HIV/AIDS and Rural Microfinance - A Matter of Survival

According to the author, it is important to examine the impact of the worldwide HIV/AIDS epidemic on microfinance institutions (MFIs) having an emphasis on rural finance. He reviews the options and strategies that MFIs can employ to protect their safety and soundness. The safety and soundness of an MFI depends on:

• Quality of its loan portfolio;
• Funding base (capital or deposits).

These are strongly affected by client behavior, and client behavior is, in turn, strongly affected by the HIV/AIDS epidemic.

The paper states that:

• • Traditional MFI mechanisms for ensuring safety and soundness may be inadequate to deal with the magnitude of risk presented by HIV/AIDS;
  • • Most of the coping strategies are designed for relatively low-risk situations, whereas the HIV/AIDS epidemic represents a large-scale threat to the institutions.

    Key to a MFI's survival is:

    • Recognizing the magnitude of the problem;
    • Adopting appropriate strategies to meet that threat.