Operating in Near-Crisis Environments: The Microfinance Experience

February 18, 2014

With 39 members across 28 countries, Women’s World Banking’s network is often faced with the tremendous challenge of operating in a crisis. During a plenary session of our Building Women-Focused Finance conference, titled What Does Operating in a Near-Crisis Environment Look Like? leaders from three institutions spoke candidly about the impact of crises on their clients and operations:

Al Majmoua, Lebanon: Ongoing instability in the region compounded with an influx of refugees from neighboring Syria has severely affected Al Majmoua’s client base. Many clients are housing refugees, stretching their already limited resources. Al Majmoua clients also face increasing competition as the influx of refugees also means an influx of skilled laborers – who provide labor for half the market rate. At the institutional level, loan officers are spending more time following up on client repayment, delaying the organization from reaching strategic goals.

Kashf Foundation, Pakistan: Faced with natural disaster, such as the severe flooding in 2010, communities served by Kashf Foundation have suffered loss of life, property and savings. With a lack of safety nets, clients were exposed to indirect effects such as price hikes on essential goods and food cost inflation.

enda inter-arabe, Tunisia: The dramatic consequences of the 2010/2011 revolution in Tunisia on Enda inter-arabe are best illustrated through numbers. Its portfolio at risk (PAR) rate, which measures the outstanding balance of loans that are not being paid on time against the outstanding balance of total loans, from only 0.425 percent before the revolution to 4.9 percent after. Sixty-six percent of its branches were destabilized and there were significant security risks.

Moderated by Women’s World Banking’s  own Public Relations Manager, Maura Hart, Essma Ben Hamida Co-Founder, Executive Director of enda inter-arabe; Youssef Fawaz, Chief Executive Director of Al Majmoua; and Roshaneh Zafar, Founder and Managing Director of Kashf Foundation spoke about the crisis management strategies they have implemented. The leaders spoke to the strategies they are taking to overcome the challenges as well as lessons learned – Essma noted that crisis always leads to opportunity.

An audience member raised the important point that we must create different solutions to different disasters, some of the lessons that the three leaders shared can be applied across contexts, including:

  1. Understand the needs of your clients: Essma noted that we should remain close to our clients and communicate regularly with them. Roshaneh and Youssef both spoke to the importance of assessing the lives of clients to understand and prioritize their needs.
  2. Provide a host of risk-mitigating financial products: Roshaneh noted the most important risk management tool that a client can have is access to a savings account, allowing them to weather unpredictable storms. Encouragingly, Women’s World Banking’s network performance for 2012 reveals that our clients are accessing products beyond credit with a specific growth in savings.
  3. Develop partnerships: Youssef spoke to the importance of coordinating with MFIs and relief organizations. Al Majmoua secured a grant from UNHCR to work with both the refugee and host populations. Essma noted that in these situations we should call on “partners, networks and friends of microfinance” because they react!
  4. Prepare and make the necessary operational changes: The importance of having the necessary operational structures in place before a disaster occurs was touched upon. Essma reminded the audience that the establishment of a risk management strategy and risk management department are essential to mitigate the effects of a crisis.
  5. Communicate: Communication with both staff and clients is key to keeping them informed of changes that are occurring and to understand their needs during a period of uncertainty.

What has been the impact of these crisis management strategies? At Enda, PAR has been steadily declining from 4.9 percent in 2011 to 3.3 percent in 2013. At Kashf, 6,000 households have recovered financially, and at Al Majmoua, they have opened centers providing financial and vocational training and have secured funding to work with both refugee and host populations.

These experiences speak to the resilience and client-centric nature of Women’s World Banking’s network members. Women’s World Banking stands in solidarity with all of our network members experiencing and managing through crisis situations.