Microfinance in a time of crisis

A new report from CGAP (via P2P Consulting) indicates that the financial crisis has had a substantial impact on microlending institutions:

“Many poor households are struggling with the many consequences of the global food, financial, and employment crises . . . . Their income sources, like revenue from small businesses or from money sent from families working abroad, have become more erratic. At the same time, many expenses, like food, are still far higher than before. Savings are thus being withdrawn and loan repayment rates to MFIs are worsening.”

Sixty-five percent of respondents to the CGAP survey reported declining or at best stable loan portfolios in the most recent six months, reflecting the impact of the credit crunch. In addition, more than two-thirds of MFIs reported an increase in their portfolio-at-risk levels.

As folks in the do-gooding world tend to do, CGAP nonetheless accentuates the positive, but if the microfinance movement is going to be sustainable we need to face these challenges directly--and that means admitting these problems could be serious.