Microfinance
Last year, the COVID crisis required the Fund to support its partner MFIs in a time of high uncertainty by entering into handshake agreements to restructure near-term maturities. During this time, we signed the Grameen’s Pledge to support microfinance institutions during the crisis period. Given the risks and uncertainty, disbursements were slowed, and liquidity was allowed to build up.
Overall risk levels (as measured, among others, by PAR 30 + Restructuring) are more elevated than they were pre-COVID. Nonetheless, positive trends have been seen in portfolios since the initial shocks.
As we see these positive progressions, our focus has changed. Although risk levels are higher, we notice that MFIs are operationally very active – and are playing a fundamental role in supporting informal economies at a time when other sources of funding are increasingly uncertain.
Given this, we are now focused on disbursements and are prioritising loans to existing partners which have shown good management throughout the crisis. MFIs are often looking to work with a smaller number of familiar funders, and the Fund is increasing its loan sizes to long-term partners with a good track record accordingly.
Most institutions now no longer require any form of COVID support measures and most COVID restructuring agreements have now been unwound. Certain institutions which were particularly hard hit still require measures – and LMDF remains part of the Grameen’s Pledge.
Our microfinance institutions