I hope it will remain under control in the countries in which we operate.
JB: The health crisis has shown, first, the solidity of the commitments undertaken by the Foundation, i.e. the judicious choice of its counterparts. Secondly, the quality of the response of the team and its Managing Director to adapt to this unprecedented context, helped by the mobilisation of its Board and its specialised committees. Finally, the Foundation’s commitment to continue its lending activity despite this «hostile» environment and to support microfinance institutions through an international initiative to harmonise the policies of other lenders and a precise dialogue with each of the borrowers.
BL: One year on, it is worth underscoring the remarkable mobilisation and adaptation of the Foundation’s teams, with great collaboration between the various functions. We should also note the great resilience of our portfolio to date, which has perhaps exceeded our expectations. Good information/involvement on the part of the Board has enabled it to express its full support and solidarity with the Foundation’s strategy and actions. Things are still very uncertain for 2021, with perhaps a better visibility in the 4th quarter, but again nothing is certain. Let’s hope that 2021 will be a year of transition that will enable us to resume our development activities in 2022.
By Violette Cubier, TA Manager, Grameen Crédit Agricole Foundation
We continued to develop our third business line in 2020, namely technical assistance for our partners. Our technical assistance missions have contributed to the institutional strengthening and resilience of our partners in this time of crisis.
The Foundation supports its partners through various technical assistance programmes. This support covers a variety of issues such as operations and human resources management, governance, financial management, strategic planning, digitalisation of operations and products, launch of new services, risk management and social and environmental performance management.
The Foundation mobilised to provide close support to its partners throughout 2020. The technical assistance missions were adapted to respond to the priorities and emergencies that the partners had to face (liquidity management and portfolio quality, business continuity plans), but also to support them in their business recovery, their strategic reflections and the transitions necessary to face the crisis (digitalisation, strengthening of activities in rural areas). We also set up joint actions with other actors such as SIDI and the Fefisol fund, with whom we have organised training for some fifty organisations in Africa.
The year 2020 was also marked by a strong development of our technical assistance activities, with an increase in existing programmes and the launch of new programmes. The latter enabled the Foundation to extend the geographical areas of operation in technical assistance and to address more actively key issues such as the development of rural economies, adaptation to climate change or the financial inclusion of refugees.
The coordination of technical assistance activities is now a major focus of the Foundation’s operation for contributing to the institutional strengthening of its partners and supporting them in their economic, ecological and digital transitions, thereby increasing their impact on the ground.
The COVID-19 environment improved substantially for our partner microfinance institutions in the 2nd half of 2021. More specifically, as of November 2021, 64% of them reported that the measures taken to contain the epidemic in their countries had eased compared to those experienced in the summer, and 70% of respondents (49 MFIs) no longer faced COVID-19-related constraints in their operations.
The low levels of disbursements are related first and foremost to difficulties experienced by MFI clients. The two most common reasons given (54% and 49% respectively) for the MFIs that are not growing at the expected levels this year are the deteriorated risk profile of clients and the reluctance of clients to take out new loans. This justification is further confirmed by the fact that 53% of respondents still have a higher risk portfolio than before the crisis. This persistent increase in risk and the situation of a portion of the MFIs’ clients with little or no needs consequently limits the possibilities of MFIs for development.
We note that 76% of the MFIs have already started to implement measures related to these strategic lines and 16% plan to launch actions in this direction in the coming months. Thus, only 7% of the sample have less clear perspectives on this point. A certain time lag in the implementation of these measures emerges however, depending on the size of the institutions: the vast majority of Tier 1 MFIs (93%) have already implemented such measures, whereas this proportion drops to 77% for Tier 2 and 64% for Tier 3 MFIs.
